The Cybersecurity Law

The Cybersecurity Law

Cybersecurity is a world-wide hot topic nowadays, and hence it is no surprise that progressively more and more countries are adopting relevant laws to regulate the matter.

As for the newly enacted Macau SAR´s Cybersecurity Law, published in the Official Gazette this 24 June 2019, although not publicly assumed, it follows the trend imposed by its PRC´s homonymous law, at least to a certain extent. The basic principles, duties and enforcement ideas are somewhat present. Nevertheless, the powers vested to the new regulatory supervising entities are still less comprehensive than those existing in PRC´s.

As the Region´s first comprehensive privacy and security body of rules over cyberspace, we are yet to fully discover the challenges that this new Law and its enforcement will pose, notably its articulation with the existing Personal Data Protection Law.

Nevertheless, despite being approved amidst some criticism and concerns regarding potential violations of basic freedoms, as it will only come into effect on 21 December 2019, there will hopefully be enough time to produce the set of regulations foreseen in the Cybersecurity Law and, most importantly, to quell the concerns with its implementation and enforcement.

At this stage it is however certain that, while bringing necessary regulation to prevent the failure of essential infrastructures for the security and the economy of the Macau SAR, the potential reach of the Cybersecurity Law and the duties imposed on operators of critical infrastructures mean that this new piece of legislation will present unprecedented challenges to local people as well as local and foreign businesses in Macau.

 

General Overview

The law is intended to determine and regulate the Macau SAR´s cybersecurity system, aiming to protect the networks, systems and computer data of the operators of critical infrastructure.

It provides for three levels of supervision:  the Commission for Cybersecurity (CPC) in a first level, the Cyber Security Incident Response and Response Center (CARIC) in an intermediate level, and the supervisory bodies, as the final level.

The CPC is the top political body, chaired by the Chief Executive of the Macau SAR, and will be responsible for defining the guidelines, objectives and strategies towards cybersecurity goals, as well as proposing and negotiating agreements and protocols that may be deemed necessary to guarantee the Region´s cybersecurity, with both local or foreign public and private entities.

The CARIC, a specialized structure for the prevention and handling of any cybersecurity incidents, shall be coordinated by the Judiciary Police, and is responsible for monitoring the computer data transmitted between the operators of critical infrastructure networks and the internet, aiming to prevent, detect and fight cybersecurity incidents.

Finally, the supervisory bodies shall be responsible for overseeing private operators by areas of activity (v.g. the Monetary Authority will inspect banks, the Health Services will inspect private hospitals, etc.).

The composition, powers and mode of operation of all these entities will be defined by the Chief Executive in complementary regulation, thus meaning that the real range of this Law (and the competence of the new entities related thereto) shall only be fully comprehended when those regulatory pieces of legislation are enacted.

 

Critical Infrastructures operators

The Cybersecurity Law is applicable to both public and private operators of critical infrastructures using computer networks or systems. The former generally include the Chief Executive´s Office and other holders of political and judicial offices, the Region´s public services and agencies. In turn, the latter include all private entities, with or without registered address in Macau, that are allowed to conduct business in Macau in certain key areas  which include, amongst others, banking, insurance and finance activity, healthcare services, gaming concessionaires, media (that are not exclusively aimed at broadcasting entertainment contents) and telecommunications.

 

Duties

Amongst the vast group of duties that the Cybersecurity Law imposes (organic duties, procedural, preventive and reactive duties, self-evaluation and report duties and collaboration duties), the most noteworthy are:

  1. allowing the representatives of CARIC or of the supervisory bodies to access their networks (without any prior judicial decision approving the said access);
  2. appoint a person in charge of cybersecurity, and its substitute, who shall be in constant contact with the regulatory supervising entities (being subject to a prior probity check);
  3. approve an internal cybersecurity plan and procedural guide aimed at the prevention, monitoring, report and reply to cybersecurity incidents;
  4. regularly check the security and the existing risks to its networks and systems;
  5. submitting an yearly cybersecurity report listing, inter alia, the cybersecurity incidents and the measures adopted to prevent new incidents;
  6. network operators must register the identification of the pre-paid SIM card users acquired before of the enactment of the law (or otherwise suspend service to such SIM cards);
  7. network operations must verify and register the identity of the clients upon the execution of agreements, confirmation of provision of internet access services, registration of domain names or public services of land or mobile telecommunications; and
  8. the internet services providers must keep, for a year, the network address translation records from private networks addresses into public network addresses.

Needless to say that the aforementioned duties will definitively bring implementation and maintenance costs to each of the entities covered by this new Law although, again, the full extent of such costs is still to be assessed, pending further regulation of the Cybersecurity Law.

 

Penalties for infractions

As for penalties, those in breach of the Cybersecurity Law may be fined up to MOP5 Million.

Other ancillary penalties may also be imposed on those in breach such as the loss of the right to supply products to the Government or to receive Government subsidies for a period of up to 2 years.

In addition, individuals in breach of preventive, reactive or procedural duties may see their employment suspended or terminated or sent to compulsory retirement.

 

Concerns raised with the implementation of the Cybersecurity Law

The major concern lies on the authority granted to CARIC, which is coordinated by the Judiciary Police, to conduct real-time monitoring of the computer data transmitted between the operators of critical infrastructure networks and the internet.

Considering that the operators of telecommunications infrastructures are subject to the Cybersecurity Law, this provision has raised fears of opening the door to real time monitoring of virtually every person and entity in the Macau SAR.

In addition, the Cybersecurity Law does not seem to implement any mechanism of oversight of CARIC’s actions, e.g. when monitoring data and accessing critical infrastructure operators´ premises and networks, which again poses the concern of unsupervised police action in extremely sensitive areas of the Macau SAR’s economy as well as unwarranted interference in the citizens’ privacy and personal data.

