What happens when you win the Olympics?
As Brisbane prepares to host the 2032 Olympics, there are questions over contracts that siphon off revenue and invest almost all power in the International Olympic Committee.
When John Coates, president of the Australian Olympic Committee, bluntly ordered Annastacia Palaszczuk to attend the opening ceremony of the Tokyo Olympics last week, he was widely condemned.
Critics accused him of sexist bullying, picking on the premier of Queensland and condescending to her about her duties.
Palaszczuk, who had earlier suggested she would watch the Tokyo opening on television, sat silently beside Coates as he forcefully countermanded her during a press conference following the announcement that Brisbane would host the 2032 Games.
“You are going to the opening ceremony,” he lectured. “I’m still the deputy chair of the candidature leadership group and so far as I understand there will be an opening and closing ceremony in 2032 and all of you are going to get along there and understand the traditional parts of that, what’s involved in an opening ceremony, so none of you are staying behind and hiding in your rooms, alright?”
Coates later insisted Palaszczuk was grateful for his help in overcoming some public resistance to her flying to Tokyo during the pandemic. “I might have done it too crudely,” he said. “But I thought if I did it crudely, I would be taking the hit for her.”
It certainly was crude. Hans Westerbeek, professor of International Sport Business at Victoria University, said it was a “horrible” display. But it was not a sexist one, he says, “because that’s how the AOC and IOC [International Olympic Committee] treat everyone”.
It is an arrogance born of power, Westerbeek says, based in the fact that they are an independent, international non-government organisation “that has no obligation to listen to anyone other than themselves”.
“They make their own rules, and they govern their own rules,” says Westerbeek.
By dint of those self-determined rules, laid down in contract law and backed by
immense commercial power, they can bully any host. And they do. The Coates exchange with Palaszczuk was only a minor example. A far bigger one has played out in Tokyo.
In response to the coronavirus pandemic, the Tokyo Games were delayed a year. Most Japanese – 70 to 80 per cent according to multiple polls – wanted them cancelled. But it was not Tokyo’s decision to make.
“The City of Tokyo does not have any power to decide whether or not the Olympic Games will be held,” Yoshihisa Hayakawa, a professor of law at Rikkyo University, explained to Nine media in May. “This is the exclusive power of the IOC.”
The host city, he said, was merely “an entity that provides venues”.
A decision by Japan to scrap the Games would have come at immense cost. Tokyo was already set to become by far the most expensive Olympic Games ever staged. Official government estimates put the cost at more than $US20 billion.
Covid restrictions also meant the hosts were denied a major source of their revenue: ticket sales. Had the Games been abandoned, the hosts would have been forced to pay the International Olympic Committee compensation for lost revenue from broadcast rights, sponsorships and so on.
That is what the contract stipulated. It is what all the Olympic contracts stipulate, and have stipulated for decades – while the IOC owns the Olympics, it is the host that pays for them, whatever the circumstances.
A principles contract for the Brisbane Olympics, released by the IOC, is similarly one-sided: the IOC alone has the right to cancel the Games, it is indemnified by the host against all losses, and it can effectively over-ride public health and border rules. The agreement was described in The Australian Financial Review as “an extraordinary contract that gives extraordinary power to a private entity over a sovereign government”.
In 1999, Dr Mark Brabazon published a lengthy analysis of the legal structure of the Sydney Olympics in the UNSW Law Journal.
He painted a forensic picture of contractual arrangements that strongly favoured one party.
According to Brabazon, the endorsement contract, executed between the City of Sydney, the state of New South Wales and the AOC in May 1991, “left the State and to a lesser extent the City responsible for the full cost of staging the Olympic Games, committed to enter a contract in terms to be dictated by the IOC, and left the AOC in effective control of the entity charged with the running of the Games”.
Agreement to these terms was necessary before Sydney could even be considered as a Games venue.
A second contract, the host city contract, executed two years later, after the IOC voted to stage the Games in Sydney, was far more detailed.
It reinforced that while “the Games … are the exclusive property of the IOC”, the city and the state and national organising committees “were to bear jointly and severally the entire financial responsibility and risk of the Games, including the indemnification of the IOC and the provision of all-risks insurance for themselves and for the IOC”.
It stipulated a long list of things the host had to provide, including some 1500 rooms for IOC and other international officials, as specified by the IOC, in hotels designated by the IOC.
All contracts – indeed, “any agreement” entered into by the organising committees in connection with the Games – were to be approved by the IOC executive board. The Olympic organisation had effective veto power over just about everything.
As was the case with Tokyo, the host city contract with Sydney did not permit the city or the national organising committee to cancel the Games for any cause. It did, however, permit the IOC to terminate the contract and withdraw the Games on grounds of war or civil disorder or for breach of contract by the city or organising committees. In the case of a breach of contract, it permitted the IOC to seek damages from the host.
