Ensuring the validity of PPPs

TO ENSURE the legality and validity of their public-private partnership (PPP) contracts with the government, can investors ask the courts to pass upon these agreements before signing and implementing them, and before spending for and building the contracted highway, airport, pier or other infrastructures?

Actual case and controversy. This question makes a lot of common sense. Unfortunately, under our adversarial system of administering justice, judges are barred from rendering advisory opinions. Neither can they answer hypothetical or moot questions. However, the secretary of justice may issue advisory opinions, which bind the Executive Department unless and until modified or reversed by the courts.

Courts can issue judgments only after hearing an “actual case and controversy,” and only after a party asserts an actual violation of a right under a specific set of facts. Hence, decisions must always be understood in the context of (1) their peculiar facts, (2) the specific issues raised and ruled upon, and (3) the law applied or interpreted.

In the past, the Supreme Court has been excoriated by some businessmen for striking down government contracts (including PPPs), especially those signed after a public bidding. Examples of these contracts involve the reclamation of the Manila Bay (Chavez v. Public Estates Authority, July 9, 2002, May 6, 2003 and November 11, 2003), the construction of Terminal III of the Ninoy Aquino International Airport (Agan v. Piatco, May 5, 2003 and January 21, 2004) and the computerization of the 2004 elections (Information Technology v. Comelec, January 13, 2004 and February 17, 2004).

Grounds for invalidity. I do not have the space to detail these cases. Let me just say that all of them were found to have been tainted with grave abuse of discretion. Hence, the Supreme Court voided and deemed them non-existent in law, even if they had been formally inked on paper. Why?

First, the objects of the contract—reclaimed and submerged foreshore land in the Manila Bay—could be leased, but could not be sold to private corporations. Moreover, the selling price was indecently low, P1,200 per square meter when the market price was P90,000 per sq m. The total “difference in price is a staggering P140.16 billion, equivalent to the budget of the entire judiciary for 17 years and more than three times the Marcos Swiss deposits that this Court forfeited in favor of the government.”

Second, the contract violated the bidding rules when the award was given to an entity that had failed to meet the financial or eligibility requirement of the rules.

Third, the contract contravened the “fair competition essence” of public bidding by awarding benefits that were not offered in the original bidding. Allowing a winner to enjoy substantial benefits that were not included in the bidding, without a public bidding of the added benefits, desecrates the law on public bidding.

Fourth, the contract obligated the government to pay the creditors of the investor in case the latter defaults, in violation of the law proscribing “government guarantees in any form.”

Fifth, the “essence of public bidding is violated by the practice of requiring very high standards or unrealistic specifications that cannot be met… only to water them down after the award is made. Such scheme, which discourages the entry of bona fide bidders, is in fact a sure indication of fraud in the bidding, designed to eliminate fair competition.”

The Court emphasized that “public bidding aims to level the playing field. This means that each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations, so that the best offer or lowest bid may be determined, all other things being equal.”

All in all, the Court has been strict in protecting public interest, especially when blatant irregularities and serious suspicions of corruption attend public biddings. As in all things, it is best to tread the straight and narrow path in law. Straying beyond will mean tiptoeing in dangerous legal minefields that can blow up the best laid business plans.

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Inquirer’s 25th birthday. Hail to the Inquirer as it commemorates its 25th anniversary on December 9. Though a member of the Inquirer family, I write independently without any intervention from the owners, directors, officers or editors. This is reason enough for me to celebrate. For nearly four years, I have unfailingly written every Sunday, with no censorship of any form or guise. I choose my own topics. No one has suggested what I should or should not write about. There are no sacred cows, no untouchables, no favored topics and no taboos.

My only constraints are space (5,600 characters per column), libel laws and English grammar. Having come from a judicial career in which professional independence and personal integrity are indispensable values, I cherish my association with this broadsheet of “balanced news, fearless views.”

The same yardstick of independence and integrity characterizes my entry to the business community after I retired from the Supreme Court. I have humbly accepted only independent directorships or adviserships in blue chip companies that treasure these ideals. I have respectfully declined positions—regardless of compensation—in which I would be compelled to represent proprietary or vested interests. I feel honored that the companies I joined respect my independence and integrity, in the same way the Inquirer does.

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