Public Procurement & Government Contracts 2021

Last Updated April 07, 2021

Macau

Law and Practice

Authors



Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in the Macau SAR and Lisbon, Portugal, with key practice areas of corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

Macau law does not have general statutes governing the procurement of government contracts. Despite some general provisions in the Administrative Procedure Code, the matter is governed by different statutes that regulate the different government contracts and contract procedures, as detailed below.

  • Decree-Law No 57/99/M, gazetted on 11 October 1999, which approved the Macau Administrative Procedure Code (MAPC), prescribes the general provisions applicable to public contracts (inter alia, public construction works contracts, public construction works concession contracts, public services concession contracts).
  • Decree-Law No 122/84/M, gazetted on 15 December 1984, provides the regime of the expenses to be incurred with construction works and procurement of goods and services by the government, including the public departments with administrative autonomy, as well as the regime of the contract procedure to be followed for each type of expense. Decree-Law No 63/85/M, gazetted on 6 July 1985, provides the regime applicable to the public tender when such is required for the procurement of goods and services pursuant to Decree-Law No 122/84/M. The revision of these two decree-laws is currently under public consultation, as outlined in 5.4 Legislative Amendments under Consideration.
  • Law No 3/90/M, gazetted on 14 May 1990, provides the bases of the regime and procedure for the concession of public construction works and public services.
  • Law No 14/96/M, gazetted on 12 August 1996, provides the obligation of the concessionaires of public construction works and public services to make public on an annual basis their respective balance sheet, the management report and the opinion of the supervisor or the supervisory board.
  • Decree-Law No 74/99/M, gazetted on 8 November 1999, provides the regime of the public construction works contract, including the rules governing the negotiation of the contract, the applicable administrative procedures and the execution of the contract. According to this decree-law, the price of a public contract – ie, the consideration to be paid to the contractor – can be set out using two different regimes, global price or series of prices, which can be combined in the same construction works in respect of the different contractors involved and/or for tasks of different nature.
  • Dispatch No 52/GM/88, gazetted on 23 May 1988, establishes the procedure for the purchase of real estate assets by the public administration services.
  • Dispatch No 66/2006 of the Secretary for Economy and Finance, gazetted on 20 November 2006, establishes the instructions for the economic classification of income and expenses.
  • Administrative Regulation No 6/2006, gazetted on 1 November 2006, establishes the financial regime of the public administration services.

The Macau government, public departments with administrative autonomy, autonomous services and funds are subject to procurement regulation.

The procurement of goods and services, the concession of public construction works and public services are subject to special statutes on procurement regulation.

In general, the minimum value thresholds serve as indicators to determine the type of procedures to be used in the public procurement procedures.

Based on the current law, when the public works contract is estimated to exceed MOP2.5 million, or the estimated cost for the acquisition of goods and services exceeds MOP750,000, the awarding authority shall organise the procurement by public tender. The revision of these minimum value thresholds has recently been proposed, as outlined in 5.4 Legislative Amendments under Consideration.

For public works contracts, only entities registered in the Official List of Public Works Contractors of the Land, Public Works and Transport Bureau are admitted as tenderers; entities not established in Macau and that are not registered in the Official List of Public Works Contractors are only admitted in limited situations prescribed in the law and must evidence their registration as public works contractors in their own territory, for equivalence purposes.

With regard to procurement of goods and services by the government, there are no legal prerequisites for eligibility to bid on public sector opportunities, without prejudice to the requisites set out in the tender programme.

Please refer to 2.7 Eligibility for Participation in a Procurement Process on the general requisites of eligibility for concessionaires of public construction works or public services.

Public procurement is guided by the following general principles: legality, impartiality, competition, equal opportunities, responsibility, stability, and transparency and publicity.

In particular, under Law No 14/96/M, gazetted on 12 August 1996, the concessionaires of public construction works and public services are obliged to make public on an annual basis their respective balance sheet, the management report and the opinion of the supervisor or the supervisory board.

In general terms, as a consequence of the general principle of publicity applicable to administrative procedures, the decision to start a public procurement procedure that is to be carried out in the form of a public tender is subject to announcement in the Macau Official Gazette, as well as in two of the most-read newspapers in Macau, one in Portuguese and the other in Chinese.