Without a streamlined oversight mechanism, citizens and companies will have to rely on existing channels (e.g. the Personal Data Protection Office, the Commission Against Corruption, the Public Prosecutors Office and the Courts), which also entails an additional level of uncertainty and, eventually, a long period of time before a final decision over a claim is obtained.

Finally, the requirement that the identification of all SIM card owners is registered, has also attracted criticism towards the abuses that such provision may lead to.

In any case, the Government has continuously maintained that it will only analyze the flow of computer data, meaning that, according to the Government, data will not be decoded nor freedom of expression and/or economic freedom and/or intellectual property rights will be affected.

In summary, in a world where cyber risks are a constant threat, there is definitively the need to implement a cybersecurity legal framework and to impose special duties of care to certain industries. However, only time will tell whether the Cybersecurity Law will serve its legitimate purposes or whether it will lead to abuse.

 

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REGISTRATION OF AIRCRAFTS IN MACAU

Civil aviation and aerial activities in the Macau SAR (“Macau”) are governed by the Civil Aviation Activity Regulation (Executive Order n. º 10/2014) which set forth the general principles for aerial operations in this jurisdiction, and by the Air Navigation Regulation (Executive Order n. º 64/2019) which determines the mandatory technical requirements to provide safe and effective operation by aerial transportation.

Internationally, Macau is a signatory of The Convention on International Civil Aviation, also known as the Chicago Convention, which established the International Civil Aviation Organization. Under this Convention Macao is subject to certain obligations relating to the operational safety of civil aviation.

On other hand, Macau is not part of the Convention on International Interests in Mobile Equipment, also known as the Cape Town Convention, whose purpose is to resolve the problematics of obtaining certain and opposable rights to high-value aviation assets, namely airframes and aircraft engines.

According to the Macau’s Civil Aviation Activity Regulation, commercial aerial transportation such as passenger aerial transportation, cargo and mail to and from Macau are formed as public service concession to be granted to an operator incorporated in Macau and duly certified by the Civil Aviation Authority of Macau (“AACM”). One of the operator’s main responsibilities is to request AACM the prior authorization to operate leased aircrafts in order to comply with AACM’s security standards.

It is under AACM’s scope the issuance, renewal and amendment of any certificates, authorizations or licenses related to aircrafts, as well as the admission of similar documents when issued outside of Macau.

Under Macau law, an aircraft to be authorized to fly in here must be mandatorily registered in (i) Macau, (ii) any country signatory of the Chicago Convention, or (iii) any other country in relation to which there is an agreement with the Macau Government.

As an aircraft can only be registered in one country, and in case the aircraft is to be registered in Macau, the AACM will require evidence that (i) the aircraft is new and shall be delivered by the manufacturer directly, or (ii) it is, or will be in the short-term, deregistered in the country of origin, in order to complete the respective registration procedures in Macau and subsequently have issued the required certificates.

Moreover, it is also mandatory for the lessee (the Macau company which will operate the aircraft, i.e. an airline) to be licensed as a Macau company, and to register the lease Agreement with the AACM.

Apart from the above mentioned registration and according to Law no.10/98/M, the aircraft shall have to be registered as well with the Macau Moveable Assets Registry (“Registry”). This registration shall disclose to the public the legal status of the assets and rights registered, and it is independent to the registration with AACM.

Under Macau law, the first registration to be made with respect to any asset is the ownership, which is mandatory with respect to all aircraft registered with AACM.

Subsequently, it is also possible to register a mortgage, lease and other rights or liens over the aircraft. However, it is only mandatory by law to register the ownership rights with the Registry. Important to note that as for any mortgages and other security interests, AACM will not handle/register the guarantees over the aircraft, but rather the Registry.

Finally, registration of the aircraft with the AACM will levy the payment of certain fees, notably for the issuance of the required certificates such as Certificate of Registration, Airworthiness, Station License and Noise Certificate. The same shall apply with each registration with the Registry (i.e. ownership, lease, etc.) which shall be subject to the payment of a registration fee of MOP5,000.00.

Change of Law nº9/1999 – Judicial Organization Law

Background:

The Government of the Macao Special Administrative Region (the “MSAR”) has recently approved an amendment to the Judicial Organization Law (Law no. 9/1999), which also includes some amendments to the relevant Judicial Proceedings Codes, by means of the Law no. 4/2019 that was published on the 4th of March 2019. This Law has entered into force on the 4th of April this year.

 

Overview:

Although Law no. 4/2019 accommodates different adjustments in the Judicial Organization Law, as well as in all Proceedings Codes currently in force in MSAR, one of the most relevant amendments introduced by this Law relates to the appeal requirements in the civil court proceedings.

 

Brief commentary:

Law no. 9/1999, also known as the Judicial Organization Law, regulates the essence of the MSAR’s Judicial Organization such as the structure, competence, hierarchy and composition of the MSAR courts, as well as the monetary thresholds up to which each Court may rule a decision without appeal (in Portuguese called “alçada”).

According to the rules in place in the MSAR jurisdiction, in order to appeal from decisions of the First Instance Court (the “FIC”) to the Second Instance Court (the “SIC”), and from decisions of the SIC to the Court of Final Appeal (the “CFA”), the law requires, amongst others, that the monetary amounts expressed for each case are above a certain figure.

Before Law no. 4/2019 has entered into force, the mentioned amounts were as follows:

SIC – MOP $50,000.00;

CFA – MOP $1,000,000.00.

 

However, with Law no. 4/2019, the abovementioned amounts were modified as follows:

SIC – MOP $100,000.00;

CFA – maintain MOP $1,000,000.00.

 

This means that nowadays for all court cases (except the criminal court cases which have a particular appeal mechanism), the said limits will apply, and as a consequence only court cases with financial values above the said limits are appealable either to the SIC or to the CFA.

In our view, an increase of the amount to appeal from FIC to SIC while the amount required for the appeal to CFA remains unchanged seems to be somehow inconsistent, in particular if we take into account that such amounts should be aligned with the economy of the MSAR, which in the past 20 years grew exponentially.

