Tokyo Olympics Overseas Fan Ban Adds To Sponsors’ Losses And Lawsuits

As a partner at an international law firm advising businesses around the world on complex commercial disputes, a recently appointed arbitrator at the Court of Arbitration for Sport, and a fan of sports, I have been keenly watching the run-up to the Tokyo Olympic Games.

Since the establishment of the modern Olympic Games in 1896, there has only been five occasions in history where the Games was disrupted—all of which were due to the two world wars. In 2020, the list has unfortunately been extended due to the global outbreak of Covid-19, which has undoubtedly presented unprecedented challenges to the world and, more relevantly, Japan—the host country of the Tokyo Olympic Games.

Following the one-year postponement of the Summer Games and a number of major public debates as to whether the Tokyo Olympics should be canceled, the Tokyo Organising Committee of the Olympic and Paralympic Games finally announced that the Summer Games will proceed this July, under the condition of banning international spectators from attending the Games from abroad and with a limit of 10,000 audiences.

The economic impact of holding the Olympic Games behind closed doors is substantial. According to Katsuhiro Miyamoto, a theoretical economics professor at Kansai University, it is estimated that the “closed-door” Olympics would result in a 381.3 billion yen loss (about $3.5 billion) in spending related directly to the Games. The economic gains from promotional sporting and cultural events after the Games was also expected to be reduced by half, to say the very least. Not only is there a devastating economic impact, there will also be substantial commercial disputes arising from the “closed-door” Olympics.

In the past, with an “open-door” Olympics, souvenir sales is a multi-billion dollar business. Many of these contracts were usually concluded many months before the Games. With a “closed-door” Olympics, no international visitors and a limit of 10,000 audiences, it is expected that sales of souvenirs will drop significantly. It is common that when a party to this type of contract is making a significant loss, contractual disputes will usually be a natural consequence, especially when the losses arising from this Olympics are expected to be catastrophic.

On the other hand, the organizer’s decision to continue with the Olympic Games also meant that an approximate of 60,000 foreign athletes and their supporting staffs will be brought into the country. This raised public concerns as the nation would be exposed to health risks and potentially overloading local health infrastructure, particularly when the Japanese government only just started to get the pandemic under control as July was approaching.

As the international teams are starting to arrive in Tokyo, there are already at least two confirmed cases from the Ugandan Olympic team. There will be more and the world is watching how the Tokyo government handles this confirmed case.

The decision to proceed with the Tokyo Olympic Games has often been criticized and described by both local and international health organizations as a reckless and irresponsible move. Some even described Japan as the ultimate “loser” as it sacrifices the health of its population for economic gains.

On the other hand, however, the cancelation of the Olympic Games would be even more catastrophic to Japan’s economy, leading to an estimated 4.5 trillion yen of losses due the sunk costs in infrastructure Japan specifically built for the Olympic Games which would generate zero or very limited economic return if the Games is ultimately canceled.

In light of the constraints and challenges, the “million-dollar question” to Japan is: How can Japan turn risks into new opportunities under the Covid-19 pandemic with the limited options at hand?

The outbreak of Covid-19 has disrupted major sports events around the globe. In the U.K., the English Premier League was suspended for months in early 2020 in an attempt to control the outbreak of the coronavirus within the British community. Similarly, international multisport events such as the Arctic Winter Games and ASEAN Para Games were also canceled due to the pandemic. These suspensions eventually caused severe impacts to the hosting country and the organizer, and has led to a number of costly litigations and disputes arising from brand sponsors, broadcasters and betting companies in particular.

The Tokyo Olympic is the first international multisports event which will go ahead under the pandemic. Based on the latest announcements published by the organizer, there will be strict measures in place to ensure appropriate physical distancing between foreign athletes, supporting staffs and local citizens throughout the Olympic Games.

For instance, Olympic teams’ arrivals will be required to submit two negative test results and a detailed activity plan upon entry into Japan. They will also be required to be tested daily and banned from using public transport. The organizer has run four test events in early May for diving, volleyball, athletics and marathon and has proven that the proposed measures are effective in detecting and eliminating the spread of imported Covid-19 cases. Despite all these measures, there are still at least two confirmed cases from the Ugandan team.

Although there are only two confirmed cases, if these measures are proven to be successful, the Tokyo Olympic Games will set a precedent for the international community and offer practical solutions to help minimize disruptions caused by the pandemic in other international sport events.

Japan is well-known for its reputation as being at the forefront of technology and innovation. As part of its plan to promote Japan in the Tokyo Olympics Games, Japan intends to showcase its technology side in the sporting event. Part of its plans include the use of self-driving vehicles to transport athletes, workers, media and those with mobility issues, as well as introducing the use of robotics and artificial intelligence, which Japan is famous for, to offer various support and assistance in specific areas during the Olympic Games.

It is interesting to note that although the pandemic has caused major disruptions to the Olympic Games, the investment on these technologies could in fact be utilized to minimize the outspread of Covid-19 through eliminating actual human interactions. This will not only benefit the Olympic Games, but also the world.

Now that the Tokyo Olympic Games will be held behind closed doors, there will undoubtedly be increased reliance on live streaming and Japan’s network infrastructures for international spectators to virtually participate in the event. This also creates another valuable opportunity for Japan to showcase its ability and specialties in audio-visual technologies and cybersecurity to the wider international community in which Japan has been developing and strengthening for a long time. If these technologies do in fact prove to be effective and successful, while the short-term economic impact will still be devastating, the long-term economic gain will far outweigh the short-term effect.

Apart from the above, the Tokyo Olympic Games would also create other positive externalities to the local community in Japan, particularly in stimulating local employment. According to the latest government statistics, the outbreak of Covid-19 in Japan has resulted in an increase in unemployment rate for the first time in 11 years, in which the unemployment figures increased by 360,000 to 1.98 million. It is estimated that the Tokyo Olympic Games would create new job opportunities to the nationwide in the long-run, benefiting a total of 1.9 million people.

As Japan sets foot in preparing the opening of the Olympic Games in July behind closed doors, Japan certainly has made every attempt to strike a balance between promoting the “never give up” Olympian spirit as well as safeguarding the health and safety of its citizens. Whilst these unusual times has inevitably created unprecedented challenges and risks, these risks also come with new opportunities for Japan to showcase its ability and specialties to the outside world, strengthening and promoting their national “Made in Japan” labels, which undoubtedly will be beneficial to national and international businesses in the long-run.


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