When London won the bid to host the 2012 Olympics seven years ago, everyone knew the city would be closely scrutinised across the world. IBA Global Insight assesses the winners and losers of London’s third Olympic Games.
French aristocrat Pierre de Coubertin was renowned for two things: his formidable moustache and the founding of the International Olympic Committee (IOC) in 1894, heralding the start of the modern Olympic Games. It’s believed that Coubertin came up with the idea after becoming enamoured with English public schools and their gallant approach to sport. Here it was all about the gentlemanly amateur – polite, community-spirited and basically a ‘darn good egg’. Earning money from one’s endeavours was simply not cricket.
Coubertin’s Olympian whiskers may have endured – think of Olympic legends Mark Spitz and Daley Thompson – but the remainder of his legacy looks increasingly shaky. While global enthusiasm for the Games remains undiminished, the IOC is barely recognisable. Having originally shunned corporate sponsorship, the committee now enjoys revenue in the billions. It has raised nearly $5bn from international broadcasting rights and sponsorship over the past four years alone. Around 90 per cent of this gets funnelled back into sport, leaving an impressive $500m for ‘operational and administrative’ costs. It’s little wonder, as one leading sports lawyer who has attended several IOC bashes recounts, that £200 bottles of wine ‘barely register on their radar’ – though a vintage over £1,000, he stresses, may be deemed excessive.
The IOC has cleaned up its act considerably since the 1998 Salt Lake City scandal, when ten committee members were expelled or resigned for accepting bribes in exchange for votes. This is due in no small part to president Jacques Rogge, who has dedicated himself to repairing the reputation of the discredited organisation since he took office in 2001. Yet, despite these reforms, the IOC clearly retains a rather heady appetite for indulgence. With a monopoly over the Olympic bidding process, the committee has the power to insist on whatever rights and perks it wishes from those desperate to secure the event – and it doesn’t hold back. 1,800 five-star hotel rooms, a private car lane and 500 limousines complete with chauffeurs (in hats!) were just a few of the non-negotiable demands made on the 2012 host.
The Olympic agreement between the IOC and the host city, almost unchanged since 1996, is a truly extraordinary piece of legislation. Burges Salmon sports lawyer Mark Gay, who appears regularly before the Court of Arbitration for Sport, says that when he first read it he ‘nearly fell off his chair’. Many of the demands are brand-related, with the host expected to enact powerful legislation to protect the IP rights of sponsors – and the London Olympic Games and Paralympic Games Act of 2006 did not disappoint. Described by Blackstone Chambers barrister Brian Kennelly as the ‘most extensive piece of IP protection ever seen in the EU’, it is viewed by many as excessively draconian. Anyone who violates its strict rules over wording and symbols, including the 81-year-old grandmother who defiantly knitted an Olympics doll to sell for £1 at a church fundraiser, risks receiving a rather threatening letter – and, if ignored, up to a £20,000 fine.
‘Look at who else is hosting major sporting events: Brazil, South Africa, Russia, Qatar. We are the only old world contender, and [the Olympics is] a great opportunity to market ourselves as a centre of excellence in the organisation of massive infrastructure projects’
Tim Jones, Freshfields.
The authorities claim their enforcement of the law will be proportionate and fair. Yet paranoia begets self-censorship, which can prove just as stifling. It is true, of course, that the Olympics could not happen without the sponsors, and that the Olympics stadia remain free of promotional hoardings. It is also true that Los Angeles in 1984 revolutionised the way the Games were funded by limiting the number of sponsors and giving them exclusive rights. Before then, the events proved a substantial drain on hosts’ resources, with both Munich in 1972 and Montreal in 1976 renowned as fiscal disasters. Yet there are degrees of control, and when the ruling entity is an unaccountable billion-dollar ‘non-profit’ business headquartered in Lausanne, Switzerland – with the tax benefits that brings – it can leave an unsavoury taste, especially when host cities are left deep in the red. For some, the IOC, with its plump income and excessive demands, has lost its way. ‘What is the IOC there for?’ one top sports lawyer ponders thoughtfully, when asked. ‘It’s a very good question.’
Compounding the discomfort is the identity of some of the sponsors and service providers. Junk food brands McDonald’s and Coca-Cola are deemed by many to be particularly un-Olympian, while others, such as Dow Chemicals and Jet Set Sports, have proved even more controversial. In 2001, Dow Chemicals bought Union Carbide Chemical Company, owners of the Bhopal pesticide plant where a gas tragedy killed tens of thousands of Indians in 1984, and has been strongly criticised for failing to clean up the site or provide adequate compensation. Though Dow claims its liabilities have been settled, and the settlements upheld by the Indian Supreme Court, both the Indian government and London Assembly have called for the company’s exclusion from the Games.
Jet Set Sports was granted a contract to sell 2012 hospitality packages despite being owned by Sead Dizdarevic, who admitted handing over cash to Salt Lake City officials that was allegedly used to bribe IOC officials – none of whom were indicted – before the 2002 Games. Charges against two City officials were eventually thrown out, but not before Dizdarevic agreed to testify against them in exchange for immunity from prosecution. More recently, in February 2012, the UK's Channel 4 television programme Dispatches showed footage of a Jet Set employee offering paid access to the Olympic lanes in an undercover sting. Jet Set said the employee gave inaccurate information and no longer works there – but the revelations did little to dispel public concerns of a Games in danger of being polarised into haves and have-nots.