Pursuant to Decree-Law No 63/85/M, the opening of a public tender for the procurement of goods and services shall be announced in the Official Gazette, with details as to the awarding entity, the public service responsible for the tender, the nature of the goods and services being procured, the base value of the tender (if declared), the place and time for the examination of the tender specifications and tender programme, the deadline for the submission of tender proposals, the provisional bond to be provided by the bidders to participate in the tender and the entity where such bond shall be deposited, and the place, day and time of the public act of the tender.

Further to the decision to open a public tender, Law No 3/90/M prescribes mandatory announcement in the Macau Official Gazette for the following actions in respect of the concession of public works and public services:

  • the decision to waive the public tender procedure;
  • the decision to cancel a public tender already opened;
  • the decision not to award the contract to any of the bidders; and
  • the decision to suspend (sequestro) or terminate the concession, as well as the concession contracts.

Macau law does not prevent the awarding authority from collecting market information prior to the decision to start contract award procedures, it being prudent to collect as much information as it deems necessary to organise the tender and protect the public interest in the best possible manner.

The collection of market information may be relevant to assess the type of contract procedure to be followed by the awarding authority.

The MAPC provides four general procedures for soliciting proposals from potential contractors, which are applicable with minor adaptations to the different types of contracts executed by the government. According to the MAPC, except where a special regime establishes differently, the government can only solicit proposals (i) by public tender, (ii) by limited public tender by prior qualification, (iii) by limited public tender without prior qualification, or (iv) by direct negotiation (ajuste directo):

  • Decree-Law No 122/84/M provides that the government can solicit proposals (i) by public tender, (ii) by limited public tender by prior qualification, or (iii) by direct negotiation;
  • Law No 3/90/M provides that there must be a public tender for the concession of public construction works of buildings or facilities for public use or public services, except in the case that the public interest recommends the concession by means of direct negotiation;
  • Decree-Law No 74/99/M provides that the government can solicit proposals by public tender, public tender limited by prior qualification, limited public tender without prior qualification and, where expressly allowed in the law, by direct negotiation; and
  • Dispatch 52/GM/88 provides that the government can solicit proposals for procurement of real estate assets by direct negotiation, prior consultation or tender.

Tender Procedures

Public tender

The procedure to contract by public tender comprises the following steps:

  • the decision from the government to use this kind of procurement procedure and the preparation of the tender programme and respective specifications;
  • the announcement of the opening of the tender;
  • the request by the bidders/bidders for clarifications on the contents of the tender programme and specifications;
  • the submission of proposals by the bidders;
  • the provision of a provisional guarantee by each of the bidders to guarantee the performance of the obligations undertaken in the respective proposal;
  • the opening of the proposals and respective acceptance or rejection;
  • the awarding of the contract to the winning bidder;
  • the provision of a performance guarantee by the contractor to guarantee the performance of its obligations pursuant to the concession contract; and
  • the signing and announcement of the concession contract.

Limited public tender by prior qualification

The procedure to contract by limited public tender by prior qualification is regulated by the same rules as the public tender, with the particularity that only bidders who were pre-selected by the government based on the verification of certain requirements and conditions (technical, professional, economical and financial) can submit a proposal. After such initial verification, the government must select a minimum of three bidders and invite them to submit their proposals. The contract is awarded to the bidder who submits the proposal with the lowest price.

Limited public tender without prior qualification

A limited public tender without prior qualification procedure is regulated by the same rules as the public tender, with the particularity that only the bidders invited by the government can participate in the tender and submit proposals. The government must invite a minimum of three bidders to participate in the tender. The tender announcement is substituted by an invitation sent to the selected bidders with all the information required by law, including the deadline for the submission of proposals and the criteria for the awarding of the contract (ie, the lowest price).

Direct negotiation

The procedure to contract by direct negotiation can be used by the government when the procedure of public tender is not mandatory or has been (legally) waived. The procedure starts with the prior inquiry of at least three specialised entities with domicile/registered office or representation in Macau, being the prior inquiry waived in the situations expressly mentioned in the law, as per example cases involving internal or external public security. A prior inquiry must be in written form when the amount of expense to be incurred by the government is above MOP15,000 for the acquisition of goods and services or above MOP150,000 for construction works.

Furthermore, the three procedures are differentiated by the eligible bidders: while public tenders are open to all entities that verify the requisites provided for in the law, limited public tenders are restricted either to the entities that verify the special requisites determined by, or to the entities invited by, the administration. As a general principle, the procedure of direct negotiation requires prior consultation of at least three potential contractors.