Another amendment concerning with this matter, relates to the new wording that was introduced by the Law no. 4/2019 to the number 2 of article 638 of the Civil Proceedings Code.

Before Law no. 4/2019 entered into force, in principle, confirmatory decisions awarded by SIC were not appealable to the CFA, unless the decision of the SIC breaches mandatory case law.

However, taking into account the new wording of number 2 of article 638 of the Civil Proceedings Code, we may conclude that almost all court decisions of the SIC will be eligible for appeal to the CFA.

Indeed, only the confirmatory decisions decided by SIC regarding the decisions of the FIC concerning formal matters of the case are unappealable.

This means that it is predictable an increase in the volume of the number of court cases pending in the CFA and consequently of the lead time of each Court case, is likely to be also higher, as the CFA court is only staffed by 3 judges.

Therefore, it seems that these amendments to the Civil Proceeding Code are neither aligned with the reality of MSAR nor with the available resources of the CFA, and as consequence we fear that disputes from now on will be pending for years in the MSAR Courts.

In light of the above, and taking into account that be Civil Proceedings Code is currently under legislative review, we hope that the Government of the Macau SAR and the Legislative Assembly will be able to reconsider the provisions in place, and proceed to solve these issues.

Acquisition of Portuguese Nationality

ACQUISITION OF PORTUGUESE NATIONALITY

 

More and more, either for tourism or for investment purposes, Portugal has become a considerably relevant destination chosen by foreigners from all over the world.

Being the westernmost country in Europe, this nation, primarily known for its welcoming weather, long history and bathed by the Atlantic Ocean along its extensive coast, is now experiencing explosive economic growth, namely in terms of tourism, real estate and technological perspectives.

Although there is facilitated  access to the  country, which  is possible after either obtaining a tourist visa (permit to enter and stay for a limited period of time) or an investment visa (especially golden visas, which allow foreigners to obtain legal residency permission in Portugal, mainly by  investing  a minimum   amount  of  500.000€  in  real  estate  property),  only  acquisition of the Portuguese nationality  will  allow a  foreigner to obtain the equality of rights ensured to a Portuguese citizen.

Therefore, those who wish to become Portuguese nationals and fulfil the requirements to acquire Portuguese nationality will especially benefit from:

  1. The same constitutional rights and obligations assured to Portuguese citizens, namely fundamental rights that characterize a democratic state governed by the rule of law (encompassing rights such as life, freedom of expression, vote, work, social insurance benefits, health and housing), including the exercise of political rights and non-technical public functions, as well as those other rights and duties that the Constitution or the law exclusively reserve for national citizens, and which are denied explicitly to third-country nationals and stateless persons.
  2. Becoming a European Union citizen. A Portuguese national is simultaneously a citizen of the European Union (“EU”), which ensures a number of individual rights and duties at the European level, namely the free movement of people, goods (exempted from  taxes, customs duties and other  official charges), services and capital, the right of residency, and the right to work in any one of the 28 European Member States, as well as being entitled to the right of protection  provided by the diplomatic or consular authorities  of any Member  State when staying at non-EU countries, under the same conditions, when there is no diplomatic representation of the citizen’s home country.
  3. Access to the Schengen area without a visa. Similarly, Portuguese citizenship also guarantees entrance to the entire Schengen area, in other words, free movement of people without border control among the 26 members of the Schengen Agreement, without having to apply for a visa. Not only most Member States of the EU (all State Members, with the exception of Bulgaria, Romania, Cyprus, Croatia, Ireland and Great Britain) signed the Schengen Agreement, but also Iceland, Liechtenstein, Norway and Switzerland, which are not part of the EU. Consequently, any Portuguese citizen is allowed to legally live in any one of 26 Schengen area countries, four of which are not part of the EU.
  4. Dual citizenship. Portuguese nationality can simultaneously be cumulated with any existing nationality, allowing the dual citizenship regime to operate freely (except if forbidden by other countries) and therefore, by becoming a Portuguese national a citizen does not automatically lose his or her previous nationality.

There are four different ways which legally allow a person to acquire Portuguese nationality: (i) acquisition of citizenship due to birth circumstances (called “citizenship of origin”), (ii) acquisition of the citizenship through naturalisation, (iii) acquisition by declaration (a person fulfilling specific requirements, declares that he or she wishes to become Portuguese); and (iv) acquisition due to adoption.

 

  1. A) PORTUGUESE NATIONALITY ACQUISITION BY BIRTH

First of all, Portuguese nationality can be acquired depending on birth circumstances by those who are either:

  1. children with at least one Portuguese parent, either born in Portugal or in a foreign country (after birth registration with the Portuguese Civil Registry Office or a written declaration of will to become a Portuguese citizen), including the ones who were born in a territory under Portuguese administration;
  2. born before 8 October 1981, in a territory under Portuguese administration; or
  3. born outside Portugal, descendants of at least one Portuguese grandparent who possesses Portuguese  nationality and have significant connection with Portuguese community (e., has sufficient  knowledge of the Portuguese language, regular contacts with the country, and has not been convicted of a crime punishable under Portuguese law with imprisonment for three years or above), after having his birth registered at the Portuguese Civil Registry; or
  4. citizens born in Portugal with a foreigner parent also born in Portugal, in the condition that specific requirements regarding the residency status of their parents are met;
  5. born in Portugal and do not possess any other nationality.

This is an option which has retroactive effects, which means that its effects are produced from the moment of the citizens’ birth, without prejudice of the validity of juridical relations established before and based on another nationality.

If the citizen’s birth conditions do not fulfil all the requirements established in order to claim Portuguese citizenship by birth (as enumerated above), the citizen may also apply under certain other circumstances detailed bellow: through the mechanism of naturalization, by having a legally recognized relationship with a Portuguese citizen, or even by being adopted.

