OSG asks court to stop audit of 'Big 3' oil firms

MANILA, Philippines – The Office of the Solicitor General (OSG) urged a Manila regional trial court (RTC) yesterday to reconsider its decision ordering an audit of the “books of account” of Pilipinas Shell Petroleum Corp., Chevron Corp. and Petron Corp., the country’s three largest oil firms.

In two orders dated April 27 and May 5, Manila Judge Silvino Pampilo Jr. directed the Commission on Audit (COA), Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to form a panel of examiners to conduct the audit and find out whether the firms committed cartelization and predatory pricing under the Oil Deregulation Act (Republic Act 8479) and monopoly and combination in restraint of trade prohibited under the Revised Penal Code.

Solicitor General Agnes Devanadera, in a motion for reconsideration, said the government agencies would be exceeding their own mandate if they are compelled to conduct the audit.

The OSG branded the court’s order as “unwarranted,” saying “it would be improper and unjust to demand compliance with what is not sanctioned by law.”

“Consequently, since the examination of the books of accounts of the respondents are beyond the mandate and jurisdictions of the COA, BIR and BOC, it would be legally impossible for said government agencies to comply with the order,” the OSG said.

The OSG cited the case of “Cui v. Cui,” which provides that “one can do lawfully only those things and can do them only in the manner prescribed by the law of its charter and of the state, and whatever may be the purpose of its creation.” 

The order stemmed from a petition for declaratory relief filed by civil society group Social Justice Society (SJS), requesting the opening and examination of the three oil firms’ books of account. The group contended that their request is necessitated by a strong public interest and the need to uncover the mystery surrounding the frequent increases in the prices of petroleum products.

The three oil firms have filed separate motions to dismiss the petition.

Devanadera said the COA, BIR, and BOC can only examine the oil firms’ books if it is for the purpose of determining tax liabilities, franchise taxes, customs and tariff duties as well as for the fixing of rates of public utilities.

The OSG argued the ordered examination is not sanctioned by the Rules of Court or by RA 8479. The OSG lawyers said the rules cover only the production and inspection of the books or documents being requested by the other party. 

The OSG cited Black’s Law Dictionary in contending that inspection and audit “are two different matters.”

The OSG said inspection involves an examination by a private person of public records and documents, or the books and papers of his opponent in an action, for the purpose of better preparing his own case for trial.

An audit is defined as an official investigation and examination of accounts and vouchers.

The OSG also said RA 8479 grants jurisdiction to the court in cases involving cartelization and predatory pricing, but only after the Department of Justice-Department of Energy Task Force deems there has been such a violation and directed the prosecutor to file the appropriate complaint.

The OSG also said “the audit of the respondents, which are private corporations, is not within the jurisdiction and mandate of the COA, BIR and BOC.”

The COA is limited to auditing the government or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled bodies with original charters.

“Not being public utilities, the COA does not have the power and authority to examined respondents’ books of account in connection with the fixing of rates of regulatory bodies and prices of petroleum products and for the purpose of fixing the franchise taxes,” the OSG said.

The OSG said the BOC can only examine the oil companies’ books of account only for the purpose of determining proper payment of duties and taxes by an importer.