Note: This text is fictional. Any similarity to the present or past reality of Macau, Japan, Singapore or Portugal is a mere coincidence.
By Jorge Godinho
Visiting Professor of Gaming Law at the Faculty of Law and the Faculty of Business Administration, University of Macau
A gaming concession, like anyone, has a life cycle.
At its origin is a decision to legalize the operation of gaming, taken by a certain jurisdiction. Such decision is usually a very difficult step, adopted among doubts, fears and protests. It is often a tough choice, an option almost always forced by a harsh economic reality that typically includes a recession or a full-blown crisis involving severe difficulties in financing the public coffers and balancing the budget. During bad times “abnormal” things happen, which otherwise would never see the light of the day. The rates of existing taxes are increased, new taxes are introduced, and brand new sources of revenue have to be discovered — for example in the field of gaming, which therefore, reluctantly, will come to exist.
Not that the demand for gaming was absent. Gambling has always existed: if it is not formally legal, it is offered illegally by criminals. It is therefore much more rational to have this problematic business offered transparently, in a controlled environment, with proper regulation to limit the downside as much as possible. And, of course, with interesting levels of taxation.
Thus, among moral doubts, and under the weight of financial needs, the debate on the legalization of gaming gets underway. It is necessary to overcome the recession, boost the economy, create jobs, leverage tourism and, above all, obtain desperately needed tax revenue.
The concept of a gaming concession begins to take shape. Studies and economic forecasts are prepared; models and detailed options are discussed. Where can the operation be located? What investments will be required? Who may operate gaming? On what terms and conditions? How is suitability going to be checked? Is smoking going to be allowed in gaming areas? How about credit for gaming and junkets? How to prevent money laundering? How much is the tax rate going to be? How is the gross gaming revenue going to be checked? And will the public support this novelty?
It is proposed to create a monopoly concession, to be awarded to the winner of an international public tender process. The concessionaire will have to make massive capital investments within a certain deadline, and the new operation will greatly increase tourism and the local economy. Build it and they will come.
Everything starts to accelerate. Large international gaming companies wake up to the new emerging market and make favorable public statements. Suddenly everyone has plenty of opinions on what should be done. Lobbying starts. Articles appear in newspapers and magazines. Speeches are made in specialized conferences about how the new jurisdiction should regulate gaming. Ideas are floated about how much should be taxed, how the supervisory body should be structured, whether joint ventures should be required, and many other topics. In order to facilitate the approval and gain public support, politicians talk only about the opening of ‘integrated resorts’ and never about ‘casinos’. The future operation is not going to be simply a casino; it will offer all kinds of amazing experiences.
The companies interested in the gaming concession position themselves firmly. They start by opening a representative office and then proceed to organize shows, sponsor artistic events and do everything they can to prove to the local people how much they can do, including for the local culture. With them, the future will be brilliant. The pinnacle is reached at conferences where the many interested companies present ambitious architectural projects of the future ‘integrated resort’, which will create an unstoppable, extraordinary, unprecedented tourist attraction effect.
The process progresses steadily, but sometimes with delays. The local politicians try to educate themselves on the specific technicalities of the gaming sector, in order to make the best decisions. Some are against all forms of gambling.
After long debates, reports, public consultations and complex negotiations, parliament overcomes the opposition and passes the necessary laws. Soon after, the Government prepares the regulations and detailed specifications. Gaming is really going to happen.
An international public tender process is launched soon after. It is the moment of maximum speculation and enthusiasm, but also nervousness. Teams work around the clock to get the proposals ready.
On the last day of the deadline, a Friday, journalists picture and interview a long list of competitors with their lawyers, at Government offices, delivering heavy boxes containing their proposals and all the necessary documents. Alea jacta est.
The following Monday the boxes are unsealed, and a press release reveals the names of all participants. The list is quite long and interesting, but also includes unknown entities. The tender committee then starts its long and decisive work, by studying the proposals, listening to presentations by the bidders and then measuring the proposals against the set of applicable standards, using a point system. Journalists and analysts try to understand what is going on in the tender committee and to guess who will have better chances, more capital, better projects and more experience. Some observers claim they are sure about who will win.