 

  1. B) PORTUGUESE NATIONALITY ACQUISITION BY NATURALIZATION

Unlike acquisition by birth, the consequences of Portuguese nationality acquisition by naturalisation only start taking effect from the moment of registration of the required acts or facts on which they depend. Therefore, the right to Portuguese citizenship is ensured and can be requested by those who are either:

  1. of legal age or with legal capacity according to the Portuguese law; legally living in Portugal with a valid residence permit for at least five years; with sufficient knowledge of the Portuguese language; has not been convicted of a crime punishable under Portuguese law with imprisonment for three years or above; and does not represent  any danger or threat to national security (g. being involved in terrorist activities);
  2. of legal age or legal capacity according to the Portuguese law; has not been convicted of a crime punishable under Portuguese law with imprisonment for three years or more; and does not represent any danger or threat for national security or defence; provided that  he or she was in the past a Portuguese national (who has lost the Portuguese citizenship status and who has not in the meantime acquired a different nationality);
  3. of legal age or legal capacity according to the Portuguese law; has been living in Portugal for the past five years and was also born in Portugal, child of a foreigner parent who was living in Portugal at the time of his birth; with sufficient knowledge of the Portuguese language; has not been convicted of a crime punishable under Portuguese law with imprisonment  for three years or more; and does not represent any threat for national security;
  4. of legal age or legal capacity according to the Portuguese law; has not been convicted of a crime punishable under Portuguese law with imprisonment for three years or more; does not represent any threat for national security; and who, not being a stateless person, (i) has been in the past a Portuguese national, or (ii) is considered descendant of Portuguese citizens, or (iii) is a member of a community  with  Portuguese ascendancy, or (iv) has rendered  or is required  to render relevant service to the Portuguese Republic or to the national community;
  5. of legal age or legal capacity according to the Portuguese law; has not been convicted of a crime punishable under Portuguese law with imprisonment for three years or more; does not represent any threat for national security; and who is a Sephardic Portuguese Jew descendant, with evidence of his or her heritage and allegiance to any Sephardic Community with  a Portuguese origin;
  6. of legal age or legal capacity according to the Portuguese law; with sufficient knowledge of the Portuguese language; has not been convicted of a crime punishable under Portuguese law with imprisonment for three years or more; does not represent any threat for national security; has been living in Portugal for at least 5 years prior to the application and has one descendant of Portuguese nationality acquired by birth.

 

  1. C) ACQUISITION OF PORTUGUESE NATIONALITY BY DECLARATION:

The following individuals are ensured Portuguese nationality:

  1. a foreigner who has been married for more than three years to a Portuguese national, by declaring his or her will to acquire Portuguese citizenship while married; or
  2. a foreigner who, at the time of the declaration, has been living with a Portuguese national under the common-law marriage regime for more than three years (duly recognised by a judicial decision of a court law); and
  3. those who have lost Portuguese nationality as a result of a declaration made during a period of legal incapacity may acquire it, when capable, by declaration.

 

  1. D) ACQUISITION OF PORTUGUESE NATIONALITY ACQUISITION BY ADOPTION:

A foreigner who was adopted abroad by a Portuguese citizen, after having the adoption’s foreign court decision duly confirmed by a Portuguese court of appeal, acquires Portuguese nationality without further legal constraints.

 

Based on the foregoing considerations and in light of the different Portuguese nationality acquisition mechanisms, let us now analyse the specific situation of citizens who were born in Macau, particularly in view of the transfer of sovereignty from Portugal to the People’s Republic of China on December 1999, taking into account the several legislative amendments approved in terms of Portuguese nationality regulations.

 

  1. E) ACQUISITION OF PORTUGUESE NATIONALITY ACQUISITION, SPECIFICALLY BY CITIZENS WHO WERE BORN IN MACAU:

On 20 December 1999, the sovereignty over the Macao Special Administrative Region (“MSAR”) was transferred from the Portuguese Republic to the People’s Republic of China, in compliance with the Joint Declaration on the Question of Macau signed in 1987 by both countries. In order to ensure a smooth transition, it was agreed that the Macau residents who were born in Macau and had already acquired Portuguese citizenship before the handover date would be able to maintain and use their Portuguese travel documents (which are granted only to Portuguese nationals in accordance with the law).

According to Law no. 37/81 of 3 October (which came into force on 8 October 1981), to acquire Portuguese nationality a citizen born in Macau has to meet one of the two following criteria:

  1. either be born in Macau until 8 October 1981, entitling the same to Portuguese nationality acquisition by birth; or
  2. if born from 8 October 1981 onwards, has least one Portuguese parent.

It is important to emphasize that amongst other conditions, and in order to exercise such right, it is necessary for individuals under this condition to provide evidence of previous registration of the citizen’s birth with the competent authorities at the place of birth, and that the relevant records state unequivocally the name of the parent who has Portuguese nationality.

In conclusion, after demonstrating the different advantages and generically listing the most common legally-established situations of acquisition of Portuguese nationality – as well as their mandatory requirements – it is possible to assert that each individual’s case has its own specificities, which require an individual analysis of the relevant circumstances in order to determine the best course of action.

 

New Regime of Financial Leasing Companies

In order to meet the development needs of today’s financial leasing industry in Macau, as well as revitalize the local financial leasing system, the Macau SAR Legislative Assembly enacted Law No. 6/2019, “Legal Regime of Financial Leasing Companies” and Law No. 7/2019, “Tax Incentives Regime for Financial Leasing Companies”.

Both laws were published in the Macau SAR Gazette on April 8, 2019 and became effective on April 9 of the same year, replacing the existing Decree-Law no. 51/93/M that came into force more than 20 years ago.

 

Redefinition into financial institutions

The new law (Law No. 6/2019) changed the legal position of financial leasing companies. Instead of qualifying the financial leasing companies as credit institutions, those institutions are now considered financial institutions, leading to more relaxed and different regulatory requirements than the ones previously applicable, and thereby revising the respective regime towards the development needs.