Each of the aforementioned procedures has minor adjustments in Decree-Law No 74/99/M (applicable to public works contracts), and Decree-Law No 122/84/M and Decree-Law No 63/85/M (applicable to goods and services procurement).

The revision of these minimum value thresholds has recently been proposed, as outlined in 5.4 Legislative Amendments under Consideration.

Restrictions on conduct of negotiations

As a general rule, the contract is awarded to the bidder who submits the proposal with the lower price, subject only to the verification by the winning bidder, and by its respective proposal, of all the requirements prescribed in the tender specifications. Furthermore, the draft contract is not subject to be negotiated between the parties: the bidder may challenge it only on grounds of discrepancy in respect of the tender programme and tender specifications.

There is, however, no general provision in Macau law preventing the awarding authority from – in consideration of the particulars of the deliverable and/or the existence of various awarding criteria – prescribing in the tender specifications that (some) bidders be called for a negotiation before the award is made.

A final bidding procedure may also take place if the best price is offered by more than one bidder. Any such bidding will take place verbally and in the presence of all such bidders. If none of the bidders improves its price, the awarding authority is entitled to choose one of them at its discretion.

In a public tender for construction works, the awarding authority and the winning bidder may negotiate further certain amendments to the proposal provided that the new agreed solutions are not part of the proposals submitted by another bidder.

Furthermore, the negotiation in the case of a direct negotiation is subject to prior inquiry procedures, as mentioned above.

The situations where the awarding authority may choose between two types of tender are expressly prescribed in the law. The option for a limited tender usually exists when the value of the award exceeds a certain amount (eg, MOP7.5 million for the provision of goods or services), when the services or goods to be provided require special technologies, or when the construction works are complex and shall be performed in special circumstances. In such situations, the option between the public tender or the limited tender is not completely discretionary, as the administration must at all times act in the best manner possible to pursue and protect the public interest.

The waiver of tender (either public or limited) may only be determined by the awarding authority for reasons of public interest and if certain conditions require so, including the protection of public safety, the urgency of the procedure caused by sudden natural catastrophes or the protection of certain intellectual property rights.

In the particular case of the procurement of real estate, it is the Financial Services Bureau that must assess the most adequate procedure (direct negotiation, prior consultation or tender) and submit its proposal to the awarding authority.

As outlined in 5.4 Legislative Amendments under Consideration, the revision of the aforementioned minimum value thresholds has recently been proposed.

The legislation does not impose mandatory deadlines for the publication of procurement procedure-related documents.

The deadlines for the bidders or interested entities to exercise certain rights in the context of tenders are expressly set forth either in the law or in the tender programme.

Pursuant to Decree-Law No 63/85/M, the deadline for the submission of proposals in the context of a tender for the procurement of goods and services shall be between 15 and 180 days, as determined in the tender programme considering the nature and the relevance of the goods or services being procured, counted from the tender announcement.

In respect of a tender for public construction works, Decree-Law No 74/99/M provides the following:

  • if the procedure is organised in the manner of a public tender, the tender announcement must determine the deadline for the submission of proposals, which shall be between 20 and 90 days, considering the volume and complexity of the works, counted from the tender announcement;
  • if the procedure is organised as a tender limited with prior qualification, the entities that are eligible under the selection criteria shall have not less than 25 days to submit their application and the pre-selected bidders shall have not less than 40 days to submit their proposal (final time limits are determined by the awarding authority); and
  • if the procedure is organised as a limited tender without prior qualification, the selected bidders shall have not less than five days, as determined by the awarding authority, to submit their proposal.

The specific criteria that parties must meet in order to be eligible to participate in the procurement procedures depend on the nature of the contract to be awarded. The specific statutes of certain public contracts prescribe (in more or less detail) some criteria and where the law does not provide or does not detail them, they must be prescribed in the tender documents.

Law No 3/90/M prescribes the general criteria for an entity to be eligible as a concessionaire of public construction works or public services: suitability (ie, appropriateness), technical and financial capacity. It also prescribes that when the concessionaire is a commercial company, it must have its registered office and main management in Macau and its main business must be the activity the concession of which is to be granted.

