Stressing that the concession agreements with Manila Water Company and Maynilad Water Services Inc. were onerous, Malacañang on Thursday vowed not to pay a single centavo to the private firms as ordered by a Singapore-based court.
Chief Presidential Legal Counsel and spokesman Salvador Panelo said the Philippine government would not acknowledge the ruling of the Permanent Court of Arbitration in favor of Manila Water and Maynilad and will not pay the P11 billion compensation awarded to the two water companies.
“No, we won’t pay them because the contracts are onerous. They are too disadvantageous to the government,” Panelo said in a broadcast interview.
“There are contracts that are against public policy. If we can prove that in court, it will be annulled,” he added.
The Singapore arbitration has ordered the government to pay about P3.6 billion to Maynilad and recently, P7.4 billion to Manila Water for the non-implementation of water rate increases and compensation for losses and damages, respectively.
Justice Secretary Menardo Guevarra said the government is now more interested in getting a new deal than in striking a compromise on the arbitral award that the two concessionaires are pushing.
Guevarra stressed that the contracts are not iron-clad and noted that, “there is a contractual provision on amendments to the concession agreement.”
The Department of Justice (DoJ) chief likewise explained that under law, the government cannot be held hostage to unlawful provisions.
“The state is not stopped by the mistakes of its agents, especially if the acts committed are constitutionally or legally infirm. and the statute of limitations does not apply if the act sought to be set aside is void for being contrary to law or public policy. In any event, there is a standard separability clause that leaves other valid provisions effective,” Guevarra indicated.
He said the legal remedies being considered are not mutually exclusive as he noted that the Office of the Solicitor General is contemplating judicial remedies locally and/or abroad.
He added some members of the Cabinet want an overhaul of the existing concession agreements and that others are thinking of more drastic actions.
“PRRD (Mr. Duterte’s initials) has asked the DoJ to come up with an integrated solution. We’ll do,” Guevarra said.
Manila Water is a subsidiary of Ayala Corp, while businessman Manuel V. Pangilinan’s Metro Pacific Investments Corp. owns a controlling stake in Maynilad.
The two private companies distribute water in Metro Manila and other parts of the country under agreements signed with state regulator Metropolitan Waterworks and Sewerage System (MWSS) in 1997.
In a speech on Tuesday night, President Rodrigo Duterte lashed out at the two water concessionaires after a review conducted by the DoJ showed the water contracts were “onerous and disadvantageous to the people, relative the terms or periods, government non-interference, as well as concessionaire indemnification for losses.”
Due to the two provisions, the government was ordered by the Singapore arbitration court to pay the firms as compensation for losses and damages.
The DoJ chief said another onerous provision is the extension of these contracts to 2037, considering that the extension was granted 12 to 13 years before the original expiration of the 25-year concession agreements in 2022.
Moreover, the spokesman said the “unfair” and “one-sided” contracts were products of “personal” and not of public interest.
“The problem is representatives of the government are not considering public interest but personal interest. That’s why this is happening,” Panelo lamented.
“The contracts say that if the water concessionaires acquire losses for whatever reason, the government has to pay. Where did you see such a contract?” he asked.
The DoJ, which reviewed the concession agreements, noted a dozen onerous and disadvantageous provisions in the 1997 contracts entered into by MWSS with Manila Water and Maynilad.
Mr. Duterte threatened to slap officials of the water companies with economic sabotage and have them arrested.
Last August, the Supreme Court imposed massive fines on MWSS, Manila Water and Maynilad for non-compliance with the Clean Water Act. The SC imposed about P2 billion in fines for each.
Both Manila Water and Maynilad, however, threatened to pass on the penalty by floating the possibility of a 780 percent rate increase.