This article first appeared in the Mar/Apr 2014 issue of World Gaming magazine.
Esteemed Macau lawyer Luís Mesquita de Melo brings us the latest of his regular columns in which he provides insightful analysis of a wide range of legal issues related to Macau and the gaming industry. In this issue he looks at the enforcement of gaming debts under Macau law.
Gaming debts are fully enforceable under Macau law.
The Macau Civil Code determines in its Article 1171 (1) that “Gaming and betting are sources of civil obligations whenever special laws so provide, as well as in sports competitions in relation to the persons taking part in them; otherwise, if lawful, gaming and betting are a mere source of natural obligations”.
The possibility of enforcing gaming debts constitutes an exception to the normal regime under civil law systems, which qualify gaming debts as “natural obligations”, as opposed to “civil obligations”.
A “natural obligation” may be defined as an obligation that does not give rise to an action to enforce it, but that does have some recognizable legal effects. In fact if the debtor pays the debt, such payment is recognized as extinguishing the obligation although the creditor was not entitled to obtain fulfilment of such obligation by the debtor.
On the other hand, civil obligations bind in law and may be enforced in a court of justice.
With Macau being a gaming jurisdiction, and considering that Macau’s economy depends on a large scale on its gaming industry, the fulfilment of gaming debts could not be left to a “moral or social duty”, as one can easily understand, as it could undermine the basis of the gaming industry’s business rationale and “harmonious” development and sustainability.
Therefore, Law 5/2004 – legal regime for the concession of credit for gambling in casinos – was enacted to address the specific issues raised by gaming debts, maxime, their enforceability.
The most common form of undertaking gaming debts arises out of the concession of credit for gaming purposes: in fact, it is quite normal across the gaming industry for gaming operators to grant credit to their players in the form of making available gaming chips without receiving in money their face value as it happens with an ordinary purchase of chips.
The most important features of Law 5/2004 are:
- Recognizing that from the concession of credit for gaming purposes emerge civil (legally enforceable) obligations;
- The determination that the only form of gaming credit allowed is through the provision of gaming chips without a payment of the respective face value;
- The restriction of the power to grant gaming credit to the gaming concessionaires, the gaming sub-concessionaries and the gaming promoters (junkets).
Any other deals or transactions with the scope of providing credit for gaming purposes that are made in violation of these rules are considered null in the eyes of Law 5/2004 and will not be recognized as creating civil obligations and, therefore, would fall under the natural obligations regime as explained above, if not under other applicable legal provisions that incriminate a number of actions with respect to providing credit for gaming purposes (for example usury for gaming) as foreseen in Article 13 of Law 8/96/M, July 22, which regulates illicit gambling.
It is, therefore, under the regime instituted by Law 5/2004, quite easy and straightforward to obtain, in Macau, a judicial decision enforcing payment of a gaming debt arisen out of unpaid credit for gaming purposes granted by a gaming operator or a junket.
Not many other jurisdictions will recognize gaming debts and will allow for judicial enforcement of such gaming related arrangements, which raises a number of hurdles and legal obstacles in enforcing Macau judgments that recognize the obligation to pay the gaming debts.
It is absolutely impossible to enforce a Macau court decision in Mainland China where most of the VIP players that gamble in Macau will have their assets.
In Hong Kong, however, the courts recognized the enforceability of a gaming debt in a “greenfield” decision, which awarded Wynn Macau the right to obtain payment from one of its gambling debtors.
The Hong Kong court recognized the debtor received a certain amount of money under a credit arrangement and signed a Marker for the same amount and (i) the debtor had no connection with Macau apart from the fact that he gambled there; (ii) the fact that the debtor had voluntarily submitted to the Macau jurisdiction was a factor which carried less weight when contrasted with the fact that the debtor had a close connection to Hong Kong; (iii) the issues of Macanese law arising in such collection proceedings in Hong Kong did not give rise to a real risk that injustice would result from a Hong Kong court reaching the wrong conclusion.
Since the great majority of gamblers will not have any assets in Macau, the options are either to choose between obtaining a judgement in Macau (a gaming friendly jurisdiction) and enforcing such judgement in whatever jurisdiction the debtor possesses assets or, if the jurisdiction where the debtor resides allows the collection of gaming debts, to obtain a judgment directly with such jurisdiction.