While the hosts were required to assume the costs and the risk, the legal agreement ensured the IOC would enjoy the cream. The IOC retained the right “directly to negotiate contracts for international television and radio broadcasting of the Games”, as well as the rights to all copyright and intellectual property in emblems, badges, medals, pictograms, posters, mascots, music and other artistic and intellectual works pertaining to the 2000 Games.
As Brabazon – these days senior counsel specialising in international tax law – observes, “intellectual property and the broadcasting rights … is where the money is”. And all that money goes to the IOC, not the host, who pays for everything.
More than 20 years since he wrote his analysis, the eminent barrister still recalls how struck he was at the “heavy-handedness” of the legal agreement in the obligations placed on the host city and nation.
“And from the lawyers’ viewpoint, how those obligations are made enforceable so that a sovereign power can’t get out of them is really interesting,” he says.
“The IOC wouldn’t want a dispute getting into the court of the nation from whom they are trying to recover money.”
Thus the Sydney host city contract provided that any dispute would be remitted for arbitration by the Court of Arbitration for Sport (CAS) in Switzerland “to the exclusion of the ordinary courts of Switzerland or of the Host Country”.
Indeed, according to rule 61 of the Olympic Charter, all disputes in connection with the Olympic Games can only be determined by CAS, which is headquartered in Lausanne.
And what is the Court of Arbitration for Sport?
“It is an offshoot of the IOC,” says Westerbeek. “It was set up in order to rule on disputes in sport, but you can hardly call it independent [of the IOC] when they were instrumental in setting [it up] in the first place.”
John Coates has been a member of the council of the court since 1994. In 1995 he was made vice-president, and then president in 2011. Coates’s biography lists scores of job titles, the big two being president of the Australian Olympic Committee, a position he has occupied for an extraordinary 31 years, and vice-president of the IOC, which he has held since 2013.
He is also chairman of the co-ordination commission for the Tokyo Games and delegate for broadcast rights for Oceania.
Coates was born in Sydney 71 years ago. His father was a lawyer, and he became one, too. He was always keen on sport, but he was born with congenitally dislocated hips, which prevented him from becoming a serious competitor. He became an administrator instead.
“Because he can’t move as fast as the rest, Coates has learnt to start his races earlier, to develop his over-the-horizon vision,” wrote The Sydney Morning Herald’s 2000 Olympics editor, Matthew Moore, in a long profile published at the time of the Sydney Games.
Moore quoted Michael Knight, who as then NSW Olympics minister and president of the Sydney organising committee for the Games spent years dealing with Coates. He said: “When you’re negotiating with Coates you find that he’s always got one more contract.”
Former Victorian premier John Cain, who was required to sign one of those tight Coates contracts before the AOC would support Melbourne’s bid for the 1996 Olympics, added: “It was like a bank guarantee; all for the bank and nothing for the partner.”
Melbourne’s bid was unsuccessful. It was widely held that the AOC did them in, so as to strengthen the prospects of Sydney winning in 2000.
Others who have dealt with Coates express similar views of him: he is a charming bully whose skills as lawyer and politician elicit both wariness and admiration.
Bob Carr, who was NSW premier through much of the run-up to the Sydney Games, likens Coates to the national secretary of a large union, who maintains control by astute patronage, “keeping the sporting organisations who are his constituency onside with a share of the spoils”.
Carr’s treasurer at the time, Michael Egan, recalls that Coates jealously guarded the Olympic spoils. Egan had a number of run-ins with the AOC and its president.
One was over a 10 per cent bed tax the state imposed on Sydney hotel accommodation. At a media conference Egan suggested Coates, who opposed the tax, had a conflict of interest because of his past involvement in a hotel development. Coates threatened to sue for defamation.
Even more acrimonious, though, was a dispute over the structure of the Olympic organising committee, which Egan describes as a 50-50 joint venture that gave Coates a veto power over line items in the budget.
“We got to the stage where the AOC wouldn’t let the government do anything,” he recalls. “So we had to buy them out.”
That cost the state some $100 million. It taught Egan two things: “That you never go into a joint venture with anyone” and that John Coates is a tough negotiator.
He is also, as Carr and Egan attest, extraordinarily well connected with people on both sides of politics. But his power base was and is “firmly in the Labor NSW Right”.
Carr says Coates was particularly close to the right-wing powerbroker and senator Graham Richardson, whose “whatever it takes” style is similar to his own. Carr suggests Coates is grooming another leader of the NSW Right, Mark Arbib, as his AOC successor.
