Introduction
On 22 July 2024, during his 3rd State of the Nation Address, the President of the Philippines, Ferdinand Marcos, Jr., announced the immediate ban of all Philippine Offshore Gaming Operators ("POGOs"). The ban was in response to a number of POGOs deviating from offering online gambling services, and instead involving themselves in activities "furthest from gaming such as financial scamming, money laundering, prostitution, human trafficking, kidnapping, brutal torture, even murder".
Along with this announcement, instructions were given to the Philippine Amusement and Gaming Corporation ("PAGCOR"), the government agency tasked to regulate gaming activities, to wind down and cease the operations of POGOs by the end of the year. On or about 15 August 2024, PAGCOR began the winding down process starting with the shortening of the validity of POGO work permits until 31 December 2024.
Subsequently, on 4 September 2024, PAGCOR announced that the process of winding down POGOs will start in October 2024, with the PAGCOR chairperson stating that it had been agreed upon during an inter-agency meeting and another meeting with licensees that the visas of foreigners working in POGOs will also be cancelled. The cancellation of visas will be done in batches, which is expected to remove all POGOs in the country earlier than expected.
Meanwhile, the United Arab Emirates ("UAE") has recently introduced a major development to its framework on 'Commercial Gaming', effectively legalising activities that were previously strictly prohibited or restricted, such as gambling and lotteries ("UAE Scheme"), subject to licensing and adherence to the strict regulations and standards issued.
Given the announcement that all POGOs will be banned in the Philippines very soon, operators may wish to consider relocating to another jurisdiction to continue their operations. In this regard, and given the developments taking place in the UAE, this article will explore whether the UAE may be a viable alternative jurisdiction for these affected POGOs. We have also prepared a more comprehensive comparative guide on the similarities and differences between the UAE and POGO schemes with key definitions included ("Licensing Comparison Guide"), which is available upon request via any of the contact modes set out below.
UAE Overview and the UAE Scheme Developments
The UAE is a constitutional federation of seven Emirates; namely, Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras Al-Khaimah and Fujairah. In addition to each of the seven federal jurisdictions, the UAE also includes more than 40 free zones, each considered a self-regulated jurisdiction, which are generally subject to their own laws and regulations, to the extent such laws and regulations have been put in place by the relevant free zone authority.
The UAE recently introduced a groundbreaking and long-awaited change to its Commercial Gaming framework, becoming the first Gulf Cooperation Council (“GCC”) country to legalise gaming activities which were previously strictly prohibited or restricted. These developments in the UAE came in the form of extensive licensing frameworks and standards issued by the General Commercial Gaming Regulatory Authority ("GCGRA"), including its comprehensive Licensing Guide ("GCGRA Licensing Guide").
Established in September 2023, GCGRA is the UAE federal regulatory authority which holds the exclusive jurisdiction to regulate, oversee, and supervise the gaming industry in the UAE, grant gaming licences, and enforce all regulations pertaining to all aspects of commercial gaming and gambling activities and related operations and facilities in the UAE. Based on the GCGRA's website, its stated mission is to "drive sustainable growth by cultivating world-class commercial gaming operations and agile regulation, grounded in the principles of integrity, innovation, and responsible practices", being guided by its core expressed values of integrity, trustworthiness, collaboration, innovation, and excellence.
The GCGRA Board is chaired by Mr. Jim Murren, former CEO of MGM Resorts International, supported by an Executive Management team with a depth and breadth of expertise and experience in commercial gaming and gambling, professional sports betting and all relevant ancillary areas of law and regulation. With this in mind, GCGRA's recently issued licensing frameworks and standards are quite extensive and seem to heavily mirror, albeit not entirely replicate, technical standards and regulations implemented in jurisdictions such as the United States.
It should be noted that the UAE Government is yet to publish its own federal law and the ancillary implementation regulations governing Commercial Gaming in the UAE ("Commercial Gaming Legislations"). Despite the introduction of the licensing framework under GCGRA, to date, there remain several additional UAE federal laws, regulations and policies that otherwise prohibit the act of gambling. Therefore, whether and to what extent any other laws or regulatory instruments that prohibit gambling in the UAE will be updated or repealed remains to be seen. It is anticipated, however, that the Commercial Gaming Legislations, once issued, will likely offer further clarity on the conflicts currently present under UAE federal laws, in addition to aspects such as GCGRA's authorities, the scope of the framework and the manner of its implementation, the limitations and restrictions applicable to operators and related entities, and the sanctions and penalties applicable to violations of the applicable framework.
