Lawyer advocates termination of gaming sub-concessions

Sérgio de Almeida Correia

Lawyer Sérgio de Almeida Correia has addressed the issue of gaming sub-concessions in Macau, and suggested that the government should put an end to the system as it is the basis of various problems.

“It is important to put an end to the present sub-concession system, which creates conflicts of interest and other corrupt practices,” wrote Correia in a paper published in this month’s edition of Asian Gaming Lawyer reviewed by MDT.

“It is therefore appropriate to plan for the future and to review the existing legal regime, if necessary by extending the number of concessions to allow direct allocation,” Correia added.

He further remarked that such a solution “is balanced, respects the interests of the present sub-concessionaires, and is in line with the actions of the PRC and President Xi Jinping to fight undesirable situations that undermine the power of the State and the ethical and moral authority of those that govern vis-à-vis the governed.”

In his paper, Correia pens a historical review starting from the origin of the gaming concessions in the territory, explaining that according to the customary practice for the gaming industry after the Macau handover, the concessions were bound by the legal-administrative institution. This institution is a formal contract for the operation of games of fortune and chance, and was previously defined by others as “the administrative contract by which the administration allows a private person to operate, or maintain and operate, a casino gaming premise by remunerating himself from gaming revenues and providing financial compensation to the grantor.”

This concession tool sets strict rules according to the Law 16/2001, of which Article 7 clearly states that there is a maximum of only three allowable concessions.

Correia notes that, despite the law above, casino gaming operation is undertaken by six distinct entities, out of which “three are without concession agreements with the MSAR, operating under sub-concessions but behaving as if they were true license holders.”

The lawyer remarks that the legal regime for the concessions comes directly from the general law – Law 3/90/M – and that according to the general basis of concessions, sub-concessions should be used only “for public works and public services.” He concludes that there is no legal basis for sub-concessions in the gaming industry.

As the discussion arises when the concessions and their conditions are due for renewal, with current concessions ending between 2020 and 2022, the lawyer believes that now is the right time to change the law or system that allows for these exceptions “with no legal basis”.

As explained by Correia, the sub-concessions raise three fundamental problems: One derives from the particular contractual instrument used that allows for the extension of certain obligations beyond the date of termination of the concession contracts on which they depend, a situation he considers to be “contrary to what is common practice and is not a result of the classic administrative legal framework applicable to sub-concessions.”

On the other hand, clause 94 of the sub-concession contracts state that the termination of the concessions does not imply the termination of the sub-concessions, a situation that the lawyer considers a “genuine legal aberration” that is only understandable given the circumstances at the time (2002-2006).

The legal expert says that the “continuity clauses for sub-concessions beyond the final deadlines set in the gaming concession regime are no longer acceptable”, adding that it “should be corrected as soon as possible so that this situation does not recur.”
The most “acute problem”, Correia argues, is that the government should be asking “whether the current regime of sub-concessions is in the interests of the MSAR” at all.

His response is unequivocally negative: “the current regime of sub-concessions is clearly detrimental to Macau’s interests because the proceeds from the agreement to establish the sub-concession, which should go directly into the MSAR treasury strongboxes, will eventually end up in the pockets of brokers and intermediaries who use the licenses granted by MSAR to negotiate the terms of the sub-concessions.”

In other words, “the grantor [of the contract], who is the MSAR government, is marginalized from these negotiations and takes no advantage from the income generated by an agreement prior to the commencement of casino operations of the sub-concession; and which terms it does not control.”

The lawyer concluded by noting that it is in the hands of the MSAR government to determine whether or not to maintain, or even increase, the existing concessionaires and sub-concessionaires.

He advises that the issue should be handled as soon as possible as “the future will depend on it.”

‘Total smoking ban is far from being a global trend’

The total smoking ban is far from being a global trend – most (if not all) regional competitors and potential newcomers are clearly allowing smoking in designated areas,” says local gaming industry law specialist Francisco Gaivão, in an article published in the May edition of Asian Gaming Lawyer.

In the article, Gaivão addressed the implemented changes to Macau’s smoking policy, as well as the government’s future intended policies in the pursuit of the “total [smoking] ban.”

While he said that “no one knows for sure” how the implementation of a full smoking ban would affect the local gaming industry – and the exceedingly gaming-dependent Macau economy – he also suggested a possible scenario.

He noted that on one hand, “it is widely known that a large portion of casino patrons (namely those coming to Macau) take great pleasure in smoking while gambling.”

On the other hand, “if the total ban policy is adopted, Macau will have the most aggressive anti-casino smoking policy in the world” with restrictions that exceed those of other regions, namely in competing gaming hubs such as Australia, Singapore and even Japan.

In light of this, Gaivão further noted that “such thoughtful consideration should resonate with the Macau policy makers, especially taking into account the fact that the importance of the gaming activity to the overall economy of [markets such as] Australia or Singapore is (by a long shot!) much lower than the overwhelming importance in the non-diversified Macau economy.”

UPDATED May 6, 1:32am