TOKYO -- If the upcoming Tokyo Summer Olympics were to be canceled, who would be on the hook financially?
As pundits debate the possibility of such a scenario, the contract Japan signed with the International Olympic Committee has drawn scrutiny.
A close reading of the contract signed by the IOC, the Tokyo Metropolitan Government and the Japanese Olympic Committee suggests a lopsided arrangement that puts the host city at a distinct disadvantage.
For starters, only the IOC has the authority to cancel the games -- including in cases where "the safety of participants in the games would be seriously threatened or jeopardized."
Tokyo, the JOC and the Tokyo organizing committee cannot claim any "indemnity, damages or other compensation" for a cancellation, the contract says.
And if the IOC does call off the games at Japan's request, the latter has financial obligations toward such parties as the IOC and broadcasters.
Japan on Friday extended its coronavirus state of emergency for Tokyo again less than two months before the Summer Games. Only 2.4% of the population has been fully vaccinated. But as things stand, Tokyo cannot get out of hosting the games unless it is ready to shoulder hundreds of millions of dollars in damages.
"There is a possibility that the IOC will request damages from the Japanese side," said Waseda University sport sciences professor Taisuke Matsumoto, an attorney specializing in international sporting event contracts.
The IOC is in a tight spot as well. The organization distributes around 90% of its revenue to international sports federations, national Olympic committees and elsewhere. Federations for many less-mainstream sports rely heavily on this income.
Several of these federations are already struggling with funding after the Tokyo games were postponed last year. IOC President Thomas Bach and other leaders would likely face heavy pushback from within the organization and from international sports federations unless they go after damages.
The single biggest financial blow would stem from broadcasting rights, which accounted for 73% of the $5.7 billion in revenue the IOC earned for the 2013-16 Olympiad. The committee signed in 2014 a $7.65 billion agreement awarding U.S. broadcasting rights to the games to NBCUniversal from 2021 through 2032.
"The IOC and NBC have insurance, but it's unlikely that it will cover all of the financial harm from a cancellation," said Matsumoto, who posits that Japan could end up responsible for hundreds of millions of dollars.
But the IOC would also likely face criticism for seeking additional damages from Japan, which already has incurred significant losses from delaying what would have been the 2020 games.
"We live in a time when pandemics can happen every 10 or 20 years," said Yasuaki Muto, a professor and sports business expert at Waseda University.
"Every country that is considering hosting a future Olympics faces the same risks," he said. How the IOC handles the situation could affect the search for future hosts, Muto warned.
Part of the issue is the highly unusual structure of the Olympic host-city contracts, which Matsumoto calls an "exception among exceptions."
"Usually, you would include a disclaimer for both sides should the event be canceled due to unforeseen and uncontrollable circumstances," he said. "Most international sports competitions I've been involved with have worked that way."
The Tokyo host-city contract was only made public in 2017, after the IOC and the Japanese side updated their nondisclosure agreement. "The one-sided terms of the contract likely never became an issue before because the IOC has so much more bargaining power when deciding on a host," Matsumoto said.
The 2019 Rugby World Cup in Japan was also similar to the Olympics in that Japan would have been responsible for damages had it wanted to cancel, according to a source involved in organizing the rugby event. The bigger the event, the bigger the say its overseeing body tends to have.
Regardless of the financial implications, the fate of the Tokyo games ultimately depends on whether they can be held safely in a pandemic. Given the mounting public concerns in Japan, organizers will need to craft and communicate detailed plans to put minds at ease.