PH hints ‘out-of-court’ settlement on Malampaya case

The Philippine government will go to arbitration proceedings at the International Chamber of Commerce (ICC) in Singapore this week, but this has not been dissuading the state, including Malacañang, on its hope of getting the 153-billion Malampaya tax case be resolved instead by the relevant parties in an “out-of-court settlement” process.

Palace sources, nevertheless, indicated “this wish list is only achieved if parties in the case would withdraw the cases already filed for international arbitration.”

Discussion fillers are reportedly being advanced to the Malampaya consortium, but there had been “no firm talks” set yet to this proposition.

The ICC filing and the dispute resolution case at the International Centre for Settlement of Investment Disputes (ICSID) in the United States were both elevated by the Malampaya consortium – led by Anglo-Dutch subsidiary Shell Philippines Exploration B.V. (Spex) as the gas field operator – relative to the tax claims lodged against them by the Commission on Audit (COA) of the Philippines.

Beyond these legal actions, the SPEX-led consortium also filed a petition for certiorari at the Philippine Supreme Court seeking to review the state auditor’s findings on the disputed tax liabilities. The other interest-holders in the Malampaya consortium are American firm Chevron Malampaya LLC and state-run Philippine National Oil Company-Exploration Corporation.

COA reportedly sought an extension from the high tribunal on the deadline of its mandated submission of comments on the case.

The State audit agency in its ruling in May this year, which affirmed the initial 153 billion tax claims versus Malampaya in 2015, had actually adjusted the purported tax liabilities already to as high as 1146.8 billion up to the reckoning date of 2016.

By far, according to Malacañang sources, the Office of the Solicitor General (OSG) had already been given instruction not to represent the COA in the SC case.

The two-tiered arbitration process will be an expensive exercise that the Philippines will be embroiled in, but the government still opted to engage a top-tier legal mind – former Chief Justice Reynato S. Puno, to represent and argue for the country’s stand on the case at the scheduled week-long trial in Singapore this month.

The government has “very ticklish concerns” to balance in the protracted legal battle over the Malampaya tax case, primarily so because this stirs level of uncertainty when it comes to targeted billions of dollars in investments in the forthcoming Philippine petroleum contracting round.

The tax suit against the country’s only-commercial gas field is among the policy and market risk concerns closely being watched for by investors before they would even stake fresh capital in the upstream Philippine oil and gas industry.

Forthrightly, it has been instigating massive headache to the Department of Energy, being the agency in-charge of enticing and making sure that capital will flow for the sake of the country’s quest for the next commercial-scale hydrocarbon discoveries.