SEPTEMBER 27, 2006 (STAR) By Paolo Romero - The government is not bullying the Philippine International Air Terminals Co. Inc. (Piatco) and German-based Fraport AG in pressing criminal indictments for executives of the two firms for their alleged violation of the anti-dummy law, Malacañang said yesterday.

Justice Secretary Raul Gonzalez directed State Prosecutor Philip de la Cruz to head the panel of prosecutors that would conduct the preliminary investigation of the executives involved.

Press Secretary Ignacio Bunye and Solicitor General Antonio Nachura, in separate statements, maintained that the recommendation of the National Bureau of Investigation (NBI) for the filing of criminal charges against at least 18 executives of the firms was "separate and distinct from the legal issues between the government and Piatco" that had been resolved by a Supreme Court ruling upholding the government’s expropriation of the facility.

"The government has already complied with the court’s compensation order and the government’s objective is to expedite the opening of NAIA-3," Bunye said, referring to the P3 billion paid up front to Piatco. "It is about time that the people benefit from this facility."

The NBI recommendation, addressed to the Department of Justice, was dated July 28 but it reached the office of Special Prosecutor Jovencito Zuño only on Aug. 16.

The government took control of NAIA-3 early this month after paying P3 billion in compensation to its builders. The takeover came after weeks of legal squabble that ended only when the Court of Appeals lifted its temporary restraining order on the release of the P3 billion initial compensation for the airport builder.

It was not clear why it took the government so long to recommend the filing of criminal charges when the Palace had declared as early as 2003 that the contract to build the facility was anomalous. It eventually voided the contract.

Piatco corporate secretary and spokesman Moises Tolentino downplayed the development, saying the issue raised was an "old and recycled one that will certainly be thrown out by the courts."

President Arroyo met recently for the first time with German Chancellor Angela Merkel in Helsinki, Finland where she justified the government’s move to take over the airport. But she also assured Merkel of the Philippine government’s commitment to international laws and legal contracts.

In her dialog with Merkel on the sidelines of the 6th Asia-Europe Meeting, Mrs. Arroyo also promised that the consortium that built NAIA-3 would be compensated. She relayed the same message in speeches before businessmen during her European tour.

Fraport is reportedly one of the biggest airport operators in the world with immense political influence in Germany.

Nachura, explaining the apparent delay in the filing of criminal charges, said he and Piatco and Fraport officials were aware of a parallel investigation by NBI at the height of the legal tug-of-war over NAIA-3.

"This (criminal case) is totally separate from our eminent domain case," Nachura told The STAR in a telephone interview, adding the NBI’s recommendation would still have to pass through DOJ.

"This (alleged violations of Anti-Dummy Law) happened when the contract was being forged but that is the finding of the NBI and as far as my office is concerned, we are only focusing on the issue of compensation," he said.

The Office of the Solicitor General represents the government before the International Chamber of Commerce (ICC) in Singapore and the International Center for the Settlement of Investment Disputes (ICSID) in Washington DC, which are hearing Piatco’s and Fraport’s suits against the government.

He said his office would have to formally inform ICC and ICSID of the NBI’s move.

DOJ’s Gonzalez said he would still have to determine the effects of the filing of the criminal case on the arbitration proceedings. "I am studying it because we don’t know its effect in the present arbitration case in Singapore and Washington. But the preliminary investigation should still proceed," Gonzalez said.

Nachura stressed that the issue of false ownership of the consortium had already been brought up during the arbitration hearings in Singapore and Washington as part of the government’s justification of expropriating the facility.

"I don’t think the government should ignore such violations," he said.

He pointed out that NBI’s move would not affect the ongoing valuation of the facility to determine the full amount of compensation for Piatco and Fraport, saying the process is being conducted by an independent team of international valuators.

Nachura also dismissed fears that the filing of criminal charges would further dampen investors’ confidence. "As a matter of fact, if investors see that we want clean contracts, more of them will come in," he said.

Tolentino, Piatco spokesman, said the consortium observed the law limiting to 40 percent foreign ownership of public utilities.

Tolentino said that while Fraport AG indeed owned minority shares in some of the companies in the consortium on top of the 30 percent it holds directly, this did not translate into actual ownership of the entire consortium.

"This is not at all prohibited. In fact this is allowed and encouraged in the investment incentives law. Under the investments incentives law, a foreigner can come in of course with the limitation of only up to 40 percent. But there is nothing to stop, to prevent it from owning shares in other companies within the consortium," Tolentino maintained.

"This is an old issue that has been raised. In several forums, this has been dismissed as without legal basis. The problem here is it looks like the NBI is applying a different rule in determining whether there is excess from the maximum limit on foreign shareholding in Piatco specifically referring to Fraport’s share," Tolentino told The STAR in a telephone interview.

He also pointed out that it was still debatable whether the limitation on foreign ownership could apply to the international airport project.

"Under the present status, the 60-40 limit of ownership in a corporation applies only if the corporation is going to engage in exploration of natural resources or public utilities," Tolentino said. — With Rainier Allan Ronda, Jose Rodel Clapano

Chief News Editor: Sol Jose Vanzi

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