As a general rule, pursuant to Decree-Law No 74/99/M, only entities registered in the official registration as public works constructors of the works referred to in the tender programme are eligible to participate in procedures for the award of public construction works contracts. Entities not registered may participate if such is permitted by international agreements applicable to Macau on the adjudication of construction works contracts, or when the particulars of the construction works demand so. It also prescribes that the interested party does not owe the Macau Financial Services Bureau any taxes liquidated in the previous five years and that it has no debts vis-à-vis the Social Security Fund.

Please refer to 2.4 Choice/Conditions of a Tender Procedure as to the situations where the awarding authority may organise the procurement procedure in the manner of a limited tender (with or without prior qualification). The existence of a shortlist can be determined on the basis of special qualifications, capacity or experience being required to provide certain goods or services, or to execute certain works, and/or considering the contract to be awarded.

The minimum number of qualified suppliers that must be invited to participate in a contract award procedure (organised in the manner of a limited tender with or without prior qualification) is three.

The procedure to contract by direct negotiation also starts with the prior inquiry of at least three specialised entities.       

Without prejudice to the provision of other criteria in the tender programme, the contract for the provision of goods and services must be awarded to the best proposal in terms of price and/or the deadline for the provision of such goods or services.

The contract for the execution of public construction works shall be awarded to the proposal that best guarantees the good technical execution of the project, factoring in the price, the deadline for the execution of the works, the using cost, the profitability or the technical value, etc.

Following the announcement of the opening of the tender, the tender programme and specifications must be disclosed and made public on the website of the awarding authority; the hard copy is made available for public consultation at the awarding authority's premises. The criteria, evaluation methodology and other relevant elements are disclosed altogether in the tender programme and specifications (caderno de encargos).

As referred to in 2.1 Prior Advertisement of Regulated Contract Award Procedures, the tender programme and specifications are disclosed following the publication of the announcement of the tender in the Official Gazette and in local newspapers.

Pursuant to Decree-Law No 63/85/M and Decree-Law No 74/99/M, in the procedures by public tender, following the time limits for submission of proposals, a public act takes place for the opening and acceptance of the proposals, which is processed by the commission designated by the awarding authority and comprises the following:

  • the commission prepares a list of admitted parties according to the order of submission of the proposals, and the list is read out;
  • the commission then analyses the qualification of the tenderers and prepares a list with the bidders admitted and not admitted to the tender;
  • after that, the commission opens the proposals and analyses each of the proposals to decide on admission.

The interested parties who have not been included in any of the lists can file a claim against the decision of the commission; the commission then has to decide immediately on the merits of the claim.

In a limited public tender by prior qualification, the awarding authority will notify the parties who have met the prior (technical, professional, economical or financial) requisites and invite them to submit their proposals.

In a limited public tender without prior qualification, only the parties invited by the contractor can participate and submit their proposals.

Within 90 days from the opening of the proposals, if the bidders do not receive any contract award communication, they do not need to keep their proposal and have the right to take back the provisory guarantee. If none of the bidders requests the restitution of their provisory guarantee in this period, the period is extended until one of them requests so, up to 180 days. At the end of this period, the awarding authority shall return the provisory guarantee to the non-selected bidders.

The awarding authority will notify the selected bidder to provide the final guarantee. Only after such definitive guarantee is provided by the selected bidder will the authority notify the non-selected bidders of the decision to award the contract.

The selected bidder is legally obliged to enter into the award contract after the awarding decision has been made. However, if the selected bidder does not provide a definitive guarantee in a timely manner, without reasonable cause, the awarding decision will expire and the awarding authority will keep the provisory guarantee.

Pending an administrative appeal against a decision of the tender commission in the context of procurement procedures of either the provision of goods and services or public construction works, the awarding authority cannot issue the awarding decision.

Without prejudice to the possibility of the appellant/interested party requesting the suspension of the awarding decision, as a general rule the submission of a judicial appeal (recurso contencioso) or of an action on administrative contracts (acção sobre contratos administrativos) does not suspend the effects of the awarding decision.

In general terms, the awarding authority’s decisions (eg, not to admit a bidder or to award the contract) may be reviewed, either by the awarding authority in the context of an administrative claim (reclamação), by the immediate superior of the awarding authority in the context of a hierarchical appeal (recurso hierárquico), or by the court in the context of a judicial appeal and, subject to particulars, an action on administrative contracts (acção sobre contratos administrativos) set forth in Article 113 and following the Administrative Litigation Procedure Code (Código de Processo Administrativo Contencioso, or the CPAC).

