MACAU 31 OCTOBER - 4 NOVEMBER Speaker: Álvaro Santos Rodrigues C&C Lawyers, Macau, China

Transcription

1 57 th CONGRESS - INTERNATIONAL ASSOCIATION OF LAWYERS (UIA) MACAU 31 OCTOBER - 4 NOVEMBER 2013 Round Table Discussion: The Game of Litigation Saturday, 2 November Speaker: Álvaro Santos Rodrigues C&C Lawyers, Macau, China Dear Colleagues, My name is Alvaro Rodrigues, I ve been a Lawyer in Macau for more than 20 years now, and I m here to talk to you about litigation in gaming. To talk about gaming in Macau is to talk about a cultural practice that goes so far back in time that it s not feasible to trace it. According to history, in the 16 th century when the first Portuguese arrived at this small place at the Pearl River Delta, gaming was already a reality. In fact, the territory s most vibrant industry and economic activity is the product of the perfect symbiosis between a capitalist culture and a belief that sees good fortune as the means to happiness and personal success. 1 Rapidly realizing the importance of this activity to the Asians the local Portuguese authorities were very liberal towards gaming from early on, as long as it did not disturb the public order. 2 In 1842, with the end of the First Opium War and the fall of Hong Kong into British hands, much of the European trade with China moved from Macau to the new British colony, forcing the Portuguese to find new sources of public revenue. In 1847, the first set of 1 Taking DENG XIAO PING s words for our own, it is appropriate to say that in Macau To be rich is glorious. 2 According to writings dating from 1742 and 1745 and attributed to the priest José de Maria de Jesus, at the time vagrancy, thievery, swindling, gambling, drinking, disobedience, cheating, murder and other similar vices abounded. B. OKULEY/F. KING-POOLE, Gambler s Guide to Macao, SCMP, 1979, p. 5, note 2.

2 regulations ruling gaming was introduced in order to legalize and tax the activity and, therefore, reinforcing the territory s finances. 3 Although in 1850 it is estimated that over two hundred Fantan 4 houses already existed in Macau, it was only at the end of the 19 th century that the gaming industry assumed its true economic leadership of the territory s finances and turned into one of the principal sources of government revenue. At the start of the 1930s, and in the aim of increasing tax revenues and developing the economy, the Macau government decided to grant the first gaming concession to the Companhia Hou Heng, run by Fok Chi Ting, which was given monopoly rights to operate gambling activities permitted by the law. From that moment on, new games were introduced, specifically Baccarat, which is currently the most popular table game. In 1961, the Portuguese authorities declared Macau a permanent gaming region. And in 1962, when the first concession ended, the government granted a new concession to what would become the best known and most successful gaming company in the territory, STDM, set-up amongst others by the well-known Stanley Ho. For more than 40 years, STDM had a monopoly of the gaming market in Macau, not only exercising a notable influence on the economy, but also on the entire local community. In 2002, after the handover to the People s Republic of China, the gaming sector was liberalized in Macau with the granting of not one, but three concessions, which, with the a further three sub-concessions, actually became six. This was the beginning of the modern era of gaming in Macau. The market went from a monopoly to an oligopoly consisting of a small group of operators providing casino gaming. 5 3 On a purely informative note, casinos were banned in Portugal until the beginning of the 20th century. This situation changed with the introduction of Decree No of 3 December Fantan is an ancient Chinese game. It derives from the word fantaneiro, a very old Macanese dialect word. Along with P ai Kao, it has always been very popular with the local people, even before it was legalised. 5 There are currently three concession-holders in Macau: SJM, Wynn and Galaxy. In 2005, SJM granted sub-concession rights to MGM Macau, Wynn to Melco and Galaxy to Venetian.

