SBMA-Harbor Center joint venture approved

MANILA, Philippines - The Office of the Government Corporate Counsel (OGCC) had approved the deal forged by the Subic Bay Metropolitan Authority (SBMA) with Harbor Center Port Terminal Inc. (HCPTI) for the development, modernization and operation of its ports.

In a 13-page legal opinion, the OGCC held that the joint venture agreement (JVA) of SBMA and HCPTI covering the Naval Supply Depot, Boton, Alava, Rivera and Bravo wharves and ports was aboveboard.

“Upon the foregoing, it is considered view of this office that the JVA was signed in compliance with the JV Guidelines and is consistent with the joint venture principles,” said Government Corporate Counsel Raoul Creencia.

Under the rules, OGCC’s approval was necessary before the JVA could be implemented.

In 2009, HCPTI sent to SBMA an unsolicited proposal to develop and operate the wharves and ports that are now dilapidated.

In February 2010, the SBMA Board approved and signed the JVA on the condition that it would be subjected to a bidding in accordance with the JV Guidelines to be effective.

However, no party submitted a bid that would match or surpass the HCPTI proposal. So the SBMA then approved the JVA subject to the opinion rendered by the OGCC on the matter.

But a law office opposed the deal when it was submitted to the OGCC for review, alleging that it was a midnight deal, non-compliant with JVA guidelines on technical and financial capacity of HCPTI and unwarranted delegation of SBMA of its legislative powers to HCPTI with respect to fix tariff rates and the operation of the wharves/ports that will result in unfair competition.

The OGCC said the JVA is not a midnight contract since negotiations on the project have started in 2001.

On the question on whether the agreement is prohibited given the fact that it was signed during the election period, the OGCC said it is not.

“Given the representation that no public funds would be spent or disbursed under the JVA since all infrastructures are to be performed by HCPTI, this office cannot but regard the resolution as inapplicable to the JV. Even assuming that public funds are involved, the JVA still does not fall within the ambit of the prohibition because the same has not yet been implemented. Indeed, SBMA has yet to issue in HCPTI’s favor the notices of award and to proceed, and this did not happen during the period covered by the ban,” it said.

There is also no renunciation of the SBMA of its legislative powers to operate ports and set tariff rates because “the rules governing the operations and any modification of the same rules shall be subject to SBMA’s prior written approval. There is therefore no abdication of powers but a mere implementation of SBMA’s charter.” It further stated that “(t)he collection of rates is subject to SBMA’s regulatory powers and the parameters set forth in the JVA and limited only to the JVA areas.”

“Neither does the JVA foment unfair competition. With the growing need to accelerate the provision of public services, the national leadership has even encouraged public-private partnerships (PPP) since government admittedly may not be in a position to undertake on its own a project like this given its limited resources and the countless public services that it ought to provide. The selection of a joint venture partner in a specific development area cannot result in unfair competition perse. “Otherwise, all PPPs should be unconstitutional for violating this proscription. What the JV Guidelines required as cornerstone for these PPPs are transparent rules and processes, something that was not blatantly violated here.

“Besides, the JVA explicitly provides that all wharfs/ports and/or cargoes covered by existing agreements of SBMA are excluded from the grant of concession rights. Given that the JVA openly recognizes and respects all existing contracts of cargo handlers, their property rights could not have been materially deprived. The charge of unfair competition cannot, therefore, be legally supported,” the OGCC said.

An issue was also raised that the JVA was signed prematurely or before a bidding was conducted.

In upholding the JVA between SBMA and HCPTI, the OGCC said there was no premature signing of the JVA because it was still subject to a “suspensive condition.”

“The parties understood that the JVA never became final and executor as it was subjected to a suspensive condition. HCPTI knew that it had to wait for the challenge. SBMA, in the meantime, is under no immediate obligation to either the proponent or to the challenger,” the OGCC said.

It added: “If the suspensive condition of subjecting the signed agreement to a challenge does not materialize, then the parties would stand as though the conditional obligation never existed. Thus, while on its face the JVA appears to have been executed before it can be challenged competitively, the very terms of the signed JVA readily refuses this. Evidently therefore, the required transparent and competitive process found in the JV Guidelines has not been sacrificed.”

The OGCC also upheld the financial and technical standing of HCPTI saying it “will reiterate its deference to the JVSC’s findings given its financial and technical expertise. Thus, the JVSP’s findings on HCPTI’s financial and technical eligibility need not be disturbed particularly when supported by evidence.”