In addition, the new law adds the concept of subsidiaries for the purposes of financial leasing, the existence of which is subject only to prior communication to the Monetary Authority of Macau (“AMCM”). This being said, the banks and financial leasing companies authorized to operate in the Macau SAR are now allowed to incorporate subsidiaries to hold and manage specific financial leasing projects, so as to facilitate the business operations of the same. The operation of these subsidiaries does not require licensing, but a mere communication to AMCM.

 

Authorized activities

According to article no. 3 (1) and (2) of Law No. 6/2019, both financial leasing companies and subsidiaries besides the business of financial leasing per se, may engage in the disposal and management of leased assets, exchange operations, interest rate and currency swaps, as well as in any other activities, provided that there is prior authorization from AMCM.

Similarly to what happened with the previous Decree-Law no. 51/93/M, financial leasing companies shall not receive deposits or other repayable funds from the public. Therefore, the provisions of article no. 121 of the current Financial System Act (Decree-Law no. 32/93/M) regarding the crime of unauthorized acceptance of deposits or other repayable funds shall remain applicable.

The financial leasing business shall remain exclusive object of these entities, and therefore it is expressly prohibited for any person or entity to engage in leasing business without prior authorization to do so from AMCM. Thus, it is also prohibited to any person or entity that has not been authorized to do so, to include in his firm or to use in the exercise of his activity, words that express or imply that his corporate object is the activity of financial leasing.

 

Share capital reduction

As the previous regulatory regime did, the new law provides that financial leasing companies are to be established in the form of either private or public companies. At the same time, the new law stipulates that the minimum share capital requirement for the incorporation of financial leasing companies shall be 10 million Patacas, which represents a decrease of 20 million Patacaswhen compared to the previous minimum amount provided by Decree-Law no. 51/93/M, which means the lowering of barriers and, therefore facilitating the entry of qualified participants in the market.

However, the new law does not ease the requirements regarding the subscription and payment of the share capital, which according to article no. 7 (2) should be fully paid up upon incorporation of the company.

In addition, in order to prevent financial leasing companies from becoming shell companies, the new law requires at least one member of its administration body to have habitual residence in Macau.

 

Exemption of Stamp Duty and Complementary Income Tax (Law no. 7/2019)

The acts of incorporation of financial leasing companies or of subsidiaries established for the purpose of financial leasing, as well as those relating to the increase or reinforcement of the share capital shall be exempt from the payment of stamp duty. In addition, any contracts of financial leasing regarding capital goods, excluding real estate, are also exempt from stamp duty.

Finally, leasing financial companies are also exempt from payment of stamp duty on the transfer of assets with consideration, of real estate properties intended exclusively to be used as office of the company. However, each financial leasing company may only enjoy the said exemption on one property and only up to the maximum exemption amount of MOP 500,000.00 (five hundred thousand Patacas).

Regarding complementary income tax, it should be noted that a fixed rate of 5% applies to the income obtained from the financial leasing activity. This 5% tax is not applicable once the respective income is earned abroad and it is taxed there.

 

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THE NEW TAXI LAW

Aiming to meet the needs of the population and the concerns of entrepreneurs in the segment of the passenger transport by taxi, Law no. 3/2019, published on the 4th March this year, approved the new legal regime for the taxi service activity that will enter into force on the 3rd of June 2019.

 

GENERAL FRAMEWORK

From the analysis of this new legal regime, we highlight the legislator’s initiative to attempt for the consolidation, in a single Law, of the legal framework for the transport of passengers by taxi (although it does foresee the need for complementary regulation), thereby reducing legal uncertainties associated to the previous regulatory framework, which was spread throughout several separate diplomas – some of which older than 30 years – and whose loopholes the Macau Administration attempted to tackle on the specifications of the public tenders launched from time to time to award administrative authorisations to carry out the provision of taxi services.

The new legal regime for the taxi service activity has also introduced significant changes in the licensing procedures and has strengthened the enforcement mechanisms, as well as introduced tougher fines in case of breach of activity requirements.

 

NEW LICENCE MODEL

Only commercial companies incorporated in Macau, with a minimum share capital of MOP5,000,000.00 and exclusive business scope dedicated to taxi services are eligible candidates to be awarded with a license to carry out the taxi service activity.

As for the award of the licences, the new law sets forth that in principle the same shall be granted by means of a public tender organized by the Transport Bureau. Such kind of public tenders must be announced in the Official Gazette up to 30 days before the date of the call for tender.

It is important to note that the new law foresees two types of licences – a general licence and a special license – both provided for fixed periods of time and without possibility of renewal.

Moreover, these new licences cannot be assigned or charged in favour of any third party.

The distinction between the two types of licences takes into account the places where the licence holders are authorized to pick up or to drop passengers. Therefore, holders of the general licence may pick up and drop passengers everywhere with the exception of those prohibited by law, whereas holders of the special licence may only do so at the places specifically indicated in their respective licences.

It should be noted, however, that the mere ownership of one of these licences is not sufficient for a company to start its business operations, as licence holders are required to apply – in accordance with their respective licences – for the permits of the vehicles that are intended to be assigned to the taxi activity.

 

THE TRANSITIONAL REGIME

With respect to existing permits, the new law allows the current license holders to continue carrying out the taxi activity, and if such permits are subject to a validity period, they may do so only until the expiration of their term or of its renewal term. Moreover, the assignment or charge of such licenses is also still allowed – however from now onwards such kind of agreements are required to be executed in writing and a notice of the same shall be made to the Transport Bureau.

According to the new law, current license holders have a period of 18 months counted from the date of the entry into force of the complementary regulations, to upgrade the respective taxis with the mandatory equipment that is defined by the new law, such as the global satellite navigation system and the sound and image recording system.

