RP wins arbitration case in Singapore

Clears Terminal 3 ownership dispute

July 31, 2010

The Republic of the Philippines won the arbitration case filed by Philippine International Air Terminals Co.(Piatco) in Singapore-based International Chamber of Commerce (ICC) for payment of its expenses incurred in the construction of NAIA airport's Terminal 3.

The ICC decision is final and executory and should paved the way for the full operation and grant of legal right by the Philippine government to airport terminal concessionaires. Three foreign airlines are currently building their business lounges at the international wing of Terminal 3.

The Philippine government was represented in Singapore by U.S. based arbitration lawyer Andrea J. Menaker of White& Chase LLP based in Washington, with retired Supreme Court Justice Florentino Feliciano and Supreme Court nominee Ma. Lourdes Sereno.

The government saved almost $1.1 billion claimed by PIATCO and its foreign partner Fraport AG,of Germany following its victory in its arbitration case in Singapore. Fraport operates Frankfurt airport and is partially owned by the Frankfurt City government.

The dismissal follows the decision in a similar case filed by Fraport with the Washington-based International Center for Settlement of Investment Disputes (ICSID).

In 1997 and 1998, the government of the Philippines awarded Philippine International Air Terminals Co, Inc (PIATCO) the right to build and operate an airport terminal by way of several concession contracts. PIATCO finished construction and declared that the terminal was ready for handover in November 2002. However, in January 2003, the Philippine government argued that the concession agreements were null and void. PIATCO and Fraport commenced an ICC arbitration.

Fraport filed a petition for arbitration and sued for $425 million in damages at ICSID saying that the Philippines has expropriated the investments of Fraport in NAIA-3 in alleged violation of the Philippines-Germany Bilateral Investment Treaty forged on April 17, 1997.

ICSID dismissed Fraport claim of compensation in 2007 against the Philippine government for violation of its domestic laws.

At the ICC in Singapore, Piatco filed a $560-million damage suit against the government in 2004 after President Arroyo voided the Piatco contract which decision was upheld later by the Philippine Supreme Court.

The ICC decided in August 23, 2006 that the Government of the Republic of the Philippines (GOP) should cease occupation and give up possession of NAIA Terminal 3 pending settlement of dispute. The government offered payment of proffered compensation for its right to stay as the tribunal determine PIATCO's claim.

Meanwhile, the government filed two counter-suits against the claim, each asking for $900 million, against Germany’s Fraport AG before the International Centre for Settlement of Investment Disputes (ICSID) in Washington DC, and against Piatco before the International Chamber of Commerce (ICC) in Singapore. Fraport owns 30 percent of Piatco.

Two airlines currently operates at NAIA's terminal 3, namely Cebu Pacific and Air Philippines Express. Cathay Pacific, Singapore Airlines and undisclosed Middle East Airline are reported to use Terminal 3 before the end of the year, while other foreign airlines are expected to sign the occupancy contract following the Singapore decision.

President Benigno Aquino III said the government is expecting to fully operate terminal 3 by December with those foreign carriers on its roof.