Paragraph 3 of Article 113 of the CPAC allows the affected entity to start an action on administrative contracts to request both the annulment of a decision taken by the awarding authority during the award procedure (a pre-awarding decision) and the revocation of the contract or compensation for damages, provided that the judgment of those requests is strictly connected or relies substantially on the judgment of the same facts and/or the application of the same legal provisions.

In procurement procedures for the provision of goods or services by tender, the decisions of the tender commission, in the context of the public act for opening and acceptance of proposals, must be first challenged by means of a claim to the commission and, if this is rejected, to the awarding authority.

In a procurement procedure for public construction works, the bidders must challenge the decisions or omissions (eg, the decision not to admit a bidder/proposal) first by means of an administrative claim submitted directly to the awarding authority.

If there is a relevant breach of the procurement legislation, the awarding authority’s decision may be revoked on grounds of its invalidity, including the decision not to admit a certain bidder/proposal or the decision to award the contract.

The entities affected by the awarding authority’s decision (eg, the bidders whose proposal was wrongfully not admitted) may also claim compensation for damages.

An administrative act performed in the context of a contract award procedure (eg, the awarding decision) may be suspended provided that (i) the performance of such act is likely to cause damages of difficult repair to the applicant or its interests, (ii) the suspension does not cause serious damage to the public interest that is pursued with the performance of such act (this does not apply when the damages caused by the immediate performance of the act are disproportionally higher), and (iii) there is strong indication of the illegality of the appeal submitted against the act (Article 120 and following of the CPAC).

Upon being notified of the request for the suspension of the act, the authority shall immediately cease or discontinue its performance, except if, within three days, it acknowledges in writing that the non-immediate performance of the act will cause a significant damage to the public interest, detailing the grounds for such averment.

The performance of the act in breach of the above may entail civil, disciplinary and criminal action to the authority and the individuals involved.

In general terms, the claim and the administrative appeal can be submitted by the entities vested in the interests or the rights affected by the authority’s decision.

The judicial appeal may be submitted by the entities whose interests were damaged by the decision or that have direct, personal and legitimate interest in the success of the appeal, the holders of the right of popular action (direito de acção popular), the public prosecutor and the legal entities in respect of the acts that may affect the rights and interests they must protect.

With the exception of paragraph 3 of Article 113 of the CPAC (explained above), the action on administrative contracts with the purposes of revoking the contract awarded on grounds of the invalidity of a pre-awarding act of the awarding authority may only be challenged by the entities affected by such act if they have successfully challenged the same by judicial appeal first.

There are different time limits to challenge the awarding authority’s decision, depending on the nature of the procurement procedure and the challenging mechanism to be followed.

In general terms, except where the special statutes provide otherwise:

  • the time limit to submit a claim is 15 days counted from the announcement of the act in the Official Gazette (if such publication is mandatory), or the notification (if the publication is not mandatory), or from the knowledge of the act;
  • the time limit to submit an administrative appeal is 30 days;
  • the time limit for the judicial appeal ranges from 30 to 365 days, depending on the residency of the appellant or the decision under review (express or tacit), counted from the date of the publication (when mandatory) – there is no time limit to challenge a decision on the grounds of its nullity; and
  • the time limit for an action on administrative contracts to challenge the validity of the contract (including on grounds of the invalidity of a pre-awarding act) is 180 days.

There are some situations where the special statutes provide different time limits:

  • in procurement procedures for the provision of goods and services by tender, the decisions taken by the tender commission in the public act of opening and acceptance of proposals shall be challenged to the awarding authority by means of a hierarchical appeal during the act (although the brief of the appellant may be sent in writing within the next ten days); and
  • in procurement procedures for public construction works, the claim against the decisions or omissions of the awarding authority shall be submitted within ten days from the knowledge of the act – if the claim is denied and the awarding authority is subordinated to a superior, the interested party has ten days to appeal to the superior (recurso hierárquico).

The law provides time limits for the awarding authority or its superior to decide the claim or the administrative appeal (20 or 30 days, respectively, in procurement procedures for public construction works), after which it is deemed to be rejected (indeferimento tácito).

There are no mandatory deadlines for the court to make a decision on a judicial appeal. The duration of such proceedings varies with multiple factors, such as the complexity of the matter, the number of parties involved, the incidents raised by them and the workload of the judges. However, the judicial appeal of pre-awarding decisions in procurement procedures of public construction works contracts, continuous supply contracts and services contracts for purposes of immediate public benefit are of an urgent nature; they are not suspended during court holidays, and must be decided in seven days after all the other procedural formalities are completed.

