IPI wants 9th change to CLA

Imperial Pacific International (CNMI) LLC wants the casino license agreement amended once more—its ninth bid to have the agreement amended since being awarded the casino license on Saipan.

Among the changes it wants this time is to reduce the annual casino license fee by half, extend the deadlines for IPI to complete the construction of the Imperial Palace Resort in Garapan and its other projects, and to change the community benefit fund into a percentage of its net profit instead of a flat amount.

The requested changes to the CLA has already been submitted to the CNMI Lottery Commission.

In its request for amendments, IPI cited many global and local unexpected events, including the COVID-10 pandemic, for their significant impact on the company, plus many changes to laws and regulations that cannot be predicted and that are IPI’s beyond control.

IPI director Zheng Dong Ting said that IPI has appointed its senior vice president for public affairs, Tao Xing, to head up a team to negotiate the ninth amendment to the casino license agreement with the Commonwealth Lottery Commission. Xing may have on his team some managers and legal counsel as he deems advisable, according to Ting in an IPI resolution dated June 26, 2020.

Ting said Xing has full authority to negotiate with the Commonwealth Lottery Commission and to enter into an amendment to the CLA with the commission.

Responding to Saipan Tribune questions and request for comments yesterday, IPI general counsel Michael W. Dotts said that the annual license fee is set by statute and that portion will require the Legislature’s approval. He believes, though, that the proposed change to the community benefit fund is the most significant proposal.

The lawyer said the community benefit fund is not money paid to the CNMI. “It is money paid to projects that IPI believes will benefit the community. It can be paid for a wide variety of purposes, such as education, health care, and retirement benefits,” he said.

Dotts said the original timing for the community benefit fund was that it would start after IPI began construction in Marpi. That has yet to break ground, however, because IPI does not have the public land it was expecting to get in Marpi, Dotts said.

He said the amendment now has the contribution to the community benefit fund starting when the Marpi casino begins operations.

“The calculation of the amount paid to the community benefit fund will be changed from a flat amount to a percentage of the net profit,” the lawyer pointed out.

As for the proposed changes that are not about fees and contributions, Dotts said the most significant is probably the provision that sets a timetable for the award of a suitable public land in Marpi. “This will hopefully result in the Marpi project finally moving forward. And it will then set in motion the triggering of the payment to the community benefit fund,” he said.

The lawyer pointed out that the reason why these proposed changes have popped up is the COVID-19 pandemic. He said there is a provision in the original license agreement that suspends the obligations of both IPI and the CNMI if events occur that are beyond the control of the parties, like wars, strikes, labor disputes, and what insurance companies call “acts of God” like earthquakes, tsunamis, and catastrophic typhoons.

Dotts said the amendment makes clear that epidemics, the spread of infectious diseases, and other situations that are beyond the control of IPI and that will harm operations are covered in this section.

In its proposed ninth amendment, IPI wants a new provision in the casino license agreement that states that annual license fee for each of Year 6 and Year 7 of the license term shall be reduced by half, such that 50% of the license fee paid by the IPI for Year 6 shall apply as annual license fee for Year 7 of the license term. August 2020 is the start of Year 6, while August 2021 starts the seventh year. Under the CLA, IPI is required to pay $15 million in annual casino license fee.

IPI proposes that the Initial Gaming Facility Implementation Schedule to be completed by no later than Feb. 28, 2022 and not on the current deadline of Feb 28, 2021.

IPI said it has paid over $300 million in taxes to date that funded and supported many government operations, positions and initiatives, and contributed also to maintaining the solvency of the NMI Retirement Fund.

IPI said it has continually and actively promoted the CNMI, directly and sometimes in conjunction with the Marianas Visitors Authority, particularly in China and supported the increase in tourism to the CNMI.

IPI said as a result of the COVID-19 pandemic, an unexpected major unpredicted global event that has already lasted almost six months and generally expected to last for many more months to come, IPI has, like many other businesses, fallen on hard times.