11 January 2010

Mozambique: Guebuza Promulgates Casino Bill

Maputo — Mozambican President Armando Guebuza on Monday promulgated a bill amending the law on games of chance, immediately after the Constitutional Council had given its opinion that the bill does not violate the Constitution.

The bill, passed unanimously by the country's parliament, the Assembly of the Republic, in June, relaxes restrictions on gambling and allows casinos to be built pretty well anywhere in the country, whereas the 1994 law that it replaces had put certain areas out of bounds, notably the offshore islands, because of their fragile ecosystems.

The 1994 law stated that casinos could only be built as part of a complex including a luxury hotel with at least 250 rooms. The bill scraps this, stating only that casinos must be built "in association with one or more hotels of not less than four star ranking" (in Maputo City, the obligatory ranking goes up to five stars).

The minimum investment demanded of a company seeking to set up a casino has been cut from 15 million to eight million US dollars.

The bill also legalizes on-line gambling, and will allow the establishment of rooms full of slot machines in places that are not part of the casinos (though owned by the casino company). In other words, companies would be able to set up slot machines in places such as shopping centres, thus vastly increasing the temptation to gamble, attracting people who would not normally set foot inside a four star or five star hotel.

These changes were justified by the need to attract more tourists to the country, and the body with authority over casinos is switched from the Finance to the Tourism Ministry (although the Finance Ministry will retain the power to inspect casinos, and collects the casino taxes).

But when Guebuza referred the bill to the Constitutional Council, none of these issues were on his mind. Instead, he asked the council whether the bill violates the right to private property, an issue that was not mentioned in the parliamentary debate.

Article 82 of the Constitution declares "The state recognises and guarantees the right to property".

Guebuza asked the Council whether this contradicts clauses in the casino bill under which, at the end of a casino concession, or if a concession is cancelled, the property reverts to the state, and not to whoever was running the casino.

The Mozambican law defines casinos, not as private property, but as part of the public domain, which are leased out to private companies for a particular period. The governing board of the Assembly, its Standing Commission, in its communication with the Constitutional Council, compared the concession of a casino with that of roads and railways - thus a private consortium built the Mozambique-South Africa motorway, operates it for a defined period during which it recovers its investment, and then hands the road over to the Mozambican government.

Essentially the Council agreed with this comparison, and saw nothing unconstitutional in the article in the bill which states that, at the end of the concession, and without any right of compensation for the concessionary company, "the assets inseparably linked with the operation of the games" as well as any improvements that the company may have made, revert to the state.

If the concession is cancelled because the operating company violates its contracts, the assets also revert to the state, and the company loses the deposit it made when signing the contract.

The Council ruled that the constitutional right to property is not absolute, and is limited by the public interest - which is why the right to property is not accorded the status of an individual right or freedom, in which the public powers may not interfere. The constitution places it instead in the more limited sphere of "economic and social rights".

Furthermore "realizing the right to property implies state intervention, both in the positive sense, to guarantee that this right is enjoyed by citizens, and in the negative sense, to impose limitations and restrictions based on the public interest", the Council pointed out.

The modern concept of the right to private property, it added, explicitly admits that the law may place restrictions on this right - so that owners cannot simply do whatever they like with their property.

The Council cites the conservative Portuguese jurist Diogo Freitas do Amaral to back up its position that operating a casino involves an "administrative contract" between the company and the state, under which the company operates the establishment at its own risk, makes its money out of the profits, and at the end of the contract hands the property over to the state (which can then run the casino itself, or farm it out to another operator).

Since the company, during its lengthy lease on the casino, can recover its investment, and since it knew when it signed the contract that it would have to abandon the property at the end of the contractual period, no constitutional principle was involved.

Any company bidding for a casino contract knows in advance what the terms are, the Council said, and the very fact of the bid means that the company accepts those terms. There was thus no possible constitutional objection to those clauses in the law envisaging that, when the contract is over, the property linked to the games reverts to the state.

So far Mozambique possesses just two casinos, one in Maputo, and one in Namaacha on the border with Swaziland.

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