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Pachinko Concession and Internet Digits Concession Contracts, RPPL 8-21 2010

PALAU

RPPL NO. 8-21

(Intro. as House Bill No. 8-7-1, HD2, SD2, PD1)

AN ACT

To amend 11 PNC ' 1402 and ' 1403 to facilitate additional Pachinko Concession and Internet Digits Concession Contracts; to amend RPPL 5-45, Section 2; and for other related purposes.

THE PEOPLE OF THE REPUBLIC OF PALAU REPRESENTED IN THE OLBIIL ERA KELULAU DO ENACT AS FOLLOWS:

Section 1. Purpose. The Olbiil Era Kelulau finds that it is in the interest of the people of the Republic of Palau to amend the present law concerning Pachinko and Internet Digits Concession contracts to permit additional concessions, and to decrease the fees for such concessions. Enabling additional investors to engage in such enterprises will generate additional revenue for the Republic and promote the stimulation of the private sector of Palau. The Olbiil Era Kelulau further finds that amending the existing fee requirements to entice potential investors will likely create more success and facilitate the generation of revenue initially intended by the law.

Section 2. Amendment. 11 PNC ' 1402 is hereby amended to read as follows:

A' 1402. Authority to grant concessions. Upon promulgation of rules and regulations implementing this section, Minister of Finance, at the direction and with the approval of the President, shall be authorized to grant up to two Virtual Pachinko Concessions (APachinko Concessions@) to, and execute Pachinko Concession Agreements with, any person or entity (AOperator@) to organize and operate a Virtual Pachinko Business, and to grant up to two Internet Digits Lottery Game Concession (AInternet Digits Concessions@) for the operation of internet digits lottery games within the Republic, provided that:

(a) The term of each Concession Agreement shall not exceed ten years, provided the term may be extended for up to an additional five years upon agreement by the Minister of Finance, at the direction and with the approval of the President, and Operator;

(b) Each Concession Agreement shall provide for a minimum annual Concession fee of 4% of the gross revenue realized from the operation of each Virtual Pachinko Business or Internet Digits Lottery Game Business in Palau, which fee shall be due quarterly, on or before the thirtieth day following the close of eachquarter, plus an annual license fee of $250,000.00 per year payable in advance of each fiscal year, provided that the first payment of this annual license fee shall be paid upon the execution of a Concession Agreement;

(c) For the purposes of this section 1402, gross revenue means the total amount of money received by the Operators from the Pachinko Concessions and from the Internet Digits Concessions, less any payouts to pachinko or internet digits lottery winners and less the entire amount paid in salaries to citizen employees who are residents of the Republic. The Operators from the Pachinko Concessions and from the Internet Digits Concessions agree to provide the Republic with statements on a monthly basis certified under penalty of perjury attesting to the gross revenues and payout amounts for each concession and amounts of salaries paid out to citizen employees who are residents of the Republic;

(d) The Operators shall maintain the financial capability to pay their obligations. The Operators shall submit to the Minister of Finance on an annual basis a financial audit demonstrating the financial capability of the Concessions, and shall, at the discretion of the Minister of Finance, at the direction and with the approval of the President, be subject to an outside audit to determine financial capability. Financial capability shall be determined by establishing whether the business= assets are able to cover its liabilities.

(e) . . . .

(f) The Operators . . . .

(g) The Operators . . . .

(h) The Operators . . . .

(I) Should any Concession fail to meet the requirements set out by this Chapter or any express requirement contained in the individual Concession Agreement, the Minister of Finance shall notify such Concession of impending revocation. If the failure on the part of the Concession is not remedied within the amount of time deemed appropriate by the Minister of Finance, the Minister of Finance may revoke the Concession Agreement at the direction and with the approval of the President.

(j) The Operator of any concession under this section shall, within one year after the effective date of the Concession Agreement, commence operations of the concession. Should any Operator fail to meet this requirement, the Concession agreement shall become null and void.

(k) Once Pachinko concessions have been granted and operation is imminent or ongoing, the Minister, at the direction and with the approval of the President, may create a virtual Pachinko control office in Palau, if such an office becomes necessary to manage the Pachinko concessions and their compliance with rules and regulations promulgated pursuant to this Section.@

Section 3. Amendment. 11 PNC ' 1403 is hereby amended as follows:

A' 1403. Mandatory terms of Concession Agreements. In negotiating the terms of a Concession Agreement pursuant to this chapter, the Minister of Finance, at the direction and with the approval of the President, shall obtain substantially the following terms:

(a) Each Concession shall be nontransferable, except that a Concession may be transferred with the prior written consent of the Minister of Finance, after a determination by the Minister, with the approval of the President, that it is in the best interest of the Republic. Payments of gross revenue due to the Republic under the Agreement shall be made quarterly, on or before the thirtieth day following the close of each quarter, and payments of the $250,000.00 annual license fee due to the Republic under the Agreement shall be made in advance of each fiscal year, provided that the first payment of the annual license fee shall be paid upon the execution of the Concession Agreement. The Minister of Finance shall negotiate reasonable terms

. . . .

. . . .@

Section 4. Amendment. RPPL 5-45, Section 2, as amended by RPPL 6-26 and RPPL 6-35, is hereby amended as follows:

ASection 2. Earmarking of funds. Of the funds generated by the concession fee of four percent (4%) of the gross receipts annually derived from the Virtual Pachinko Business or Internet Digits Lottery Game Business, established in accordance with 11 PNC ' 1402(c), 50 percent shall be deposited in the general fund of the National Treasury for future appropriation, 25 percent shall be earmarked and appropriated for school books, supplies and instructional equipment within the Ministry of Education, and 25 percent shall be earmarked and appropriated to supplement the Hospital Trust Fund.@

Section 5. Regulations. The Minister of Finance shall, within 90 days of enactment of this Act and in accordance with 6 PNC Chapter 1, the Administrative Procedure Act, promulgate rules and regulations implementing Section 3 of this Act.

Section 6. Effective date. This Act shall take effect upon its approval by the President of the Republic, or upon its becoming law without such approval, except as otherwise provided by law.

PASSED: November 11, 2010

Approved this 29th day of November , 2010.

/s/
His Excellency Johnson Toribiong
President, Republic of Palau