Arbib has a suitable CV: he is a former federal sports minister; is well connected in the business world, having worked as a senior executive with James Packer’s former company; and has proved himself during his time as state secretary of the ALP to be exceptionally good at extracting money from people. In October 2016, Arbib was elevated to the AOC executive.
Coates’s stellar career has had its rough patches. A few years ago, the AOC was shaken by allegations of bullying, which coincided with a determined challenge for Coates’s job by Olympic hockey gold medallist Danni Roche.
This prompted a cultural review of the AOC’S workplace practices, performed by the Ethics Centre. It ended up costing the job of the AOC’S long-serving media director Mike Tancred, even though he was cleared of bullying. It also cost the AOC some $1.6 million, in legal costs and a payout to Tancred.
The Ethics Centre review described a dysfunctional workplace in which senior leaders undermined each other and played favourites, where there was a lack of transparency in decision-making and poor communication.
When it was put to Coates at a media conference that he should resign, he shot back: “Why should I resign? There has been no confirmation of bullying. There has been some criticism of the senior leaders. I’m president and there’s been a succession of CEOS under me. I have not swept anything under the carpet.”
Some have made the point that a bullying culture would be a natural extension of the way the IOC bullies host cities. It is possible this forcefulness is necessary: the Games themselves are foolishly, even ruinously, expensive to host.
A detailed examination of the cost of hosting the Olympic Games, published late last year by Oxford University’s Saïd Business School, provided eye-opening detail of the enormous costs hosts bear. The average sports-related cost of hosting the Summer Olympics between 1960 and 2016 was more than $US6 billion, the study found. The expense had rapidly escalated over recent Games: the 2016 Rio Olympics cost close to $US14 billion, London in 2012 cost nearly $US15 billion.
Non-sports-related costs were typically several times that. According to the authors, every Summer Olympics since 1960 has run over budget, at an average of 213 per cent in real terms.
These cost over-runs, coupled with the fact that host countries often bid for the Games during good economic times but deliver them in worse times, had done immense social and economic damaged to some host nations.
The Oxford report noted, for example, that the “cost overrun and associated debt from the Athens 2004 Games weakened the Greek economy and contributed to the country’s deep financial and economic crises, which began in 2007 and was dubbed the ‘forever crisis’ ”.
When Rio de Janeiro bid to host the Olympics, the Brazilian economy was performing strongly. But almost a decade later, with costs escalating, the country was in its worst economic crisis since the 1930s.
Less than two months before the Rio 2016 opening ceremony, Rio’s governor declared a state of emergency to secure additional funding for the Games.
Tokyo is also shaping up to be a financial disaster.
Not all Games go badly, of course. But even in the case of those deemed successful, such as Sydney, it is very hard to determine what benefit, if any, is accrued to the hosts.
How do you value feelings of national pride? Or the potentially changed perceptions of the host city in the eyes of the world? Or the long-term consequences for tourism? Or other esoteric benefits?
“If you engage KPMG or any of those other Big Four [accounting firms], they would put a dollar value on it,” says Brabazon. “And you would feel confident, because they will have a big name and you’ve paid them a lot of money to do so.”
In fact, that’s exactly what has happened in the case of the Brisbane bid. Queensland and federal governments are trumpeting an estimate by KPMG that the state will reap social and economic benefits of $8.1 billion and the nation will gain $17.6 billion – spread over 20 years to 2042.
Those calculations put heavy emphasis on vague social goods, such as “the intangible benefits to residents of a host city/country associated with legacy, community spirit, prestige and civic pride associated with hosting a Games”, and “health benefits” flowing from increased physical activity, leading to “lower risk of chronic disease” and “improved productivity” due to fewer sick days. Not to mention “retained expenditure” from Australians not spending money overseas because they have stayed to attend the Olympic Games
According to Westerbeek, “The reality is most hosts find that if they simply do a cost– benefit analysis – financially, the Games will always cost you money.”
He says governments around the world are coming increasingly to the realisation that hosting the Olympics is not worth the risk.
“The biggest indicator that is visible and measurable is that the number of cities that are interested in hosting the Games … is declining, because the cost of the Games is just insurmountable.”
Westerbeek sees the International Olympic Committee becoming increasingly desperate to “pursue those who are still willing to take the huge risk of putting national and regional money into an event that is not returning the economic benefits – leaving, in some cases, taxpayers with decades of levies to pay …”
He’s not predicting failure for the Brisbane Games, only that the balance of power between the IOC and the host cities is shifting towards the latter – or needs to.
Not that you’d know it from the way John Coates spoke to Annastacia Palaszczuk. •
Carr says Coates was particularly close to the right-wing powerbroker and senator Graham Richardson. Carr suggests Coates is grooming another leader of the NSW Right, Mark Arbib, as his AOC successor.