3 The legal system in Macau), which is modeled on Portuguese law, bases its criminal law on the underlying principle of legality, whose key maxim is nullun crine sine lege, nullun poena sine lege. The value and importance of this principle is also established in Article 29 of the Macau Basic Law, thereby conferring upon it the relevance of a fundamental law. Put simply, there is no crime without law and no punishment without law. Therefore, in gaming-related crime, the rule is entirely identical to any other type of crime provided for in the territory s law. In other words, what is not provided for in either the Criminal Code and/or any other separate law created for the purpose is not a crime. A century and a half after the first effort to regulate the gaming industry in Macau, much has been done to advance and improve measures to combat the most common crimes in this area, specifically the crime of usury, and more recently the crime of money laundering. Without a shadow of a doubt, usury is the most common crime in Macau. The first record of its existence date back to 1877 and today, although no official statistics are available, Macau remains the world leader in gaming-related criminal usury. Article 13, no. 1, of Law 8/96/M establishes that the lending of credit for gaming in order to achieve financial gain is deemed criminal usury in gaming. Notwithstanding the fact is that it is very difficult to prove legally that any financial gain has taken place. The result of this was that up until the lending of credit for gaming was deemed as a natural obligation. 7 Therefore the creditor only had the power to intend that the debtor fulfilled the obligation of repayment and never the possibility to demand this repayment coercively. In practice, the gambling debtor could never be called upon to comply. Instead the debtor could chose to do it voluntarily, in which case the repayment was deemed genuine. What this means is that, up until 2004, failure to repay gaming debts could not be claimed through legal channels, but could only be fulfilled voluntarily as a mere duty of conduct. 6 The year that special legislation for this area was approved with the entry into force of Law No. 5/2004 of 14 June. 7 This is stated in Article 1171 of the Civil Code where it deems gaming and betting to be the source of natural obligations, save where a special law establishes them as a source of civil obligations.

4 This situation not only created greater risk surrounding the lending of credit, but also ensured the total lack of rules governing the activity. It also facilitated the actions and conduct of gaming promoters who very often fell into the hands of organized crime. It was in this context that the government decided to introduce legislation to regulate an activity that everyone was aware of, but whose irregularities were not governed by the existing general law. This new law, Law 5/2004, was targeted at fighting the organized crime. According to Article 3 of this new law, only the following entities were authorized to lend credit: the concession-holders, sub-concession-holders and gaming promoters (also called junkets) upon the signing of an agreement with the concession-holder or sub-concession-holder. If the lender is not the concession-holder, sub-concession-holder or a gaming promoter with an agreement with the two former entities, this conduct falls in the crime of gamingrelated usury, in the obvious event that the transaction involves a financial gain. After the introduction of this new law, the crime of usury increased in relative terms, rising from 106 cases in 2004 to 205 in November The major problem faced by all gaming jurisdictions in which credit loans are allowed is the collecting of these loans in other jurisdictions, specifically those where the concept of gaming credit is unknown, or where no type of general legislation on the activity in question even exists. The tendency in jurisdictions less tolerant towards gaming is not to permit the coercive collecting of these credit loans through judicial enforcement of the debtors assets located in their territory. In the specific case of Macau, the major problem lies in the coercive collection of credit for gaming activities lent to bettors from Hong Kong and mainland China, the main patrons of the territory s casinos. While no doubts remain when it comes to Hong Kong, 8 the same cannot be said for mainland China. 8 In the view of the Hong Kong courts after the following notorious cases: Wong Hon versus Sheraton Desert Inn, HK Court of Appeal, 1995; Las Vegas Hilton Corporation versus Lo Yuk Leong, HK Court of Appeal, 1997; The Mirage Casino Hotel versus Tao Hiu Ming William and Yung Sal Lan Shirley, HK Court of Appeal 1999; Rambas Marketing Co, LLC versus Chow Kam Fai David, HK Court of Appeal,

5 In reality, the Chinese courts consider that credit loaned for gaming in Macau cannot be collected since this action is against the concept of public order established in the Chinese legal system. Despite the various bilateral attempts to reach a favorable outcome for both parties, this matter still remains one of the biggest legal problems facing Macau today. Another type of crime related to gaming activities is the disobedience crime. Like other administrative authorities, the Gaming Inspection and Coordination Bureau also has the authority and legitimacy to forbid citizens, who have been involved in previous criminal proceedings, from entering casinos. This measure is set out in Article 312 of the Macau Criminal Code and besides a tout court ban on gaming; it also prevents the use of the other amenities in the complexes of which the casinos are part. In 2004, 15 cases were recorded, a number which rose to 248 in November A third type of crime commonly seen in the gaming context is the crime of embezzlement. This crime, established in article 336 and 340 of the Criminal Code, essentially relates to the activities of the casinos own staff, which are deemed for legal purposes as public servers. In fact, many of these employees, and especially the croupiers and security staff, come into contact with incredible amounts of money that are hard to resist. And temptation, as Oscar Wilde put it, is the only thing a Man can t resist. So they take hold of assets (essentially gaming chips) which don t belong to them. In 2004, 36 cases were recorded, a figures which rose to 112 in November Also, when this misappropriation of the chips takes place in the VIP rooms by the Junkets staff the crime does not fall into the concept of embezzlement, but rather in the concept of abuse of trust forecasted in article 199 of the Criminal Code We have also the crime of fraud (Article 211 of the Criminal Code). Casinos are excellent places to practice deception and a number of methods are known of. In Macau, 71 cases were recorded in 2004, rising to 445 in November See all in JORGE A. F. GODINHO, Credit for gaming in Macau, in Gaming Law Review Volume 10, no. 4, 2006, p. 367, note 41.

