SC nullifies Pagcor online gambling contract

The Supreme Court (SC) declared null and void yesterday the authority granted by the Philippine Amusement and Gaming Corp. (Pagcor) to a private company to conduct online gambling locally and internationally.

In a 10-page decision penned by Justice Consuelo Ynares-Santiago, the Court said Pagcor was neither allowed by law nor by its own charter to relinquish to or share its franchise with Sports and Games Entertainment Corp. (SAGE) for "sports betting and Internet gaming."

Voting unanimously, the SC justices said SAGE should obtain a separate legislative franchise and not "ride" on Pagcor’s franchise.

"A legislative franchise is a special privilege granted by the state to corporations. It is a privilege of public concern which cannot be exercised at will and pleasure, but should be reserved for public control and administration, either by the government directly, or by public agents, under such conditions and regulations as the government may impose on them in the interest of the public," the SC said.

The SC decision explained that Internet gambling does not fall under any of the categories of the authorized gambling activities enumerated under Section 10 of Presidential Decree 1869, which grants Pagcor the "right, privilege and authority to operate and maintain gambling casinos, clubs and other recreation or amusement places, sports gaming pools" within the Philippines.

The high tribunal ruled that Congress prescribes the conditions to grant a franchise and "thus the manner of granting the franchise, to whom it may be granted, the mode of conducting the business, the charter and the quality of the service to be rendered and the duty of the grantee to the public in exercising the franchise are almost defined in clear and unequivocal language."

On March 31, 1998, Pagcor’s board of directors approved an instrument called "grant of authority and agreement for the operation of sports betting and Internet gaming," allowing SAGE to operate and maintain a sports betting station in Pagcor’s casinos, as well as Internet gaming facilities to service local and international bettors.

Then Pagcor chairwoman Alicia Reyes, SAGE board chairman board Henry Sy Jr. and president Antonio Lacdao signed the grant of authority on Sept. 1, 1998.

SAGE then started its operations by conducting gambling on the Internet on a trial-run basis, making pre-paid cards and redemption of winnings available at various "Bingo Bonanza" outlets in malls and other entertainment centers.

This, however, caused much controversy as the Church and other sectors of the society objected to "online bingo" and other forms of online gambling.

Sen. Robert Jaworski filed a petition before the SC questioning the agreement between Pagcor and SAGE and asked that it be nullified.

Jaworski contended that Pagcor committed grave abuse of discretion amounting to lack or excess of jurisdiction when it authorized SAGE to conduct a gambling operation on the Internet.

He also said Pagcor was not authorized under PD 1869 to operate gambling on the Internet since the law could not have possibly contemplated online gambling.

Jaworski said the decree was enacted on July 11, 1983 when the Internet was not yet existent and gambling activities were confined exclusively to real space.

He noted that the Internet, being an international network of computers, necessarily transcends the territorial jurisdiction of the Philippines and that Pagcor’s grant contravened the limitation on its franchise.