Authority of AFAB to Regulate Online Gaming Venture Undertaken by Grand Innovasia Concept Corp. Despite Being Limited Only to Foreign Markets

DOJ OPINION NO. 009, s. 2017 June 6, 2017 Engineer Emmanuel D. Pineda Chairman and Administrator Authority of the Freeport Area of Bataan AFAB Administration Building, Freeport Area of Bataan Mariveles, Bataan 2106 Dear Engr. Pineda : We write with reference to your 26 January 2017 letter to this Department bearing the subject line Re: Request for Legal Opinion on Online Gaming at the Freeport Area of Bataan . You state that a certain Grand Innovasia Concept Corporation (GICC) was licensed by your agency, the Authority of the Freeport Area of Bataan (AFAB), to operate in the realm of business process outsourcing (BPO) support of offshore/online gaming that caters solely to international clients, without access to the local market; that GICC extends BPO support for online gaming done abroad; and that no actual gaming operations take place inside of the Freeport Area of Bataan (FAB). The grant of GICC's present business license, you also state, was pursuant to the AFAB's power to license and regulate telecommunications, mobile, internet, and other data facilities under Section 13 (h) of Republic Act (RA) No. 9728, 1 the Freeport Area of Bataan Act of 2009, which vests the AFAB with the following function within the FAB: (h) To license, set fees, regulate and undertake the establishment, operation and maintenance of utilities, other services, educational and medical institutions and infrastructure in the FAB such as, but not limited to, heat, light and power, water supply, telecommunications, mobile, internet and other data facilities, transport, toll roads and bridges, port services, etc.,and to fix just, reasonable and competitive rates, fares, charges and prices thereof; It appears, however, that GICC has future plans to expand and engage in actual online gaming limited to the international market and without access to the local market. You state that when this happens, AFAB will strictly regulate and monitor the online gaming operations of GICC to ensure that all regulatory fees and taxes due will be paid to the National Government. It is your submission that the regulatory authority of the AFAB over GICC's would be online gaming operations, is based on Section 13 (h), as opposed to Section 13 (j) of the FAB Act of 2009 which, in turn, empowers the AFAB: (j) To operate on its own, either directly or through a license to other tourism-related activities, including games, amusements, recreational and sports facilities, subject to the approval and supervision of the Philippine Amusement and Gaming Corporation (PAGCOR); Based on the foregoing, it is your contention that land-based gambling and gaming which takes place within the FAB would require the approval and supervision of the PAGCOR pursuant to Section 13 (j).You add, however, that this is different from online gaming and its support activities, which involve the use of telecommunications, mobile, internet, and other data facilities, which are covered by Section 13 (h),and consequently, the AFAB's umbrage alone. Unfortunately, we are unable to confirm the AFAB's opinion. The Supreme Court has already had occasion to rule on a similar matter in PAGCOR v. Philippine Gaming Jurisdiction Incorporated (PEJI) . 2 The bone of contention in the said case was the interpretation of a substantially similarly worded provision in RA No. 7903, the Zamboanga City Special Economic Zone (ZAMBOECOZONE) Act of 1995. Section 7 (f) of the ZAMBOECOZONE Act of 1995 authorizes the administrating power, the ZAMBOECOZONE Authority, to: (f) To operate on its own, either directly or through a subsidiary entity, or license to other tourism-related activities including games, amusements and recreational and sports facilities; There, it was contended by the ZAMBOECOZONE Authority that by virtue of the said provision of the ZAMBOECOZONE Act of 1995, it possessed the authority to pass a resolution granting the application of the co-respondent, PEJI, to be a Master Licensor/Regulator of online/internet/electronic gaming/games of chance. The PAGCOR protested and brought the matter before the courts contending that based on a reading of other ecozone laws such as the Bases Conversion and Development Authority Act , 3 the Cagayan Economic Zone Act of 1995 , 4 and the Special Economic Zone Act of 1995 , 5 there must be a categorical grant by the legislative branch upon an ecozone of an authority to regulate and authorize "games of chance" as distinguished from the words "games" and "amusement".In the absence of an unequivocal grant thereof, jurisdiction necessarily falls upon the PAGCOR, pursuant to its general regulatory power 6 over games of chance. The Supreme Court sided with the PAGCOR, stating that: It is a well-settled rule in statutory construction that where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. The plain meaning rule or verba legis ,derived from the maxim index animi sermo est (speech is the index of intention),rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will, and preclude the court from construing it differently. For the legislature is presumed to know the meaning of the words, to have used them advisedly, and to have expressed the intent by use of such words as are found in the statute. Verba legis non est recedendum .From the words of a statute there should be no departure. The words "game" and amusement have definite and unambiguous meanings in law which are clearly different from "game of chance" or gambling. In its ordinary sense, a game is a sport, pastime, or contest; while an amusement is a pleasurable occupation