Macau Gaming Law – Same same, but different… at least for some years
Expert Insight provided by Pedro Cortés, Managing Partner of Rato, Ling, Lei & Cortés – Advogados e Notários | Lektou
 
Macau Government has just announced the consultation results on the proposals for the change in the Macau Gaming Law (Law 16/2001).
There were 9 main points in the referred document:
  1.  Number of concessions for operating of casino games
  2. Term of concessions
  3. Increased legal requirements concerning supervision of concessionaires
  4. Local employment benefits and protection
  5. Strengthening review mechanisms for concessionaires, gaming promoters, and their employees
  6. Introduction of government representatives
  7. Development of non-gaming elements
  8. Corporate social responsibility
  9. Explicit stipulation of criminal liability and administrative penalty regime
We will briefly explain what proposals were made in the Consultation Document (CD) and the analysis and responses of the Government to each of the points. We will then exercise the likely amendments' outcome in the Macau Gaming Law. 

The legislative proposal with such amendments may be submitted to the Legislative Assembly soon. Whether or not before the term of the existing concessions, that's another point, but most likely, considering the timing of the publication of the results, we will have a tender before June 26, 2022. 
 
1. Number of concessions for operating of casino games
1.1  Proposal in the CD
  • Focusing on "quality" rather than "quantity" of the concessionaires
  • Restricting the number of concessions ≠ reducing the competitiveness of the sector
  • A balance between the stability of the size of the gaming market and the liberalization of the industry
  • Increasing the presence of clientele from different countries and regions
  • Increasing consumer options for tourists
  • Enriching additional non-gaming facilities, and
  • Developing more diversified tourism products, progressively promoting a more sustainable and diversified economy. 
1.2  Analysis and responses 
The Government considers that the development of the gaming industry should assume a particular dimension in the number of concessions to safeguard the stability and employment of the Macau residents and the maintenance of the Region's revenues, which are very important to the balance with the Government expenses. It also provides favorable and stable conditions for the maintenance of the population's well-being and the development of the various social infrastructures. 

The Government will consider the public policy and the economic environment, among other factors, to define the appropriate number of concessions to be allocated.
 
Our view is that the number of the operators (concessions) will be maintained as six, as it will be too risky to change the status quo at this stage. 

2.      
Term of concessions
 
2.1  Proposal in the CD 
  • Proposal to review the current 20-year term with a possibility of extension of up to 5 years
  • Exceptional additional extension of the concession term must consider the maintenance of reasonable proportionality concerning the concession period initially granted
2.2  Analysis and responses 
In its analysis and response, the Government considered the qualitative development of the gaming sector, together with the diversified and healthy promotion of Macau's industries, as priorities for their future development. 

The reduction of the concession term allows the Macau SAR to adjust the gaming industry appropriately to ensure the competitiveness of the sector depending on development trends and policies.

Therefore, when setting the concession deadline, Government states that it will consider the balance of various aspects:
  • stability of the employment market
  • return on investment; and 
  • need for the Government to carry out the continuous assessment of the development of the industry. 
Our interpretation is that the term will be less than 20 years, maximum established in the Macau Gaming Law in force, most likely between 10 and 15 years. 

3.      Increased legal requirements concerning supervision of concessionaires
 
3.1  Proposal in the CD
  • share capital – the minimum amount of share capital legally required of concessionaires should be increased (the current minimum is 200 million Patacas - approx. USD 25 million);
  • managing directors – the percentage of share capital held by concessionaires' shareholders who are permanent residents of Macau should be increased (the current rate is 10% by at least one permanent resident of Macau); and
  • profit distribution – the distribution of profits to shareholders (whether in cash or equities) cannot be made unless it meets the specific requirements defined for this purpose in advance and the concessionaire obtains the proper authorization from the Government in advance.
3.2  Analysis and responses 
The Government made the assessment, after analyzing the opinions made by the participants in the consultation, that it should clearly define the suitability and financial capacity, oversight regime, regulation of the investment plans of concessionaires, the creation of a supervisory committee, and the content of the distribution of profits.
 
3.2.1      Share capital
As regards share capital, the Government will consider certain factors, including the socio-economic environment of Macau, real condition, and the size of the development of the activities of concessionaires, as well as the needs of the future development of the gaming industry, to determine an adequate amount of share capital.

Our interpretation is that the share capital requirements of the concessionaires (currently MOP 200 million (approx. USD 25 million)) will increase, possibly to an amount that could reach MOP 1 billion (approx. USD 125 million). 
 
