Jail the billionaires?

A second arbitral ruling that has been controversial of late is that in favor of Manila Water, purportedly ordering the Philippines to pay it P7 billion. There, too, is an earlier award of at least P4 billion in favor of Maynilad. Unlike the arbitral ruling of the International Tribunal of the Law of the Sea (ITLOS), this latest ruling under the aegis of the Permanent Court of Arbitration remains secret even if it means collecting money from each and every Filipino to satisfy the judgment. Obviously, lawyers and commentators cannot intelligently talk or write about the award because they have not seen a copy of the judgment. In any case, on the basis of the releases attributed to Manila Water, this amount is to pay for its capital expenditures which it invested in to better its services to the eastern part of Metro Manila.

President Duterte correctly said government will not pay the award. Why should we? The amount is supposedly for capital expenditure of the water company when, in reality, we have an ongoing water shortage despite the rainy season. Clearly, the consuming public should be made to pay only for expenses that have resulted in better services for them. They should not be made to pay when the services have become so bad that there are now more and more days when we literally have no water.

There are two points that I want to raise. First, while the Department of Justice was correct in identifying infirmities in the concession agreement with Manila Water, particularly the fact that it was renewed before its expiration and sans public bidding, and hence void, the issue remains still whether in the first concession agreement, Manila Water should have been allowed the increase that it sought from the Metropolitan Waterworks and Sewerage System (MWSS). The subsequent infirmities of the renewed agreement cannot be a defense to a claim for contractual breach of the earlier agreement.

And two, at a time that we want China to comply with an arbitral ruling in our favor on the West Philippine Sea, a refusal to abide with the later arbitral ruling will erode our standing in the international community insofar as the

ITLOS ruling is concerned. In other words, we would be acting like China in refusing to comply with an arbitral ruling against it. Simply put, we can’t enforce awards which are only in our favor and ignore those against us.

In any case, the Office of the Solicitor General should exhaust all means to render nugatory the award or at least prevent its enforcement. While as a party to the New York Convention the Philippines has obligated itself to recognize arbitral awards to be like final and executory judgements of our domestic courts, it still has to be implemented by our local courts. When Manila Water files for enforcement, we can allege defenses such as fraud or lack of competence or impartiality of the arbiters. In other words, allege all legal defenses before our local courts and not do as China did — to simply brush aside the unfavorable award.

In my 30 years of litigation experience, including a number of arbitral cases before international tribunals, private corporations almost inevitably agree on a compromise with their host states. Why? Because despite their legal victory, the conduct of their business remains under the jurisdiction of the host state.

Already, our own Supreme Court has fined both water utilities P1.84 billion in fines for failing to spend the environmental fees they have been collecting from consumers to build wastewater facilities. This fine should automatically be set off from the latest award. Moreover, civil damages far more than P7 billion should be paid by the water facilities for their failure to provide these wastewater treatment facilities. While I am not an expert on the matter, the water utilities should be made to pay at least P20 billion in damages for their failure to clean the resource they are supposed to provide the public.

It helps that Manila Water has said that it is willing to talk to government on the arbitral award. They should if only because they came to court with unclean hands having been in breach of their obligations under the Clean Water Act. But they should talk to government because, otherwise, the billionaire owners of the water companies may just taste life in Muntinlupa if not for economic sabotage, then for syndicated estafa.

“Simply put, we can’t enforce awards which are only in our favor and ignore those against us.

“Clearly,

the consuming public should be made to pay only for expenses that have resulted in better services for them.