PPP rules shield Philippines’ gov’t from arbitration

THE Philippinee government and implementing agencies of infrastructure projects to be jointly rolled out with the private sector can no longer be haled into court once disputes arise.

“Acts and decisions of regulators shall not be subject to arbitration,” read Section 12.22, on dispute resolution between contracting parties, under the revised implementing rules and regulations (IRR) of the Build-Operate-Transfer (BOT) law published last week.

The Foundation for Economic Freedom

(FEF) and the Makati Business Club (MBC) earlier opposed scrapping arbitration as a means to settle disputes arising from public-private partnership (PPP) projects. For one, the FEF had argued that arbitration was an internationally accepted standard element in long-term contracts.

As for private firms, the revised guidelines stated that “resolution of disputes between the contracting parties, whether through arbitration or litigation, shall be as mutually agreed upon by the parties to the contract, subject to applicable laws, rules and regulations”. Dispute resolution can only be made within the Philippines, the IRR said.

The FEF and the MBC had also opposed the then-proposal to prohibit “onerous and one-sided” provisions in PPP contracts, which the amended IRR defined as “if the cost of the project outweighs the advantages the government and the public will receive from the project”.

These appeals from economists and big business fell on deaf ears, as the revised IRR retained what was contained in the earlier draft.

The 72-page revised BOT law IRR was approved and signed by Secretary of Socioeconomic Planning Karl Kendrick Chua, who as head of the state planning agency National Economic and Development Authority (Neda) chaired the committee tasked by President Rodrigo Duterte to revisit the rules on PPP projects.

The Duterte administration had shunned PPPs, especially unsolicited projects, as it wanted to avoid supposedly disadvantageous provisions such as government guarantees, subsidies, as well as material adverse government action (Maga) clauses.

Included in the current pipeline of flagship infrastructure projects under the “Build, Build, Build” programme are 20 big-ticket unsolicited PPPs with project cost totalling 1.5 trillion pesos ($28.5 billion).