THE DIRECTOR OF THE GAMING HALL, A.I., IN FULL USE OF HIS LEGAL FACULTIES, AND; 

CONSIDERING 

I. THE BACKGROUND OF THE CONFLICT

• That through the Resolution # 65 of February the 10 th , 2002; the Regulatory Council of Games of the Republic of Panama (= la Junta de Control de Juegos de la República de Panamá) rules the operation of the Systems of Online Gaming; looking to authorize and regulate panamenian companies to book electronic bets through the Internet.

• That through the Contract # 375 – 09.22.2003, the Regulatory Council of Games of the Republic of Panama authorized the Panamanian company International CYBERGAMING Corp., to hold 20 licenses: 10 licenses for online sportsbooks and 10 licenses for online casinos.

• That International CYBERGAMING Corp., in its condition of Administrator/Operator took upon itself the authority to construe the clauses and the conditions of the contract # 375 and decided to issue sub-licenses. This initiative to create sub-licenses was not authorized by the Regulatory Council of Games of the Republic of Panama .

• That International CYBERGAMING Corp. issued a sub-license to another panamenian company by the name of Corporacion Britania S.A., who launched the online sportsbook known as www.betpanam.com . At this time, International CYBERGAMING Corp. requested from the Regulatory Council of Games of the Republic of Panama to
  1. Examine BetPanam's system and gaming operation
  2. Authorize BetPanam's sub-license
  
• The Regulatory Council of Games of the Republic of Panama obliged with the first part of the request. But never with the second part of the request; hence, Corporacion Britania S.A. was NEVER explicitly authorized by the Regulatory Council of Games of the Republic of Panama to operate as an online sportsbook under the domain www.betpanam.com .
  
• That during February the 16 th and the 17 th , 2004 a series of complaints are presented to the Regulatory Council of Games of the Republic of Panama by parties alleging to be online players registered at BetPanam. These alleged players claim to have pending balances at BetPanam, which are not being settled.
  
• That given the fact that International CYBERGAMING Corp., and Corporacion Britania S.A. failed to pay these outstanding balances, these claims generated a conflict. While this conflict does not involve the Regulatory Council of Games of the Republic of Panama DIRECTLY; it does indirectly, as International CYBERGAMING Corp is holding a license issued by the Council. This conflict reflects negatively on the good reputation of the country of Panama and it suggests Panama is not a serious and well-regulated jurisdiction, while at the same time it also questions the effectivity of this Council's statements regarding players' protection entering bets online with Panamenian companies.
  
• That because of this and in order to fight the pernicious effect that this conflict might have had in the reputation of our jurisdiction and the impact it might have on the image of our growing online gambling industry, the Regulatory Council of Games of the Republic of Panama is now faced with the following choices: to determine its intervention on this conflict or not or rather delimitate its field of action regarding this conflict with International CYBERGAMING Corp., Corporacion Britania S.A. and/or BetPanam.

II. THE FACULTIES AND COMPETENCE OF THE REGULATORY COUNCIL OF GAMES ARE DERIVED FROM THE LAW

Before entering in the analysis of the legal framework, that invests the Regulatory Council with the necessary faculties to intervene in this conflict caused by International CYBERGAMING Corp., as a consequence of having intended to exercise faculties that correspond only to the Council; it's necessary to establish the role of the Regulatory Council, its powers and legal faculties

• The Regulatory Council of Games (Junta de Control de Juegos) was created by Decree # 822 of March the 1st, 1946, and it's conferred this name by Law Decree #19 of May the 8th, 1947.
  
• According to Article #5 of the latter Decree, it corresponds only to The Regulatory Council of Games to dictate the rules and restrictions regarding games of luck and all activities generating bets.
  
• On December the 11th, 1953, The Regulatory Council of Games issues its first ruling applicable to all games of luck and all activities generating bets and in this ruling there are 3 basic principles, upon which rests the juridic regulation of the current gaming industry in the country of Panama, namely:
  
  1. This Council is given the function of studying and resolving all conflicts related to all games of luck and all activities generating bets.
  2. This Council will dictate all the regulation regarding this subject
  3. This Council is authorized to conduct all business regarding games of luck and all activities generating bets in benefit exclusively of the Estate of the Republic of Panama.

Subsequently, with the creation and enforcing of Law Decree #2 of February the 10th, 1988, it was determined that The Regulatory Council of Games would be restructured, assigning new functions and powers to this institutuion but without overruling the basic principles upon which its policies will rest.

