Welcome to the third in a series of articles on the Macau gaming law IAG is publishing throughout the month of March and in early April:
Part | Date | Article |
---|---|---|
1 | Wed 2 Mar | Here comes the extension … 26 June now seems impossible |
2 | Fri 4 Mar | Cross-shareholding provisions crossing the line? |
3 | Mon 7 Mar | Problematic consequences of the satellite purge |
4 | Wed 9 Mar | Does the chip cap need a rethink? |
5 | Fri 11 Mar | Reversion of gaming areas – a problem no one is talking about |
6 | Mon 14 Mar | Directors’ liability – changing centuries of corporate law? |
7 | Mon 16 Mar | Junkets, collaborators and concessionaire liability |
8 | Fri 25 Mar | Minimum income – a stealthy gaming tax rate hike? |
9 | Mon 28 Mar | National Security – a get out of jail free card for the government? |
10 | Fri 1 Apr | Confusion reigns over so-called “Managing Director” shareholding |
11 | Sun 3 Apr | 10-year concessions hamper investment in Macau |
12 | Wed 6 Apr | Too broad suitability checks will dilute their effectiveness |
13 | Thu 7 Apr | Provisions regarding other jurisdictions can cause legal conflict |
14 | Fri 8 Apr | And that’s a wrap – where to from here? |
One of the stranger features of the Macau casino gaming industry has been the existence of arrangements which have allowed certain entities to effectively participate, despite not being awarded a casino gaming concession.
A high-profile example of this has been the so-called “satellite casinos.” There is no definition or concept of a “satellite casino” under Macau law, but the term has become industry vernacular to describe certain contractual arrangements between a concessionaire and another party (sometimes referred to as a “Party B”) under which the Party B owns the real estate of a hotel-casino property and undertakes all non-gaming operations at the property. The concessionaire undertakes the gaming operations, with gaming staff (pit bosses, dealers, cage staff, etc) being employed by the concessionaire, and all other staff (F&B, hotel, etc) being employed by the Party B.
The concessionaire receives a share of “top line” (GGR) and/or “bottom line” (profit, however contractually defined), effectively as a fee for the “rental” of their casino concession, with the Party B receiving the remainder of gaming revenue in addition to all non-gaming revenue.
At best these arrangements might be considered efficient strategy by entrepreneurial businessmen looking to own a piece of the Macau gaming pie; at worst they could be seen as almost a charade to evade all the bother and expense associated with winning a casino gaming concession – while still taking part in the spoils of the industry.
Such satellite arrangements have been considered problematic by the Macau Gaming Inspection and Coordination Bureau (DICJ) and the wider government for years. While on a strictly technical basis gaming at satellite casinos is conducted by a concessionaire, those gaming operations are within the wider cocoon of a hotel-casino property owned by the Party B, with all non-gaming operations conducted by the Party B, so the on-site influence of Party B is profound. Indeed, over the years it has not been unusual for Party B owners to use language such as “our casino” or “our gaming operations.”
When the government released its Macau gaming law public consultation document, there was no mention of satellites, so most of the commentariat (yours truly excepted) assumed they had been consigned to the too-hard basket.
It was therefore a surprise to many when the draft new Macau gaming law was released, with a new provision under Article 5.3 stating, “A concessionaire must operate games of chance in casinos in a location where it holds ownership of the real estate … ” This new provision has been widely interpreted as a satellite-killer, although a three-year grace period will be introduced for existing satellite arrangements should the relevant concessionaire(s) be awarded a new concession in the upcoming tender process.

The language of Article 5.3, as it currently stands, makes no provision for partial ownership or ownership by a related entity in the concessionaire’s group of companies. If this is the final version passed by the Legislative Assembly, it therefore means all casino gaming real estate must be 100% owned by the Macau concessionaire entities, which are Macau-registered subsidiaries of the six operator listed entities.
There are 18 Macau casinos which have historically been considered satellites, operating under the concessions of SJM (14), Galaxy (3) and Melco (1), but these aren’t the only affected properties. Most Macau concessionaires own gaming real estate in multiple companies, with a new subsidiary company often created for new casino properties. Take Sands China for example. Sands Macao, The Venetian (together with the Plaza at Four Seasons and the Parisian) and The Londoner are owned by three different companies within the Sands China group of companies. Melco is also facing this situation at Studio City since it is not owned by Melco’s concessionaire entity.
Exacerbating this problem is the fact that these properties are extremely difficult to subdivide into strata titles, which is something the operators would want to do before considering a transfer of property – since it is only the real estate associated with gaming which needs to be owned by the concessionaire entity, not the entire resort. But Macau law has certain requirements for a property to have a separate strata title, such as separate entrances and exits, independent HVAC (heating, ventilation and air conditioning) systems, and more. This would be impossible for Macau’s integrated resorts – the word “integrated” is the clue! And any such transfers of real estate could trigger all manner of unintended consequences – one that immediately comes to mind is the financing of these properties.

President of the Second Standing Committee of the Macau Legislative Assembly, Andrew Chan Chak Mo, seemed to acknowledge this difficulty late last week, suggesting to the media that the concessionaires may eventually hold a “property share” registration of some sort (the precise Chinese term used was “份額”). He gave the example of one floor operating as a casino in a building where that floor occupies say 10% of the building. Chan suggested the concessionaire could make a floorplan showing this 10% is the area of the casino, and merely register this area.
Chan’s suggested course of action probably raises more question than answers, not least of which would be how this concept could be integrated into the draft gaming law, if at all. Here’s another: if a provision in a new draft law is so problematic that it creates the need for a whole new concept of real estate ownership in Macau, why not consider altering the provision rather than creating the new concept! A simple solution would be to allow the real estate of the gaming area to be owned by any company within the group of companies the concessionaire was part of, and create a definition for a group, which would likely relate to shared control. Such definitions have been created many times before, so there is no need to reinvent the wheel here.
Another enormous difficulty would be finding agreement between Macau’s operators and the DICJ on how to precisely calculate the “property share” pertaining to gaming in an integrated resort. But that is a subject for a later article in this series!
The fourth article in this series will be published later this week.
Part | Date | Article |
---|---|---|
1 | Wed 2 Mar | Here comes the extension … 26 June now seems impossible |
2 | Fri 4 Mar | Cross-shareholding provisions crossing the line? |
3 | Mon 7 Mar | Problematic consequences of the satellite purge |
4 | Wed 9 Mar | Does the chip cap need a rethink? |
5 | Fri 11 Mar | Reversion of gaming areas – a problem no one is talking about |
6 | Mon 14 Mar | Directors’ liability – changing centuries of corporate law? |
7 | Mon 16 Mar | Junkets, collaborators and concessionaire liability |
8 | Fri 25 Mar | Minimum income – a stealthy gaming tax rate hike? |
9 | Mon 28 Mar | National Security – a get out of jail free card for the government? |
10 | Fri 1 Apr | Confusion reigns over so-called “Managing Director” shareholding |
11 | Sun 3 Apr | 10-year concessions hamper investment in Macau |
12 | Wed 6 Apr | Too broad suitability checks will dilute their effectiveness |
13 | Thu 7 Apr | Provisions regarding other jurisdictions can cause legal conflict |
14 | Fri 8 Apr | And that’s a wrap – where to from here? |