SolGen elevates Philseco issue to SC en banc

Invoking national interest, the government has elevated its suit against JG Summit to the Supreme Court en banc, asking the high court to junk its own ruling that awarded the Philippine Shipyard and Engineering Corp. (Philseco) to the Gokongwei-owned conglomerate.

In a 20-page motion, Solicitor General Simeon V. Marcelo said the case is so important that it should be discussed at the en banc level of the highest court in the land.

Marcelo said the SC en banc should reverse the ruling on the basis of what he called "far-reaching adverse consequences to the government and the nation."

According to Marcelo, government’s privatization program would be "severely impaired if not fatally injured" by the decision which he said effectively announced that the Philippine government privatization and bidding rules could "never be relied upon" even with the clearance of the Department of Justice.

Marcelo was referring to an earlier ruling made by the First Division of the Supreme Court which promulgated an order awarding government’s Philseco shares to JG Summit after the Committee on Privatization awarded the same shares to Philyard Holdings Inc. (Philyard).

The SC ruling had upheld JG Summit’s claim that Kawasaki Heavy Industries (KHI), through Philyard, did not have the right to top the consortium’s bid for the Philseco shares.

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. 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 the Philyards as its nominee. After the Gokongwei-led consortium made a winning bid of P2.03 billion, Philyard exercised KHI’s right to top and made a bid of P2.13 billion.

The court decision ordered the government to accept the JG Summit consortium’s P2.03-billion bid and return KHI’s P2.131 billion bid for the shipyard.

According to Marcelo, the SC decision would discourage foreign investments in the shipbuilding industry, despite Presidential Decree 666 which delisted the industry from the Public Service law and allowed foreign investors to own controlling shares in shipbuilding and ship repair companies.

"The decision [also] defeats [Kawasaki’s] contractual rights of first refusal," Marcelo said. He added that government would suffer losses of up to P101.5 million, representing the five percent difference between the JG Summit offer and the P2.13 billion that government would have to return to Philyards.