Pulse
Japan: Procedures and criteria for the approval of integrated resorts
By Lewis - 23 March 2021
Masayuki Fukuda, Partner at Nagashima Ohno & Tsunematsu
Under the Specified Integrated Resort (IR) Promotion Law and the Specified IR Implementation Law (the ‘IR Laws’), which were enacted in 2016 and 2018, respectively, up to three IR Areas (including one casino per each IR Area) will be approved by the Minister of Land, Infrastructure, Transport and Tourism (the ‘Minister’).
Unfortunately, due to the COVID-19 pandemic, the schedule of the IR application for approval and its examination process has been substantially delayed.
On December 18, 2020, the Cabinet published an ordinance which sets forth that an application for IR Area approval may be made from October 1 2021 through April 28 2022. On the same date, the Minister published the Basic Policy for Development of IR Areas (the Basic Policy) which sets forth the basic procedure and criteria for application and approval of IR Area.
An application for approval of IR Area shall be made jointly by a candidate prefecture (including a major city designated under the Local Autonomy Act) and a private business operator.
Naturally, prior to making such application, each candidate prefecture will have to select a private business operator as its IR business partner by way of an open bidding to be made in accordance with such prefecture’s own Implementation Policy for Development of IR Areas (the Implementation Policy) which shall be enacted in line with the Basic Policy.
It is expected that such selection will be made around summer to autumn of 2021. Please note that some prominent candidate prefectures have already published their (almost final) Basic Policies and informally pursued the process of selecting the candidate private business operator and virtually narrowed down the number of candidate casino business operators to one or a few, though new comers might slide into the list of such candidates.
More specifically, an application for approval as IR Area shall be made as an application for certification of the IR Area Development Plan (including the Basic Business Plan) proposed by the candidate municipal body and the private business operator.
Such plans will be examined by the Examination Committee which will be composed of certain knowledgeable/expert members to be appointed by the Minister. The criteria of certification of IR Area Development Plan as set forth in the Basic Policy is composed of two prongs:
(a) Satisfaction of the Statutory Required Criteria; and
(b) Showing superiority under the Evaluation Criteria.
STATUTORY REQUIRED CRITERIA
First of all, the IR Area Development Plan shall satisfy this statutorily required minimum standards. In summary,
(i) All of the statutorily required five types of facilities (i.e., international convention/conference facility, exhibition facility, tourism promotion facility, tourist service facility and accommodation facility) shall be included.
The number of casino facility shall be only one and the floor space of the gaming area shall be less than three percent of the aggregate floor space of IR Area.
Certain other requirements (such as unified land use/management, fair and justifiable selection process of IR operator, IR operator’s compliance system, non-disqualifications of IR operator and its officers and members, no unjustifiable contact with the members of the Examination Committee) shall be satisfied.
(ii) The location of IR Area shall be adequate in terms of transportation access from major cities of Japan and foreign countries and considering other economic and social conditions.
(iii) The Basic Business Plan shall satisfy certain requirements (e.g., IR business will be integrally and continuously conducted by the sole business operator. Such operator shall be a company incorporated under the Company Act of Japan and shall conduct only IR business operation.
In addition, measures necessary for eliminating harmful effects originating from casino facilities shall be taken, etc.).
(iv) The development of IR facilities, improvement of IR business and corporation with the measures implemented by the municipal body shall be clearly articulated and shall be in consistent with the budget plan and the funding plan set forth in the Basic Business Plan. In addition, the use of entrance fee tax shall be clearly specified.
(v) The social and economic impact of the implementation of IR Area shall be clearly stated together with the grounds therefor.
(vi) The measures and arrangement for eliminating harmful effects shall be specified in the IR Development Plan and they shall be appropriately implemented by the municipal body in association with the Prefectural Public Safety Commission.
In addition, the Prefectural Plan for Facilitating Gambling Addiction Measures shall be made in accordance with the Basic Law on Measures Against Gambling Addiction and such plan shall be appropriately implemented.
EVALUATION CRITERIA
Under this criteria, the superiority/inferiority of the IR Area Development Plan will be evaluated in terms of the following five viewpoints:
(i) Accomplishment of internationally competitive and highly attractive stay-type tourism;
(ii) Economic and social impact;
(iii) Capability and arrangement of stable, continuous and safe operation of IR business (including financial stability, measures for disaster prevention or mitigation, ensuring safety of IR Area/IR facilities, measures for infection prevention and building good relationship with the region community, etc.);
(iv) Use of profits gained from casino business; and
(v) Elimination of bad influence associated with casino facility and measures against gambling and other addictions.
While the basic concepts of this criteria more or less overlap with those of the Statutory Required Criteria, notably, for example, in respect of (i), the whole concept of IR Area shall be clear, internationally competitive, of superb-quality and original.
The design of IR buildings shall be so advanced, creative and attractive that they may become new landmarks of the region, though they shall be also in harmony with the landscape and the environment of the surrounding area.
In addition, IR facilities shall constructed in unprecedentedly large scales so that they may become one of the leading tourism facilities in Japan, and shall be also the most advanced facilities in the world in terms of universal design, reduction of environmental load, multicultural coexistence, fair trade, etc.
As for casino facilities, they shall be in harmony with the concept of the whole IR Area and shall be in balance with the other facilities in terms of their scale, design and layout.
In respect of (ii), it is expected that the number of MICE events or tourists will be substantially increased by opening of such IR Area so that Japanese government’s tourism goal (i.e., the number of foreign tourists will exceed 60 million and the consumption amount will exceed ¥60 trillion by 2030) may be achieved.
It is currently expected that the approval of IR Area will be made around summer/autumn of 2022 or thereafter and that the approved IR Area/casino may be open in the late 2020s at best.
Masayuki Fukuda is a partner at Nagashima Ohno & Tsunematsu. He has an LL.M. degree from the University of Pennsylvania and is qualified to practise in Tokyo and New York.
Recently, he has been intensively involved in the area of Japanese casinos/gambling laws and advises casino/gaming-related regulatory and transactional matters for international and domestic corporate clients.
He has extensive experience and skills in finance and real estate laws and transactions for international/domestic banks and other corporate clients. He is the author of ‘The International Comparative Legal Guides to: Gambling 2020 Japan’ (ICLG, November 2019) and other articles concerning casinos and gambling laws.
