Regulator can junk extension of Maynilad, Manila Water concession without court nod: DOJ

Mike Navallo, ABS-CBN News

Posted at Dec 13 2019 01:10 PM | Updated as of Dec 13 2019 01:22 PM

A woman and her 8-month-old daughter wait for workers to finish installing meters that will bring water to a residential area of Barangay Cembo, Makati City, Sept. 25, 2019. Jonathan Cellona, ABS-CBN News/File

MANILA – The Philippine capital's water regulator does not need court approval to revoke its earlier decision extending its concession agreements with Maynilad Water Services Inc. and Manila Water Co., the Department of Justice (DOJ) said Friday. 

The Metropolitan Waterworks and Sewerage System (MWSS) had granted a 15-year extension in 2009 for Manila Water and 2010 for Maynilad, ahead of the original expiration of the agreements in 2022, Justice Secretary Menardo Guevarra earlier said.

“The burden of taking action based on an interpretation of the contract is assumed by the executive. In assuming that burden, it need not obtain prior court approval,” DOJ spokesperson Undersecretary Markk Perete told reporters in a message. 

“Only in case of disagreement will resort to judicial intervention prove necessary,” he added. 

The MWSS had canceled the extension of its contract with the water distributors in a board meeting last Dec. 5, the regulator's deputy administrator for engineering Leonor Cleofas said Thursday. 
 
The decision was based on the President’s directive and the recommendation of the DOJ.

The President had earlier slammed a Singapore-based arbitration court's decision ordering government to pay the two distributors a total of P10.8 billion as compensation for denied rate increases. 

Both Maynilad and Manila Water then said they would no longer collect and vowed to work with government on possible revisions to their concession agreements. 

AGREEMENT 'SILENT' ON EXTENSION

Guevara said the DOJ relied on the “silence” of the water concession agreements on whether an extension is allowed. 
 
“While there are provisions pertaining to early termination, there are none on extension beyond the original period,” he said in a message.

“We did not find any… much less extend way before the original expiry date,” he added.

The memoranda of agreement extending the concession agreements were signed in 2009 for Manila Water and 2010 for Maynilad by former Finance Secretary Margarito Teves under then President Gloria Macapagal-Arroyo, according to Guevarra.

"It’s dangerous to adopt a policy of 'What is not expressly prohibited is impliedly allowed',” he said. 

The Supreme Court, however, cited this principle when it allowed in 2017 the construction of the Torre de Manila condominium despite looming in the background of the Jose Rizal tomb and monument at Luneta Park in the capital. 

“What is not expressly or impliedly prohibited by law may be done except when the act is contrary to morals, customs, and public order,” wrote now retired Senior Associate Justice Antonio Carpio, who penned the decision.

But Perete insisted 2 legal issues went against the application of this general rule. 

“We should not lose sight of the fact that what is involved here is a concession relating to the service of a basic necessity and the maintenance of a public utility. From this starting point, should liberality be used in favor of the concessionaire to the detriment of the public and the government?” he said.

He also pointed out that the concession agreements contain a clause on renewal but none on extension.

“A clause on renewal is less onerous than one for extension because renewal presupposes renegotiation, while extension adopts in toto the provisions of a contract. If the parties saw it fit to include a provision on the less onerous option of renewal, did they not in fact rule out the more onerous and lopsided option of extension?” he explained.

Guevarra also noted that the Manila Water and Maynilad "have never denied the existence of inequitable provisions in the water concession agreements."

"In fact, they have expressed their willingness to renegotiate. If this is so, what contracts are supposed to be extended till 2037? The old one expressly repudiated by the government and virtually admitted as flawed by the private concessionaires?” he asked. 

The justice secretary added that the government was not unilaterally revoking the concession and would instead sit down with water concessionaires.

“We’re not rejecting the entire contract, just repudiating the onerous provisions,” he said.

LAW, PUBLIC INTEREST OVER PRIVATE-PUBLIC PARTNERSHIPS

The row over the water concession agreements has caused jitters in the stock market with shares of Manila Water and Maynilad and their parent companies tumbling for several days following the President’s tirades against them.

In the face of concerns of possible loss of business investor confidence with the government’s handling of the water concession agreements, Perete said laws and public interest should always prevail.

“It is not government’s intention to discourage private investments, much less to repudiate valid partnerships with the private sector. But such partnerships should not take precedence over the law and the public interest,” he said. 

In an interview last week with ANC’s Tina Monzon-Palma, Guevarra defended President Duterte’s actions.

“The President has repeatedly stated that it’s the welfare of the people that is his utmost concern. On a few occasions, he has said that he doesn’t mind too much the foreign investments go down because of certain policies he has adopted but what he also repeatedly said was, ‘For as long as my actions would redound to the benefit of the people, that’s my principal concern,” he said.

“In my opinion, in the future, future investors may also realize that this is a government that attaches a lot of priority to the welfare of its people and they will probably consider that as a factor in considering more investments,” he added.