There is insufficient publicly available information to provide an accurate figure for the annual number of procurement claims in Macau. However, it is noted that, according to the information announced by the Commission Against Corruption (Commissariado Contra a Corrupção, or CCAC), in 2017, 15 complaints were filed related to the procurement of goods and services. The CCAC annual report for 2019 does not provide detailed information regarding procurement complaints.

The submission of claims or hierarchical appeal is generally not subject to the payment of administrative costs.

A judicial appeal is subject to the payment of court fees of between MOP880 and MOP26,400, as determined by the court depending on the complexity of the matter and the overall processing of the proceedings.

The court fees of an action on administrative contracts vary with the value of the award and/or the damages petitioned (eg, if they accrue to MOP3 million, the applicable court fees are MOP19,400) and any incident, appeal or other action of the parties therewith may be subject to the payment of further fees.       

The MAPC prescribes a general right for the administration to unilaterally modify the contents of a public contract, provided that such modification respects the object of the contract and the equilibrium of the obligations of the parties, as well as the right to unilaterally terminate a public contract for reasons of public interest, without prejudice to the contractor’s right to be compensated.

DL 74/99/M allows, within certain limits, the modification of the construction works plans, by the initiative of the awarding authority or the contractors, as well as the contractor’s right to the revision of the contract when the circumstances under which the parties have decided to contract have been changed by virtue of abnormal and unexpected circumstances, resulting in a significant increase in the execution of the works.

Contractors to public contracts of another nature are also vested in such right (to the modification of the contract on grounds of ulterior change of circumstances) by virtue of the general provision of Article 431 of the Macau Civil Code.

Please refer to 2.3 Tender Procedure for the Award of a Contract, on the procurement procedures by direct negotiation, and by limited tender.

Having already lost the court battle to overturn the lapse of its 25-year land concession term in 2018, Polytex Import and Export Company Limited, the Macau-based affiliate of Hong Kong’s Polytec Asset Holdings Limited, saw its final bid at compensation from the Macau government come undone after Macau’s Administrative Court rejected its USD3.1 billion damages claim in April of last year. This decision was within a string of lawsuits filed against the Macau SAR after it decided to declare the lapse of provisional land concessions, and reclaim several plots of land, on grounds of expiry of the concessions. Although Polytex initially filed to appeal against the above-mentioned decision, it was announced later in the year that Polytex was seeking to withdraw the appeal.

The public procurement rules and procedures in Macau at the moment are spread among the different statutes that regulate the different types of contracts that can be entered into with/by Macau public entities. Thus, the government is preparing a bill with the goal of simplifying, updating and enhancing the public procurement legal regime.

The new bill will:

  • set the principles applicable to public procurement procedures;
  • detail and regulate the different types of procedures that may be adopted by the adjudicator; and
  • define the rules for the participation of bidders and the bidding process, and the criteria to be considered on adjudication.

Further to the simplification of the regime, the new bill will also, inter alia:

  • expand the applicability of the public procurement rules to the execution of leasing contracts (of movable and immovable property);
  • introduce a new procedure for public procurement (competitive negotiation); and
  • enhance the rules for the constitution and work of the tender commissions.

The goal of the continuing revisions to the public procurement regime is to increase publicity and transparency, and to promote fair competition.

However, as the works for the new bill progress, an amendment to Decree-Law No 122/84/M has recently been proposed, in order to update the existing minimum value thresholds that determine the type of procedures to be used in the public procurement procedures. According to the proposed wording, the following amendments would come into effect:

  • procurement by public tender would be organised when the public works contract is estimated to exceed MOP15 million, or the estimated cost for the acquisition of goods and services exceeds MOP4.5 million;
  • when procurement by direct negotiation is possible, written prior inquiry shall be required when the amount of expense to be incurred by the government is above MOP900,000 for construction works or above MOP90,000 for the acquisition of goods and services; and
  • limited tender thresholds would also be updated so as to make this option available when the award exceeds MOP45 million.
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Trends and Developments


Authors



Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in the Macau SAR and Lisbon, Portugal, with key practice areas of corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

Brief Overview of Land Laws and Leasehold Concessions

The Macau Special Administrative Region (the "Macau SAR") was originally 17 square kilometres in size. While at the time of the 1999 handover to the People’s Republic of China it had a population of about 430,000 people, according to data published by the local Statistics and Census Service that population surpassed 680,000 people at the end of 2020. The region’s reduced territory, coupled with a very high population density, originated a dire need to regulate the use of the existing land, as well as to search for ways to obtain more space.

