António Lobo Vilela
António Lobo Vilela is a Macau-based laywer and author of the Macau Gaming Law Book
Macau Business | March 2022
The draft law proposal on the amendment to the Gaming Law submitted to the Legislative Assembly reaffirms the principle of the operation of games of chance confined to casinos (directly) owned by the casino operators, established in the casino concession and sub-concession contracts.
The only novelty is that no exception to this principle is admissible. The draft law proposal provides that in the event the current casino operators are “awarded rights to operate casino games of chance,” they may continue to operate such games on a property not owned by them for a (maximum) period of three years from the entry into force of the law amending the Gaming Law, and provided that the Chief Executive grants authorizations.
This rule is consistent with, among other things, the (newly announced) public policy of (1) downsizing Macau’s gaming market, as stated in the proposed Article 1/2, subpar. 5 of the Gaming Law, and (2) prohibiting the sub-concessions, i.e., the “transfer, or assignment, in whole or in part, to a third party, of the right to operate casino games of chance, or the transfer, or assignment, in whole or in part, to a third party, of the concessionaire’s legal rights and obligations related to gaming, or their contractual position as concessionaire,” as per the proposed Article 7/3.
This measure will most certainly impact the already sluggish gaming gross revenues and have a materially adverse effect on the operation of some casino operators.
Firstly, it directly hits the so-called “satellite casinos” i.e., the “third party promoted casinos,” according to SJM’s annual reports, or the “collaborative entities,” in the wording of Article 5/4 of the draft law proposal. Out of the existing 42 casinos, 20 are “satellite casinos” (of which two are currently closed) operating under the umbrella of SJM, Galaxy, and Melco.
Although the draft law proposal allows casino operators to enter into agreements with third parties concerning the management of “all or some of the concessionaire’s casinos,” it bans the possibility of gaming-revenue-sharing. This fact alone will sound the death knell of the “satellite casinos,” at least as they currently operate. As a consequence, it will increase the already high unemployment rate with the employees hired by the “collaborative entities.” (Despite the Secretary for Economy and Finance mentioning that all are employees of the concessionaire/sub-concessionaires, in a December 2016 response to a legislator’s written interpellation, the former Gaming Inspection and Coordination Bureau (DICJ) Director says otherwise, acknowledging “there is no legal provision, in effect, that requires that the hiring of all casino employees be done solely by the respective concessionaire/sub-concessionaire”.) Let’s see if – and how – legal engineering will manage to overcome the legal command, thus creating an implementation failure of the Gaming Law, with enforcement mechanisms failing to accomplish the policy goals due to ineffective oversight.
The announced death of the “satellite casinos” will at least put an end to new embarrassments to the government, as was the case with the last one to open. Ending a moratorium imposed by the government in 2008, the opening of Casino Royal Dragon in September 2017 was surrounded by controversy due to statements made by the then DICJ director, who realized no request for opening that casino had been received, and the day before the opening said that there still was no authorization despite the inauguration being scheduled for noon the following day.
Secondly, it affects the “self-promoted casinos”, i.e., the casinos operated directly by a casino operator but located on properties owned by third parties (within their group of companies in the vast majority of the cases). Allied to the casino reversion mechanism and the intention to create a “special premium” in case the artificially set minimum gaming gross revenue to be generated by the gaming tables and machines is not met (which most probably will result in a considerable shrinkage of the number of the gaming tables and machines in operation), it will be exciting to see the casino operators concluding that no commercial sense exists in buying the property where the casino is located to then revert to the Macau SAR after a couple of years.
Lastly, the measure also clashes with the (current 5) gaming machine halls located outside casinos, i.e., the “satellite gaming machine halls” in the wording of the 2016 Mid-term Review Report. I wonder if we will ever see STDM selling to Melco the Macau Tower’s unit where the Mocha Macau Tower operates. As no changes to the principle of the location of gaming machines inside casinos are envisaged, the rules set by the Gaming Machines Regulation to allow these halls to open outside casinos continue to be irreconcilable with the Gaming Law, and thus illegal. Moreover, it may finally allow the government to enforce the long overdue “main government action in the area of Economy and Finance” announced in the Policy Address for 2015, “to prevent problem gambling and the problem of the spread of gaming to residential zones, proactively removing gaming machine halls from residential zones.”
Macau’s first Chief Executive once said that “gambling is a significant factor in the context of Macau’s economic development.” Despite the merit that some measures have or may have, the current government, certainly continuing to “strengthen governance based on scientific principles” (whatever these are…), proposes several amendments to the Gaming Law that will strangle Macau’s golden goose, the one that represents almost 80 per cent (2019) of the Macau SAR revenues.
Is this the correct path for a city that claims to be international but where no Fortune 500 company has headquarters or offices, or that doesn’t appear in the (global) Startup Ranking, where the six poorest countries in the world are ranked with 47 startups together?
As a friend put it, unfortunately, Macau has a business that it seems not to like! Popcorn time!