Let's see:

Article 1: "The Governement of Panama will benefit of all games of luck and all activities generating bets through the Regulatory Council of Games, which will function under the dependency of the Ministry of Treasure and Taxing"

Article 2: "The Regulatory Council of Games, representing the Government of Panama, assumes the profitship of all games of luck and all activities generating bets in benefit exclusively of the Estate of the Republic of Panama."

Article 12: "The following are faculties of The Regulatory Council of Games:

...

2. To fiscalize, to control, to supervise, to prevent, to investigate and to inspect the profitship of all games of luck and all activities generating bets

3. To guarantee the betting public that all their winning bets will be paid unfailingly

4. To approve, to deny, to condition or to delimitate the requests of contracts for the Administration and Operation of games of luck and all activities generating bets.

...

...

...

9. To dictate, to derogate, to modify, to complement the ruling concerning games of luck and all activities generating bets."

Deriving from the content of the legal dispositions quoted above, we conclude beyond any reasonable doubt; that is The Regulatory Council of Games and NOT International CYBERGAMING Corp., who is legally in charge of all aspects related to the profitship of all games of luck and all activities generating bets taking place within or from within the National Territory of the Republic of Panama .

III. LEGAL FRAMEWORK DEFINING THE ROLE OF THE REGULATORY COUNCIL OF GAMES REGARDING THE GENERATION OF REVENUE THROUGH ONLINE BOOKMAKING

With the validation of the Law Decree #2 of February the 10th, 1998; the Regulatory Council of Games is ascribed as the entity representing the Government of Panama relating games of luck and all activities generating bets, specifically in the articles 5 and 24 respectively, as well as the responsibility of regulating and supervising all games of luck and all activities generating bets taking place in the exterior, by electonic means or other wire communications –such as the use of the Internet- excluding from its regulatory power only those activities where it is not feasible to identify the origin of the betting funds OR (and not AND) the identity of the involved parties.

Let's review what the Law Decree #2 of February the 10th, 1998 dictates regarding online bookmaking:

Article 5: "... all games of luck and all activities generating bets taking place in the exterior (foreign) via electronic means or wire communications, shall be supervised and regulated as well."

Article 24: ..." to be explicitly excluded all bets that are placed via electronic means or wire communications, such as the ones placed on the Internet, in which it will not be feasible to correctly identify the origin of the funds placed in bets or the identity of all parties involved. This type of bet is explicitly prohibited ".

IV. ADMINISTRATION AND OPERATION CONTRACTS ARE REQUIRED FOR BOOKMAKING IN OR FROM WITHIN THE REPUBLIC OF PANAMA

In order to fulfill the regulations stipulated by the articles 5 and 24 respectively of the Law Decree #2 of February the 10th, 1998 and in order to face the challenge implicit in the regulation and supervision of this new industry, where the operational platform is mostly technological; The Regulatory Council of Games decided to approve the Resolution # 65 of 10.25.2002, looking to facilitate trough its proper regulation –hence avoiding and preventing the foundation of illegal establishments with this purpose- the development of a healthy industry, reputable, with great potential of generating employment, with mechanisms in place to protect the public that bets recreationally, but without violating our current laws to prevent money laundering.

The Resolution # 65 of February the 10 th , 2002; on its article #7, rules that in order to book virtual bets in or from within the Republic of Panama the following is required:

Article 7: "For a natural or juridic persona to operate a gaming system of wire communication in or from within the Republic of Panama, that person must subscribe an administration and operation contract with The Regulatory Council of Games.

With each contract, The Regulatory Council of Games will issue the corresponding gaming license(s), that will allow the Administrator/Operator to launch the online gaming system(s)" .

Article 8: "The Administrator/Operator that willingly accepts the subscription or renovation of a contract, is submitted to the fulfilling of the laws and regulations of The Regulatory Council of Games"

From the analysis of these statements, it's concluded that in order to operate online gaming systems in or from within the Republic of Panama it is required the subscription of a contract with the Government of Panama –represented in this case by The Regulatory Council of Games- in virtue of which there will be issued the gaming licenses in favor of the Administrator/Operator and NOT of a third party as International CYBERGAMING Corp., has intended to construe; and in this case the Administrator/Operator was clearly warned at the moment of signing contract #375 (refer to clause #4 of the clause).