3.2.2      Managing Director
The Government understands that the proposal to increase the shareholding by the Managing Director may not safeguard the development of the Macau gaming industry and may also cause great uncertainty to the concessionaires as it may change the current shareholder structure. 

On the other hand, Government also considers that even if the percentage of the share capital held by the managing director is increased, it will not necessarily contribute to Macau, as the managing director would also like to maximize the profits derived from his/her investment, not directly increasing the local investment, a goal intended by the Government. 

In this context, and considering the opinions favorable to such increase in the share capital (currently of 10% of the shares), Government will ponder whether such expansion is necessary and what could be the percentage. 
 
Our interpretation is that there might be changes but not fundamental changes, especially if the economic rights of those shares can continue to be minimized or almost inexistent under the legal mechanisms currently used by the concessionaires. 
 
3.2.3      Restrictions in the distribution of dividends 
The Government understands that the gaming industry involves significant funds and investments. One of the factors in the suitability verification process is financial capacity.   Most of the opinions collected during the consultation period were against the imposition of requirements to the distribution of dividends, as it may interfere with the free market and discourage the concessionaires' interest in investing. 

The Government will consider the concerns and suggestions made by stakeholders and comprehensively analyze the overall content of the law review by assessing the positive and negative effects resulting, to define a proposal to achieve the objectives of the amendment to the law and reach the desired interests.
 
Our interpretation is that the Government will find other measures to achieve the same goal but may abandon this idea of including legal requirements to the distribution of dividends by the concessionaires to the shareholders. 

4.      
Local employment benefits and protection
 
4.1  Proposal in the CD
  • Concessionaires should constantly and proactively take measures to ensure access to employment for resident workers and efforts to promote career advancement
4.2  Analysis and responses 
The Government understands that the revenues derived from the gaming activity are currently highly affected by the context and external factors. Therefore, any incidents unfavorable to the operation of the industry by concessionaires may put in cause the stability of employment of Macau residents. 
Concessionaires have strong financial capacity and, hence, should strengthen the protection of workers' rights and, in particular, take continuous and proactive measures to ensure the employment of workers and promote their professional rise and horizontal mobility. For, adequate and sufficient professional training should be provided to encourage the professional development of the workers - 80,000 in the industry.  

In this context, concessionaires should provide their workers with better perks and conditions to attract and retain talent with better qualifications to contribute to the development of the industry, ensuring the stability of its workers. Content of any amendment to the law will be optimized after collecting and analyzing the opinions of the relevant sectors of society.
 
The reinforcement of the benefits and protection is expected to take a significant role in amendments to the Macau Gaming Law. 

5.      
Strengthening review mechanisms for concessionaires, gaming promoters, and their employees
 
5.1  Proposal in the CD
  • Suitability of personnel hired by concessionaires (not belonging to key employees) and other individuals or entities relating to concessionaires, as well as the suitability of workers recruited by gaming promoters and their collaborators or individuals and entities closely associated with them. 
5.2  Analysis and responses 
The Government understands that the opinions are in line with the proposal, i.e., the suitability verification and supervision mechanisms do not seem to be entirely adequate to the complexity of the casino games, and it is necessary to strengthen such mechanisms.

It is also understood that the industry played a positive and active role in promoting the economy and tourism of Macau and safeguarded the revenues of the Region. 

However, there were illegal acts practiced by the shareholders of concessionaires, employees, gaming promoters, and their collaborators. 
Government considers it necessary to establish a comprehensive and effective prevention mechanism to strictly ensure the development of a healthy and orderly gaming industry.
 
Additional suitability assessment and supervision mechanisms should be expected in the set of amendments to the Macau Gaming Law. 

6.      Introduction of Government Delegates
 
6.1  Proposal in the CD 
  • Appointment of Government delegates to extend the Government's direct supervisory power over the concessionaires 
  • Ensure that public interests are given precedence and supervise the fulfillment of the duties related to the concessions
  • The role will follow as reference the Decree-Law no. 13/92/M
6.2  Analysis and responses 
The Government will consider the opinions and reference the supervision systems adopted in other jurisdictions or countries where casino games are operated.

It is inferred that, despite the proposal to introduce delegates from the MSAR Government, allowing direct access to the most comprehensive information on the management or operation of the concessionaires, such a decision may interfere with the functioning of its activities and its independence. 

