The Supreme Court has declared as “valid and not unconstitutional” the controversial $62.08 million and the $211.21 million loans secured by the Philippine government from the Export-Import Bank of China in 2018 to bankroll, respectively, the construction of the Chico River Pump Irrigation project and the Kaliwa Dam project.
“The Loan Agreements have sufficiently complied with the applicable procurement laws and conform with the pertinent provisions of the Constitution,” the SC held, in ruling for the validity and constitutionality of the two projects.
“Wherefore, the consolidated petitions for prohibition in G.R. Nos. 24598 l and 246594 are denied. The Court declares valid and not unconstitutional the Preferential Buyer’s Credit Loan Agreement on The Chico River Pump Irrigation Project and the Preferential Buyer’s Credit Loan Agreement on The New Centennial Water Source-Kaliwa Dam Project,” the SC declared in the decision penned by Associate Justice Jhosep Y. Lopez.
The SC resolved to dismiss the petitions filed by the then Makabayan Bloc in Congress composed of Neri J. Colmenares, Carlos Isagani T. Zarate, Ariel B. Casilao, Emerenciana A. De Jesus, Arlene D. Brosas, Sarah Jane I. Elago, Danilo H. Ramos and Elma A. Tuazon.
Named respondents were former government officials led by then President Rodrigo R. Duterte, who was deleted as respondent in the petitions on account of his presidential immunity from suit, and then Executive Secretary Salvador C. Medialdea.
Colmenares and other petitioners argued that the assailed loan agreements were invalid for violations of various constitutional mandates particularly the failure to secure the needed Monetary Board concurrence, in bypassing qualified Filipinos in favor of foreign project contractors, and for containing stipulations that defeat the State’s pursuit of an independent foreign policy.
The $62.08 million loan for the Chico River Irrigation project was executed on April 10, 2018 between EXIM Bank and the Philippine government through the Department of Finance. Through Resolution No. 813 dated May 17, 2018, the MB gave its final approval to the loan agreement.
For the $211.21 million loan for the Kaliwa Dam project, the MB gave its final approval on June 6, 2019 under Resolution No. 854.
“Regarding the CRPIP (Chico River) Loan Agreement, on February 1, 2018, the DOF requested the MB for the issuance of an Approval-in-Principle on the proposed loan, which the MB granted on February 22, 2018 through Resolution 305,” the SC noted.
“Negotiations proceeded between the EXIM Bank and various Philippine government agencies, as represented by the DOF, culminating in the signing of the CRPIP Loan Agreement on April 10, 2018. Following the DOF’s request for the MB’s Final Approval, the same was given on May 17, 2018, through Resolution No. 813,” it said.
“The Court rules similarly on the NCWS (Kaliwa Dam) Loan Agreement. On September 7, 2018, the DOF endorsed the MWSS’s proposed loan to the MB, for which the MB gave its Approval-in-Principle on September 28, 2018 through Resolution No. 158,” the high court noted.
Negotiations ensued and on November 20, 2018, the NCWS Loan Agreement was entered into between the EXIM Bank and the GRP (Government of the Republic of the Philippines). Through Resolution No. 854 dated June 6, 2019, the MB finally approved the loan.
“As with the CRPIP Loan Agreement, the NCWS Loan Agreement’s Representations and Warranties by the Borrower, as well as the Special Covenants, specifically Article 6.4, indicate undertakings to comply with the conditions attached to the Approval-in-Principle, in order to obtain the Final Approval.
While Section 19, Article II of the 1987 Constitution requires the development of a self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, the SC said it does not impose a policy of Filipino monopoly of the economic environment.
The objective is simply to prohibit foreign powers or interests from maneuvering our economic policies and ensure that Filipinos are given preference in all areas of development.
The high court said that the Loan Agreements themselves are distinct from the mutually adopted bidding procedures through which the infrastructure projects were awarded to foreign contractors.
Relative to procurement laws, the award of projects to foreign contractors and their consequent financing under the Loan Agreements are outside the purview of the GPRA and the 2016 Revised Implementing Rules and Regulations (2016 HM) effective at the time the CRPIP and NCWS projects were awarded.
“Given that these commercial relationships are contractual in nature, arbitration thereon is understood as a purely private system of adjudication facilitated by private citizens, which has been consistently recognized as valid, binding, and enforceable. Given such fundamental principles, courts should liberally construe arbitration clauses, adopting the interpretation that would render such clauses effective,” the SC said.
“Particularly, in contracts with a foreign element, the courts have generally respected the contracting parties’ stipulated choice of law,” it added.
At any rate, the SC said the petitioners’ contentions — that the choice of applicable law and forum are heavily skewed in favor of the lender EXIM Bank and will prove greatly disadvantageous to the Philippines in case a dispute arises — deserve no consideration.
“As Associate Justice Amy C. Lazaro-Javier pointed out, petitioners’ contentions are speculative at best, there being no indications that the arbitration clause has been or is being enforced.
“Also, the Court cannot sustain such apprehensions as petitioners have failed to prove as fact the allegedly inequitable foreign laws, of which the courts do not take judicial notice. Well established in our jurisdiction is that foreign laws must be alleged and proven like any other material fact.”
“In view of the foregoing disquisitions, petitioners have failed to present any compelling issue to warrant the nullification of the CRPIP and NCWS Loan Agreements, or any of its clauses.”