Government invokes national interest in Philseco i

The Arroyo Administration is invoking the issue of national interest in an effort to persuade the Supreme Court en banc to reverse its first division’s decision awarding the Philippine Shipyard and Engineering Co. (Philseco) to a consortium led by the Gokongwei Group.

The Office of the Solicitor General is planning to elevate the case to the Supreme Court en banc, hoping to avoid a legal precedent that would force foreign shipyard owners to divest their holdings in excess of 40 percent.

The OSG has filed a motion for reconsideration before the Supreme Court’s first division but the government is escalating its effort to block the decision "in consideration of national interest."

Informed sources said Solicitor General Simeon Marcelo has decided to personally handle the case in which a lower court classified shipyards as public utilities where foreign investors could own only up to 40 percent.

If the decision is upheld, at least five major shipyard operators have to divest to comply with the Supreme Court.

Meanwhile, former Finance Secretary Ernest Leung told reporters yesterday that the government and Kawasaki Heavy Industries (KHI) did not undertake a legal amendment to their joint-venture agreement when the latter agreed not to exercise its right of first refusal on the government’s 87-percent stake in Philseco.

According to Leung, who was head of the Committee on Privatization (COP) at the time, the legal undertaking was not necessary since both parties were in agreement that KHI would only exercise its right to top the winning bid when the shares were auctioned in a public bidding.

Leung said a formal amendment of the joint venture was not necessary and the provision was clearly stated in the asset specific bidding rules (ASBR) which laid down the rules and terms of the public bidding for the Philseco shares.

"For me, it was simple. It was P100 million more for the government," Leung said.

The JG Summit consortium offered P2.03 billion for the government’s shares in Philseco while KHI (through Philyard) topped the offer with a P2.13-billion bid.

The COP awarded the shares of Philyard, prompting JG Summit to file a case in a lower court which ordered the government to accept the JG Summit consortium’s P2.03-billion offer and return KHI’s P2.131-billion bid.

Philseco is a joint venture between KHI and the state-owned National Investment Development Corp. (NIDC). Government decided to privatize the facility in 1994 as part of its effort to raise funds.