Gov't settles dispute with China firm over Northrail contract

ABS-CBN News

Posted at Nov 06 2017 11:08 PM

MANILA - A court case that could hamper the progress of the PNR Manila to Clark Railway project has been settled, the government said in a statement on Monday.

The Department of Transportation (DOTr) and the Bases Conversion Development Authority (BCDA), the two agencies in charge of the Northrail project, said they have reached an out-of-court settlement agreement with the Chinese firm that was contracted to build the railway during the Arroyo administration. 

In a joint statement, the DOTr and the BCDA said the government settled with China National Machinery Industry Corporation (SINOMACH) rather than engage in a long and expensive legal battle that could compromise one of the Duterte administration's priority infrastructure projects. 

The DOTr and the BCDA said the agreement "will save the Philippine government upwards of $100 million, or more than P5 billion in potential payment of claims to SINOMACH, as well as hundreds of millions of pesos in legal fees and arbitration costs."

According to the two agencies, under the terms of the settlement, the government and the Chinese firm agreed to (1) waive their claims against each other and declared that there will be no more payment by NORTHRAIL to SINOMACH, and vice versa, and (2) share the remaining arbitration fees in equal proportions.

Northrail was conceived during the time of former President Fidel Ramos, but never got off the ground. 

During former President Gloria Macapagal Arroyo's term, the railway project was revived with Chinese funding and SINOMACH as the contractor. 

The project, however, was hounded by allegations of bribery and overpricing, and questioned in court over the allegations it skirted public bidding. 

SINOMACH filed for arbitration in Hong Kong in 2012 and won the first phase of the proceedings in 2016. 

The DOTr and BCDA said that despite the settlement, "the administration will still go after the government officials involved in the allegedly anomalous and/or overpriced contracts."

Earlier this year, Transportation Sec. Arthur Tugade said the PNR North Railway will reduce travel time from Manila to Clark to less than an hour and is expected to be completed in 2021.

The project is also expected to support the development of Clark International Airport as an alternative to the congested Ninoy Aquino International Airport.