Both such needs increased alongside the exponential economic growth that the Macau SAR experienced in the early 21st century, in particular after the liberalisation of the gaming industry, which quickly turned Macau into the world’s biggest gambling hub. The increasing inflow of tourists demanded further accommodation, attractions and infrastructure, as well as related tourism services.

In order to counter this size limitation, the Macau SAR turned to land reclamation methods so as to claim new land from the Pearl River Delta, which has allowed it to progressively expand to its current 32 square kilometres and enabled the development of additional real estate.

Regulation first came in the form of Law No 6/80/M, gazetted on 5 July 1980 and aimed at establishing effective legal policies of disposal and use of undeveloped, state-owned land. This law was revoked and replaced by Law No 10/2013 (the "Land Law"), pursuing – essentially – the same objectives.

Among the various forms of land grant from the Macau SAR government to private entities, the most common is the leasehold concession (concessão por arrendamento), which may be defined as a form of temporary grant of undeveloped land that entitles the concessionaire to the right to develop and care for the new land in accordance with the correspondent concession contract.

The Land Law differentiates two phases of the concession with the purpose of mitigating idle land cases: leasehold concessions are initially granted on a provisional basis for a limited period of time not exceeding 25 years ("provisional concession") and may ultimately become definitive ("definitive concession"), provided that the concessionaire fulfils its obligations in a good and timely manner.

The concessionaire is typically bound to certain undertakings regarding the use and development of the land within a specific timeframe ("development period" or "prazo para aproveitamento"), which, by definition, is shorter than the concession period, as defined in the concession contract.

For instance, with regard to the concession of land for construction of real estate, the concessionaire will undertake to complete the construction and obtain the use permit (licença de utilização) of the building(s). The issuance of the use permit within the agreed development period constitutes what is referred to as proof of development (prova de aproveitamento) before the relevant authorities.

Proof of development (as applicable) allows for the conversion of the concession from provisional to definitive. From this moment onwards, the concession will be automatically renewed for additional periods of ten years at a time.

It is when the concessionaire fails to develop the land on or before the term of the development period (or, in any event, on or before the term of the provisional concession period), or fails to fulfil or to guarantee the timely fulfilment of any other terms of the concession within the provisional concession period, that a debate (or a dispute) regarding the eventual expiry of the leasehold concession or other related rights may arise.

Expiry of Land Concessions: Sanction versus Preclusion

Typically, there are two legal standpoints regarding the expiry of provisional land concessions:

  • expiry as sanction (caducidade-sanção), which occurs when the concessionaire does not obtain proof of development within the development period, or fails to meet any other agreed deadline within the provisional concession period, due to misconduct or default of its obligations; and
  • expiry as preclusion (caducidade-preclusão), which occurs when the concessionaire fails to obtain proof of development within the provisional concession period (which, again, may not exceed 25 years), regardless of the reasons thereof and even regardless of such failure having been caused by an action or by an omission by public authorities.

While the declaration and enforcement of the former (ie, caducidade-sanção) is consensual among concessionaires, the Macau SAR administration and the courts, the same cannot be said with regard to the latter (ie, caducidade-preclusão). In fact, in administrative and judicial proceedings, various land concessionaires have supported that, prior to declaring the expiry of the concession, the Macau SAR administration should ascertain whether the non-performance was due to a reason not attributable to the concessionaire, or if the lack of development stemmed from unforeseeable circumstances, from a force majeure event, or even, exclusively or not, from public authorities’ fault.

However, both the Macau SAR administration and the courts consistently reiterate that when the expiry is declared on the basis of the term of the concession’s deadlines for the development of the land, this declaration is based on preclusion (caducidade-preclusão), and therefore failure to develop the land according to the concession contract and within the agreed deadline(s) is, in and of itself, the only fact relevant to ascertain the legality of the decision that declares the expiry of the land concession. Hence, any other facts and potential reasons for non-performance by the concessionaire should be deemed as irrelevant.

