Granting the Hapi Jockey Club, Inc. a Franchise to Construct, Operate, and Maintain Race Tracks for Horse Racing in the Provinces of Batangas, Laguna, and Cavite

Case Overview and Summary

Nature and Scope of Franchise
- Grants Hapi Jockey Club, Inc. a franchise to construct, operate, and maintain race tracks for horse racing in Batangas, Laguna, and Cavite provinces. (Section 1)
- Allows establishment of branches for booking purposes anywhere in the country.
- Allows holding or conducting horse races with betting on results directly or through totalizator.

Authority of Philippine Racing Commission and Games and Amusements Board
- Philippine Racing Commission (PHILRACOM) to supervise and regulate races, enforce laws and rules governing horse racing, frame and schedule races, construction and safety of racetracks, allocation of prizes, and security of racing. (Section 2)
- Games and Amusements Board (GAB) to supervise and regulate betting in horse races.

Offering, Taking or Arranging Bets for Races
- Grantee or authorized agents may offer, take or arrange bets for races in or outside the Philippines, in person or electronically, anywhere in the Philippines, whether on-track or off-track betting stations, a day in advance or during scheduled races. (Section 3)
- No other entity or person can offer, take or arrange bets on any horse participating in races conducted by the Grantee, or maintain or use a totalizator or other device for betting within or outside the Grantee's premises.

Penalties
- Any person violating the provisions on offering, taking or arranging bets shall be punished by a fine of not less than Twenty thousand pesos (P20,000.00) but not more than One hundred thousand pesos (P100,000.00), or imprisonment of not more than six (6) months, or both, at the court's discretion. (Section 4)
- If the offender is a partnership, corporation, or association, the criminal liability shall devolve upon its president, managing partner or manager responsible for the violation.

Use of Computerized and Mechanical Devices
- Grantee is authorized to provide and operate mechanical, electrical, electronic or computerized devices, equipment and facilities for the effective conduct of business, including: (Section 5)
- Photo patrol and other electronic devices or cameras
- Automatic starter
- Electrical, electronic and computerized totalizator
- Photo finish devices
- Machines for sale of tickets including off-track stations
- Facilities for tattoo branding of horses
- Facilities and instruments for drug testing
- Weighing machines and devices for horses
- Modern sound systems and loud speaker facilities
- Facilities for safety, security, comfort and convenience of public
- Modern telecommunications and broadcast equipment for receiving and transmitting messages, signals and pictures related to betting system, conduct of races, winning numbers and dividends, and other information
- Continuous and back-up power supply, and other instruments, devices, equipment, facilities and systems
- Other facilities, devices or instruments that will ensure clean, honest racing and betting
- PHILRACOM to suspend and prohibit holding of races if Grantee fails to provide and install any of the equipment or facilities within three (3) years.
- GAB to assign auditors and inspectors to supervise and regulate placing of bets, computation of dividends and distribution of wager funds.

Terms of Betting Tickets
- Grantee shall publish and display prominently the terms and conditions regarding the sale of betting tickets. (Section 6)

Distribution of Total Wager Funds or Gross Receipts
- 82% shall be distributed as dividends among holders of winning tickets. (Section 7)
- 8.5% shall be retained by the Grantee as commission or fee for conducting races.
- 8.5% shall be set aside for payment of stakes or prizes and authorized bonuses for jockeys.
- 0.5% shall be set aside for use of PHILRACOM, or in case of pari-mutuel races, for use of GAB and Jockeys and Horse Trainers' Injury, Disability and Death Compensation Fund.
- 0.5% shall be set aside for operation of drug testing facilities and rehabilitation of racing facilities.

Breakage
- Receipts from fractions of less than Ten centavos (P0.10) eliminated from dividends, known as breakage, shall be set aside as follows: (Section 8)
- 50% to be used by PHILRACOM for additional prizes and horse breeding activities
- 25% to city or municipal hospitals where racetrack is located
- 25% to augment funding for establishment, maintenance, and operation of drug rehabilitation centers

Schedule of Races
- Grantee is authorized to hold races on at least two (2) days during the week as determined by PHILRACOM, and on all Saturdays, Sundays and official holidays, except where law expressly provides that no races are to be held. (Section 9)
- Grantee may conduct races on the eve of any public holiday, not earlier than 5:30 PM, but not to exceed five (5) days a year.
- Grantee shall allocate racing days pursuant to Republic Act No. 309, as amended.

