Macau Gaming Law Primer
By Tom Smock

Macau, a Special Administrative Region (SAR) of the People's Republic of China, is the only area of China with legally operated land-based casino gaming. Since the May 2004 opening of the Sands casino, Macau has seen an unprecedented explosion of growth within its gaming industry. Witnesses to the Sands opening recall the building's entrance doors - quite literally - being torn from their hinges by the mob of anxious gamblers rushing to enter the new casino. Since then, casino development has proceeded at breakneck speed to capture market demand, and Macau's gaming law has evolved in an effort to keep pace.

Macau was a Portuguese colony for more than 400 years before it transferred back to China at midnight on Dec.19,1999 (known as the "handover" and annually celebrated as a holiday in Macau). As a result of its colonial past, Macau still maintains a legal system similar to the current Portuguese system, but is subject to amendments that have been adopted since the handover.

In general, Macau has legal system that is largely codified having, for example, a civil code, commercial code, penal code, etc. Additionally, Macau law is bilingual; its laws are debated, created and published in Chinese and Portuguese.

The lawmaking process is based on two distinct bodies that have the power to create new laws - the Legislative Assembly and the chief executive. The Legislative Assembly consists of members who are directly elected, members who are indirectly elected and members who are appointed by the chief executive. The Legislative Assembly can pass changes to the Macau codes by enacting, suspending or repealing laws. The chief executive, currently Edmund Ho Hau Wah, who is serving his second elected term through December 2009, is empowered to sign bills passed by the Legislative Assembly. Further, the chief executive is also empowered to enact executive orders and promulgate administrative regulations.

Unquestionably, the legal change having the greatest practical impact in Macau since the handover has been the adoption of new laws liberalizing entry into the casino industry. Government-permitted gambling has existed in Macau for hundreds of years. But since 1962, casinos were only legal pursuant to a 40-year monopoly concession granted by the government to the Sociedade de Turismo e Diversoes de Macau (STDM), owner of the famed Lisboa Hotel & Casino in operation since 1970.

As the STDM monopoly concession reached the end of its term, Macau Law 16/2001 (Legal Framework for the Operations of Casino Games of Fortune) was passed by the Legislative Assembly and signed by the chief executive in September 2001. Chapter II of Law 16/2001 permitted three new, separate 20-year casino concession contracts to be granted through a public tender process. Additionally, in October 2001, the chief executive issued Administrative Rule 16/2001, which provided specific guidelines for the tender process and subsequent casino operations that would be allowed under the new concessions.

Following the tender process, the government granted three new casino concessions in 2002 to Wynn Resorts (Macau), Galaxy Casino and SJM, an affiliate of STDM. Law 16/2001, together with the express terms of these three concession agreements, forms the crux of current gaming law in Macau. Three additional subsequent government permitted sub-concession agreements were granted to Venetian Macau, MGM Grand Paradise and Melco PBL, which flowed from the concessionaires as expressly contemplated under the original concession terms.

Article 1 of Law 16/2001 states the object of Macau's gaming law, which includes the "promotion of tourism, social stability and economic development" in the SAR, while Article 3 defines the specific types of casino games that are permitted. However, many of the sections of Law 16/2001, as well as Administrative Rule 16/2001, were drafted to address the process involved in tendering and granting the concessions. Thus, in some instances, the law was silent as to key areas of the new concessionaires' daily casino operations.

As a result, subsequent clarifications to Macau's gaming law have been issued. For example, in March 2002, the chief executive issued Administrative Rule 6/2002 governing the activity and licensing of Macau's junket operators, or "gaming promoters" as they are referred to under the rule. This rule calls for suitability and licensing of junket operators and grants Macau's gaming regulatory authority, the Gaming Coordination and Inspection Bureau (DICJ) the authority to supervise junket operator activity.

On May 31, 2004, Law 5/2004 was passed to address the issuance of casino credit. Law 5/2004 specifically allows the holders of casino concessions, sub-concessions and gaming promoters to issue credit in the form of casino chips given to patrons without immediate payment. The law provides that such a transfer of casino chips creates a civil obligation for the debtor to repay the credit issued.

In March 2006, the Legislative Assembly passed, and the chief executive signed, Law 2/2006, establishing measures for the prevention of money laundering. Prior to this law, none of Macau's existing anti-money laundering rules applied to casinos. But, Article 6 of Law 2/2006 makes clear that the newly enacted requirements apply to those entities that conduct gaming activities, as well as to game promoters.

As Macau's newly competitive casino industry continues to mature, certain review and clarification in other areas of the general framework of Law 16/2001 should also be anticipated. In consultation with the industry, Macau is already considering new laws regarding slot machines, such as specifically requiring slots to be subject to a centrally controlled monitoring system. Given the current labor shortages in Macau, together with the continuing growth of slot play, such a centralized monitoring requirement seems to be a good solution and safeguard.

Article 4 of Law 16/2001 states that concessionaires are not authorized to operate interactive games; rather, interactive gaming must be pursuant to a separate concession of the government. This area is also one Macau's gaming industry should anticipate future clarification on. Likewise, more specific regulations regarding casino chips and better practical definitions of gaming areas may arise in the near future.