Macau Business | December 2021
By António Lobo Vilela
Like any other, Macau’s gaming ecosystem also has vulnerabilities, some internal, others external.
The recent ‘Dore case’ in which the Court of Final Appeal’s ruling confirmed the Court of Second Instance’s decision that gaming operators are jointly and severally liable for the repayment of the funds on deposit with gaming promoters uncovered an internal system flaw and opened a Pandora’s box.
We agree with the direction of the Court of Second Instance’s decision. To quote ourselves, casino operators are the “best positioned entities, for reasons of physical proximity, to, firstly, supervise the ‘activities carried out in casinos’ by gaming promoters.” Based on the system that applies to (horseracing) bookies, the current ‘exclusive (civil) imputability system’ for casino operators results from culpa in eligendo, entailing a poor choice related to the gaming promoter whose registry for the exercising of the activity was accepted, or from culpa in vigilando, for the failure to supervise the ‘activities carried out in casinos’ by the gaming promoter.”[i]
The decision is “crucial to the Macanese gaming ecosystem and the way it is structured,”[ii] although the extent of the problem cannot be immediately identified, as no numbers exist on the funds on deposit with gaming promoters.
What lessons can be learned from the Court’s decision?
Firstly, the operation of independent cages by gaming promoters should be addressed and rethought by the Macau government, pondering whether all transactions conducted should be solely under the purview and control of the casino operator.
Secondly, the Gaming Inspection and Coordination Bureau (DICJ) should be (by far much more) proactive and imprint more stringency to the enforcement expected from the governmental agency “responsible for (…) the regulation, supervision, and coordination of gaming operations and gaming activities.” Several ‘gaming promoters heist’ happened and since at least 2014 that DICJ voiced that the reception of funds in deposit in the VIP rooms “is an activity carried out by those who are not specifically authorized to do so, and as such, it is illegal.”
Thirdly, the legal and regulatory framework should be a living structure that evolves and not something to keep crystallized. More than ever, the (several times) announced deep-drive review of the gaming promotion regulations is of utmost importance.
Lastly, a reshape in the relationship between casino operators and gaming promoters is needed, as latent financial risks may outweigh the perceived profitability of VIP gaming. Casino operators must be firmer in enforcing overseeing the gaming promoters registered with them, namely imposing minimum internal control rules or compliance policies. Moreover, contracts with the gaming promoters shall be more detailed to include indemnity clauses against illegal activities, and require specific types of guarantees or the creation of mandatory cash provisions.
The People’s Republic of China’s (PRC) in considering cracking down on capital flows by broadening restrictions on offshore gambling, which, in conjunction with the COVID-19 pandemic (aggravated by Macau authorities’ persistence with the COVID-zero policy), put and definitely will continue to put strain on the decadent (but still significant in terms of gross gaming revenue generated) VIP gaming segment. The recent arrest warrant issued to the founder and CEO of Suncity Group by PRC’s Wenzhou Prosecution’s Office over alleged cross-border gambling activities is a new setback whose proportions only time will tell.
All these externalities mixed together make the perfect blend that can ultimately lead to the need to remake Macau’s gaming industry from scratch.
Considering the fewer than ever references in the 109.000-plus-word Policy Address for 2022 Report to the words ‘casino’ (14, not including the 4 times it was used in Gaming Law’s full name), and ‘gaming’ (50, not including the 7 times it was used in DICJ’s name), one may wonder if Macau’s gaming industry is really too big to fail and too important to be gambled with?
[i]Macau Gaming Law, Annotated with Comments, Volume III, p. 274.
[ii]SeeAntónio Lobo Vilela, The liability of Macau casino operators for the activity rendered inside casinos by gaming promoters (junkets) – An update on the current litigation, Gaming Law Review, March 2021, 66-75.