Macau, ______, 2011.
To: ____ COMPANY LIMITED 澳 門 __________
Re: LEGAL OPINION - Macau Gaming Credit Law - Law 5/2004
Dear Sirs
We are lawyers qualified to advise in Macau Special Administrative Region (“Macau”) and we were requested to provide a legal opinion (“Legal Opinion”) on the laws of Macau in force and applicable in the matter of gaming credit procedures and its legal regime. For the said purpose, we have examined the laws, rules and regulations that we deem necessary for this Legal Opinion hereunder. This Legal Opinion is limited to and is given on the basis of the current laws and practice in Macau and is to be elaborated in accordance with and governed by the laws of Macau.
◊ In order to provide this opinion, we have examined each of the following documents: (1)Commercial registry of ___ Company Limited, issued 6.01.2010; (2) ____ Company Limited Gaming Promoter Licence number E__;
(3) Authorization Extend Credits Agreement granted by and between ___ Macau, S.A. and ____ Company Limited; (4) Exhibit A of the Gaming Promotion Agreement between ___Macau, S.A. and ___ Company Limited; (5) Four Markers/Receipts IOU: ___, issued on ___, ___, issued on ___, ___, issued on ___, and ___, issued on ____.
â—Š The opinions in this opinion letter are subject to the following assumptions: (1) The Examined Documents are legal, valid and binding in relation to each of the persons involved; (2) All signatures are genuine; all copy documents are complete and conform to the originals; (3) All factual statements, information, representations contained in the Examined Documents (which we have not independently verified) are accurate, complete and up-to-date. (4) There have been no changes made to the Examined Documents provided to us for the purposes of this opinion letter. â—Š Based upon the foregoing and having regard for legal considerations which we deem relevant, including, without limitation, the Gamming Laws and regulations, the Civil Code and the Commercial Code, we are of the opinion that:
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1st Question – Whether is there under Macau Law any contract of borrowing and lending money such as the ones existent in Hong Kong legal system? 1.1 In Macau, the contract for money borrowing is regulated by Macau Civil Code, in its articles 1070 to 1078. 1.2 However, specifically for the purpose of gambling credit grant contracts, there is the Law 5/2004, enacted on 14
th
July, which rules the granting
of gaming credit in Macau and, according to its article 3, authorizes the i) concessionaires, the ii) subconcessionaires and the iii) gaming promoters who enter into a contract with the concessionaires or the subconcessionaires, to grant gaming credit. 1.3 According to that Law - article 6, paragraph 6 - the power to grant gaming credit must be limited to three typical situations: 1 – a concessionaire or a subconcessionaire as a creditor may grant gaming credit to a gaming patron as a borrower; 2 – an authorized Gaming Promoter as a creditor may grant gaming credit to a gaming patron as a borrower; 3 – a concessionaire or a subconcessionaire as a creditor may grant gaming credit to an authorized Gaming Promoter as a borrower. 1.4 Such powers to grant gaming credit cannot, as a general rule, be assigned or transferred in any form - otherwise that grant will be void, according to article 5 (the only exception is on paragraph three of this same article 5). 1.5 As to the gaming credit contract between the credit grantor (whoever he may be) and the borrower (whoever he may be), it is enforceable as a civil debt, according to article 4 of Law 5/2004. 1.6 That means that such obligation to repay the debt and the interest is 3
legally qualified not as a natural obligation but rather as a full civil obligation. 1.7 Therefore, whenever arises any breach, nonperformance or any failure to comply voluntarily with all or any of the contractual obligations – which, most of the times, will be simply the obligation to repay the amount lost and pay the due interest - such matters can be submitted to Macau Courts as it is a judicially enforceable obligation, following the general regime established in article 807 of Macau Civil Code. 1.8 Under Macau Law, we can affirm that it is possible to celebrate any contract of borrowing and lending money and, furthermore, there is one special regime for the gaming activity, regulated by a special law (Law 5/2004).
2nd Question - What is an Agreement for Concession and Issuance of Credit under Law 5/2004? 2.1 Agreement for Concession and Issuance of Credit is the contract or pact agreed and documented upon the signature made by the borrower in the Marker/Receipt IOU as he is granted any gaming credit. 2.2 By means of that agreement, the borrower declares to have received the credit and declares to accept and agree with the terms and the conditions that the credit grantor has demanded him in order to lend the credit. 2.3 Such agreement or contract can be qualified as a standard agreement, that is to say, it is prepared in advance by one of the parties (the credit grantor) and is aimed to be accepted without any particular negotiation in an undetermined number of contracts with hypothetic borrowers (1).