The Government will assess the balance of the various interests and factors to strengthen surveillance of the gaming operators without affecting the aim of amending the law, i.e., increasing the competitiveness of the gaming sector.
 
Our view is that there might be additional mechanisms to strengthen the supervision that may not include the Government delegates. 

7.      Development of non-gaming elements
 
7.1  Proposal in the CD 
  • Non-gaming elements should play a relevant role in supporting Macau's diversified development 
7.2  Analysis and responses 
The Government states that the public opinions align that concessionaires must promote projects not associated with gaming. Other opinions consider that it is not appropriate for the Government to indicate precisely which projects the concessionaires should carry out, as it may undermine concessionaires' diversified development and autonomy, and their development plans.

Great attention and consideration to the development of Macau in all aspects have been made by the Government, which expects the gaming industry to take a leading role in developing new poles that sustain economic growth. That will boost the diversified and sustainable development of the economy, promote sports and cultural tourism, support the introduction of gaming-related manufacturing industries to be installed in Macau, explore emerging industries, conduct different types of international or renowned events and competitions, thereby strengthening the resilience of the local economy.
 
Even though it is not entirely clear how our view is that inclusion of non-gaming elements by the concessionaires is one of the most critical aspects in terms of public policy and will indeed be introduced visibly in the revised Gaming Law. 

8.      Corporate social responsibility
 
8.1  Proposal in the CD
  • Provide support for the development of small and medium-sized enterprises;
  • Provide support to local industries;
  • Ensure that labor rights are upheld – namely, those regarding in-service training and professional advancement of local workers – as well as maintaining the effectiveness of and guaranteeing access to a workers' welfare system;
  • Hire disabled or rehabilitated individuals;
  • Provide support for philanthropic actions; and
  • Provide support to exchange activities in the educational and cultural areas and scientific studies. 
8.2  Analysis and responses 
The Government understands the lack of a uniform definition within society or a consensus on the social responsibilities to be entrusted to the concessionaires.

The definition in the law on social responsibilities may limit the flexibility to respond promptly to the community's needs. 

An assessment of the scope of social responsibility may include defining the minimum requirements for compliance with social responsibilities. 
In turn, concessionaires must submit a concrete proposal to fulfill social responsibilities when submitting a bid in the international public tender. The content must be included in the concession contract as contractual clauses.
 
In our view, there will be a general provision in the Gaming Law, with the specific content to be included in the concession contracts as contractual clauses according to the proposals submitted in the international public tender.

9.      
Explicit stipulation of criminal liability and administrative penalty regime
 
9.1  Proposals in the CD
Criminal liability
  • Concessionaires depositing money or other amounts unlawfully accepted on their behalf or through their shareholders or employees; and
  • Concessionaires accepting the deposit of cash or different amounts provided by others and pay or undertake to pay remuneration or any other form of consideration.
Administrative penalties
  • Liability in respect of administrative offenses by establishing a penalty regime in the legal framework, defining the relevant circumstances and the seriousness of the breach of duty that needs to be considered when terminating the contract. 
9.2  Analysis and responses
The Government will conduct an in-depth study on the "illegal acceptance of deposits" relating to activities, namely whether it shall be a typified crime to define the more appropriate sanctioning regime. 

As to the crime of simple contempt, given the powers of the Government, it may not be necessary to typify the crime against the concessionaire.

The Government will improve and clarify the sanctioning provisions and the supervision regime for the gaming operators, being the powers and law enforcement enhanced. 
 
It is expected to enhance the criminal offenses, eventually including a typified crime for the illegal acceptance of deposits. A regime on administrative penalties should also be anticipated. It is already foreseen in the Macau Gaming Law but was never regulated.

10.   Other areas

National security, gaming tax, online gaming, impact on daily life
There were other opinions in line with the strengthening of the national security policy, the special gaming tax   - with some opinions for and others against the decrease/increase and other forms of games. On this point, Government did not explicitly withdraw the online gaming, noticing that such an introduction could undoubtedly generate immediate revenues. However, such possibilities should consider and carefully assessed the risks regarding problem gambling.
 
Responsible gaming, participation of the Government in the concessionaires, change of the regulatory model, and satellite casinos
The Government states that responsible gaming will actively study and assess additional restrictive measures to the existent self-exclusion regime and third-party exclusion of problem gamblers. 

Government considers that it is not adequate to be a shareholder of the concessionaires and that any change of regulatory model – concessions – will not be considered. The existence of satellite casinos will also be pondered.