A few months later, the historic day arrives. At a press conference, the top Government official announces, on behalf of the tender committee, the results: competitor ABC, Ltd has scored more points in total and is therefore the winner. On that day, the shares of ABC, Ltd skyrocket to historic highs and then fall. In economic and financial television channels and newspapers, the size of the investment and the potential revenue of this new market is discussed at length.
We have a gaming concessionaire.
The concessionaire gives immediately a press conference, in a packed room. She expresses her thankfulness for having been chosen. She feels extremely honored and will do everything possible to fully comply with the commitments made in the concession contract that will be signed. She will make a major contribution to the economic development of this city. With her, there will be diversification, non-gaming offerings and service quality like this place has never seen.
On the other hand, for a long list of well-known international competitors the moment is of defeat, of shattered hopes. All the studies, preparation, positioning and marketing done was in vain. They gambled and lost. Their shares sink, causing a mini-crash. Some do not accept the decision. They sue, but the disputes do not produce any result: courts give reason to the Government, as the process was conducted fully within the law. In a short time, the dust settles.
With everything clear, it is time to start working. There are architectural and works projects, issues of accessibility, transportation, land use, infrastructures — a million things to solve, given that the new integrated resort will be like a small town. And above all there is the problem of financing this enormous investment.
Many months have passed. However, the concessionaire has not yet started the construction work. Nothing happened, apparently.
Various commentators begin to ask whether there is any serious problem. Articles appear in the newspapers raising the issue. In social networks and newspaper commentary boxes many people claim that the company is unreliable, and that they knew this would happen. Therefore, the Government should act immediately and withdraw the concession. Lots of questions are asked. Does the concessionaire have a secret agenda? Does she actually want to sell the concession to third parties, and pocket a fabulous profit, without building anything? Is the real aim to get a good position for a jurisdiction other than ours? Everyone asks what exactly is going on.
The concessionaire apologizes and endeavors to explain that the delays are due to technical reasons, the sheer complexity of the project, and to small changes in the plans in order to improve them and make the integrated resort even more beautiful. There are also some issues on funding, which will be resolved very soon by a syndicated loan about to be signed.
It is amid this atmosphere of nervousness and mistrust that the foundation stone is formally laid. The construction of the integrated resort will finally start.
Years go by. Until, one fine day, with pomp and circumstance, fireworks and dancing waters, and in the presence of all local leaders, the integrated resort is opened to the public. Gaming is going to start.
Large crowds of tourists arrive, some attracted by false rumors that lots of goodies would be handed, including free gaming chips. In the casino, the Baccarat dealers smile; they have been training for months and today it is for real. Cheaters are also around, trying to exploit unexperienced dealers in the mass market section. At the hotel reception there are endless queues for check-in. The shopping mall, a real labyrinth, is invaded by hordes of tourists eager for new luxury goods stores and tax-free purchases. There is a lot of excitement. Some gamblers stay in the casino for more than 24 hours.
The opening day goes well, and all local and regional television stations broadcast the news at length. It is also a financial success. The concessionaire starts to cash in very significant amounts. The tax revenue of the first quarter is much higher than initially anticipated. Very soon, the old Government budget problems start to disappear and with this finally some long-delayed public works can move ahead.
The hotels around the integrated resort are all fully booked in holidays and weekends, and very well attended in weekdays due to a constant stream of conferences and trade shows. The casino does roaring business. Many small businesses and service providers work as suppliers to the integrated resort, filling every conceivable need. The local economy has been transformed.
The concessionaire quickly becomes the largest employer of the entire area. She acquires economic power and considerable political influence. She operates casinos, various hotels, many restaurants, a fleet of ferries, some aircraft and luxury cars for the VIP players, dozens of buses for the mass market, in addition to real estate projects, shopping malls, shows, and the largest convention center in the country.
The senior managers of the concessionaire are now in attendance at all major public events. They finance other activities, support sports events and research projects in universities. The main shareholder becomes known for his philanthropy. As years go by, the concessionaire acquires an increasingly important status.