of the senses, diversion, or enjoyment. On the other hand, a game of chance is a game in which chance rather than skill determines the outcome, while gambling is defined as making a bet or a play for value against an uncertain event in hope of gaining something of value . A comparison of the phraseology of Section 7(f) of R.A. No. 7903 with similar provisions in the three cited statutes creating ECOZONES shows that while the three statutes, particularly R.A. No. 7922 which authorized the Cagayan Economic Zone Authority to directly or indirectly operate gambling and casinos within its jurisdiction, categorically stated that such power was being vested in their respective administrative bodies, R.A. No. 7903 did not. The spirit and reason of the statute may be passed upon where a literal meaning would lead to absurdity, contradiction, injustice, or defeat the clear purpose of the lawmakers. Not any of these instances is present in the case at bar, however. Using the literal meanings of "games" and amusement to exclude games of chance and gambling does not lead to absurdity, contradiction, or injustice. Neither does it defeat the intent of the legislators. The lawmakers could have easily employed the words "games of chance" and gambling or even casinos if they had intended to grant the power to operate the same to the ZAMBOECOZONE Authority, as what was done in R.A. No. 7922 enacted a day after R.A. No. 7903. But they did not. (Emphasis and underscoring supplied, citations in the text omitted) No strenuous exertion of the imagination is required to see why this ruling should apply similarly to the AFAB's authority under Section 13 (j) of the FAB Act of 2009. Unless there is a clear grant upon an ecozone such as AFAB to regulate "games of chance," the PAGCOR's statutory regulatory function prevails. The final clause of 13 (j) requiring "approval and supervision" of the PAGCOR is of no moment here since the plain and simple truth is that the legislature, in establishing the AFAB, did not provide it with the authority to authorize and regulate games of chance. The said clause, however, is not without meaning, and should be taken to mean that the approval of the PAGCOR should be secured to ensure that no gambling activities otherwise subject to its regulatory jurisdiction should fall through the cracks; and the supervision should be done by the PAGCOR considering the interlocking responsibilities over GICC as an AFAB licensee pursuant to Section 13 (h) doing business in the FAB territory and PAGCOR's authority over the same in the event that GICC does enter into its online gaming venture. Neither is our opinion on this issue affected by AFAB's reliance on Section 13 (h) of the FAB Act of 2009. In laying down its ruling in PAGCOR v. PEJI , this Department would not be remiss to assume that the Supreme Court combed through the entirety of the provisions of the ZAMBOECOZONE Act of 1995 to ensure the justness of its ruling. A further perusal of the ZAMBOECOZONE Act of 1995 would reveal a similar provision permitting the ZAMBOECOZONE Authority to regulate and undertake the establishment, operation, and maintenance of utilities, other services, and infrastructure within its ecozone. Section 7 (d) of the ZAMBOECOZONE Act of 1995 authorizes the ZAMBOECOZONE Authority: To regulate and undertake the establishment, operation and maintenance of utilities, other services and infrastructure in the ZAMBOECOZONE such as heat, light and power, water supply, telecommunications, transport, toll roads and bridges port services, etc.,and to fix just, reasonable and competitive rates, fares, charges and prices therefor; While one would readily argue that the immediately foregoing provision differs from Section 13 (h) of the FAB Act of 2009 since it does not provide for "mobile, internet, and other data facilities," this is simply not the case. It should be noted that the enumeration in Section 7 (d) "heat, light, and power, x x x" that follows the subject "utilities, other services and infrastructure x x x" is bookended by the words "such as" and "etc." These enumerations are mere guides for the interpretation of the provision, but should in no way be taken as an exclusive categorization of what constitutes the concept of "utilities, other services, and infrastructure." That the Supreme Court did not busy itself with Section 7 (d) of the ZAMBOECOZONE Act in coming up with its ruling in PAGCOR v. PEJI is reason enough for us to believe that it did not believe that the said provision was sufficient to grant the ZAMBOECOZONE Authority with regulatory functions over online gaming taking place within its territory. The same is likewise applicable to AFAB and to the similarly worded Section 13 (h) of the FAB Act of 2009. All told, and for the reasons already stated, we opine that any online gaming venture undertaken by GICC, despite being limited only to foreign markets, should be subject to the regulatory authority of the PAGCOR, and not the AFAB. We trust that the foregoing has been helpful. Very truly yours, (SGD.) VITALIANO N. AGUIRRE II Secretary Footnotes 1. AN ACT CONVERTING THE BATAAN ECONOMIC ZONE LOCATED IN THE MUNICIPALITY OF MARIVELES, PROVINCE OF BATAAN, INTO THE FREEPORT AREA OF BATAAN (FAB), CREATING FOR THIS PURPOSE THE AUTHORITY OF THE FREEPORT AREA OF BATAAN (AFAB), APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES. 2. G.R. No. 177333, 24 April 2009. 3. RA No. 7227. 4. RA No. 7992. 5. RA No. 7916. 6. See Presidential Decree No. 1869, Series of 1983, as amended, and as currently enforced, with respect to online gaming, by the PAGCOR's Rules and Regulations for Philippine Offshore Gaming Operations ,dated 1 September 2016.