GERMANS TO SUE RP GOVT OVER PIATCO NAIA3 DEALManila, May 8, 2003 -- German aiport operator Frankfurt Airport Services Worldwide or Fraport AG, a major foreign stakeholder in the Philippine International Air Terminals Co. (Piatco) consortium, said yesterday it would pursue legal action against the Arroyo administration after the Supreme Court (SC) yesterday upheld the voiding of contracts for the construction of the Ninoy Aquino International Airport (Naia) Terminal 3 project. The legal actions, which take the form of an arbitration proceedings filed in Singapore and a possible plea for World Bank (WB) intervention, are expected to start a long legal tug-of-war for the right to operate the terminal project. Airport service concessionaires, nevertheless, hailed the SC decision. "The Supreme Court ruling that the Piatco contract was null and void saved Philippine jurisprudence and kept a longstanding doctrine that third parties or complete corporate strangers cannot revoke existing and valid business contracts," Perfecto Yasay Jr., chairman of Manila International Airport Authority-NAIA Association of Service Operators, said. He said a different decision would have thrown the country's legal precedents awry and created a nightmare scenario where existing legitimate claims could be ignored. He said it was "a contract of the worst of kind and people should go to jail if the whole message and spirit of the court ruling were to be fully served both to mete out penalties and deter future Piatcos." "Our existing contracts with airport authorities to service Terminals 1 and 2 were to be revoked under the contract with Piatco, a third party and a non-party as far as we are concerned. It is like the business contract between Jose and Pedro to service a garage was given to Juan simply because Juan was building a new garage in the compound," he said. "These contracts were signed in 1997 between the Philippine state and the Piatco concession consortium. On the basis of the reasons for the Supreme Court decision, which are expected to be available soon, the Piatco partners will coordinate in the coming days further steps to be taken. Fraport expects that Piatco upon decision of the majority partner will take legal action against this decision in Manila and, at the same time, will continue with its arbitration proceedings currently underway in Singapore," Fraport said in a press statement. "If the Supreme Court decision becomes final and conclusive, then Piatco should be able to claim compensatory damages for the completed terminal. Simultaneously, Fraport will continue to make its own and direct claims against the Philippine state for compensation: for example, on the basis of the German-Philippine Investment Guarantee Treaty," it added. Fraport earlier wrote off its entire investments in the project of some $300 million due to its officials' frustrations during its negotiations with Philippine officials over the project. The German firm, nevertheless, did not give details on the source of its officials' frustrations but there were allegations of mulcting by top-level government representatives during the talks. Fraport's management remains optimistic and will continue to fight further for a solution to the problem through discussions with the existing partner, potential investors and the Philippine government, the firm had said. "We will continue our major commitment to defend the company's interests in the Philippines. The write-down does not mean that Fraport will give up its claims, in whole or in part," said Fraport's executive board chairman Wilhelm Bender. After all, "according to an independent expert opinion, the terminal's value clearly exceeds the construction costs," said Bender. "We will also take legal action to assert our claims consistently," Bender added. Therefore, Fraport's executive board will push ahead with its legal offensive. It is preparing an application for arbitration proceedings at the World Bank against the Philippine government, the firm stated. The companies' contracts to service Terminals 1 and 2 were to be revoked by the Piatco contract once Terminal 3 became operational. Yasay said renewal was iffy at best since Piatco which was given control over various airport services including some regulatory functions of the government had to give its approval before any of these companies could operate again at the airport and compete with Piatco. "Piatco was primed to be a monopoly at the airport. We have been operating there for decades and all of a sudden, we would be banned from it because Piatco was to take over. What about the sanctity of our contracts?" Yasay asked. "The court ruling," he said, "sent a powerful message to local and foreign businessmen to take the straight path in doing business here. The Chengs and Fraport of German (Piatco's main shareholders) had it coming to them." Fraport, he said, was part of the whole deal to "squeeze blood from us" and should not poise itself as a victim because "we are the victims here." Yasay said the next move would be to speed up the opening of the airport, choose its expert operator with an international track record, and correct the 42 defects of the terminal, many of them concerning safety and security. He also said the Chengs and Fraport will have to open their books to an audit if they want to be reimbursed for actual expenses minus those that are questionable, including the millions of dollars given the Alfonso Liongson for questionable purposes.
Reported by: Sol Jose Vanzi
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