V. REPSONSBILITY OF INTERNATIONAL CYBERGAMING CORP. REGARDING THE OPERATION OF THE WEBSITE BETPANAM.COM

Having established that The Regulatory Council of Games is by law -and since 1953- the entity to regulate all games of luck and all activities generating bets in and from within the Republic of Panama, and the one to which it corresponds to analize and resolve all the conflicts related to the Panamenian gaming industry, including online bookmaking, as long as it is not related to bets where it is not feasible to identify the origin of the betting funds OR the identity of the involved parties; the Regulatory Council of Games must determine its intervention on this conflict or rather delimitate its intervention in order to solve the conflict brought about by International CYBERGAMING Corp., as the reputation of the Panamenian Government is at risk, not before establishing why the conduct of the Administrator/Operator breaks the rules that regulate the online bookmaking industry and threatens the good reputation of our jurisdiction.

Let's see:

• With the subscription of the Contract #375, dated on September the 22nd, 2003, it was imposed to International Cybergaming Corp. –in its condition of Administrator/Operator- the fulfillment of certain conditions, as it is the creation of the bank accounts established in the Article #68 of the Resolution #65 (see clause #9 of Contract # 375 – 09.22.2003), which ultimate purpose is to guarantee the necessary funds to settle all pending balances in the players' accounts in case of going out of business.
  
• On page 57 of the file containing the request of a gaming license for the web site BetPanam –dated on March the 4th, 2004- it's registered how the Legal Representative of International Cybergaming Corp. communicates to the Regulatory Council of Games, that BetPanam is using one of the gaming licenses of this company and that they are complying with all the regulations required by the legal regulations of its operation. (see clause #4 of contract #375)
  
• International Cybergamming Corp. showed proof to the Regulatory Council of Games, that they counted with the necessary experience for the developement and management of this venture. They also presented their book of standard operational procedures and internal control, in which they outlined the procedures to identify without any doubt all the players registered on the website and/or the origins of the betting funds. After which, the Regulatory Council of Games subscribed the Contract #375 with International Cybergamming Corp., being their procedure a premeditaded violation of the Resolution # 65 of October the 25 th , 2002 and the condition agreed upon with the Panamanian Government, as they have been willing to evade their responsibility, arguing a sub-licensing that was never authorized by the Regulatory Council of Games.

Being all these things considered, there's no doubt for the Regulatory Council of Games that the domain name www.betpanam.com was operating under the auspice of International Cybergamming Corp., as the Administrator/Operator requests its gaming systems to be reviewed for the concession of one of the 20 gaming licenses that were given to them with the subscription of Contract #375. Therefore, the Administrator/Operator is the only one responisible for the mismanagement of the licenses, despite their claiming that Corporacion Britania S.A., was indeed a sub-licensee. This is not a possibility as the possibility of sub-licensing is not encompassed by the current legislation, without having the explicit authorization of the Regulatory Council of Games.

After having analyzed the evidence contained in this process filed by International Cybergamming Corp., it is determined that they must assume the responsibility of the payment of all the funds received as bets and/or winnings. This responsibility will not be assumed by the Regulatory Council of Games, as it was the Administrator/Operator who was authorized to book those bets and not this dependency.

VI. POSITION OF THE REGULATORY COUNCIL OF GAMING REGARDING THE PAYMENT OF THESE CLAIMS

Before addressing the claims made by the players of BetPanam, the Regulatory Council of Games will make some statements regarding the capabilities of this agency's faculties:

Article 44. Players must be registered before playing: "No Administrator/Operator will be able to allow a person to take part, as a player, in a game or a bet through a gaming system using wire communications, unless that person is properly registered as a player with the Administrator/Operator, according to what is stipulated by the Article #24 of the Law Decree #2 of February the 10th, 1998".

Article 47. Players must open an account with the Administrator/Operator: "As soon as a person is registered as a player, the Administrator/Operator must open an account under his name, named as ‘player's account'".

Article 51. Funds transfers to the players: "Upon players' request, the Administrator/Operator must transfer all requested funds to the player immediately".

The Regulatory Council of Games receives the complaints of some individuals who claim to have an account with the website www.betpanam.com . When asked for evidence, these individuals have presented a balance sheet with their account number, the pending balance and the name of the account holder.

When asked by the Regulatory Council of Games, the Administrator/Operator accepts that these players are indeed registered players at BetPanam, having met the requirements for the identification as such; the system creates account numbers and the funds are transferred via NETeller to the account owned by Corporacion Britania S.A. Therefore, the origins of the funds have been established through the transfers made via NETeller, which allowed for the identification of credit cards and bank accounts.