Tax Provision
- Documentary Stamp Tax: Ten centavos (P0.10) on each ticket; additional Ten centavos (P0.10) on every One peso (P1.00) or fractional part if ticket cost exceeds One peso (P1.00); Five centavos (P0.05) on every One peso (P1.00) for double forecast/quinella and trifecta bets. (Section 10)
- Franchise Tax: 25% of gross earnings from horse races, equivalent to 8 1/2% of total wager funds or gross receipts, allotted as follows:
- 5% for national government
- 5% for province or city/municipality where racetrack is located
- 7% for municipal hospital where racetrack is located
- 6% to Philippine Anti-Tuberculosis Society
- 2% to White Cross
- Taxes on Winnings: 10% of winnings or dividends after deducting ticket cost; 4% for winnings from double forecast/quinella and trifecta bets; 10% of prize for winning race horse owners; winnings of Ten thousand pesos (P10,000.00) or less are exempt.

Term of Franchise
- Franchise shall be in effect for twenty-five (25) years from date of effectivity of this Act, unless sooner cancelled. (Section 11)
- Franchise shall be deemed ipso facto revoked if Grantee fails to:
- Commence operations within three (3) years from approval of operating permit by PHILRACOM
- Commence operations within five (5) years from effectivity of this Act
- Continuous operation for two (2) years

Warranty in Favor of National and Local Governments
- Grantee shall hold national, provincial, city, and municipal governments free from claims, liabilities, demands, or actions arising out of accidents causing injury to persons or damage to properties during construction or operation of racetrack. (Section 12)

Sale, Lease, Transfer, Grant of Usufruct, or Assignment of Franchise
- Grantee shall not sell, lease, transfer, grant usufruct of, nor assign franchise or rights and privileges acquired thereunder to any person, firm, company, corporation, or other entity, nor merge with any other corporation or entity, nor transfer controlling interest of Grantee, without prior approval of Congress. (Section 13)
- Grantee shall inform Congress of any such transaction within sixty (60) days after completion.
- Failure to report to Congress shall render the franchise ipso facto revoked.
- Any person or entity to which franchise is sold, transferred, or assigned shall be subject to the same conditions, terms, restrictions, and limitations of this Act.

Dispersal of Ownership
- Grantee shall offer at least 30% of its outstanding capital stocks, or a higher percentage as may be provided by law, in any securities exchange in the Philippines within five (5) years from effectivity of this Act. (Section 14)
- If public offer of shares is not applicable, other methods of encouraging public participation must be implemented.
- Noncompliance shall render the franchise ipso facto revoked.

Reportorial Requirement
- Grantee shall submit an annual report to Congress on its compliance with franchise terms and conditions and operations on or before April 30 of every year during franchise term. (Section 15)
- Annual report shall include update on business roll-out, development, operation or expansion; audited financial statements; latest General Information Sheet submitted to Securities and Exchange Commission, if applicable; and certification of PHILRACOM and GAB on status of permits and operations.
- Reportorial compliance certificate issued by Congress shall be required before any application for permit or certificate is accepted by PHILRACOM and GAB.

Fine
- Failure to submit annual report to Congress shall be penalized by a fine of Five hundred pesos (P500.00) per working day of noncompliance, collected by PHILRACOM from Grantee and remitted to Bureau of the Treasury. (Section 16)

Equality Clause
- Any advantage, favor, privilege, exemption, or immunity granted under existing or future franchises for horse racing, upon prior review and approval of Congress, shall become part of this franchise and be accorded immediately and unconditionally to the Grantee, except provisions concerning territorial coverage, term, or type of service authorized. (Section 17)

Repealability and Nonexclusivity Clause
- This franchise shall be subject to amendment, alteration, or repeal by Congress when public interest requires and shall not be interpreted as an exclusive grant of privileges. (Section 18)

Separability Clause
- If any section or provision of this Act is held invalid, all other provisions not affected shall remain valid. (Section 19)

Repealing Clause
- All laws, decrees, orders, resolutions, instructions, rules and regulations, and other issuances or parts thereof which are inconsistent with the provisions of this Act are hereby repealed, amended, or modified accordingly. (Section 20)

Effectivity
- This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation. (Section 21)