Government asks SC to recall award of Subic shipya

The Arroyo administration has asked the Supreme Court to reconsider its decision to award the privatization of Subic Shipyard to a consortium led by the Gokongwei group.

In an attempt to stave off legal crisis, Solicitor General Ricardo P. Galvez filed a motion asking the High Tribunal to set aside its decision promulgated on Nov. 20, 2000. Galvez said such decision will have a wide-reaching impact on the government’s entire privatization program.

According to Galvez, the Supreme Court erred when it upheld JG Summit’s claim that Kawasaki Heavy Industries (KHI) did not have the right to top the consortium’s bid for the Philippine Shipyard and Engineering Corp. (Philseco).

The court ordered the government to accept the JG Summit consortium’s P2.3-billion bid and return KHI’s P2.131-billion bid for the shipyard.

Philseco is a joint venture between KHI and the state-owned National Investment Development Corp. (NIDC).

Government decided to privatize the facility in 1994 to raise funds. To make this possible, the Asset Privatization Trust convinced KHI to give up its right of first refusal (ROFR) and instead exercise the right to top the winning bid when the asset was put on the auction block.

KHI agreed and appointed Philyards Holdings Inc. (PHI) as its nominee. After the Gokongwei-led consortium submitted a bid of P2.03 billion, Philyard exercised KHI’s right to top and offered P2.13 billion.

JG Summit contested the award to KHI, saying KHI’s right to top was not valid.

According to Galvez, JG Summit could not contest the award since its consortium and all the other bidders that vied for government’s 87.67-percent holdings in Philseco knew about KHI’s right to top from the outset since it was contained in the asset specific bidding rules (ASBR).

Galvez said KHI’s right to top was made known in the ASBR and during a pre-bidding conferences conducted by the APT prior to the actual bidding. Galvez also pointed out that there should not be any apprehension against allowing a foreign corporation to operate a public utility for an unlimited period. He said the government shares would be conveyed not to KHI but to Philyard which is only 40-percent owned by KHI.

Philyard itself is a group owned by KHI, Magsaysay Lines, SM Fund, International Container Terminal Services, Keppel, Insular Life and the National Government which held a 10-percent interest.

At the end of the transaction, Galvez said KHI’s aggregate interest in Philseco would not exceed the constitutional limitation even if its 2.59-percent outstanding shares are included.

The decision of the High Tribunal was issued by the 1st division headed by Associate Justice Consuelo Ynares-Santiago in November last year, when Chief Justice Hilario Davide was in the thick of the impeachment hearings at the Philippine Senate.