Harry Roque’s Blog

I was dismayed that President Aquino, through his spokespersons, has turned out to be the loudest defender of his predecessor fromer President Gloria Macapagal-Arroyo on the dirty airport deal. Terminal 3 become a dirty deal for two reasons: one, if the German investors are to be believed, their Build-Operate-Transfer Contract was allegedly cancelled by the past dispensation because they refused to pay huge sums of amount that Arroyo officials attempted to extort from them. In fact, it was on this basis that the first and second impeachment complaints against Mrs. Arroyo, which P-Noy endorsed when he was still a congressman, included the Terminal 3 project as a ground for teh complaint. Two, because until and unless the builders are paid their prompt, adequate and just compensation, the continued use of Terminal 3 is unconstitutional for violating the due process clause of the Constitution. This provision provides that there shall be no taking of property without due process of law. It is furthermore, also illegal under international law for constituting an illegal taking.
These illegalities have been highlighted anew when the International Centre for Settlement of Investment Disputes ruled last December 23, 2010 to annul an earlier ICSID panel decision which dismissed the complaint by Fraport for just compensation on the basis of what in international litigation is referred to as a “preliminary objection”. This is, in layman’s terms, a dismissal on the ground of lack of jurisdiction.

Recall that Fraport first submitted the issue of illegal taking of its property rights in Terminal 3 with the ICSID in 2003, shortly after the Philippine Supreme Court promulgated the “Agan vs. PIATCO” decision which nullified the latter’s BOT contract as being “null and void ab initio”. ICSID is a facility maintained by the World Bank in order to encourage capital investment in developing economies by providing an effective and speedy disposition of investment disputes. Its existence is by reason of a treaty, the ICSID Convention, and its jurisdiction is based also on consent freely given by states when, among others, they execute Bilateral Investment Treaties which will in turn provide that investment disputes existing between the contracting states should be resolved with finality by the center.

When Fraport commenced arbitration against the Philippine government, it prayed that prompt , adequate and just compensation be paid as provided under international law. The Philippine government, like any state, would not want such a determination to be made under international law obviously because state organs, such as domestic courts, using domestic laws, would be rendering an amount more favorable to the state than the investor. Hence, as a matter of strategy, the Philippine government resisted the proceedings in ICSID opting initially to shy away from the proceedings, but later relented and belatedly argued that it had no jurisdiction.

The Philippine position was this: the jurisdiction of the ICSID was pursuant to a bilateral investment treaty between Germany and the Philippines which referred the settlement of investment disputes to the ICSID. Under Article 1(1) of the treaty, an “investment” shall mean any “kind of asset accepted in accordance with the respective laws and regulations of either contracting party”. The Philippines’ position was that only investments which complied with Philippine laws could be submitted to the ICSID. And because Fraport, by exercising acts of management, ironically in the exact same way that Smartmatic did in the conduct of the last automated elections, allegedly violated our criminal laws, specifically the Anti Dummy Law, the ICSID should not exercise jurisdiction.

The first ICSID panel gave credence to this submission by the Philippines and hence dismissed Fraport’s complaint.

From this decision, Fraport filed, also before ICSID, an action to annul its earlier decision, on the ground, among others, that the panel committed “serious departure from procedure” when it dismissed Fraport’s complaint on the basis purportedly that the latter violated the anti-dummy law. Specifically, this second ICSID panel found that the earlier panel violated Fraport’s right to be heard when after the earlier tribunal had already declared the proceedings as having been terminated, the Philippine government continued to manifest the happening of subsequent facts including a dismissal by the then Chief State Prosecutor of a complaint against Fraport for violation of the anti-dummy law but purportedly only “because the prosecutor did not have access to secret shareholders agreement which had he had access to, would have resulted in an indictment”. It was on the basis of this belated information that the earlier panel ruled to dismiss the original complaint.

To this narration of facts, the second panel annulled the earlier decision because : “ the tribunal could not… have made such a determination, (that the Prosecutor could have indicted Fraport for violating the ADL) without hearing both parties on the adequacy and effect of record before the Prosecutor and considering such further evidentiary enquiries or proceedings as may be necessary in light of the submissions”.

The ICSID highlighted that information on the dismissal was submitted after a 14 February 2007 order that the tribunal “does not wish to receive any submission from either of the parties”. This according to the tribunal was “ incompatible with the fundamental obligation… to permit both parties to present their case in relation to new material”.

So now it can be said: after all adulation and even appointments given to some members of the Philippine legal team that represented the Philippines in these international proceedings—which in the end, the Philippines lost—who will now pay the P2 billion pesos which Mrs. Arroyo paid to lawyers who lost the case for us? Obviously, it will again be the poor Filipino people. Darn this dirty airport robbery!.