Time passes. In fact, the concession has a very long duration, of twenty years or more. It is a generation; two decades is a lot of time. What will happen next is for others to solve, when such time will arrive.
However, time inexorably goes by. What at first was a very distant prospect gradually approaches. There is now little time left before the end of the concession. Scholars, analysts and bankers begin to question the future. How will it be now? The pressure increases rapidly. Everyone wants answers.
After a period of silence, the Government finally announces that, as anticipated under the law, a new public tender for a monopoly concession will take place. Once again, a merciless moment of decision will have to happen.
Analysts and commentators return in force. The performance of the concessionaire is evaluated. Will she be able to continue? Is she going to be defeated by stronger competition?
Some newspapers publish articles clearly linked to the concessionaire, full of warnings, stressing the need to be extremely careful and not embark on any foolish adventures. People should not believe in empty promises made by outside opportunists. This concessionaire has been here for many years, and she is the only company that can trusted. The Government must not be naive.
It becomes very clear what everyone already knew: the concessionaire has changed a lot during these years. Before she was like a very elegant and beautiful, but fragile, young woman. Now she is older, stronger and heavier. She speaks with greater conviction, in a louder voice. She gained power.
However, in her heart, she feels weak and is still fragile. She knows very well that this was, from the beginning, a marriage with a firm deadline attached and without any commitments whatsoever after that. She is now vulnerable to all kinds of influences and demands. She wants, at all costs, to ensure continuity. She wants to be in the good graces of the decision makers. She tends to accept all impositions made to her. She is keenly aware that she can be unceremoniously dispatched — exchanged for another with more seductive promises. She despairs and thinks: “I do not want to die! I want to be born again and continue in the new cycle that will open! I can do so much more…”.
And so, the time comes for a new public tender. The concession will not be extended. We are going back to square one. The problem is that the new public tender is not an examination of the past work, like a school exam at the end of the semester. It is a discussion around future projects, much like a job interview. The concessionaire insists that no irresponsible decisions should be made. However, the tender committee will only look at the projects that are presented, as the public interest requires.
And this is the point at which a new decision is made, and we return to the beginning.
Jorge Godinho is currently a visiting professor of gaming law and criminal law at the Faculty of Law and at the Faculty of Business Administration, University of Macau.
He holds a PhD (2006) in law from the European University Institute in Florence, Italy, and a master’s degree in law from the University of Macau (1999). He is a law graduate from the University of Lisbon (1989).
Jorge is very well known for original research that explores and maps uncharted legal waters, and he has a series of firsts.
He published the first monograph in Portugal on the crime of money laundering in 2001 (Do crime de branqueamento de capitais, Almedina, Coimbra).
He produced the first full translation of a major code into English in Macau (Commercial Code, Macau, 2003).
He wrote the first major treatment of Macau law in English (Macau business law and legal system, LexisNexis, Hong Kong, 2007).
He wrote the first major treatment of gaming law in Portuguese language (Direito do jogo, vol. I, Rui Cunha Foundation, Macau, 2016).
In 2019 he published the first history of casino games of chance in Macau (Os casinos de Macau. História do maior mercado de jogos de fortuna ou azar do mundo, Almedina, Coimbra).
Other firsts include: the first discussion in Portuguese language of the crime of unlawful enrichment (“Do crime de riqueza injustificada”, in Boletim da Faculdade de Direito da Universidade de Macau, no. 24, ano XI, 2007, 17 ff); and the first discussion in Portuguese of confiscation of proceeds of crime with reversal of the burden of proof (“Brandos costumes? O confisco penal com base na inversão do ónus da prova (Lei n.° 5/2002, de 11 de Janeiro, artigos 1.° e 7.° a 12.°)”, in Liber Discipulorum para Jorge de Figueiredo Dias, Coimbra Editora, Coimbra, 2003, 1315 ff).
Prior to embarking on an academic career, he practiced law in Portugal and Macau, and worked for five years at the Monetary Authority of Macau, the regulator of banking, insurance and financial services.
He can be reached at [email protected].