October 27, 2016 Sochi will host RGW Sochi – gambling event dedicated to the creation of Krasnaya polyana gaming zone. We are exploring the subject and decided to meet with Maria Lepschikova, the lawyer of PL LLC, in order to discuss legal aspects of gaming zone operation in the region. The expert has more than 12 years of experience in legal support of lottery and gambling business and an insider’s knowledge of gambling situation in Sochi.
Interviewer: Russian Gaming Week Sochi (RGW)
Expert: Maria Lepschikova (M.L.)
M.L.: According to Article 12, p.4 of the Federal Law № 244-FZ, starting from the date of approving Krasnaya polyana gaming zone boundaries by the government of the Russian Federation, designated purpose of the land parcel inside this boundaries has been changed, and since this date the land can be used for organization of gambling venues and provision of related services.
In addition, according Article 12, p.3 of the Federal Law № 244-FZ, the government authority of Krasnodar Krai is empowered to provide management of the gaming zone. It means that lessor can lease the land inside the boundaries to gambling activities organizers (including legal entities that satisfy particular requirements). After leasing the land, the latter has the right to organize gambling venues within the territory of the gaming zone. The land within the territory of the gaming zone can be also leased by the third parties for the provision of the related services. Obviously, before the determining of territory boundaries by the government of the Russian Federation, such lease was impossible.
Organizers of gambling activities can operate within the gaming zone territory only by virtue of special permission, provided by the government authority of Krasnodar Krai, which is empowered to provide management of the gaming zone.
From the legal point of view it means that the company interested in operating in Krasnaya polyana gaming zone should prove (by providing corresponding documents) its eligibility and then following formal procedures get a permission for operating in the gaming zone (lease agreement, permissions etc.).
Thus, currently the development of the gaming zone depends on the amount of companies, which have applied or will apply for the permission for operating there.
RGW: How will the infrastructure of Gorki Gorod affect the development of Sochi gaming zone?
M.L.: It should be noted that among all gaming zones created in accordance with the Federal Law № 244-FZ, Krasnaya polyana is the most developed land parcel in terms of infrastructure. It is not an open country that Azov-City got.
Therefore, the availability of developed infrastructure inside and/or near the land parcel will facilitate the beginning of the gaming zone operation. Previously when allocating the land for gaming zones (except for Krasnaya polyana) the government of the Russian Federation had to comply with legal requirements as for its location: the gaming zone shouldn’t be located near the boundaries of inhabited areas. And if there are no inhabited areas, there is no infrastructure. Krasnaya polyana became the first exception from the rule.
RGW: What else should the government do in order gaming zone could replenish the budget?
M.L.: Taking into account the discussed above issue regarding the infrastructure, perhaps the only thing left is to issue permits for operating within the gaming zone to the companies, which will fill it with objects of taxation. Such objects include each gambling slot and each gaming table.
RGW: What are the prospects for foreign investors?
M.L.: In accordance with Article 6 of the Federal Law №244-FZ, the organizer of slot machine halls and/or casinos should be a legal entity established/registered within the territory of the Russian Federation, which has net assets amounting to not less than 600 million rubles (calculation method is specified by the Russian government), and founders of such a legal entity should have no unexpunged or unspent convictions for economic crimes or any deliberate medium-gravity and grave crimes.
Organizers of gambling activities should be annually audited and add the results of the audit to their official statutory reporting. They are also obliged to provide regular information on the beneficiaries and other information specified by the Russian government.
Thus, foreign investors can consider the possibility of working in Krasnaya polyana only on the behalf of a Russian legal entity, which they will have to either create or buy a stake in.
In any case, to find a way of legalization of foreign investors is possible.
RGW: There is legal bookmaking within the territory of Sochi already. What will be the changes for the business after opening a gaming zone in Krasnaya polyana?
M.L.: It should be noted that the format of the gaming zone and betting shops outside the gaming zone are two different things. Betting shops are usually opened in crowded places with high traffic, i.e. one can visit betting shop just on the way, but in order to visit gaming zone you have to go there intentionally.
I’m a lawyer, not a marketing analyst, but I can assume that bookmakers operating on the territory of Sochi may currently have a kind of “secondary gain” from the opening of Krasnaya polyana. The opening of the gaming zone implies the development of junket tourism in the region. Hence, not all tourists that come to play will stay in hotels within the boundaries of the gaming zone. Many of them may want to combine their travel with other leisure activities, and the flow of gambling tourists to the city may have a positive impact on the operation of Sochi bookmakers outside the gaming zone as well.
RGW: How will new gaming zone in Sochi coexist with Azov-City till 2019?
M.L.: From my own experience I can say that Krasnodar Krai is large and Azov-City gaming zone is not very close to Sochi.
I believe that they will not compete. Especially, if taking into account the fact that Azov-City has already formed its pool of customers, and Krasnaya polyana is designed for foreign tourists mostly. At the same time the opening of Krasnaya polyana requires some more time. So I would say that the two zones will coexist in 2017-2018, without interfering with each other.
However, it should be noted that companies operating in Azov-City gaming zone are commercial legal entities. If they understand that there is no profit in the zone, they may stop their operations in Azov-City even earlier than January 1, 2019. At least it is their right to choose how and when to work within the term, specified be the law.
Get more information about Krasnaya polyana gaming zone at the industry forum RGW Sochi.
Buy tickets to the event at: https://goo.gl/8D0d4w.