Notwithstanding the above, it is our understanding that GCGRA is currently accepting applications and has already issued a licence to at least one operator in the UAE (with secondary sources reporting as of the date of this article that a second licence has been or is in the process of being granted). Therefore, GCGRA is likely able to clarify any ambiguities and/or grey areas which may not be currently clarified pending the issuance of the Commercial Gaming Legislations and, whilst applicants and parties interested in the UAE Scheme should be cognisant of its potential shifting and developing status, this should not necessarily be deemed as a deterrent from considering the UAE Scheme as a viable option. On the contrary, provided appropriate advice is sought from experienced experts and consultants in the field as well as GCGRA, the UAE Scheme, particularly in view of its timing, may very well be a potential alternative POGOs can count on.
Viability of the UAE Scheme and Key Considerations for Operators Under the POGO Scheme
Operators under the POGO scheme could potentially find similar avenues to continue their business under the UAE scheme, as both schemes offer licences for various forms of gaming activities catering to different roles within the gaming industry.
There are several good reasons why operators under the POGO scheme should consider moving to the UAE:
Market Potential: The UAE's decision to legalise Commercial Gaming marks a significant shift in the region's approach to gambling. As the first GCC country to do so, the UAE presents a unique opportunity for operators to tap into a new and potentially lucrative market.
Comprehensive Licensing Options: The UAE Scheme offers a variety of licences that cater to different aspects of gaming operations, including entity licences for operators and vendors as well as individual licences for key personnel. This flexibility can accommodate the diverse needs of Gaming Operators.
Possible Eligibility of POGOs under the UAE Scheme: Based on our understanding of POGOs, we view that they are likely to qualify as entities requiring an "Entity Licence" as "Gaming Operators", which include internet gaming operators. Although internet gaming operators have not been formally defined by GCGRA (this will likely be addressed in the pending Commercial Gaming Legislations), the GCGRA does elaborate broadly on “internet gaming” as being "commercial gaming conducted via the Internet, on a computer/mobile/other digital device and within the UAE".
Individual Licensing: The UAE Scheme includes individual licences for key persons and gaming employees, which could provide more clarity and accountability within the organisation.
Notwithstanding the above set out benefits and assuming POGO operators do qualify as Gaming Operators, such operators should also take into account the following considerations based on our understanding of the UAE market and the information provided on the UAE Scheme to date:
Initial Setup Costs: Transitioning to the UAE Scheme may involve significant initial costs, including the potential requirement of establishing a local entity (see item 8 below), application and licence fees, as well as compliance with technical standards and ongoing obligations.
Cultural and Legal Adjustments: Operators will need to adapt to the cultural and legal landscape of the UAE, which may differ significantly from the Philippines.
Regulatory Environment: Overall, as GCGRA appears to impose stringent technical standards as well as wide oversight and enforcement mechanisms, operators must maintain high standards of compliance to avoid sanctions and penalties. With this in mind, POGOs considering the UAE Scheme are advised to carry out a gap analysis to distinguish additional obligations and requirements which may not have been previously applicable under the POGO scheme.
Responsible Gaming Framework: The UAE's emphasis on a responsible gaming framework may require operators to adopt new practices and standards.
Fee Structure: The specific fee structures and amounts in the UAE may differ from those in the POGO scheme, potentially impacting the financial planning of operators.
Obtaining Professional Advice: POGOs will need the support of appropriately qualified and experienced legal, regulatory and tax advisors in potentially transitioning from the POGO scheme to the UAE Scheme.
Uncertainty in Implementation: As the UAE Scheme is relatively new, there might be uncertainties in its implementation and enforcement, particularly in view of the pending Commercial Gaming Legislations as noted above.
Local Entity Requirement: Although this requirement is not expressly set out by GCGRA on their website or in the Licensing Guide, our assumption is that this will likely be set out in the pending Commercial Gaming Legislations due to the following reasons:
UAE's Commercial Companies Law prohibits any commercial operations in the UAE without appropriate licensing.
