Piatco: 'Favored businessmen' behind NAIA-3 anti-dummy suit

By Lala Rimando, abs-cbnNEWS.com

Posted at Jan 22 2011 06:35 PM | Updated as of Jan 24 2011 09:44 PM

MANILA, Philippines (UPDATED) - The Department of Justice's move to charge anti-dummy law violations against the builders of controversial NAIA-3 airport terminal shows that the Aquino government's lawyers are in "cahoots with their favored business personalities," Piatco said in a statement Saturday.

Piatco, or the Philippine International Air Terminals Co. Inc., is the consortium of Filipino and German firms that won the right to build and operate Terminal 3, an international airport facility at the Ninoy Aquino International Airport (NAIA) in Manila, the country's main gateway. Their contract was scuttled by the Arroyo government in 2002, triggering legal cases here and abroad.

"They (Piatco) know that the government lawyers, in cahoots with their favored business personalities, will use the Anti-Dummy charge as its last card in its fight against the NAIA 3 investors, who – their backs having been pushed to the wall – dared to sue the government in international courts," said Piatco in the statement signed by Moises Tolentino Jr., VP for legal and administrative affairs.

It expressed its "gravest concern" on the "disappointing move" of the Aquino government to file anti-dummy charges against the officials of Piatco and its German partner, Fraport AG Worldwide Services, Inc.

Piatco also criticized the Aquino government for not being "different from the past unlamented Arroyo Administration." It was referring to the campaign promise of President Aquino to rid the government of wrongdoings.

Piatco said it has already "suffered tormenting harassment from the highest officials of government for the past nine (9) years."

'Weapon of terror'

Piatco also scored the Aquino government for using the anti-dummy law as a "weapon of terror" that it could use "against our friendly foreign investors."

This was stressed vis-a-vis the Aquino government's Public-Private Partnership (PPP), a key scheme to attract investors to finance and build much-needed infrastructure projects to unlock economic potentials of the country.

"The decision to file the criminal charge (after deliberately allowing the resolution of the complaint to remain pending for several years) is truly alarming not only for the named respondents but also for current and future foreign investors in the country.

Previously, Piatco expressed its support to the Aquino government's PPP programs.

German Ambassador to the Philippines Christian-Ludwig Weber-Lortsch recently told ANC's Business Nightly that the NAIA-3 issue has tainted the Philippines' reputation as an investment destination.


Weber-Lortsch also echoed foreign investors' calls for the Philippine government to re-consider the 40% cap on foreign participation in major infrastructure investments.

Violations of the 40% cap were set by the Philippine Constitution, Foreign Investments Act, and the Anti-Dummy Law.

Piatco's German partner, Fraport, has admitted at an international tribunal in Washington that its aggregate investments in Piatco and the cascade companies reached over 61%. But it stressed that this should not be considered as a violation of the Anti-Dummy Law since the Philippines allows a liberal computation of foreign investments.

Fraport's investment in Piatco itself does not exceed 40%.

However, a tribunal at the International Center for Settlement of Investment Dispute (ICSID) that heard the case filed by Fraport has ruled in 2007 that Fraport still violated the Anti-Dummy Law since the Filipino and German firms executed secret shareholder agreements that assigned to Fraport the operational, financial and managerial control of NAIA-3.

In December 2010, a separate tribunal annulled the decision of the first tribunal citing the lack of Fraport's opportunity to present evidence to refute the basis of the violation.

Questionable timing

Piatco said the Jan. 21 decision of the justice department to pursue the filing of a criminal case against officials of both firms is questionable.

"Both in timing and in tenability, DOJ's decision is highly suspect," it said in the statement.

It noted the "telling defeat in the second round of its legal battle with Fraport" at the ICSID.

It said that Piatco has also asked the High Court of Singapore to set aside the previous ICC award.

In July 2010, the ICC handed a decision that favored the Philippine government.

Both ICSID and ICC cited the anti-dummy law violations of Fraport and Piatco. Both courts abide by Philippine laws and local court decisions

Under the previous Arroyo government, a state prosecutor dismissed in December 2006 the anti-dummy law complaint against the officials of Piatco and Fraport.

Thus, Piatco questions the reinstatement of the same criminal case.

"That’s our point: the Anti-Dummy Law card is a very important weapon for the government," it stressed in the Saturday statement.

To recover their investments in NAIA-3, Piatco had filed a $565 million compensation claim against the Philippine government at the ICC.

On the other hand, Fraport cited the bilateral investment treaty between the Philippine and German government when it sought protection from the ICSID. It claimed it spent $425 million in the Manila project.

Interested in NAIA-3

Piatco won the NAIA-3 deal in 1997 after it successfully challenged the bid of the project's original proponent, Asia’s Emerging Dragon Corp (AEDC), which was led by the country's tycoons: John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty, Alfonso Yuchengco, and Lucio Tan.

Tan has pursued AEDC's suit all the way to the Supreme Court. It wanted the High Court to compel the government to reinstate its proposal as the original project proponent. In 2008, the Supreme Court dismissed AEDC's appeal.

Tan controls local carrier Philippine Airlines, which operates at the nearby Terminal 2. PAL's domestic and international operations has already exceeded the capacity of Terminal 2.

Meantime, PAL officials, who are caught in a feisty labor dispute with its cabin and ground crew unions, have neither denied nor confirmed rumors about a buy-in offer by Ramon Ang, the president of diversifying conglomerate San Miguel Corporation.

San Miguel has been diversifying away from its food and drinks business and into heavy industries and infrastructure. An airport facility would complement its infrastructure portfolio, which would likely include a port in Manila soon.

On the other hand, Gokongwei's holding firm, JG Summit, has expressed interest in bidding for the right to operate the partially used airport facility.

NAIA-3 is currently the hub of JG Summit's fast-growing subsidiary, budget airline Cebu Pacific Air. The Gokongwei's took the risk of being the first airline to operate at NAIA-3 when the Arroyo government partially opened the mothballed facility in 2008.

Taking that risk paid off. Cebu Pacific's transfer to NAIA-3 paved the way for its business to grow by leaps and bounds.

Lance Gokongwei, the president of the country's current leader in the domestic air passenger market, has remarked that Cebu Pacific could soon fill the entire 13-million annual capacity of NAIA-3. He had expressed to the government that an expansion of NAIA-3 is already needed.

Piatco has previuosly sent an eviction letter to Cebu Pacific and other NAIA-3 concessionaires for "illegally" staying at the terminal.

NAIA-3 is currently operating at 55% of its capacity as it needs repair and retrofit work to ensure that it is structurally safe.