Through the analysis conducted by the Regulatory Council of Games, the information containing the account number, the available balance to date and the account holder's name was confirmed. This information was compiled trhough:

• Complaints filed by the players with their account numbers and a copy of their balance sheets
• Digits that would confirm the opening of an account with the financial entity, in order to transfer funds between BetPanam and the player.
• Reports given to the Regulatory Council of Games by the general manager of Corporacion Britania S.A., Mr. William Commee, regarding the active accounts of www.betpanam.com and the pending balances.
• A report made on April the 16th, 2004, elaborated by the risk management consultant for Corporacion Britania S.A., Chester Hunter; this report was based on information extracted form the data base of BetPanam, which confirms the active accounts in the web site belong to those players that were sending their complaints to the Regulatory Council of Games.

The Regulatory Council of Games concludes that these complaints were filed by actual registered players in BetPanam; that their identity as well as the origins of the funds were confirmed by the Administrator/Operator International Cybergamming Corp., in previous reports.

The Administrator/Operator sumitted a report on April the 16th, 2004, in which they identify the origin of the betting funds and the identity of the players with the help of their book of standard operational procedures and internal control. This report was made by Mr. Chester Hunter, Risk Manager for BetPanam and it also contained e-mail correspondence between Mr. William Commee and the players. This information is now contained in our files and it's conclusive proof that these players had an active balance with BetPanam.

The Administrator/Operator did not comply with the stipulated by the Article #68 of the Resolution #65 of October the 25th of 2002, regarding the opening of the accounts; but in recognizing its responsibility regarding the files claims, it consigns the Bond # 15-048600-8 signed on July the 30th of 2004 with Aseguradora Mundial, S.A. for the payment of all balances and winnings that are owed. This bond will be due to realease on January the 25th, 2004.

According to the faculties conferred by the Article #12, numeral 3 of the Law Decree #2 of February the 10th, 1998 to the Regulatory Council of Games, this agency must guarantee the payment of bets and winnings to the betting public; however, this institution cannot intervene directly, as it's the sole responsibility of the Administrator/Operator, who developes the gaming activity at hand.

On September the 16th, 2004, the Regulatory Council of Games –through the Executive Secretary- sent a note to Kathia Aparicio, Legal Representative of International Cybergamming Corp.; in which, in addition to enumerating all the legal and contractual anomalies, they were conceded a period of time of 30 calendar days to emend these anomalies.

On October the 19th, 2004, a note by the Attorney William Ackerman was received by the Executive Secretary of the Regulatory Council of Games; in this note, the directors of International Cybergamming Corp. requested an extension of an additional month and informed the Council about a change of Legal Representative.

This note was addressed by the Executive Secretary of the Regulatory Council of Games on October the 27th, 2004. In this reply, the Council informed International Cybergamming Corp. that the extension was conceded until November the 25th, 2004 and that the change of Legal Representative had to be accredited according to the law, which had not been done at that point.

That after the things that were explained above, the Council did not receive any furhter correspondence from International Cybergamming Corp.

Given the circumstances, the Director of the Regulatory Council of Games, in full use of its legal faculties,

RESOLVES:

FIRST: To issue an Emergency Order, in order to restrict the Concession Contract #375 in favor of International Cybergamming Corp., to 2 licenses: one to be used as an online sportsbook and one to be used as an online casino.

SECOND: To demand from International Cybergamming Corp. and from Corporacion Britania S.A., according to the statistical report presented by the Regulatory Council of Games in the Annex #1 of this Resolution, the payment of the owed monies to the 35 players who proved they had an active balance at www.betpanam.com , by presenting their respective balance sheets.

THIRD: To order the release of the Bond # 15-048600-8 signed on July the 30th of 2004 and due to be released on January the 25th, 2005 consigned in absence of an escrow account by International Cybergamming Corp., through Corporacion Britania S.A. with Aseguradora Mundial, S.A.; so that, using the same system used to make the deposits, the latter assumes the fulfillment of the obligations according to the attached inform by the Regulatory Council of Games.

FOURTH: against this current Resolution, procedes the Resource of Reconsideration before the Director of Gaming Halls, a.i., as it is established by Article #74 of the Resolution #65 of 2002, in agreement with Article #45 of the Resolution #92 of 1997.

CHARTER OF FUNDAMENT (??): Law Decree #2 of the Law Decree #2 of February the 10th, 1998, Resolution #65 of October the 25th, 2002.

LET IT BE NOTIFIED AND DONE

RAUL CORTIZO COHEN

Director of Gaming Halls, a.i.