Casino rivals mull action over state aid rules’ breach

Casma chairman Edward Gatt resigned before Dragonara concession was signed, but denies having had misgivings on controversial extension

A concession granted to Dragonara Gaming Limited has been extended to 64 years.
A concession granted to Dragonara Gaming Limited has been extended to 64 years.

Business operators outraged by the 64-year extension to the Dragonara casino concession are considering taking legal action over alleged breach of state aid rules.

MaltaToday was told that members of the business community had already been provided with a legal memorandum on why the Casma Ltd concession, approved by both sides of the House, was a potential breach of state aid rules.

Despite its approval in the House, Labour government sources have insisted that the concession was not discussed within the Cabinet, and suggested that Casma chairman Edward Gatt only resigned recently in April to avoid signing the concession.

Edward Gatt, a lawyer who in the past backed economy minister Chris Cardona’s bid to become PL deputy leader, however, denied having resigned over any misgivings he had on the contested concession due to it not being released on a public tender or expression of interest.

Gatt resigned as Casma chairman on 29 April, but no replacement was appointed by Cardona since then.

Gaming industry players are up in arms after the Dragonara casino operators received a 64-year extension to their lease agreement, without a competitive tender. The casino concession was first granted to Dragonara Gaming (DGL) in 2010, for a 10-year lease. The company is co-owned by Johann Schembri and the Bianchi Group. The lease includes the land immediately surrounding the building.

But in a motion which economy minister Chris Cardona took to the House without being first presented in Cabinet, both sides of the House approved the extension of the casino concession for the remaining 64 years of the lease that Casma Ltd has on the land.

Casma awarded DGL the 10-year lease after competitive tender. DGL was obliged to invest €17 million in the property, something the parliamentary motion says was more than fulfilled. The motion was eventually approved unanimously by Parliament on Tuesday afternoon with no discussion on the terms and conditions of the concession. It was seconded by Deputy Prime Minister Chris Fearne.

Economy minister Chris Cardona yesterday did not deny the fact that he had not taken the Dragonara concession to ministers, saying discussions in Cabinet were confidential. “For the Opposition to only take issue of this mutual decision, after themselves voting for it in Parliament, is ironic,” he quipped, referring to the PN’s vote in favour.

Edward Gatt this week told MaltaToday his departure had nothing to do with the nature of the contract. “The contract required the board to meet more often than it used to and it was becoming too much given my private workload as a lawyer. I was missing meetings and so I decided to resign and make way for somebody else.”

While Gatt resigned on 29 April from Casma, the company’s articles of association only require a minimum of three directors so no replacement was appointed.

There are various business establishments in St Julian’s with an interest in taking over the casino concession at the Dragonara, one of Malta’s oldest casinos.

“There is no doubt at law, that the concession had to go out for a public expression of interest after the expiry of the 10-year period. Nothing in the rules governing concessions exempts MIMCOL and Casma from adhering to public procurement regulations,” one major operator told MaltaToday.

This newspaper was informed that business groups were seeking legal advice on a possible case of breach of state aid rules.

“There is no doubt that this was no simple extension of the concession. At a concession of 64 years, it would have been attractive enough for the entire entertainment industry to bid for it. There is no doubt this was illegal, at both national and European level,” the same operator said.

The land on which the casino stands had been leased by the Malta Development Corporation in 1990 to Casma, which allows the government company to administer the site as it wishes. “Dragonara Gaming is now undertaking to continue making additional investment over the site which shall include restoration and conservation works which shall amount to millions of euro,” the ministry added.

But the 64-year extension of the concession will also save millions of euro for Dragonara Gaming.

DGL currently pays €1.2 million in rent annually under the 10-year lease agreement awarded by tender in 2010. But under the renewed lease piloted by Cardona, the casino will only be paying €500,000 for the first 15 years of its 64-year term.

Moreover, for the remaining 50 years Dragonara will pay €1 million a year, subject to an increase of 5% every five years thereafter, with the first increase being applicable on the 21st year.

Savings of €13.5 million are the bare minimum which Dragonara will be enjoying based upon its current annual rent of €1.2 million.

One businessman who spoke to newspaper BusinessToday this week said that no information had emerged from Parliament about the terms according to which the lease had been extended. “We were very surprised, and we still need to understand what it actually means, because so little information has been forthcoming,” he said.

“It’s amazing that no questions were raised by the Opposition, which is quite concerning and makes it apparent that nobody is scrutinising such lease concessions. At the very least it should have asked what the terms of the extension were,” they said.

Sources said the motion granting the concession of the land to Dragonara Casino had not been brought up for discussion within the Nationalist Party’s parliamentary group ahead of Tuesday’s sitting. On the night, when the motion was presented in Parliament, most of the Opposition MPs had already left the Chamber to attend a House committee sitting.

READ MORE: Generous concession will save Dragonara casino millions

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