6 Several schemes are known in Macau that fall in the concept of crime of fraud. Nowadays new technologies are also contributing for the increase of this type of illicit conduct, which involves large amounts of money. For example, the introduction of micro-cameras on the casino equipments in order to enable individuals outside of the casino to get all the information of the sequence of the cards and to pass such information to the gambler through sms to the mobile phones. Although most attempts at deception are deemed to be crimes of fraud, Article 6 of Law 8/96/M establishes other specific types of illicit conducts. In that sequence we have the crime of fraudulent gaming outside of authorized gaming places. This crime consists in operating gaming outside the casinos, assisting luck either by mistake, deception or through the use of equipment, and falsifying gaming chips. In November 2011, 11 cases of fraud were recorded. Within Law 8/96, Illegal gaming in an authorized location is the other crime addressed and punished. Anyone in a legally authorized location who undertakes gaming or any other type of betting activity which does not observe the terms and conditions contained in the game regulations, and in particular accepts bets without the necessary authorization, is sentenced to 3 years in prison or subject to a fine. Though it appears strange, this is a practice which occurs in Macau s casinos. The results verified at a certain gaming table are used by the players and the perpetrator replaces the casino, accepting the bets. This is known in Macau as the parallel betting and is very common in order to avoid the payments of the casino commissions by the players. As a legal counsel of a concessionaire I have personal knowledge of such cases, since I have handled quite a few myself. Moving forward, we come to the most publicized of all gaming-related criminal offences: money laundering. It is only very recently that this practice has been considered e crime. It was only when Law No.2/2006 that the Prevention and Suppression of the Crime of Money Laundering, entered into force and that this problem began to be specifically tackled.

7 Besides the various international conventions to which Macau is a party, Macau law requires that all financial institutions, casinos, sellers of luxury goods, real estate agents, lawyers, etc., identify the nature of their operations and activities. Until this information is provided these entities are refused to perform certain operations. Other requirements set by law include the need to store documents for a reasonable period of time and to cooperate with the authorities whenever a justified suspicion of money laundering exists. Due to their very singular characteristics, casinos are places where large sums of money circulate every day, mainly in the so-called VIP rooms. These are used by big gamblers and the origins of the huge fortunes spent often originate in simple cases of money laundering. Although year after year the MSAR government implements increasingly restrictive measures as far as the casinos activities are concerned, in the aim of preventing money laundering as far as possible, the latter still remains an invisible crime for which few prosecutions exist. Up until November 2011, only 31 money-laundering cases had been record in the MSAR courts. Finally, we come to organized crime and criminal association. This type of crime, which gained media attention at the end of the nineties, normally consists of three different types of offence: firstly, gaming-related usury; secondly, kidnapping; and thirdly, extortion and criminal association. At the start of the new century, this type of crime decreased, not just because of tighter police control, but above all due to the fact that most of the clients are now from mainland China and, as a result, this type of crime now tends to occur outside Macau. The existence of the triads in organized crime recorded in the casinos is common knowledge. However, the difficulty of establishing the necessary causation to prove the existence of a criminal association means that few legal proceedings exist... merely 5 up to November This being said, it is important to stress out that the Macau Government has taken all the necessary steps to ensure that the gaming environment is an attractive and healthy reality. Therefore, through Law No. 16/2001 and the wording of the Gaming Concession Contracts, in order to avoid future litigation, the government in a due diligence process requires that concession-holders provide all possible information on any circumstances that may affect

8 their normal operations, liquidity or solvency, legal proceedings brought against them or one or more of its directors or shareholders, or even the main employees in important positions in the casino. Having reviewed the various types of crime provided for and punished in the MSAR legal system, as far as casino gaming is concerned, and highlighted the numbers of court cases recorded up to the end of 2011, we are of the opinion that Macau is in fact a highly credible and safe gaming jurisdiction at the international level. It is one that attracts the interest of the world s largest gaming operators, which manifest total interest in continuing to invest on a massive scale in what is the largest gaming market in the world, with seven-times the earnings of Las Vegas. Beside the entire context of a free market economy, we believe that the solid judicial system and the sound measures taken to tackle the crime associated with this type of activity certainly represent a relevant factor in the industry s success. Thank you very much! Macau, 2 nd November 2013 Álvaro Rodrigues