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Virtual Pachinko Concession or Internet Digits Lottery Game Business, RPPL 8-54 2012

AN ACT

To amend Sections 1402 and 1403 of Title 11 of the Palau National Code to reduce the annual license fee to operate a Virtual Pachinko Concession or Internet Digits Lottery Game Business, and for other related purposes.

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

Section 1. Legislative Findings. The law pertaining to Virtual Pachinko Businesses and Internet Digits Concessions set forth in Chapter 14 of Title 11 of the Palau National Code was recently amended by RPPL No. 8-21. Inadvertent errors were discovered in RPPL No. 8-21 that should be corrected for purposes of providing clarity and for legislative consistency. The intent of RPPL No. 8-21 was to decrease the licensing fees from two million five hundred thousand dollars ($2,500,000.00) to two hundred fifty thousand dollars ($250,000.00) in hopes that Pachinko Concession and Internet Digits Concession operators would establish businesses within the Republic of Palau. However, reducing the licensing fee has failed to generate any additional interest in establishing Pachinko Concession and Internet Digits businesses in Palau. As such, the Olbiil Era Kelulau finds the licensing fee must be further reduced to forty five thousand dollars ($45,000.00), an amount more in line with the industry standard.

Section 2. Amendment. Section 1402 of Title 11 of the Palau National Code as amended by RPPL No. 8-21 is hereby amended to read as follows:

A' 1402. Authority of President to grant concession.

Upon promulgation of rules and regulations implementing this section, the Minister of Finance, at the direction and with the approval of the President, shall be authorized to grant up to two (2) Virtual Pachinko Concessions (APachinko Concession@) 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 (2) Internet Digits Lottery Game Concessions (AInternet Digits Concession@) for the operation of internet digits lottery games within the Republic, provided that:

(a) The term of each Concession Agreement shall not exceed ten (10) years, provided the term be extended for up to an additional five (5) years upon agreement by the Minister of Finance, at the direction and with the approval of the President, and the Operator.

(b) Each Concession Agreement shall provide for a minimum annual Concession fee of four percent (4%) of the gross revenue realized from the operation of each Virtual Pachinko Business or Internet Digits Lottery Game Business in Palau. The fee shall be due quarterly, on or before the thirtieth day following the close of each quarter, plus an annual license fee of forty five thousand dollars ($45,000.00) 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 purposes of section 1402 of this Chapter, Agross 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 of the Pachinko Concessions and Internet Digits Concessions shall provide to the Republic statements on a monthly basis, certified under penalty of perjury, attesting to the gross revenues and payout amounts to winners in each concession and the amount of salaries paid out to citizen employees who are residents of the Republic.

(d) The Operators shall maintain at all times 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) There shall be established by each Concession Agreement a limit on the amount of money (expressed in U.S. Dollars) each player may spend during each session of play.

(f) The Operators shall comply with all licensing and permitting requirements.

(g) The Operators shall offer no games other than Pachinko or Internet Digits Lottery Game respectively.

(h) The Operator shall implement appropriate controls to make it impossible for a computer located in Palau to access the internet site or sites of the Virtual Pachinko Business and the Internet Digits Lottery Game Business. The Palau National Communication Corporation is required to block the internet site or sites of the Virtual Pachinko Business and the Internet Digits Lottery Game Business to deny access by any computer located in Palau.

(I) . . .

. . .@

Section 3. Amendment. Section 1403 of Title 11 of the Palau National Code as amended by RPPL No. 8-21 is hereby amended to read 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. The payments of the forty five thousand dollars ($45,000.00) 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. Payments due to the Republic under the Agreement shall be made six (6) months after the commencement of operations pursuant to the Agreement and every six (6) months thereafter. The President shall negotiate reasonable terms regarding default. When a payment to the Republic is made, the operator of the Concession shall provide a detailed written accounting of revenues and expenses relating to the Concession for the period for which payment is made.

(b) The courts of the Republic of Palau shall have exclusive jurisdiction over all matters or claims arising under the Concession Agreement and all claims made by players of internet pachinko or the internet digits lottery game.

(c) The Republic of Palau shall be immune from liability for any claim made by a player of any game authorized pursuant to a Concession Agreement under this Chapter, or by any government within the jurisdiction of which the gambling, games authorized pursuant to this Chapter are prohibited. The operator of a Concession shall provide a competent legal counsel or counsels to the Republic and hold the Republic harmless in any action made by any players against the operator of a Concession under this Chapter or by any government. The Republic shall have the right to retain legal counsel of its own choosing to defend any claims.

(d) The operator of a Concession granted under this Chapter shall provide annual reports to the President regarding all details of operations, revenues, payouts, and any pending and potential legal claims against the operator. The operator shall further provide complete annual financial statements on the game authorized under a Concession Agreement, and such financial statements shall be audited by an independent auditor who is a certified public accountant licensed in the United States of America or the Republic of Palau. Reports under this subsection shall be delivered to the President not later than the beginning of the Republic=s fiscal year.

(e) The President shall report to the Olbiil Era Kelulau in writing at least every two (2) years regarding all details of operations, revenues, payouts, and any pending and potential legal claims against the operator. The President=s report shall further include an evaluation of the benefits to the Republic of the games authorized pursuant to a Concession Agreement and an assessment of whether the restrictions against participation by Palauan citizens are effective.

(f) After granting a Concession under this Chapter, the President shall submit complete copies of the Concession Agreement to the presiding officers of the Olbiil Era Kelulau, and such copies are deemed to be public documents.

(g) Each Concession Agreement extended for an additional term beyond the original a term shall be subject to unilateral termination by law upon sixty (60) days notice if the Olbiil Era Kelulau finds on the basis of substantial evidence that termination would be in the best interest of the Republic.

(h) If, after a Concession is granted pursuant to this Chapter, it is determined on the basis of evidence admissible in the Courts of the Republic that any officer or director of the operator of the Concession has been convicted of a felony in any jurisdiction, or that any officer or director is under indictment for a felony in any jurisdiction, the Concession Agreement shall be deemed to be null and void ab initio. The Republic may waive the operation of this subsection if the felony conviction or indictment is for a charge unrelated to the business authorized under the Concession Agreement.@

Section 4. Effective Date. This Act shall take effect upon its approval by the President of the Republic of Palau or upon its becoming law without such approval, except as otherwise provided by law.

PASSED: December 5, 2012

Approved this 7th day of December , 2012.

/s/
Johnson Toribiong
President
Republic of Palau