Lastly, holders of a professional taxi driver licence must, upon entry into force of the taxi law, apply at the Transport Bureau for the replacement of their former licences by taxi driver identification cards. Failure to do so will bar the existing taxi drivers from paying the annual tax fee, which will only be possible after the present licence is substituted by the new identification card.

 

André Castanheira Pinto
David Sá Machado

The offshore termination plan in the Macau S.A.R.

Background

The Government of the Macao Special Administrative Region (“MSAR”) has recently put forward and sent to the Legislative Assembly a proposal for the revocation of Decree-Law no 58/99/M, of 18th October. In other words, the whole offshore system in the MSAR is coming to a definitive end as the draft legislation sets the extinction of the offshore activity for the first day of the year 2021.

This provision comes as a follow-up measure after the Region was included in the European Union’s tax haven blacklist (since January 2018 transferred to the greylist), upon which the Government of the MSAR set itself to study and review in order to find strategies to improve the tax system for offshore institutions.

Despite this, the MSAR Government did not consider a regeneration of the offshore legislation and instead chose to end it once and for all.

It was not that long ago that the MSAR was praising the offshore sector as a gateway for the development of an international business centre in the region, whereas the justification note for the draft bill reads now that the current legislation “does not meet the needs and the environment of economic development” in the MSAR. Contrary to this claim however, at least Bank Institutions and quite a number of resident workers and Law Offices in the MSAR have been actively participating in sizeable financial operations involving local offshore companies.

Amongst the most relevant concerns, let us turn our attention to the most important consequences that such policy may arise, briefly analysing the draft legislation.

 

Overview

Comprised of merely five articles, the legislation’s focus was clearly set on a short-term termination of the offshore sector in the MSAR. Overall, the following consequences are somewhat evident:

  • Henceforth, no enterprise shall be able to be licenced as an offshore entity;
  • There will be an expiration of all licences as of 1st January 2021, although they may subsequently proceed with normal activities as domestic companies, provided that the respective articles of association are amended in accordance with the provisions of the new law as detailed bellow;
  • During the period between the date of entry of the new law and 31st December 2020 – the transitional period – offshore companies may still carry on their business although some of the offshore tax benefits shall cease as follows:
  1. Offshore institutions shall not benefit from:
  • the exemption from inheritance and donations tax on the free transfer of movable and unmoveable property exclusively affected to the offshore business;
  • the exemption from real estate transmission tax on properties affected, exclusively, to the offshore activity;
  • the exemption from stamp duty on donations between living persons to whom the exemption on (i) applies;
  1. The managers and high level specialized staff authorised to establish residence in the Territory, under the terms of the MSAR law, shall no longer be exempted of professional tax concerning the salaries paid to them by offshore institutions until 31st of December of the third year after the beginning of the activity in Macau;
  2. Offshore institutions with certain exemptions from income tax shall no longer be exempted from submitting the declarations stipulated in the regulations relating to income tax;
  3. Tax exemption over income, derived from intellectual property, that has been acquired as of 16th October 2017 shall cease, starting on 1st July 2018;
  • If offshore companies opt to convert as domestic companies they are required to change their business names and business scope. And thus, they will be since the incorporation date subject to full Macau complementary tax;
  • If offshore enterprises request the abovementioned changes within 90-days from 1st January 2021, they shall be exempted from the applicable taxes, notary and commercial registry fees.

 

Brief commentary

Although the offshore system is going to be abolished, the MSAR remains a tremendously competitive location.

On one hand, enterprises in the MSAR are able to take advantage of the privileged geo economic situation that the Region has to offer, given the increasingly closer relations with the People’s Republic of China as well as other relevant Asian countries. On the other hand, the training and specialisation of local workers in the MSAR, bearing higher academic qualifications, are also a key decisive factor for economic growth and success.

Therefore, is it very likely that most of the offshore institutions transformed into domestic companies shall remain in the MSAR, making it sufficiently attractive – together with the overall fiscal environment – for these companies to stay and do business in the MSAR.

However, companies wishing to continue their operations in the MSAR and willing to make the necessary amendments may face some challenges according to what is currently set in the draft legislation.

While the new law provides for a reasonable period for these companies to disappear as offshore entities and allows the same to maintain certain tax exemptions, it should be possible for these enterprises to become domestic companies over these two years and simultaneously benefit from the favourable tax regime foreseen in the new law, allowing the envisaged changes to take place in a smoother way and a wider period of time, rather than the proposed limited three-month time span commencing on the 1st January 2021.

Quite clearly, it is a mistake not to allow the transformation until 31st December 2020, as offshore companies could easily continue to benefit from a more relaxed period in which they could be allowed to readapt. In fact, most offshore enterprises have foreign partners abroad, which means that it might take some time for them to undertake the necessary measures.

At the very least, there should be an ex officio procedure or decision ordering the cancelation and deletion of registration from the Financial Services Bureau and the Commerce and Movable Property Registry, if these companies do not transform into domestic companies within the time frame established by the new law. Indeed, the proposed legislation merely states that the licence expires but does not refer what the consequences are if these companies do not adapt to the new regime, making them legally inoperable but formally existent at the same time.

Also, there shall be cases where offshore enterprises need time to discuss with the financial institutions, management, associated companies, group companies, etc., because of their joint financial responsibilities, which could lead to disastrous and unintentional defaults in the future, amid contractual duties and financial responsibilities.  In any case, offshore companies will have to start discussions with the banks regarding the upcoming changes brought by the draft law and explain that they will have to transform into normal commercial companies in order to continue trading. At the same time, the short-span deadline may also pose a problem for the Registry services themselves, facing up to 500 potential amendment requests in one go.