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As in JORGE GODINHO, Professor at Faculty of Law of the University of Macau, in ‘Credit for gaming in Macau’. 4
2.4 Being a standard agreement it is not, however, subject to any Governmental approval but rather to full compliance with Macau Civil Code and, furthermore, with Macau Law on Standard Contract Terms (Law 17/9/M enacted on 18th September) (2). 2.5 Being so, some limits shall apply such as the interest rate which will be legally deemed usurary if it exceeds the triple of the default interest rate, which stands currently at 9,75%, according to Executive Order 29/2006 enacted on 10th July. 2.6 Nevertheless, Macau Law does not invalidate the contractual fixation of an usurary interest rate but rather previews as the proper remedy its automatic reduction to the maximum legal limit (the referred triple), according to article 1073, paragraph three, of the Macau Civil Code. 2.7 On the other hand, the Macau Commercial Code states that there is freedom to issue negotiable instruments not especially mentioned in the law, according to its article 1064 and following ones. 2.8 In order for a Marker/Receipt IOU to be validly considered as a negotiable instrument, the intention to issue it as an instrument of such nature must be clearly mentioned in it and the law must not forbid it, according to the same article 1064. 2.9 In accordance with article 677, c), of Macau Civil Procedure Code, if such instruments abide to all the legal requirements, they can and they must also be qualified as executive titles and, therefore, they can be directly submitted by the creditor to Macau Courts in order to obtain at once the coercive execution proceedings of the unaccomplished obligations, that is to say, no prior
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Idem. 5
declarative action will be needed. 2.10 So, we can affirm that an Agreement for Concession and Issuance of Credit i)
is a contract documented and agreed upon the signature made by
the borrower in the Marker/Receipt IOU; ii) by means of which the borrower clearly declares to have received the credit and clearly declares to accept and agree with the terms and the conditions that the credit grantor has demanded him in order to lend the credit; iii) is a standard agreement, not subject to any Governmental approval, rather to full compliance with Macau Civil Code and with Macau Law on Standard Contract Terms, in result of which some limits, as the maximum of the triple of the legal default interest rate, shall apply; iv) is judicially enforceable and the Marker/Receipt IOU in which the Agreement is documented can be presented in Court immediately as an executive title.
3rd Question - Requirements under Law 5/2004 and article 1064 of Macau Commercial Code: Money borrowing and lending and/or Agreement for Concession and Issuance of Credit? 3.1 Considering that such Agreement for Concession and Issuance of Credit is documented by means of a negotiable instrument called marker – the Marker/Receipt IOU -, it needs to be in writing and the object of the performance expected must be clearly mentioned there – the repayment of the granted credit and of the correlated interest - as well as it must be clearly specified the amount that has been lent and borrowed, preferably not only in 6
figures but by words, all according with article 1068 of Macau Commercial Code. 3.2 Such Agreement must always be signed at least by the borrower, according to article 1066, paragraph one of Macau Commercial Code. 3.3 Considering, however, that it is a onerous contract – i.e., a contract that demands the obligation of the borrower to repay to the lender the credit granted and to remunerate him through an interest rate -, it is also required that the lender also signs such contract and, if applicable, also the warrantor and the witness. 3.4 If by any chance the lender has not signed the Agreement, one of the major disadvantages will be that the correspondent Marker/Receipt IOU – within which the Agreement should be documented - cannot be qualified as an executive title and, therefore, if the creditor nevertheless wishes to obtain the repayment and collect the interest he must submit a prior declarative action in Court in order to try to prove that he has actually granted such credit for gambling. 3.5 It must also be referred that according to article 1116 of Macau Commercial Code; incomplete negotiable instruments can be accepted and then filled in accordance with the clauses agreed in advance with the patron. 3.6 In sum, the requirements imposed by the laws in appreciation are: i) written form; ii) mention to the repayment of the granted credit and the correlated interest; iii) mention to the amount lent and borrowed; iv) signatures by the borrower, by the lender and, if applicable, by the warrantor and the witness. 4th Question - ____ Company Limited has complied or not with all legal 7
requirements in the four presented credit operations? 4.1 We notice that the Marker/Receipt IOU ___issued on ___ was not signed by the borrower and, therefore, we do not deem it void but, however, as mentioned above, it cannot be qualified as a negotiable instrument nor as executive title and, therefore, the creditor must submit a prior declarative action in Court in order to try to prove that he has actually granted such credit for gambling. 4.2 As to the others, we consider them to be valid and judicially enforceable, both in Macau as in Hong Kong Courts (3). 5th Question - Importance of ____Company Limited being duly authorized as a Promoter of Games of Fortune and Chance? 5.1 As above said, it is essential that the credit lender, if he is a Promoter, has a triple authorization. 5.2 First of all, such Promoter must be entitled with a Governmental Gaming Promoter License (to be provided by the Gaming Inspection and Coordination Bureau), according to Administrative Regulation 6/2002, enacted on 1 st April, and Administrative Regulation 27/2009, enacted on 10 th August. 5.3 Secondly, in accordance with article 23 of these two Administrative Regulations, such Promoter can only work as a Promoter if he is registered in any 3
