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Extension not stated

Since Maynila and Manila Water have agreed to renegotiate the original contract, the extension becomes invalid.

Alvin Murcia



The Department of Justice (DoJ) had pinpointed yesterday that an extension of the water concession contracts was illegal from the start since the concession agreement signed in 1997 under a privatization program of President Fidel V. Ramos did not contain a provision for it.

The contracts were prolonged in 2009 by 15 years during the term of former President Gloria Macapagal-Arroyo with their terms ending in 2037 from the original 2022.

DoJ Secretary Menardo Guevarra explained the relevant provision in the concession agreement was on the renewal of the contract upon its expiration and provisions pertaining to early termination. There was none on extending the deals beyond the original period.

The justice chief likewise said the memorandum of agreement on the extension of the contract was signed by former Secretary of Finance Margarito Teves during the administration of President Gloria Macapagal-Arroyo.

Guevarra added that it’s dangerous to adopt a policy of what is not expressly prohibited is impliedly allowed.

Likewise, Guevarra said that since Maynila and Manila Water have agreed to renegotiate the original contract, the extension becomes void.

“What is there to extend?” Guevarra asked. The justice chief added that up to this point the concessionaires have never denied the existence of inequitable provisions in the agreements.

“In fact, they have expressed their willingness to renegotiate. If this is so, what contracts are supposed to be extended until 2037? The old one expressly repudiated by the government and virtually admitted as flawed by the private concessionaires?” Guevarraqueried.

Not the whole deal
The government is not rejecting the entire water contract but only the onerous provisions, Guevarra indicated.

The President has earlier said that he is thinking of filing plunder charges against Manila Water and Maynila due to the onerous provisions.

“That’s why we’re sitting down with them at the moment, we’re not rejecting the entire contract, just repudiating the onerous provisions,” Guevarra said.

For Justice Undersecretary and spokesman Markk Perete, two related legal issues go against the application of the general principle that what is not prohibited is allowed.

“We should not lose sight of the fact that what is involved here is a concession relating to the service of a basic necessity and the maintenance of a public utility. From this starting point, should liberality be used in favor of the concessionaire to the detriment of the public and the government?” he questioned.

“Number two, more importantly, we should note that the concession agreement contains a clause on renewal but not on extension. A clause on renewal is less onerous than one for extension because renewal presupposes renegotiation, while extension adopts in toto the provisions of a contract.”

Perete said that if the parties saw it fit to include a provision on the less onerous option of renewal, did they not in fact rule out the more onerous and lopsided option of extension?

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Executive assumes burden
“The burden of taking action based on an interpretation of the contract is assumed by the executive. In assuming that burden, it need not obtain prior court approval. Only in case of disagreement will resort to judicial intervention prove necessary,” Perete said.

He added that it is not the intention of the government to discourage private investments, or to repudiate valid partnerships with the private sector, but such partnerships should not take precedence over the law and the public interest.

Guevarra, on the other hand, said the issue of whether the private water concessionaires are in fact public utilities is up for resolution by the Supreme Court.

Doing business a favor
The actions taken by President Rodrigo Duterte against concessionaires Manila Water and Maynilad is not anti-business and is even meant to do the business community a favor, Presidential Communications Operations Office Secretary Martin Andanar said.

Foreign chamber groups and analysts have warned of a serious backlash on investor confidence as a result of the cancelation of a resolution extending the contracts of the water firms by 15 years even before their full terms have completed.

“Oh no, definitely not! The main point here is that we should not be entering into onerous contracts,” Andanar said on the impact of the Metropolitan Waterworks and Sewerage System (MWSS) decision to nullify the resolution with the water firms.

“This is in fact, doing the business community a favor by telling them that there is no room for corruption in our business industry and under the term of President Rodrigo Roa Duterte and there are no sacred cows. You’ve been asking for big fish and there you go,”Andanar said in a television interview yesterday.

Andanar noted that the message imparted from the President’s efforts against the one-sided deals that the water firms wrangled from the government is what counts.

“I think the purpose here is to send the message to both Maynilad and Manila Water that the President is not accepting this kind of reasoning and this kind of onerous contract that’s why the MWSS revoked the extension of the contract,” he said.

with Francis T. Wakefield

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