Welcome to the seventh 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? |
Article 48F(2) of the new Macau gaming law reads, “Concessionaires are jointly and severally liable for the liability of their gaming promoters arising from carrying out gaming promotion activities in their casinos …”
This is nothing new. Being aware of this potential liability, concessionaires carry out their own due diligence process before entering into formal written agreements with gaming promoters. They are also able to take some comfort in the knowledge that these gaming promoters – more commonly known as junkets – go through an annual DICJ review, with new licences issued each January 1.
Junkets have been a hot topic in the Macau gaming industry in recent months. On 26 November 2021 the Wenzhou Public Security Bureau announced it had been granted approval by the People’s Procuratorate of Wenzhou to issue an arrest warrant for Alvin Chau, the CEO of Macau’s largest junket operator, Suncity Group. This led to a cascade of events, including the Macau arrest and detention awaiting trial of Mr Chau and Levo Chan, the Chairman and CEO of Macau’s historically second largest junket operator, Tak Chun.
Ultimately, the junket industry as we have known it for the past decade or so ended with the demise of dedicated junket rooms, the closure of Suncity and Tak Chun, and the announcement by various Macau concessionaires of the cessation of the operating relationships with major junket operators.
The prevailing wisdom around town is that junkets will carry on, but in a vastly diminished form to their prior incarnations. Under the new proposed Article 23(2), each gaming promoter may only work with one concessionaire, and under the new Article 23(4), gaming promoters may no longer have dedicated junket rooms nor participate in revenue sharing arrangement with concessionaires. This will see gaming promoters devolve towards to their original form, as in the pre-liberalization days, when they received a commission on rolling and acted more akin to glorified travel agents rather than the pseudo-operators which they became throughout much of the last decade.
The President of the Macau Association of Gaming and Entertainment Promoters, Kwok Chi Chung, confirmed as much when he spoke with Inside Asian Gaming last month, acknowledging that junkets would likely need to revert to their original “commission on rolling” business model. Kwok told IAG, “Promoters have existed since before the liberalization of the gaming industry and have been expanding during these past 20 years … This [new] direction is just ‘back to the starting point,’ because before the handover [of Macau back to China in 1999], in the beginning, we were already working in that direction … I am very confident about the future of promoters because we used to work like that.”
It seems Kwok is not the only person with this view, with 46 junket licenses being issued in January this year and another 29 potentially on the way, as at the end of January. It’s hardly the 85 issued the year before and is well below the peak of 235 back in 2013, but then again it’s also not none.
While it is understandable that concessionaires are liable for promotional activities of the junkets they engage with, there is a provision in the new gaming law which will be of more concern to Macau’s gaming operators. Article 48F(3) provides that concessionaires will be “jointly and severally liable for the liability of members of administrative organs, employees, and collaborators of their gaming promoters arising from carrying out gaming promotion activities in their casinos …”
Collaborators are defined in Article 2(11) as “natural persons selected by gaming promoters to assist in their engagement in games promotion operations …” While such people are authorized by the DICJ in accordance with Article 23A, it is merely because of gaming promoters “submitting a list of collaborators that it intends to select or replace” to the DICJ.
In other words, the concessionaires do not choose the collaborators, the junkets do. Collaborators are “friends of friends” of the concessionaires, so to speak. While you can choose your friends, you can’t choose who your friends choose as friends! There is no contractual or legal relationship between the concessionaires and the collaborators, and the concessionaires have no power to dismiss or censure a collaborator.
Further, collaborators can work with multiple junkets and, indirectly, multiple concessionaires. They can introduce players who play at many different casinos in Macau – so at any given moment it may be difficult to know precisely which junket a collaborator is working with, and therefore which concessionaire would be liable for the collaborator’s actions.
There is a very large network of collaborators in Macau. At any given moment, a concessionaire may not be precisely aware who is and who is not operating as a collaborator in their casino – and which junket operator they are collaborating with. Here’s another issue: what happens if a collaborator meets and does business with a junket operator on the site of a casino owned by a concessionaire the junket operator in question is not working with? Which concessionaire is liable? The one working with the collaborator, or the one which operates the casino the meeting is held at?
Frankly, it’s potentially very confusing and while it’s reasonable that concessionaires be liable for the actions of junkets it has entered into a contract with, it seems a stretch to burden the concessionaire with responsibility for the actions of any number of potentially “lone wolf” collaborators wandering their casino floors.
The eighth article in this series will be published next 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? |
