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Analysis: Litigation risk makes it impossible to close casinos once they are opened

  • September 25, 2019
  • , Akahata , p. 15
  • JMH Translation

By Masahiro Takekoshi

 

Battles over interests are intensifying between municipalities looking to host casino-centered integrated resorts (IR) and overseas casino operators, who want to crack the Japanese market. Under the circumstances, it has been learned that prefectures and cities sanctioned by the government to host casinos will not be able to close casinos once they open as they might face the risk of litigation.   

 

On Sept. 19, the Osaka prefectural and city governments revealed that they had received casino concept proposals from a joint venture between Las Vegas-based MGM Resorts International and Japan’s Orix Corp., Malaysia’s Genting Group and an operator who prefers to remain anonymous.

 

Meanwhile, as the Yokohama city government announced its bid to host a casino, Las Vegas Sands and Melco Resorts & Entertainment said they will shift their focus from Osaka to Yokohama.

 

For the time being, the government will designate three municipalities for hosting casinos. But the structure will remain unchanged that overseas firms will take a leading role in operating casinos, regardless of which municipalities are selected as hosts.

 

Overseas casino operators once identified Japan’s casino system as an “investment risk.” This was because the government gives a 10-year permit to a casino-designated site at the initial stage, allowing it to be renewed every five years. In Macau and Singapore, for example, the operation period is set at 20 years. Overseas operators argued that the Japanese system makes it extremely risky for them to recoup their initial investment, which could amount to 1 trillion yen, since there is no guarantee that they can continue to operate over a long period of time.  

 

At a pro-casino forum held in Osaka on Aug. 8, Koichi Hagiuda, who has been appointed as minister of education, culture, sports, science and technology in the recent cabinet reshuffle and also serves as a senior member of the parliamentary league on casinos, made reference to this point when he gave a speech there.

 

Hagiuda explained that the aim of the operational period set by the government is to examine casino operators on a regular basis. He argued that the hosting municipality and the operator can sign a 30-year contract for the operation of a casino and that the contract may supersede the government’s designated operational period. He also noted that this point will be incorporated into a “basic policy” [which the government set forth in September] for clarification.

 

He also pointed out that the hosting municipality may face the risk of being sued by the operator if an anti-casino mayor is elected or anti-casino members form the majority in the assembly and they demand the casino be closed. He mentioned that this litigation risk would make it difficult for the municipality to scrap the hosting of a casino.

 

In fact, the government’s “basic policy,” which was released in September, stated that “it is necessary to secure stable and continued operations of IR facilities over the long run” and that municipalities “need to carefully consider” when they submit applications for the cancellation of casino operations.

 

It is not easy to close a casino once it is opened. “Careful consideration” is indeed necessary.

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