Ethics and equality
The IOC and its sponsors are not the only Olympic kingpins in town, of course; around 110 leaders have flown in to join the party, including controversial figures such as Azerbaijan’s president Ilham Aliyev and Rwandan president Paul Kagame. Those on EU blacklists have not made the cut, but some believe the list should be extended to all leaders of countries that criminalise homosexuality or ban women from competing. ‘This is not about politics in sport,’ says human rights lawyer Mark Stephens of Finers Stephens Innocent, stressing that the Olympic Charter vows to support equality and encourage the promotion of ethics. ‘This is about the rights attached to us by virtue of being human beings.’
While the ‘Olympic family’ is gliding through town in temperate splendour, others are forced to sweat it out on the sidelines. Fifty small businesses pooled their resources to take the Olympic Delivery Authority (ODA) – the public body responsible for the Olympic infrastructure – to court after it severely restricted roads around their warehouses with minimal consultation. Because the case could not be heard before the Olympics, and because funds were limited, they soon dropped the suit. The businesses have been in operation for up to 30 years, but now their futures are uncertain. ‘They are up against the wall,’ says Bindmans’ John Halford. ‘One has already gone out of business and a number of others almost certainly will.’
One company that almost certainly will not go out of business is G4S, the security firm that spectacularly failed in its contractual obligations to provide 10,000 guards for the Olympics. CEO Nick Buckles has much to answer for, but it cannot have helped that the government chose to inflate its requirements in December 2011 from 10,000 guards to 23,700 (of which 7,500 were to be military personnel), increasing the public cost from £282m to £553m. In a recent report, Margaret Hodge, chair of the Committee of Public Accounts, declared it was ‘staggering the original estimates were so wrong’.
There remain questions to be asked as to how G4S, which receives more than £1bn of revenue from public sector contracts, came to be in charge of Britain’s biggest peacetime security operation. It is of no small concern that three years ago G4S won a huge contract from the UK’s Ministry of Defence just weeks after employing former defence secretary John Reid as a consultant, while more recently Lincolnshire Police awarded a £200m contract to G4S soon after White & Case partner Tom Winsor, whose firm was advising G4S on the deal, authored an independent report on police reform. The MoD, G4S and White & Case all stress that neither Reid nor Winsor played any role in the deals, and no direct influence has been suggested. However, complex ties between the public and private sectors abound – and it’s worth noting that G4S recently voted in its 2012 AGM to increase its influence by allowing political donations of up to £50,000. Here, as anywhere, transparency is key.
‘This is not about politics in sport. This is about the rights attached to us by virtue of being human beings’
Mark Stephens, Finers Stephens Innocent.
Whether the public will recoup any of the money paid to G4S is unclear, though the government has vowed to activate ‘all penalty clauses’ in the contract. How G4S responds to such demands is yet to be seen. Herbert Smith and Norton Rose, G4S’s external advisers of choice, have proved predictably tight-lipped on the matter, refusing even to disclose whether they are representing the company at all.
Tim Jones from Freshfields – the Games’ official provider of legal services and enviable procurer of £700m worth of contracts, ranging from IP rights and property agreements to flower provision and metal sourcing (for medals) – is also reluctant to discuss G4S. He does, however, admit that the whole debacle has proved a ‘fantastic opportunity’ for the UK’s opposition Labour Party to create a political storm around the outsourcing of public contracts to private companies. ‘The whole issue is a political hot potato, and it’s an important debate to have,’ he says. ‘I think a lot of people feel uneasy about that sort of contracting out of police or military services.’
What Jones is keener to talk about is legacy: of sport, of regeneration, of commerce. The first, he concedes, is ‘up in the air’, with nobody as yet stepping forward to take ownership. This is a serious concern – especially considering the coalition has now abandoned the former Labour government’s original target to involve a million new people in sport by March 2013 (it has so far reached a meagre 109,000). Jones is more confident about regeneration: the Olympic Village has been bought by developer Qatari Diar for £557m, while housing association Triathlon Homes will invest £268 million in 1,379 affordable homes. This will leave the taxpayer around £175m out of pocket, but such investment should prevent the area from gentrifying, Jones suggests, while the new Westfield shopping centre has provided up to 10,000 much-needed jobs.
Where commerce is concerned, it is up to businesses to take the initiative, says Jones. ‘Look at who else is hosting major sporting events: Brazil, South Africa, Russia, Qatar. We are the only old world contender, and it’s a great opportunity to market ourselves as a centre of excellence in the organisation of massive infrastructure projects.’
Indeed, for all its corporate largesse, suspect security and questionable guest list, few can deny that the Olympics is exciting. Its governance may be flawed, but its original wholesome ethos is still very much evident in the athletes’ astonishing skill and commitment – give or take the occasional inevitable doping scandal – and the passionate support of sports lovers across the world. There are also positive signs that the IOC is attempting to rein in excesses, with Rogge vowing to reduce the cost and complexity of the Games so that developing countries might stage them in the future. If he succeeds, that really would be a worthwhile legacy of which Coubertin would be proud.