On the other hand, the draft legislation is also misleading in terms of defining what the companies’ scope of business are set to become in the near future. In fact, article 4 calls for an exclusion of these companies’ corporate object, leading to believe that their corporate activity is illegal, which is actually false, because their activity is entirely within the law’s boundaries and there are hundreds of companies with the same corporate object. As it happens, there is actual legislation mentioning several activities within the offshore commercial service and auxiliary service scope, in areas such as consultancy in information technology equipment, data processing, database activities, administrative and archival support, research and development, testing and technical analysis, ship and aircraft management and administrative services, and trade in goods and services between the People’s Republic of China and Portuguese-speaking countries. Therefore, the idea of transformation of a corporate name is correct, but not when applied to the corporate object, which is entirely legal, independently of being an offshore entity or a local corporation.

 

Conclusion

The somewhat straightforward solution adopted by the Government looks like being more a quick discard rather than a well-considered and informed decision. In short, the diploma has several deficiencies and its drafting should be reconsidered. There is no magic formula to make an offshore system disappear and taking any dodgy shortcuts will just make matters worse.

The Macau land law: Overview and status quo

1. The old law vs the new law

Much has been said and written about the expiration of concession leaseholds under Law no. 13/2013, of 2 September (the “New Land Law”), as opposed to the former Law no. 6/80/M, of 5 July (the “Old Land Law”).

In comparative terms, it should be noted that there are very little differences between the Old Land Law and the New Land Law, within the relevant controversial context, with particular emphasis to the preclusion of renewal of the provisional concessions as set forth by the New Land Law – within the terms set in paragraph 1 of its Article 48.

In this sense, a closer look at the Old Land Law and the New Land Law reveals that the previous article 55 and the current article 48 both converge on the understanding that there is no room for land lease renewal within provisional concessions, as this merely applies to definitive ones.

What did in fact change is the Government’s disposition towards the matter, now choosing to terminate the concessionaires licence due to expiration and to withhold any further concession leasehold awards, whereas in the past, it was customary practice from the Government to declare the expiration of the concession leaseholds due to term expiration, alongside the decision to regrant the licence with exemption of public tender, on the grounds of public interest – as shown, e.g. by Dispatch of the Secretary for Transport and Public Works No. 20/2006 –.

This decision has ultimately led to entirely unreasonable, disastrous and unfair economic and social practical results – which were certainly not the goals pursued by the legislator when the New Land Law was discussed and approved –, thereby sentencing to death the validity and effectiveness of legal instruments such as contracts of developers with promissory buyers by the thousands, as well as the concessionaire’s trust alongside with that of the investors and the general public, ultimately jeopardizing a massive volume of legal transactions.

2. How has the New Land Law been applied?

From this viewpoint, both the Administration and the Macau Courts have consistently made it clear that once the provisional concession period has expired without it becoming definitive – i.e., without developing the land within the (development) period set out in the contract – the concession shall be deemed expired ipso facto, simply due to a mere passing of time and regardless of whether or not the land was effectively used by the concessionaire, and whether or not the concessionaire was at fault for the non-development of the land.

This claim is sustained by the notion that in such cases there would be no other alternative for the Chief Executive except to declare the expiration of the concession leaseholds, and therefore honour the principle of administrative legality and legal security and certainty.

In truth, the aforementioned understanding is based on a possible interpretation / application of the New Land Law, but it is certainly not what this legislation had initially intended for, and neither does it comply with the Macau legal system as a whole. Also, the said interpretation is seemingly inconsistent with the land concession leasehold regime, and it does not benefit the enforcement of the principles on which such interpretation is supposedly based, namely the principle of legality and the principle of security and certainty of the legal trade.

3. There are other interpretations

Following a close scrutiny of the New Land Law’s legal framework it is not entirely difficult to find other viable and more suitable interpretations which, although they may follow a different dogmatic approach to the matter, are however more beneficial, revealing a more harmonious outcome and leading to a better aligned and overall fairer legal system. This might allow for the period of the concession leaseholds to be legally and legitimately extended (and not renewed), suspended, and more importantly, for the provisional concession to be converted into a definitive concession.

Let’s have a closer look at these alternative interpretations:

  1. The concession leasehold as a surface right

    The scope of the concession leasehold is first and foremost to grant powers to build, transform or maintain the works for the purposes set forth in the respective title (vide article 42 of the New Land Law).

    Granting the concessionaire powers to maintain the works on the concessioned land, which were absent from previous laws, which only mentioned powers to build and transform, is symptomatic of the New Land Law’s acknowledgement of the confluence of the substance of the right arising from the concession leasehold and the surface right.

    On the other hand, the concession itself is governed by contract and additionally by civil law, according to article 41 of the New Land Law.

    With regard to the expiration period, it is clear from the surface right’s regime set out in the Civil Code (vide paragraph 3 of Article 1427 of the Civil Code) that the termination of the surface right by way of lack of use after 7 years is subject to the rules on the suspension and interruption of the limitation period.

    Therefore, in cases where the Government has deliberately prevented the concessionaire to develop the land within the stipulated term, there are grounds to suspend the time period given to exercise the right, pursuant to paragraph 2 of art. 313 of the Civil Code.

  2. Expiration as a punitive sanction

    On the other hand, should it be chosen to dismiss any discussion around the nature of the provisional concession period (expiration / limitation period), the fact that should also be considered is that (and contrary to the current understanding of the Macau Courts) the New Land Law prescribes an expiration regime which itself is a true punitive expiration, as in fact already did the Old Land Law. In this sense, and to the extent that the expiration of the provisional concession is associated with the failure to carry out the development, it always bears a punitive intent, aiming to sanction the concessionaire who failed to develop the land due to his inertia or negligence.

    Consequently, when expiration is invoked due to failure to comply with obligation to develop the land within the concession’s set term, the following circumstances must be verified simultaneously:

    1. expiration of the concession leasehold period;
    2. whether the land was in fact developed or not;
    3. failure to carry out the land development; and
    4. whether such failure was due to a breach of the contract’s development clauses attributable to the concessionaire;

    Therefore, only in case all of the abovementioned conditions are met will the declaration of expiration be legitimate.

