German envoy wants to revive negotiations on NAIA 3

Negotiation the best option

January 4, 2010

MANILA, Philippines - Germany's ambassador on Tuesday urged the Aquino administration to put an end to the ownership dispute over the Ninoy Aquino International Airport Terminal 3 (NAIA 3) by reviving negotiations among the parties involved in the case.

In a statement, German Ambassador Christian-Ludwig Weber-Lortsch said the legal battle over the Manila airport terminal could run for years, "leaving the infrastructure project shelved by lawyers instead of being finished by engineers."

"As a way out of this impasse, I am still optimistic that the new administration, in line with its investment priorities, will bring the parties involved to the negotiating table in order to facilitate a legal, fair and timely solution for an inherited problem," he said.

An ad hoc committee of Washington-based International Centre for Settlement of Investment Disputes (ICSID) recently overturned an August 2007 decision which dismissed German firm Fraport AG's $425 million claim over NAIA 3.

Fraport filed a case with ICSID in September 2003 to seek protection for its investments in NAIA 3 after the Philippine government unilaterally cancelled the contract awarded to airport builder Philippine International Airport Terminal Co. (Piatco), the consortium where Fraport has a 30% stake. Piatco and Fraport officials have been accused of violations of the Anti-Dummy Law and the Anti-Graft and Corrupt Practices Act.

The ad hoc committee of the ICSID said Fraport was not given a chance to review a Department of Justice decision on the Anti-Dummy case filed against the company.

With the recent ICSID ruling, Fraport may again sue the Philippine government.

Malacañang said, however, it was unfazed by the legal setback, and that it was still eyeing NAIA 3's full operation this year.

NAIA 3 operations illegal

The German ambassador said current operations and tenant agreements on NAIA 3 are "illegal" as Piatco, Fraport and the German government, as guarantor, reserve all rights over the airport terminal.

"The Philippine Supreme Court clearly stated that no acts of ownership are allowed until full payment of just compensation by the government to PIATCO and its investors," Weber-Lortsch said.

However, the government said ongoing expropriation proceedings grant it the right to take over NAIA 3.

"Ang rule sa expropriation, once the government files its expropriation proceedings, entitled na siya to possession. Meron nang deposit of so much amount. 'Yun ang ginawa even before our time kaya na-operate ang NAIA 3 partially," Executive Secretary Paquito Ochoa told reporters.

Ochoa added that the recent ICSID ad hoc committee's decision has no impact on NAIA 3 operations.

"It has no effect as far as we are concerned. That decision has no effect on the operations of NAIA 3," Ochoa noted.

Ochoa said the Palace is still studying whether the government would file an appeal.

In a separate statement, Solicitor General Joel Cadiz said the ICSID decision was based on a procedural ground and does not validate Fraport's claim for compensation.

"The decision merely provides Fraport the opportunity to commence a new arbitration and to present its claims again."

"The Philippines therefore retains the right to reassert all of its defenses against Fraport's claims, including its arguments relating to Fraport's violation of the Anti-Dummy Law and anti-corruption laws."

NAIA 3's was opened in July 2008, and is currently operating at only half capacity. Only Philippine Airlines and Cebu Pacific are using the terminal.

The opening was supposed to have been held in March 2006, but a 100-square meter part of NAIA 3's arrival area collapsed.