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Gaming industry – public policy for a fresh era
Insight provided by Pedro Cortés, Managing Partner at Rato, Ling, Lei & Cortés – Advogados
Introduction
In recent weeks, the discussion on the future of Macau's economic engine – the gaming industry – has intensified. This appears to have been on the agenda at the 17 May 2021 closed-door meeting between the secretary of economy and finance, the head of the Gaming Inspection and Coordination Bureau and the members of the Legislative AssemblyCommission on Public Concessions.
Gaming concession (and subconcession) contracts are due to expire on 26 June 2022. Before then, the government must:
This begs the question of whether there is sufficient time to complete these steps, especially since there will be a new Legislative Assembly following the elections scheduled for September 2021. However, an even more important question is what approach the government will take in terms of public policy. (1)
Current public policy
The current public policy is set out in Article 1.2 of the Gaming Law, which establishes the legal framework for the operation of fortune and chance games in casinos. This legal framework aims to ensure that:
Of these five aims, the most important is the appropriate protection of Macau's interests in collecting taxes from the operation of these games.
The criteria (2) used to select the concessionaires from the candidates that participated in the international public tender in 2001 also suggest that these taxes are a key part of Macau public policy. Unlike the above list of public policies, the list of selection criteria was itemised hierarchically as follows:
Public policy for a fresh era
Due to the cross-boundary travel restrictions resulting from the COVID-19 pandemic, Macau's economy and the model underpinning it must change. At the end of 2020, the region's gross gaming revenue (GGR) was down 79.3% year onyear,(4) with a total annual GGR of MPtc65.44 billion ($7.57 billion).
This has surely influenced the government officials evaluating which amendments to the Gaming Law should be proposedto the Legislative Assembly.
Macau's general public policy on gaming likely need not be redefined by the government. It exists and has beenimplemented successfully. What Macau needs is good public policies for a fresh era. Essentially, the existing policies must be refined in order to address possible problems and future challenges.
Notwithstanding the apparent failure to achieve one of its goals (ie, for Macau to be an international world- class tourismdestination), and taking for granted the fact that the current public policies of the Gaming Law will remain in force beyond 2022, the following amendments should be made:
As regards the criteria for awarding the concessions, the government should consider not only the amount of thepremium or contributions to be paid, but also:
Legal framework for extending current concessions
Article 13 of the Gaming Law states that each concession (and, consequently, subconcession) applies for 20 years.
Where a concession is awarded for less than 20 years, the government may, at any time up to six months before the endof the concession period, extend it, provided that it does not exceed 20 years.
This was the case of Sociedade de Jogos de Macau, SA (SJM) (and, consequently, MGM Grand Paradise, SA (MGM)),whose concession was extended on 15 March 2019 until 26 June 2022. This means that SJM (and MGM) received anextension under Article 13.2 of the Gaming Law (extending the term to 20 years, up to 31 March 2022), as well as aspecial extension under Article 13.3 of the law, which states that once the 20 years has expired, the chief executive mayextend the concession, one or more times, for a maximum of five years. This special extension may change the termsand conditions of the concession contracts – an amendment to the concession and subconcession contracts of SJM and MGM, respectively, was announced in March 2019.
Comment
There is a lot at stake in terms of the future of Macau's biggest (and sole) industry. To be competitive at the international level, the government must first state its intentions for the future of the industry, of which some of the proposals mentioned above must surely be part. Only after defining the public policy will it be possible to implement the legislative tools needed to achieve the defined goals.
Considering the tight timeline, and despite the fact that an extension has been foreseen since 2019, the government should put off any tender plans that it may have in order to assess the impact of the COVID-19 pandemic and, inparticular, attract new players which may be interested in having a piece of Macau's gaming industry pie. As has beenseen in the past, the law states that the public interest should be taken into consideration when granting extensions.
Endnotes
(1) See Cabot, Anthony, "Public Policy and Policy Goals", Regulating Land-Based Casinos, Cabot, Anthony, Pindell, Ngai and Wall, Brian (eds) at 5 (2nd ed, UNLV Gaming Press, 2018) ("public policy is more narrowly defined as the broad principles (or concerns) that a government espouses as the basis for regulating casino gaming").
(2) Established in Chief Executive Order 217/2001, 2 November 2001.
(3) Macau Policy Address for 2007: "the Government will further nurture and support industries with high potential, such as the convention andexhibitions industry."
(4) Monthly gross revenue is available on the Gaming Inspection and Coordination Bureau's website.
(This article was first published at International Law Office)
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