Manila Water, Capitol dispute may end up in arbitration
CEBU CITY, Philippines —Arbitration may be needed if the dispute between the Capitol and Manila Water Consortium Inc. (MWCI) within 30 days or until January 10, 2020.
The period commenced when the Capitol served the Notice of Termination of its joint investment agreement (JIA) with MWCI on the bulk water production project in Luyang River in Carmen last December 11, 2019.
Lawyer Rory John Sepulveda, a legal consultant of the Capitol, said Governor Gwendolyn Garcia and MWCI President Virgilio Rivera would have to sit down and discuss the grounds of the Capitol for terminating the JIA.
The two chief executives will also have to settle on the province’s acquisition of the shares of MWCI in the Cebu Manila Water Development Inc. (CMWDI), the joint investment company that bore out of the JIA and now manages the P1-billion bulk water project.
The Capitol’s issuance of the Notice of Termination stemmed from five alleged unauthorized breaches in the terms of the JIA which the governor identified in a Notice of Breach she released last August 29, 2019.
The alleged unauthorized changes in the project terms are the increase in the Capital Expenditure (Capex) from P702 million to P1.003 billion; increase of tariff rate from P13.95 per cubic meter to P24.59 per cubic meter; decrease of the projected internal rate of return from 19.23 percent to 12.30 percent; non-remittance of the province’s receivables; and the plowing back of the Capitol’s earned revenues to the Capex of the project.
In a statement last Sunday, December 15, MWCI defended the changes and said that it was unanimously decided by the board of directors of CMWDI.
Rivera said the increase in the Capex was needed to meet the demand of CMWDI’s contract with its first major customer, the Metropolitan Cebu Water District.
CMWDI currently supplies MCWD with at least 35 million liters per day.
Sepulveda said that based on the terms of the JIA, if a party would commit a fault, the other party might buy them out at 80 percent of the fair market value of their shares.
“What if di sila magkasinabot? Any dispute that remains unresolved after the lapse of the 30-day period stated above shall be referred to and settled by arbitration in the Philippines, to be conducted pursuant to the Philippine Dispute Resolution Center, Inc. (PDRC) Arbitration Rules,” Sepulveda said quoting the Dispute Resolution provision of the JIA.
If arbitration will indeed follow, three PDRC-accredited arbitrators would handle the dispute which would be held in Cebu City, Sepulveda said.
The Capitol will choose the first member arbitration panel while MWCI will choose the second member. The two members will decide who will be the third member who will sit as the chairperson of the panel.
In case the two members cannot decide on who will be the third, it will be the PDRC that will make the appointment, Sepulveda explained./dbs
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