New Subic ‘royalty fee’ will make goods costlier

A newcomer is imposing 55- or 65-percent “royalty” on long-time locators at Subic Bay Freeport. This will push up prices of grains, fertilizers and other imports in Luzon’s second busiest harbor.

Traders elsewhere copy Subic rates. Costlier goods nationwide will worsen inflation. Food and other basics will become more unaffordable for common folk to whom the Marcos Jr. admin promises prosperity.

Harbour Centre Port Terminals, Inc. demanded the royalty payments in late December 2023. It invoked a 2022 ruling of a five-man Supreme Court division.

The SC upheld Harbour Centre’s 2009 joint venture with Subic Bay Metropolitan Authority to control freeport management and operation. It was a split decision, 3 to 2.

Decades-long locators resist the stiff royalty demand. They called it “extortion.” Harbour Centre retorted that it’s a “terminal usage fee” for locators to temporarily continue their old port concessions.

Exchanges of letters between the locators and Harbour Centre have heated up. Each side has threatened to sue for damages.

Harbour Centre misinterpreted the SC ruling, locators alleged. Cutting into their earnings, the royalties will force them to close shop. Workers will be laid off. That wasn’t the SC’s intent, they said.

Locators pointed up that Harbour Centre’s joint venture agreement does not authorize royalty collections. The latter insisted to take over wharfs that have no previous exclusivity deals with SBMA.

The 55- or 65-percent fee will raise freeport costs, locators warned. SBMA is prohibited from allowing any increase without public hearing.

Three of the locators pioneered in Subic in 1994-1996:

• Mega Subic Terminal Services, Inc., which built Subic’s hi-tech grain unloading plants;

• Subic Seaport Terminal Services, Inc., whose fertilizer landings introduced the freeport to world maritime commerce; and

• Amerasia International Terminal Services, Inc., which systematized cargo handling.

SBMA granted them long-term contracts. In turn, they invested hundreds of millions of pesos on facilities, services and manpower.

In the last 12 years alone, they contributed P2.7 billion to SBMA’s income. Subcontractors who installed machineries and shops around them also remit to SBMA.

Controversy tainted Harbour Centre’s joint venture. SBMA’s administrator in 2009, Armand Areza, accepted and approved the unsolicited proposal within a few weeks – during an election ban on government contracting.

As SBMA’s lawyer, the Office of the Government Corporate Counsel opposed the joint venture. The National Economic and Development Authority withheld endorsement. Over the years, Harbour Centre’s P6.54-billion investment promise shrank to only P200 million.

SBMA’s present administration respects the locators’ long-term contracts. It supports their petition for declaratory relief at the Olongapo City regional trial court. The RTC will define the rights and obligations of all parties affected by the SC ruling.

Undue partiality can lead to graft raps. Previous SBMA directors had been charged before the ombudsman but were cleared years later.

Before vacating his post recently, SBMA chairman Jonathan Tan reiterated to Harbour Centre the need to sustain contracts. “I have to protect myself and SBMA, including the directors, [from lawsuits],” he said. Newly installed chairman-administrator Eduardo Aliño is striving to settle the mess.

Although the SC upheld Harbour Centre’s joint venture, it did not order any breach of obligations. Two points support locators:

• SC rulings form part of the law of the land. At the same time, the Constitution states in Article III, Bill of Rights, Section 10: “No law impairing the obligation of contracts shall be passed.”

• The SC is the final repository of justice. As such, it defends the law, in this case the Civil Code, Book IV, Obligations and Contracts, Chapter 1 General Provisions, Article 1159: “Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.”

The joint venture agreement itself forbids quashing of existing Subic contracts:

“Section 4.1, Grant of Concession Rights … SBMA hereby grants to [Harbour Centre] during the Term of this Agreement the concession as the exclusive port operator at the Joint Venture Areas and exclusive cargo handler for foreign and domestic break-bulk and bulk cargoes and other related cargoes for the entire Zone. Such concession shall exclude:

“4.1.1. Wharfs/ports and/or cargoes covered by existing Agreements involving SBMA; provided that [Harbour Centre] is not prohibited from handling the same or similar cargoes covered by the agreements if there are no exclusivity provisions therein or in case of an agreement for cargo handling has been reached between [Harbour Centre] and the Locator… .”

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