POSTSCRIPT / August 19, 2010 / Thursday


Philippine STAR Columnist

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RP ‘wins’ Naia-3 case, but at staggering cost

WE WON?: The government has announced with glee that it won the arbitration case filed by the builders of the Ninoy Aquino International Airport Terminal III (Naia-3) against the Philippines before the International Chamber of Commerce in Singapore.

It won — in the sense that the ICC dismissed the demand of the Philippine International Air Terminals Co. (Piatco) that it be paid $1.1 billion (P49 billion) for the government’s abrogating its contract to build the terminal and expropriating it.

But the government also lost. All its 23 counterclaims that would have fetched $900 million were thrown out. Despite that loss, the government still paid its lawyers a staggering P2 billion.

The counterclaims include the price of 8.6 hectares for access roads, the rentals and real estate taxes on the site, unpaid taxes, lost revenues from the delay in the operation of Naia-3, and the cost of completing the facility to make it safe and structurally reliable.

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IT’S A DRAW: From where I sit, it is a draw. I see the ICC arbitrators merely sending home the squabbling parties to settle their domestic problem in their usual Philippine-style free-wheeling fashion.

It is a matter of emphasis. Malacañang focused on the “victory” angle and praised its Filipino and foreign lawyers, because they supposedly saved the government the $1.1 billion demanded of it.

On the other hand, those who were lusting after the Piatco contract and the legal lions spoiling to handle the case would rather talk of the high cost of winning the dismissal of the Piatco claims.

(Piatco is a consortium led by Germany’s Fraport and its local partner, Paircargo of the Cheng family. Not much was known previously of the Chengs quietly doing cargo business until the Naia-3 case broke open.)

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COUNTERCLAIMS: When the contract was voided, then Solicitor General Alfredo Benipayo, the foreign lawyers and retired Supreme Court Justice Florentino Feliciano, who was the lead Philippine counsel, could not agree on whether or not to expropriate Piatco’s assets.

The government eventually ordered expropriation, but paid Piatco P3 billion in 2007, leaving a balance of P12.7 billion.

Although the government saved P1.1 billion in the arbitration cases, it will continue to shell out more millions, part payment of the high cost of corruption in doing business in the Philippines.

Actually, Piatco’s claim in the ICC was for only $565 million. Why or how did Malacañang come up with $1.1 billion being saved in “winning” in the arbitration?

To make the figure impressive, maybe Malacañang added Piatco’s $565-million claim and Fraport’s separate claim of $465 million before another arbitration body in the United States. (Fraport’s claim had been denied.)

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SOLOMONIC: In 2002, President Arroyo revoked the Piatco contract on the ground that certain terms were illegally renegotiated by her predecessor and that it was grossly disadvantageous to the government.

After it was revoked, a case was elevated to the Supreme Court, which ruled that the deal was void ab initio (or void from the very beginning).

However, Piatco got a separate ruling from the High Court that it may file a claim for just compensation without opening its books.  The decision penned by Justice Dante Tinga also ordered the government to pay P3 billion to Piatco for its assets that were expropriated.

Solomonic, isn’t it? Everybody went home with something in his pocket.

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FRAPORT CLAIM: Instead of filing the claim before Philippine courts, Piatco took its $565-million claim before the ICC in Singapore.

Its German partner Fraport, which had a 30-percent stake in Piatco, filed a separate case before the World Bank’s International Centre for Settlement of Investment Disputes in Washington, DC. Fraport’s claim of $465 million was eventually denied.

In sum, while the government saved $1.1 billion, it lost $900 million in rejected counterclaims, at least P3 billion in expropriation costs, and P2 billion for lawyers.

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DOING WHAT?: Malacañang may want to ask the Manila International Airport Authority why it paid the lawyers P2 billion. And it better move fast, because the MIAA is releasing this month $400,000, almost P20 million, for them.

Aside from congratulating retired Justice Feliciano, Malacanang should find out how much he and UP professor Maria Lourdes Aranal Sereno got as their share of the hefty fees. (That may be academic now since President Aquino has named Sereno associate justice of the Supreme Court.)

We have been told that during the hearings in Singapore, a minimum of 10 government lawyers were always present. Doing what?

If we already had competent lawyers, why did we hire White and Case for the arbitration? And if the foreigners are that sharp, why did White and Case still have to hire Feliciano and Sereno?

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PIATCO RECOVERY: The government has been quiet about fact that the ICC deemed Piatco “a builder in good faith,” contrary to the Philippine claim that it was a “builder in bad faith.”

We had wanted a declaration of bad faith so Piatco could be denied the right to recover its expenses in building the terminal and the government, in turn, could claim damages.

This was one of the key counterclaims that we lost. Now the government has to contend with a Piatco still seeking recovery compensation for building Naia-3.

The ICC said the Philippines relied generally on provisions of our domestic Civil Code, which provides various forms of damages, restitutions and remedies, as bases for the counterclaims.

The ICC noted, however, that when the Philippines “turns to discuss each particular counterclaim, with some exceptions, it does not point to a particular legal basis for putting forward the claim.”

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(First published in the Philippine STAR of August 19, 2010)

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