POSTSCRIPT / January 9, 2005 / Sunday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Naia-3 arbitration looks like forum shopping to us

WHO/WHAT SAVED US?: Pls pardon a little irreverence on a Sunday.

Government leaders see to it that they pray publicly and invoke God now and then, kahit kunwari lang, and thereby appear to be in synch with the mostly Christian population.

But for President Arroyo to thank God for “sparing” our dear country from the devastating tsunami that came crashing from the Indian Ocean last Dec. 26 and killing at least 160,000 people somewhere else is overdoing it, di po ba ?

The map shows that that killer tsunami triggered by a magnitude-9 earthquake off the west coast of North Sumatra could not have reached the Philippines, because of land masses of Indonesia, Thailand and Malaysia blocking it.

Was the President saying that God in His infinite mercy placed those big islands between the Philippines and the Indian Ocean purposely to spare us? Or that He directed the earthquake to occur in that part of South Asia away from our neighborhood?

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FORUM SHOPPING: The arbitration to which foreign investors in Terminal-3 of the Ninoy Aquino International Airport (Naia-3) are dragging the government looks to this layman like forum shopping in a loose sense.

Here we are threshing out things in Philippine courts and there they are crying in front of arbitration groups in a foreign land about how they are being eased out of a strategic project where they have poured in millions.

Arbitration is all right — at a certain stage of a protracted dispute where a delay in its resolution is damaging to all the parties. In fact, we have arbitration in our own system, such as in labor disputes, where an out-of-court settlement is sometimes in the best interest of the protagonists.

As a non-lawyer who is uncomfortable seeing Congress pass laws just to please foreign moneybags and not primarily to protect the natives, I think our having been inveigled into acceding to foreign arbitration should be reviewed.

Also, if we have to move on to foreign arbitration, it should be only AFTER — not before — an established local judicial process has bogged down into a deadlock.

There is no deadlock in the court case involving the Naia-3 contract of the Philippine International Air Terminals Co. (Piatco). The legal process is ongoing, so arbitration — in my mind as a lay observer — is premature.

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SUPREME CHARTER: Foreign arbitration, even if covered by an agreement binding the Philippines, cannot take precedence over the expropriation proceeding ongoing before the Pasay City regional trial court.

The arbitration bodies, despite their presumed good faith, must wait.

Expropriation, or government purchase of private property (such as Terminal-3) for a vital public use, is an exercise of the state’s power of eminent domain as provided by the Constitution. It is valid as long as the usual conditions — such as due process and just compensation — are met.

Section 18 of Article XII (National Economy and Patrimony) says: “ The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.”

A mere bilateral or multilateral agreement such as one for arbitration cannot be superior to, or be allowed to subvert, the Constitution. In fact, such agreements could be knocked down as unconstitutional if shown to be so.

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ARBITRATION: Comes now another email from lawyer Mario E Valderrama, resident representative to the regional sub-committee of the Chartered Institute of Arbitrators, East Asia Branch, which we share with readers for whatever it is worth:

“The ICC (International Chamber of Commerce) head office is in Paris. But the seat of arbitration is in Singapore, because that was the place chosen by the parties to the Piatco contract.

“It could have been in the Philippines had the contracting parties opted for the Philippines as the seat or if we have a law prescribing that transactions similar to the Piatco contract could only be arbitrated or litigated in the Philippines.

“The ICC International Court of Arbitration is not a court. It is an administering body. It is an ‘arbitral institution’ in legal parlance.

“It is the arbitral tribunal, not the ICC Court, that will decide the dispute. The tribunal is, in a sense, a ‘private court,’ because by and large its creators are the disputants, such that we can say that they own it; and to a large extent they can shape it to whatever they want it to be.

“The arbitrators are like ‘temporary employees,’ whose job description is to resolve the dispute between the parties following the rules and procedures agreed upon by the parties.

“Also, the arbitral bodies will not go after the assets of any party to the arbitration. It is the ‘winner’ who will do so, by filing separate petitions for the enforcement of the arbitral award — the decision of the arbitral body — before the courts in the countries where the ‘defeated’ party has leviable assets. Of course, the ‘defeated’ party can oppose the petitions in the ‘enforcing courts.’”

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COMPLICATIONS: Reacting to our POSTSCRIPT last Jan. 6 saying that arbitration has complicated the picture, because “it could happen that the outside arbiters would render a decision contrary to what a Philippine court, even the Supreme Court, may decree,” Valderrama drew a distinction “between the suit filed by the non-signatories to the Piatco contract as against the Philippine Government and Piatco, and the relationship between the Government and Piatco.”

He said in part: “There is no controversy that our courts may declare the Piatco contract void or inimplementable as against third parties, that is, the non-signatories. So, Piatco cannot recover the terminal under its old contract, no ifs and buts about it. If at all, it could only be through a new contract, which is possible only if there would be a negotiated settlement.

“At this point, the likelihood is that the arbitration would only revolve around ‘just compensation.’

“The amount could be staggering, if the bases would be the compliance features in the contract. These are the provisions that will become effective if certain contractual provisions cannot be implemented or in case of breach by any of the parties.

“Or the amount could be very much less if, at the end of the day, the tribunal, or more so the supervising court (or the court in the seat of arbitration), would declare the contract void because it contravenes public policy. Though here, we are talking about public policy in the international sense, and not in the domestic sense.

“The controversy exists because the Supreme Court went as far as defining the resulting relationship between the contracting parties, namely the Government and Piatco, and in pre-empting arbitration.

“Under our present law, in a situation similar to the Piatco case, a court is supposed to refer to arbitration the signatories to an arbitration agreement and at the same time allow the suit involving the non-signatores to continue separately (see RA 9285 Sec 24). This is, in a sense, a correction by legislation of a judicial doctrine.”

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ZONAL VALUATION: It has been said in newspapers and on radio that just compensation (or the correct payment to Piatco for its Terminal-3) which the Pasay court is determining is based on zonal valuation in the area.

Zonal valuation or the fair market value of land in the vicinity of the terminal should have no direct bearing on “just compensation” in this case. The government, not Piatco, owns the land where the terminal stands, so Piatco is not to be paid for it.

Piatco can expect to be paid or offered an amount based on the cost of the building, the facilities it installed, possible penalties, plus maybe some reasonable fees. An ongoing audit will soon fix the figures as reflected on documents and receipts.

Should government take over the terminal only after full payment? I have seen many expropriation cases where the government took over property and proceeded to build projects (such as roads and airports) on them even without full payment. The payment came later, if it did at all.

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(First published in the Philippine STAR of January 9, 2005)

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