  3. The condition thesis

    From a different perspective, it should also be noted that the land development is itself a condition for converting the provisional land concession into a definitive concession.

    As such, under paragraph 2, article 268 of the Civil Code, such condition is considered to have been met should the land development be barred, in breach of good faith, by the obligee.

    Now, let’s assume that the lack of development is due to the Government’s decision to suspend works and carry out an assessment of development projects aimed at approving a new urban plan, and such approval is pending for over a decade. In this case, the Government is exclusively liable for the fact that the building was not constructed and the land not developed, which was a resolutory condition of the concession’s provisional nature and a suspensive condition of its definitiveness.

    Therefore, in this case one can argue that the aforementioned condition was not fulfilled due to fault of the obligee and should be considered applicable by analogical application paragraph 2 of article 268 of the Civil Code.

  4. Extension / Suspension

    Lastly, articles 103 and 104 of the New Land Law provide that the term for development can be suspended or extended in the event it is not attributable to the concessionaire the failure to carry out the necessary steps in the development within the indicated term, and the Chief Executive deems the reasons invoked admissible.

    In light of such circumstance, should it be assumed that the referred suspension or extension is included within the time-limit for the concession period?

    The New Land Law provides no indication to the contrary. What would happen if under the abovementioned provisions the development period was suspended for such an extended period of time that it would inevitably cause the concession period itself to be exceeded? Would the provisions set out in article 48 of the New Land Law be applicable unconditionally? It does not seem a judicious understanding.

    In fact, the extension of the leasehold period does not consist on a renewal (the extension is not automatic and is only granted for a strictly necessary period of time), and the fact that the New Land Law states that the concession period cannot exceed the duration of 25 years does not necessarily mean that the land concession overall duration might not exceed the said 25 years, suspensions included. Should there in fact be a suspension, the leasehold period reaches a standstill and therefore the same is not increased.

4. Conclusion

Although different legal solutions and interpretations consistent with the New Land Law’s ratio and sentiment of justice do exist, it is by far convenient that a matter of such importance as the one under scrutiny is carefully analysed and made uncontentious for the sake of security and stability of the legal trade in Macau. This may only be achieved by manner of legislative intervention, which is in fact badly needed.

32nd Birthday of Manuela Antonio Law Firm

It is with great pride that we commemorate yet another birthday here at our law office, crossing milestone after milestone in our already rich history. On the 28th of this month our firm completes 32 years of its establishment. We take this occasion to thank the support of our excellent team of collaborators, and indeed of our loyal clients for their priceless aid in our success.

As usual, our law office stands tall amongst the professional leads of the time, with countless achievements and accomplishments along the years, including this year which proved to be exceptionally productive.

In fact, this year has surpassed the impressive figure of more than 15000 clients.

Also, we won numerous awards, among which the prestigious International Financial Law Review’s market leader award for the principal of our firm Manuela Antonio, as well as the Chambers and Partners top tier law firms.

On the other hand, and looking towards the future generation of lawyers, our firm has also grown larger on the inside, adding three new trainees to our already capable team of counsels.

As always, we plan on keeping our professional relationship with our clients thriving, and to continue providing the excellence that throughout the years has constantly accompanied the name of our law office. Another year, another shower of success!

Happy birthday to us!

Macau Perspective over Financial Derivatives

Derivatives are financial instruments that result from fixed-term contracts whose value is ascertained by reference to a specific underlying asset or group of assets that play a very important role in the financial markets.

Other than its speculative purpose, derivatives are nowadays a useful risk management tool at disposal of financial institutions to cover exposures to important risks inherent to market variations like interest rates, currencies, index, etc.

Although derivatives can be traded on organized market places, they are predominantly traded over-the-counter (OTC). According to figures disclosed by the Bank for International Settlements, in the end of 2017 the global market for OTC derivatives amounted to more than 531.91 trillion US Dollars, and derivatives traded on organised markets amounted to 33.1 trillion US Dollars.

When trading in a OTC market, the counterparties commonly agree to govern their arrangements by standard terms and conditions (Master Agreement) drafted by worldwide recognized expert organizations like ISDA – International Swaps and Derivatives Organization.

However, when negotiating OTC Master Agreements across different jurisdictions, lawyers and legal counsels are frequently concerned about the validity and enforceability of the netting and close out netting provisions laid down in such contractual standards.

Although the Macau Legal System does not contemplate a definition of derivatives, it however recognizes this kind of financial instrument under the paragraphs e) of article 17.º of the Decree-Law no. 32/93/M of 5 July 1993 (Macau Financial System Law) and of paragraph c) of article 12.º of the Decree-Law no. 25/99/M of 28 June 1999 (Asset Management Companies Law) as regards to the activities that either Banks and Asset Management Companies are allowed to perform.

As in many other jurisdictions, Macau insolvency rules are deemed to be part of public policy and so, although the Parties are allowed to validly choose a foreign law to govern their Master Agreement, in the insolvency scenario the Macau Law shall prevail.

In such case, the enforceability of netting and close out netting provisions foreseen in OTC´S Master Agreements becomes quite problematic. Indeed, provided that the status of insolvent is declared by Macau Courts, it will be impossible to proceed with any set-off with regard to the credits / liabilities of the insolvent party, which shall be frozen and under control of Court-appointed administrator. As such, in our jurisdiction the set-off provisions will only operate, in principle, until the start of any insolvency proceedings against a Macau Counterparty.

In conclusion, Macau is not, for the time being, a “friendly jurisdiction” to netting provisions, although pursuant to the n.º 4 of the article 6.º of the Macau Financial System Law, the local regulator (Monetary Authority of Macau – AMCM) has the authority to enact regulatory requirements towards the establishment of automatic compensation mechanisms. Legislation clarity is therefore a must-do task that the local authorities shall have to embrace in order to create a proper environment in the business development of derivative instruments in Macau.