As decided in 2010 by the Court of First Instance of the High Court of the Hong Kong S.A.R. in the case of Wynn Resorts vs. Mong Henry-, obligations that arise from credit for casino gambling granted in Macau are enforceable in Hong Kong – download of that decision is available in http://www.hklii.hk/hk/jud/eng/hkcfi/2010/HCA000192_200969792.html Anyway, such case of law had already been previously established under Hong Kong Courts, for instance in the Las Vegas Hilton Corporation vs Lo Yuk Leong, Court of Appeal, 1997 and in the LLC vs Chow Kam Fai David, Court of Appeal, 2002. 8
concessionary and, furthermore, if that registry is authorized by the Gaming Inspection and Coordination Bureau. 5.4 Finally, such Promoter must also be himself authorized by the concessionary/sub concessionary to grant credit, according to article 3, paragraph 2, and article 8, paragraph 1, both of Law 5/2004. 5.5 Otherwise, not doing so, that credit grantor – who is not, therefore, technically a Promoter - will be most certainly committing a crime of gaming usury, according to article 16 of Law 5/2004 and article 13 of Law 8/96/M enacted on 22nd July and, in accordance to that, be deemed by the criminal law as a extortionate money-lender. 5.6 Moreover, even in the case that such credit grant is not by any chance actually qualified as the above crime, nevertheless the obligations that arise from that credit grant will be qualified only as natural obligations and, therefore, obligations that are not judicially enforceable anywhere. 5.7 Answering to the submitted question, we can affirm that it is crucial and essential that ____ Company Limited is authorized and registered in the above terms.
6th Question - ____ Company Limited can impose and claim overdue charge
even
though
the
terms
and
conditions
at
the
back
of
the
Markers/Receipts IOU do not mention its amount? 6.1 Under Macau Law, the legal interest rate has been stipulated at 9,75%, according to Executive Order 29/2006 enacted on 10th July, and the maximum that can be imposed in any commercial operation is three times that legal interest rate. 9
6.2 If the accorded interest rate exceeds 29,75% - the triple of the default interest rate - it will be deemed usurary and be automatically and ope legis reduced to that maximum of the triple of the default interest rate. 6.3 In the situation presented to us, no interest rate has been stipulated in the Marker/Receipt IOU and, so, according to article 1070, paragraph 2, of Macau Commercial Code, any overdue charge must be calculated in accordance with the legal default interest rate, that is to say, it is 9,75% per year. CONCLUSIONS: 1st - Under Macau Law, like in Hong Kong legal system, it is possible to celebrate any contract of borrowing and lending money and, furthermore, there is one special regime for the gaming activity, regulated by a special law (Law 5/2004). 2nd - Agreement for Concession and Issuance of Credit is a contract enforceable as a civil debt, documented and agreed upon the signature made by the borrower in the Marker/Receipt IOU, by means of which the borrower clearly declares to have received the credit and clearly declares to accept and agree with the terms and the conditions that the credit grantor has demanded him in order to lend the credit and is a standard agreement, therefore subject to full compliance with Macau Civil Code and Macau Law on Standard Contract Terms, namely the automatic and ope legis reduction to the maximum of the three times the default interest rate, which is at present 9,75% per year. 3rd - The requirements imposed by the laws in appreciation are: i) written form; ii) mention to the repayment of the granted credit and the correlated 10
interest; iii) mention to the amount lent and borrowed; iv) signatures by the borrower, by the lender and, if applicable, by the warrantor and the witness. 4th – Marker/Receipt IOU ___, issued on ___, was not signed by the borrower and, therefore, it cannot be qualified as a negotiable instrument nor as an executive title and, so, the creditor must submit a prior declarative action in Court in order to try to prove that he has actually granted such credit for gambling. 5th - As to the other Markers/Receipts IOU, we consider them to be valid and judicially enforceable, both in Macau as in Hong Kong Courts. 6th – Promoter of Games of Fortune and Chance must have a triple authorization: entitlement with a Gaming Promoter License provided by the Gaming Inspection and Coordination Bureau; registry in any concessionary and authorization of that registry by the Gaming Inspection and Coordination Bureau; authorized by the concessionary/subconcessionary to grant credit. 7th - Otherwise, not doing so, he may be committing a crime of gaming usury and the obligations arisen from that credit grant will be qualified only as natural obligations and, therefore, obligations not judicially enforceable anywhere.
8th - It is crucial and essential that ___ Company Limited is authorized and registered in the above terms. 9th – In the case that no interest rate has been stipulated in the Marker/Receipt IOU -, we consider that any overdue charge shall be calculated 11
in accordance with the default rate, that is to say, it cannot be up 9,75% per year. This Legal Opinion is confined to and given on the basis of the laws of Macau as they are in force at the date of this opinion. Yours faithfully,
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