No doubt Supreme Court Senior Associate Justice Antonio Carpio is a
legal luminaire in his own right. He could have been the next Chief Justice
after the expulsion of Maria Lourdes Sereno but he opted to be excused when it
was time to appoint one.
In the arbitral case filed by the Philippines
against China he was at the forefront of the things that was going one of course
this is because he was part of the Philippine panel there.
He was always there so much so, other parties claim
that he has bias for former President Benigno Simeon “Noynoy Aquino III or simply against the incumbent
President from Davao Rodrigo Roa Duterte.
Supreme Court Justice Antonio Carpio (photo credit) |
In this article published last April5, 2019 Mr.
Rigoberto Tiglao in The Manila Times titled “Carpio is ignorant, or lying about
loan terms in his anti-Chinese rants“, he presents a different facet of who is
Justice Carpio in this time of the administration of Duterte who has chosen to
be friendly and cordial with the Asian giant that is China a 360 degree change
from what was happening during the previous administration.
In the article, the esteemed justice questions the
loan agreements entered into by the present administration saying that in the
event there is a default in the loan payments with China, China can seize
Philippine assets, probably the oil rich Reed bank.
Tiglao calls the reasoning of Carpio as completely
absurd.
"It is astonishing that Carpio is
ignorant of these facts. Or he is merely taking advantage of his credibility as
a Supreme Court justice and fooling Filipinos into suspecting and hating the
Chinese. He has also been falsely claiming that the Chinese loan for the Chico
Dam project has “onerous sovereign immunity” clauses when these are standard
clauses that lawyers require in loan documents. (See table.)
What has happened to the quality and
integrity of our Supreme Court justices?"
For
the consumption of the public, we are quoting in full the said article of Mr.
Tiglao for the sake of clarity and truthfulness.
Carpio is ignorant, or lying about loan terms in his anti-Chinese rants
IN the
course of his campaign to paint China as an evil empire, Supreme Court Senior
Justice Antonio Carpio has claimed that the Philippines had defaulted on its
loans in 1983.
He said this
is a precedent that if government defaults on its borrowings from China for the
Chico River dam project, the Chinese can seize Philippine assets, probably even
the gas-rich Reed Bank.
That is so
absurd.
Carpio is so
totally ignorant of international loan agreements, and what happened in 1983,
that bankers are laughing at him. More likely, he is deliberately lying for his
agenda that is becoming clearer every time he opens his mouth. This is to stoke
the embers of the centuries-old anti-Chinese racism among Filipinos so as to
force President Duterte to move away from China and instead, as his predecessor
did, be a vassal of the US.
I know in
detail what happened in 1983 because I covered daily for two years as a senior
reporter of the Business Day newspaper the unraveling of the debt crisis at the
time, when Carpio claimed the Philippines “defaulted” on its loans.
It is
astonishing that for a former corporate lawyer, and Supreme Court justice,
Carpio doesn’t seem to know that in international loans, “default” is a precise
legal term. It is an event that occurs when the lender declares that the
creditor has failed to pay its interest payments (or the loan principal) on
time, and beyond a grace period stipulated in the loan agreement.
Default
There is a precise meaning for “default” because it’s a financially catastrophic event for a country for even a single bank, to declare a government or any of its entities in default.
It means
such things as other banks refusing to extend any more loans and bank advances,
even letters of credit to that country, the raising of interest rates on its
long-term instruments, and the fall in the yield of its bonds.
Obviously,
Carpio’s idea of a default is based on his experience as a corporate lawyer
running after a defaulting company’s assets for a bank.
There is even a formal feature in international loans that reflects the
global banks’ wiliness, which they invented in the 1970s to make sure that
countries pay for their loans — since banks can’t really foreclose on
properties of a sovereign nation that doesn’t pay is debts, except by having its
government invade it militarily. (This happened in 1902 when Britain, Germany,
and Italy imposed a blockade on Venezuela when it refused to pay on its foreign
obligations.)
This is the so-called “cross-default” provision contained in most
foreign banks’ and institutions’ loan agreement with a debtor country. This
means that if a country defaults on its debt to one bank, it automatically puts
it in default in all its other loans. That means obviously a financial meltdown
for the country.
Bad loans
A bank would hesitate to declare a country in default for another serious reason: It would have to book that debt as a bad loan, and its forgone interest income booked as losses.
Because of this, while there have been a few cases in the post-war era
when countries missed their debt payments, the most recent being Greece in its
IMF loans in 2015, creditors prefer not to declare a country in default, and
instead refer to it as “delays” in payments, and negotiate for the rescheduling
of the debts.
Anyone with a modicum of knowledge on the features of international
loans would see that his story of China garnishing Reed Bank if the Philippines
“defaults” on its loans is Carpio’s pure horror scare.
The only extremely unlikely scenario if we are unable to service this
China loan (and for whatever allegedly onerous default loan provision to take
effect) is when the country is in such deep foreign-exchange crisis, government
cannot get the foreign exchange to service all of its loans. In that scenario,
we will have much, much bigger problems then what Carpio supposedly fears as
the garnishment of the Reed Bank.
If ever we are declared in default by China, the Chinese wouldn’t even
have time to do the papers garnishing Reed Bank. All global banks would have
stopped its trade credits, short-term loans, and other foreign exchange
remittances to the Philippines that we would be in total financial Armageddon.
Contrary to Carpio’s claims, no foreign bank or state financial
institution has ever declared the Philippines in default, even during the debt
crisis in 1983.
Instability
During that period when we could not service our foreign exchange loans because we run out of dollars for various reasons: the 1979 oil crisis that bled our foreign exchange reserves to pay for petroleum imports; the outbreak of the global debt crisis of 1982 when Latin American countries couldn’t pay their loans which raised global interest rates to unheard-of rates; mismanagement by Marcos technocrats of our foreign debt build-up; and of course the worsening political instability due to the assassination on Aug. 21, 1983 of Ninoy Aquino.
The central bank at the time even fudged our foreign exchange reserves
to fool the global financial community that we could service our loans — which,
however, was uncovered by media, making things worse for the country.
The country averted a declaration of default by banks after Marcos’
technocrats got our foreign creditors to instead agree to a 90-day
“moratorium,” also called a “standstill agreement,” that allowed the Philippines
to temporarily stop servicing its loans, while a “rescheduling agreement” (to
push back the maturity dates) was being negotiated.
Of course, the “moratorium” led to our worst economic crisis, as foreign
banks naturally refused to give additional short-term credit to service our
loans, and to even open letters of credit. Our GDP plunged by 7 percent for
each year in 1984 and then in 1985 — which loss in the economy was recovered
only after 10 years.
Surprisingly though, but at a huge cost to ordinary Filipinos, the
economy started to recover in the second half of 1985 that Marcos was confident
enough to agree to the US demand that he call for a snap election in December
that year. It was a brilliant US machination.
It is astonishing that Carpio is ignorant of these facts. Or he is
merely taking advantage of his credibility as a Supreme Court justice and
fooling Filipinos into suspecting and hating the Chinese. He has also been
falsely claiming that the Chinese loan for the Chico Dam project has “onerous sovereign
immunity” clauses when these are standard clauses that lawyers require in loan
documents. (See table.)
What has happened to the quality and integrity of our Supreme Court
justices?
What
can you say about this?
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Report from Manila Times
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