The Macau SAR administration and the courts further stress that, as a general rule, the 2013 Land Law does not allow the administration to renew provisional land concessions beyond their original term. Although it may be argued that there were no significant changes brought by the new Land Law on this matter, the position adopted by the Macau SAR administration from 2015 onwards saw various concessionaires having their land reverted to the state’s hands.

Consequently, it comes as no surprise that the termination of leasehold concessions on the grounds of expiry has prompted legal battles over the past years, as pointed out by the recently published investigation report of the Commission Against Corruption of the Macau SAR (CCAC), which took on 74 idle land-related case files where the leasehold concession had lapsed between 2015 and 2020 due to the non-fulfilment of the agreed terms by the end of the provisional concession period.

As reported in the CCAC’s investigation, several of the concessionaires from these 74 case files filed for litigious appeal against the declaration of expiry issued by the chief executive of the Macau SAR regarding at least 21 land plots and, in every case, the appeal was later dismissed by the courts.

Recent Developments: Compensation Claims

Seeing that the Macau SAR courts have consistently dismissed all appeals regarding the termination of existing concession agreements based on the declaration of expiry at the term of either the development period or of the provisional concession period under the above-mentioned grounds, in the past couple of years concessionaires followed a different route and filed lawsuits claiming damages from the state.

In some cases, concessionaires alleged that, with its own actions and/or omissions, the administration had contributed to the non-performance of their development obligations and of the agreed deadlines.

In the litigation surrounding Polytex Import and Export Company Limited’s Pearl Horizon project, widely covered by the media, a USD3.1 billion compensation claim filed by the concessionaire was dismissed by the courts. Although the claim was not judged based on its underlying merits, as the state’s acquittal was achieved on the grounds of an alleged waiver of any rights to compensation granted by the concessionaire in favour of the Macau SAR, it recently relinquished its right to appeal. Several other compensation proceedings are pending trial and therefore we are yet to know what position the Macau SAR courts will uphold; ie, whether any compensations will be awarded and, in that case, upon the verification of which requirements.

An additional layer of complexity is added in the case of concessions for the construction of housing units where off-plan marketing had already started, or even where promissory agreements had been already signed prior to the expiry. In those cases, the declaration of the concession’s expiry not only hurts the concessionaire’s own interests, but also those of the units’ promissory purchasers. As a result, such as what happened in the above-mentioned Pearl Horizon litigation, some of the promissory purchasers filed suits on their own (independent from those filed by the concessionaire), requesting that the Macau SAR be sentenced to indemnify all losses that such expiry had caused them.

Among these promissory purchasers, some chose to withdraw their lawsuits in light of Law No 8/2019, gazetted on 23 April 2019, which ultimately would allow them to purchase other housing units to be especially developed on the government’s own initiative with special conditions with regard to price and taxation, among others. In this context, the concession of the land plot of the ill-fated Pearl Horizon project was recently granted to Macau Renovação Urbana, S.A., a public urban renewal company, and, in accordance with Law No 8/2019, some of the housing units this company will be developing on the site may be acquired by the same promissory purchasers, their price to be determined with reference to the one originally agreed with the previous developer.

Since its approval, Law No 8/2019 has proved to be a viable resource for the people affected to seek some relief for the losses resulting from cases of land concession expiry.

Other Rights to Be Claimed

For different reasons and under different particular circumstances, some concessionaires opted to waive their land concession rights after the administration undertook to compensate them with another land grant. Even though the administration may not have yet vested such interested parties with new land concession rights, the chances of enforcement litigation increase as time goes by.

Closing Notes

In light of the aforesaid, and taking into consideration these case files and the standpoints included therein, it is likely that more may follow suit, in the form of compensation and/or enforcement claims.

Moreover, one will have to wait to see if the concessionaires will be able to demonstrate the role they argue the administration played in the progress of the licensing procedures of the now-lapsed concessions and, should it happen, which criteria will be followed by the courts to assess and calculate the consequences arising therefrom.

As the current position of the Macau SAR administration and the courts with regard to the expiry of land concessions has been widely publicised and is known by all players, concessionaires have been more cautious in complying with the legal and contractual deadlines imposed on provisional land concessions recently, thus an avalanche of new litigation regarding the legality of decisions declaring the expiry of such concessions not being expected.

Riquito Advogados

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+853 2838 9918

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Law and Practice

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Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in the Macau SAR and Lisbon, Portugal, with key practice areas of corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

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Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers and offices in the Macau SAR and Lisbon, Portugal, with key practice areas of corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

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