A contract is a covenant between two people or entities embarking on a common, mutually beneficial goal. Once signed, that contract legally binds both parties to respect all its contents down to the fine print.
From time to time, conflicts arise, and pleadings are brought before the proper courts. The most common is when one violates the contract terms. The legal avenue is for one party to sue the other for breach of contract.
President Duterte was recently on war mode against so-called oligarchs whom he accused of corruption and threatened to have imprisoned. Not mincing any words, he cursed and accused the Ayalas and Manny Pangilinan of fleecing the people of billions of pesos through separate, “onerous” water concessionaire contracts, which the Fidel V. Ramos (FVR) government signed and the Gloria Macapagal-Arroyo (GMA) administration extended with the Ayalas’ Manila Water Co. and MVP’s Maynilad Water Services.
Although both companies had signified that they would no longer seek payment for the more than P10.8-billion arbitral award they won before the Permanent Court of Arbitration in Singapore (the source of the President’s ire), Duterte’s fury was unabated. The issue remains his main beef in various speeches, never mind that the eruption of Taal Volcano has been wreaking havoc on people’s lives and properties, and the country’s economy, in the past two weeks.
To recall, Manila Water was supposed to get P7.4 billion, and Maynilad, P3.4 billion, to cover their claimed losses when the government rejected their demand for tariff hikes. Signed by FVR, Maynilad’s and Manila Water’s 25-year deals were supposed to expire in 2022. The contracts were extended to 2037 by GMA, after the two firms were mandated to fast-track their respective wastewater investments. Even before such extension, however, through the Metropolitan Waterworks and Sewerage System (MWSS), GMA decided in July 2004 to recognize the two private firms not as public utilities, but as mere agents of the government agency, which sanctioned their passing on income taxes to consumers via tariffs.
Neither my barber nor I are lawyers, but we both know that no law under the water concession contract seems to have been violated by either water firm. FVR, in his defense of his water privatization legacy, says that the contract was well-thought-out and is a product of diligent and meticulous staff work. He says that the contract should be upheld, but if the present government sees the need to amend it, renegotiations must be done with both water firms. The Duterte administration, however, is hell-bent on putting these “oligarchs” in jail. Duterte should be reminded that the government consented to the contract, and that the contract is legally binding, no matter how onerous he or any other person may view it.
Can the government throw the books at Maynilad and Manila Water? A legal eagle told me that private individuals could be sued under the graft and corrupt practices act only if they acted in conspiracy with government officials (RA 3019, https://www.ombudsman.gov.ph/docs/republicacts/Republic_Act_No_3019.pdf). Since this is a criminal act, only individuals, such as the executives or board members of the corporation, could be charged, if it could be proven that they colluded with a government officer in committing any of the acts cited in laws, such as the plunder law.
In this case, FVR could be implicated because he allowed the government guarantee to be part and parcel of the contract, and GMA, too, because she extended the contract under the same terms and conditions without competitive bidding. The legal eagle, however, opined that the concession contract should be viewed from the 1997 perspective when the water crisis gripped the entire nation.
The recoverability of corporate income tax was, likewise, agreed on by both parties, and modeled after the water privatization in England and Wales. Some people are saying that the 2012 Supreme Court ruling disallowing corporate income tax recoverability in the Manila Electric Co.—since it is a public utility—should be applied to both water firms. According to the ponente himself, Justice Rey Puno, the Meralco ruling was not meant to be applied to other utilities. More important, GMA had already classified the water concessionaires, not as public utilities but as contractors for MWSS.
Even for the sake of argument that Manila Water and Maynilad are indeed public utilities, the ruling should not impair the contract. The Constitution forbids laws being passed prejudicing such agreement. If at all, the legal eagle said that it should apply prospectively and should only amend accordingly the extension of the contract starting 2022.
Likewise, it is not true that the government is barred from participating in rate setting. Tariff is a continual source of negotiation between the concessionaires and MWSS regulatory office on recoverable expenses based on historical capital expenditures, operating expenditures and future projects. The government, in turn, is paid huge concession fees yearly. Also, no tariff increase will be finalized and effected without the approval of the MWSS board members who by the way are all Duterte appointees. The computation should be that the tariff will enable the concessionaires to recover all investments at the end of the concession agreement.
Duterte often brags about his law degree to defend some of his questionable actions. I don’t know how he and his legal team will circumvent established jurisprudence to put the Ayalas and MVP behind bars on a non-bailable criminal offense. But some see Duterte’s action as a strategy to force the concessionaires to agree on a new deal his government has crafted that is now under review by both Manila Water and Maynilad.
But the way I see it, Duterte is parlaying his populist magic before a gallery of captive audience, which has put him in power and has helped maintain his high trust ratings, according to pollsters. Already, he has upped the ante by including the UP Techno Hub, another Ayala project with the government, among the list of contracts to be reviewed. On Tuesday, Finance Secretary Sonny Dominguez revealed that Chevron’s (formerly Caltex) Philippines lease contract with the government would also be scrutinized. For the past four decades, the company has been renting a 120-hectare industrial park in San Pascual, Batangas, from a subsidiary of the state-run National Development Co. (NDC) for only 74 centavos per square meter a month, which the DOF finds “grossly disadvantageous” to the public. Chevron’s monthly rent is way below the current fair monthly market rate of P17.90 per square meter.
For his populist magic to thrive, he has to pit “his people” against their perceived tormentors—the elite, the Ayalas and MVP—and maintain his stance that he is not part of the establishment that, to a large extent, the people abhor. Duterte has to give them a figure to hate and throw virtual rocks at.
I’m reminded by a novel I read some time ago, written by Chingiz Aitmatov, a Soviet novelist. He recounted an incident in 1935 where Joseph Stalin invited his trusted people and some of his media henchmen into a meeting in a barnyard. In that meeting, he asked one of his staff to bring him a live chicken which he held forcefully in one hand, while his other hand plucked the poor chicken’s feathers in handfuls. The tormented chicken wiggled, squawked and withered under Stalin’s sadistic action until it was completely dressed. After putting the mortified chicken down, Stalin then scattered heaps of grain on the ground. The chicken, despite the pain, staggered to reach the grains and began to peck. Stalin then sprinkled some more grains just in front of him. The weakened chicken still struggled to go for the grains. Aitmatov recounted that Stalin turned to the people and said, “People are like this chicken. It doesn’t matter how much pain you inflict on them. The moment you offer them what they need, they will still follow you and turn to you for their survival.”
Could it be that some of us are Duterte’s
chickens, nibbling the grains out of his hand for survival? What will it take
for us to get our dignity back and gain normalcy again? Aitmatov has this piece
of advice: “…all it takes…is to stop
being a chicken.”
For comments and suggestions, e-mail me at mvala.v@gmail.com
3 comments
Could it be that we are the chickens too of the “elite” and Mr. Val you are one of the friends, connected to the elite, or benefited something from the elites? In my opinion, the president is trying to balance the power of the oligarch and the power of the government. The oligarchs can not be compared as chickens like what Stalin demonstrated. The Oligarchs are like Stalin, and the people-consumers are the chickens being dressed, yet given something and because of need still they go to the “Stalin(Oligarchs)”.
very well-paid article, by oligarchs
It appears that Duterte is at war with the non-chinese oligarchs only but is in honeymoon with the chinese oligarchs and with china itself.