SC denies with finality Piatco’s bid to operate NAIA-3

The Supreme Court denied with finality yesterday the appeal of the Philippine International Air Terminals Co., Inc. (Piatco) on the tribunal’s May 2003 decision nullifying all its contracts with the government on the construction and operation of the $650-million Ninoy Aquino International Airport Terminal-3 (NAIA-3) project.

Malacañang reaffirmed President Arroyo’s earlier decision for the government to take over the facility for public use while negotiations for just compensation for Piatco are ongoing.

The court said the Constitution grants the state in times of national emergency the right to temporarily take over the operation of any business affected with public interest. This right is an exercise of police power which is one of the inherent powers of the state, the court added.

Mrs. Arroyo created last year a three-member committee of Cabinet secretaries which will spearhead the takeover plans.

Piatco, however, vowed to resist any government takeover without just compensation. The consortium, led by Fraport AG of Germany, also said it will file a second motion for reconsideration.

Former solicitor general Frank Chavez, a lawyer for Piatco, said the the consortium will definitely file a second motion for reconsideration. Should it be denied by the SC, Chavez said they will set into motion "a legal remedy that has been prepared in anticipation of the denial of Piatco’s motion for reconsideration."

He emphasized that the government can not take over NAIA-3 because it is private property, having been built using private funds.

"The government takeover of Terminal III requires payment or just compensation. The government cannot justify a gratuitous takeover of Terminal III upon the silly and sadly baseless exercise of police power. There is no national emergency that would justify invocation of police power," Chavez said in a statement.

Justice Undersecretary Manuel Teehankee, concurrently the chief of the Office of the Government Corporate Counsel, said the government, through its lawyers, is open to discussing the approaches to computing the compensation for Piatco and is ready to answer the consortium’s second motion for reconsideration.

"The government will review the options under the decision and various approaches to just compensation without prejudice to its ability under its police power to make use of the facilities if necessary," Teehankee said.

He added that the government will also face Piatco should it resort to international arbitration remedies before the International Chamber of Commerce for Settlement of Investment Disputes.

"The government is well represented by its counsels in both arbitral forums," Teehankee said.

Meanwhile, Deputy Presidential Spokesman Ricardo Saludo told reporters that the Palace will still await the study and recommendations of the Department of Justice (DOJ) and the Solicitor General on the pending legal issues on this case related to the compensation claims filed by Fraport AG before a World Bank body in New York.

‘Flawed Contracts’

In a 46-page decision penned by Justice Reynato Puno, the high tribunal maintained that the agreements between Piatco and the government were violative of the Build-Operate-Transfer Law and thus against public interest.

Voting 7-5-2, the SC pointed out that Piatco was not a qualified bidder in the first place as it failed to show its financial viability to undertake the project.

Those who concurred with Puno were Chief Justice Hilario Davide Jr. and Justices Artemio Panganiban, Ma. Alicia Martinez, Renato Corona, Conchita Carpio-Morales and Romeo Callejo Sr.

Those who dissented were Justices Jose Vitug, Leonardo Quisumbing, Consuelo Ynares-Santiago, Angelina Sandoval-Gutierrez and Adolfo Azcuna while Antonio Carpio and Dante Tinga did not take part in the deliberations.

The court explained that it was "daylight clear" that at the time of the pre-qualification, People’s Air Cargo and Warehousing Co., Inc. (Paircargo), one of the incorporators of Piatco, had a net worth equivalent to only 6.08 percent of the total estimated project cost.

The other members of the consortium were Philippine Air and Grounds Services Inc. and Security Bank.

"By any reckoning," the court said Piatco’s funds were insufficient to satisfy the required 30 percent of the total estimated project cost.

In its May 5, 2003 decision, the Court said Piatco should not include the entire net worth of Security Bank to reach the needed equity for the project estimated to cost a minimum of $350 million or P9.18 billion.

"If this flawed process would be allowed, public bidding will cease to be competitive and worse, government would not be favored with the best bid," the Court said.

Aside from this, the tribunal declared that the agreements with Piatco were also blatantly onerous and lopsided in favor of the consortium as it would be allowed to impose its own fees and charges, be given direct government guarantee and monopolize the operations of an international airport in Luzon.

"The contracts at bar which made a mockery of the bidding process cannot be upheld and must be annulled in their entirety for violating the law and public policy," the court ruled.

The court disclosed that the contracts were substantially amended after the project was awarded to Piatco, making it more beneficial to the consortium and prejudicial to public interest.

It said giving Piatco the liberty to fix fees and charges would rob the Manila International Airport Authority (MIAA) the authority to protect public interest in case of abuse by the consortium.— With Marichu Villanueva, Sandy Araneta, AFP