PIATCO loses case at ICC

Clears Terminal 3 Ownership 

November 17, 2011

The Republic of the Philippines has won its case against the Philippine International Air Terminals Co. (Piatco) in Singapore for compensation payments worth $565 million for Ninoy Aquino International Airport (NAIA) Terminal 3 project contract.

The Singaporean Court affirmed the ruling of the Singapore-based International Chamber of Commerce (ICC)’s arbitration tribunal that dismissed the claim of Piatco as it junks the consortium’s motion to set aside ICC’s decision. Piatco was ordered by Singapore to pay the government of the Philippines more than $6 million in costs. 

Solicitor-General Jose Anselmo Cadiz said the Singapore court denied the appeal filed by the Philippine International Air Terminals Co. (PIATCO) to set aside the 2010 decision by the ICC finding the consortium in violation of the Philippine Anti-Dummy Law. 

The Singapore High Court told PIATCO that ICC acted within its powers in dismissing Piatco’s claims on the ground of illegality and that the arbitration tribunal observed due process in arriving at the decision. It junked Piatco’s claim that the ICC tribunal misapplied the Anti-Dummy Law and found it disingenuous for PIATCO to insist that it was not given the right to be heard on the issue considering that the case records show that consortium fully argued its case before the arbitral tribunal. 

The Anti-Dummy Law prohibits foreign nationals from controlling 60% of utility industries vested with national interest such as airport and terminal management, operation, administration. PIATCO consortium is substantially owned by German Corporation Fraport. On July 22, 2010, the ICC ruled that Piatco and its German investor Fraport AG committed fraud in the NAIA Terminal 3 Project. 

The ICC tribunal found that Piatco and Fraport illegally ensured that Fraport shall control the public utility through secret shareholder agreements and loans. The amended and supplemental agreement authorized PIATCO to build the $650-million NAIA 3 and grant a franchise to operate and maintain the terminal during the concession period of 25 years. 

The contracts were nullified however by the Supreme Court of the Philippines as it held Paircargo Consortium, predecessor of Piatco, not to possess financial capacity when it was awarded the NAIA 3 contract and that the agreement was contrary to public policy. 

Piatco sued the government before the ICC in Singapore where it sought to recover at least $565 million in damages. Its foreign investor, Fraport, separately sued the government at the International Center for the Settlement of Investment Disputes (ICSID) in Washington. Both companies lost their respective cases. 

In August 2007, the Washington-based ICSID affirmed the Supreme Court’s nullification of the concessions and rejected Fraport’s claim because of its violation of the Anti-Dummy Law. The Singapore-based ICC also rejected Piatco’s claim because of illegality arising from Piatco’s violation of the Anti-Dummy Law.