MWSS can’t draw from Maynilad performance bond — international panel

The international appeals panel asked to resolve the conflict over the termination of a water concession agreement by Maynilad Water Services Inc. (MWSI) has stopped the government, through the Metropolitan Waterworks and Sewerage System (MSWW), from drawing on a $120-million performance bond until after a final ruling on the case has been made.

In a June 19 order, the three-man Appeals Panel reiterated an earlier order stating that MWSS may not draw on the performance bond until the panel promulgates a final award in the case and gives notice to the concerned parties.

MWSS has demanded payment on June 17 to the Hong Kong-based Citicorp International Ltd., acting as agent for the issuing banks, for about $98 million (P4.6 billion) from the performance bond, claiming that MWSI has failed to perform its obligations under the concession agreement.

The demand letter, approved by the MWSS board of trustees, was signed by MWSS officer-in-charge Macra Cruz who also claimed that the drawing "has been submitted to the Appeals Panel for adjudication" and that the panel "has handed down its decision in such matter and this drawing is consistent with that decision."

However, the Appeals Panel, created by the International Arbitration Court of the International Chamber of Commerce, said MWSS may not draw on the bond "because of the submission of Maynilad’s claim relating to its payment of concession fees to the Appeals Panel, until the Panel has handed down its decision in the matter."

"Such decision has not been handed down," the panel stressed.

The performance bond is a guarantee fund mechanism required on Maynilad in the event it fails to fulfill its obligations or commitments in the concession agreement.

The MWSS said it needs to draw on the bond issue it badly needed funds to service the payment of its mounting dollar-denominated loans.

The Appeals Panel further ordered MWSS "not to make any requests to the banks under the performance bond" while the case is still being deliberated.