Inside Asian Gaming

INSIDE ASIAN GAMING | July 2010 22 Macau Policy Mentor the Dragon Rules governing Macau’s soaring junket operations are clearly spelled out, says lawyer Bruno Nunes A s much as people try to introduce the concept of “diversification of the economy”, there is no way around the fact: Macau is gaming, and mainly high stakes gaming. Diversification plans are either wishful thinking or are in the infancy stage. If it is casino gambling that makes Macau the world’s gaming capital, then what much of the outside world— especially investors—want to understand is the legal framework that regulates the junkets, the specialist agents that help to create most of the revenue via VIP ‘roll’. The agents do that by facilitating the extension of credit to high rollers in return for a commission on their roll. Background on gaming and junkets in Macau Gaming in Macau has existed for centuries and was legalised in the mid 19th century. In 2002 the 40-year monopoly of STDM ended following the approval of Law no. 16/2001 (a legal framework for games of fortune and chance in a casino). Thus far, six gaming licences have been granted: Sociedade de Jogos de Macau (SJM), Wynn Resorts, Galaxy Entertainment Group, Las Vegas Sands, MGM Mirage/Pansy Ho and Melco/PBL 1 . Currently 33 casinos operate in Macau, with a total of 4811 tables and 14,503 slot machines. This inventory has just delivered the highest grossing quarter ever in the casino history of Macau with gross revenues amounting to almost 41 billion patacas 2 . Of these revenues almost 70% derive from the VIP segment, where the biggest contributors are the junkets. Macau’s system of contractual deals in VIP gaming was established in the mid 1980s, during STDM’s gaming monopoly concession. Although contracts between junket agents and casino operators assumed at that time an important role in the supply of VIP players to the casinos, limited government regulation was in place to control junket activity. The principal reason for this was that there was only one gaming concessionaire. The control resided mainly in authorisation and general control of the junkets by the Gaming Inspection and Coordination Bureau. The contracts themselves were private agreements between junket and operator, operated within the general framework of Macau commercial law. Study of legal history in most cultures suggests commercial custom comes first Junket regulation–Confucian principles of moderation allied with Western legal tradition 1 Macau implemented the concept of concessions awarded by public tender for games of chance within casinos (thus technically not licensing the operation of a casino in itself) under Law no. 16/2001. Article 7, no. 1, which states there should be a maximum of three licences. These were granted to SJM, Wynn Resorts and Galaxy Entertainment Group. Three sub concession licences were granted to Las Vegas Sands, MGM Mirage/ Pansy Ho and Melco/PBL (now Melco Crown Entertainment). These operators had to enter a sub concession agreement with the government. 2 www.dicj.gov.mo/web/en/information/DadosEstat/2010/index.html