Gov’t draft of new water contracts expected to be ready by year’s end

JUSTICE Secretary Menardo I. Guevarra said the government is forming a team to draft revised water concession contracts, which will exclude terms the President considers onerous, adding that the new concession agreement will be ready before the year ends.

“We are still forming our team that will come up with the government version of the water concessionaire agreements,” Mr. Guevarra said on the sidelines on an event against corruption.

“We hope to be able to come up with the revised version of a water concession agreement that has not include the onerous provisions… before the year is over,” he added.

President Rodrigo R. Duterte last week said Manila Water Co. Inc. and Maynilad Water Services, Inc. enjoy onerous provisions in their concession agreements with the Metropolitan Waterworks and Sewerage System.

Mr. Guevarra said last week that the department found “a dozen provisions that were deemed onerous or disadvantageous to the government and consuming public.” He cited among other provisions, the prohibition against interference of the government in rate-setting and indemnities for possible losses in case of government interference.

He also said that the department found irregular the extension of the contracts to 2037 which was granted “12-13 years” before the 25-year concession agreement expires in 2022.

The government will complete the revisions and only then will sit down with the water companies, he said.

The new contracts will be drafted by lawyers from the Office of the Solicitor General (OSG), Office of the Government Corporate Counsel, Department of Finance and Department of Justice.

“Marami naman okay na provisions (There are many provisions that are all right). It’s just a matter of weeding out... (the) provisions which we consider onerous or highly disadvantageous but the rest of the agreement can stand,” he said.

If the concessionaires do not agree to the revisions, Mr. Guevarra said the government will bring the matter to the courts.

Manila Water disclosed to the Philippine Stock Exchange early this month the Permanent Arbitration Court in Singapore ruled in its favor, ordering the government to indemnify it the amount of P7.39 billion over its losses resulting from the government’s breach of obligations. The court is September last year also awarded P3.4 billion to Maynilad on similar grounds.

The OSG said last Friday it will exhaust all legal remedies in response to the ruling in favor of Manila Water and its next steps “will show that the arbitral award was not, to quote Manila Water, due to a ‘procedural lapse’ by government. It is a company’s refusal to become the subject of legitimate regulation.”

Mr. Guevarra said that the arbitration cannot necessarily be enforced because the government is ready to oppose it.

“OSG is thinking of appealing the arbitral ruling to the Singapore High Court or when this decision is enforced in local courts in Philippine court, then (the) Philippine government will surely oppose it on the grounds that the arbitral ruling is against public policy,” he said.

Metro Pacific Investments Corp. (MPIC) and DMCI Holdings, Inc. hold 52.8% and 25.24% stakes, respectively, in Maynilad. Meanwhile, Japanese trading company Marubeni Corp. has a 20% interest in the utility.

On the matter of the contract extension, the government can disregard the 15-year extension because the extension’s validity is in question, Senator Aquilino L. Pimentel said.

Mr. Pimentel, who chairs the Senate Committee on Trade, Commerce and Entrepreneurship, said former President Gloria Macapagal-Arroyo’s government had no authority to approve the extension.

“Babalik ako sa aking basic principle na since hindi pa expired ang original contract, wala pang 2022, hindi pa pwedeng iinvoke ang extension (I return to the basic principle that the original contract has not expired, and will not do so until 2022. So it is not yet possible to invoke an extension),” Mr. Pimentel told reporters in a briefing Monday.

“Kung di pa ‘yan implemented,

pwede pa s’yang i-disregard ng Duterte administration (If it is not yet implemented, the government can disregard it).”

The MWSS concession deal with Manila Water and Maynilad was extended to 2037. The extensions were approved respectively in October 2009 and April 2010, way ahead their 2022 expiration.

“The Gloria administration cannot tie the hands of the Duterte administration,” he said.

Mr. Pimentel said the government should now clarify whether it will revoke the extension, and begin by 2020 the process of accepting applications for a new concession agreement. He noted that present concessionaires are not necessarily disqualified from applying.

“Start the process by 2020, 2021 of looking for new concessionaires, announcing before the search, the new terms of the concession agreement.”