GCGRA's "intake form", the completion of which forms the first step in applying for a Commercial Gaming Licence, requests the applicant to designate which of the seven Emirates it wishes to "operate in", thereby indicating that operating within the UAE is required.
GCGRA's licensing process contemplates the provision of an "in principle" approval that would allow the applicant to "incorporate [a] corporate entity" and obtain relevant visas, open bank accounts, etc., although a further step contemplates the applicant establishing a local entity "if required" – suggesting it may not be a strict requirement (at least from a GCGRA standpoint), or, in the alternative, it refers to circumstances where the applicant already has a local entity established (the language is not currently clear).
GCGRA's sole existing licensee as far as has been officially announced, maintains two local entities: a main entity established in a free zone, and a branch established onshore in Abu Dhabi.
In view of the above, we believe that the establishment of a local entity within the UAE will likely be required, although it remains unclear whether (i) such entity will have to be established onshore in the UAE or if a free zone entity will be considered by GCGRA, and (ii) whether such entity must be a fully-fledged legal entity (such as a limited liability entity) or if the GCGRA would grant licenses to branches of foreign entities.
Qualifying Domestic Entity ("QDE") Requirement: In addition to the above possible requirement for a locally established entity, the GCGRA Licensing Guide expressly states that applicants for a Gaming Operator licence "must have a relationship with [a QDE] in order to obtain a license". Although GCGRA defines a QDE as "a UAE company which has substantial business operations in the jurisdiction and can satisfy other requirements relating to financial standing and operational history", it remains unclear at this stage what GCGRA means by a "relationship with a QDE" in this context. Given the broad language used here, this could range from a contractual arrangement to a joint venture or shareholding arrangement with a local UAE entity. However, it is not possible at this time, without further clarification from the GCGRA, to determine what this could mean for a Gaming Operator Licence applicant.
Foreign Legal Standing/Record and Established Experience in the Field: The GCGRA specifies numerous criteria for Commercial Gaming License applicants. This includes:
proven experience in the gaming industry as proof of competence, and a proven record of compliance with gaming-related licensing requirements, general laws, and regulations; and
disclosure of any past or ongoing legal, regulatory or litigation proceedings.
It is also particularly important to note that the GCGRA's intake form specifically requests applicants to specify their country of operation, thereby suggesting that GCGRA (at this stage at least) might only consider foreign entities that are currently duly established.
Whilst we presume that POGOs will have no difficulty in establishing their experience in the gaming industry, it is important to bear in mind the issue of foreign legal standing given the impending prohibition of POGOs in the Philippines. As such, we recommend that POGOs, particularly those which do not hold legal standing in any other foreign jurisdiction and those that might consider the UAE as an alternative jurisdiction for their operations, take steps towards potential licensing (or at the very least commence inquiries with GCGRA in respect of the same) as soon as possible in order to avoid any difficulties that may arise as a result of the revocation of their licences in the Philippines.
Conclusion and Next Steps
Overall, moving to the UAE Scheme could be a strategic decision for POGOs looking to continue their business in a regulated environment and an untapped market, particularly given the UAE'’s geographical and economic potential of becoming a regional hub and a leader in the gaming industry in the region.
Nonetheless, in view of the above considerations, POGOs should first evaluate the differences between the two schemes and seek further guidance from GCGRA as to:
any ambiguities and requirements not currently clarified under the UAE Scheme; and
the operator's eligibility under the UAE Scheme for licensing in the UAE,
following which, POGOs can determine whether the UAE Scheme would be a suitable alternative for their operations, taking into account their business model, objectives, and commercial preferences.
Given that the UAE gaming licensing regime is still very new, and the Commercial Gaming Legislations have not yet been published, this article does not set out an exhaustive list of issues that may arise or may be relevant to POGOs or other foreign applicants for GCGRA licensing, and further issues and considerations that may arise.
Should you require further information in relation to the UAE Scheme or any assistance with respect to licensing in the UAE, or wish to request a copy of the Licensing Comparison Guide, please do not hesitate to get in touch with us.
This client alert was prepared by the Singapore and Philippine offices of Rajah & Tann Asia, in collaboration with UAE-based legal services consultancy The Bench FZE. For further information about any of the matters discussed herein or to request a copy of the Licensing Comparison Guide, please contact our team.
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