'Aquino, Hilbay agreed to keep water arbitration suits secret' says Veteran journalist

The outburst of President Rodrigo Roa Duterte regarding the 1997 water concessionaire agreement between Manila Water Company and Maynilad Water Services has opened a canned of worms were in the dreaded corrupt government officials are feared again to be behind this detrimental agreement to the disadvantage of the Filipino people.

The agreement was entered between the two giant water firms with government and has been stipulated to last for 25 years.

President Duterte has publicly berated the two firms and has categorically said that the government would not pay the the P10.8B arbitral award granted by the Singapore based Permanent Court of Arbitration in favor of the two firms for losses suffered by the water firms due to disallowed water rate increases from 2013 to 2017.

Former SolGen Florin Hilbay and President Noynoy Aquino
(photo credit to owner)

In his article former Ambassador Rigoberto Tiglao gives light to the background how all of this began…. And it brings us back to the Benigno “Noynoy” Aquino administration.

“How could the arbitration panels have dismissed such facts staring them in the face? Was Hilbay as solicitor general just too dumb or too lazy to defend the MWSS stand? Or did he sabotage the government’s defense so it would lose the case?

We don’t know. If Hilbay deliberately plotted to have the water companies win the arbitration, he was clever enough to hide his tracks, literally: the arbitration was kept secret.

Unlike other arbitration cases that the Philippine government has been involved in, such as its suit against China over the South China Sea dispute, the proceedings, the two water companies’ arguments, the government’s defense, and the award itself have been kept confidential. Check it out for yourself at the website of the Permanent Court of Arbitration for the two suits. Only the Maynilad case is listed, but contains no details. Manila Water’s case is not listed at all

It would seem a classic case of “noynoying” again happened during the time this matter was being heard in PCA, which led to asking the Philippine government to pay the two firms.

For purposes of full disclosure and knowledge of the reaing public, we have quoted full the said article below.

Aquino, Hilbay agreed to keep water arbitration suits secret

FORMER President Aquino 3rd and his solicitor general Florin Hilbay agreed to the two water companies’ demand to have the arbitration suits that the latter had filed against the government kept secret.

The two arbitration panels, one each for Maynilad Water Services Inc. and Manila Water Co. Inc., in decisions announced in July 2017 and November 2018, upheld the two concessionaires’ claims, and ordered government to pay them P3.4 billion and P7.4 billion, respectively. Each panel had three members, two of which were foreigners, and one Filipino. The suits were heard by a three-man panel the two parties agreed to, with the Singapore unit of the Hague-based Permanent Court of Arbitration acting as registrar.

What’s so outrageous about this is that the water companies in their suit claimed that these amounts represented their losses when the regulatory body Metropolitan Waterworks and Sewerage System (MWSS) refused to grant their petitions to raise their tariffs from 2014 to 2018. (The other day though, the Ayala-led, majority foreign-owned Manila Water claimed the suit was filed for “breaches of procedure” it hasn’t explained.)

But the MWSS proved to have been correct in its computations. Even without the rate increases they demanded, these firms’ income in those years totaled P67 billion; their average annual income of P13.4 billion during those five years was even higher than the P10.5 billion of the previous five years.

Yet the firms still wanted to recover those amounts that they claimed in 2015 when they filed the case they would lose, but didn’t.

How could the arbitration panels have dismissed such facts staring them in the face? Was Hilbay as solicitor general just too dumb or too lazy to defend the MWSS stand? Or did he sabotage the government’s defense so it would lose the case?

Secret
We don’t know. If Hilbay deliberately plotted to have the water companies win the arbitration, he was clever enough to hide his tracks, literally: the arbitration was kept secret.

Unlike other arbitration cases that the Philippine government has been involved in, such as its suit against China over the South China Sea dispute, the proceedings, the two water companies’ arguments, the government’s defense, and the award itself have been kept confidential. Check it out for yourself at the website of the Permanent Court of Arbitration for the two suits. Only the Maynilad case is listed, but contains no details. Manila Water’s case is not listed at all

Such confidentiality is allowed under the United Nations Commission on International Trade Law (Uncitral), under whose provisions the suits were filed. But this could be done only upon agreement of the two parties, and only when the private party can prove that it stands to have its proprietary secrets revealed to its competitors. What competitors? Manila Water and Maynilad Water are monopolies in the sectors they distribute water.

Why did the government, represented by Aquino 3rd and Hilbay, agree to such confidentiality? If they had not agreed to keep the proceedings secret, they could just have told Maynilad and Manila Water: “Take it or leave it, and just comply with the MWSS decision.”

If not for a November 29 letter by Manila Water’s assistant corporate secretary to the Securities and Exchange Commission’s Disclosure Department — a requirement because the firm is publicly listed — the public would not known of the award and the water company would have secretly negotiated with government for the payment of the P7.4 billion. It would have claimed that even the payment was covered by the confidentiality agreement.

If I were of a very suspicious mind, I’d even think that Hilbay’s bending oer to make the proceedings secret, and even perhaps a promise not to undertake a genuine defense of the MWSS decision, clinched his job as solicitor general. After then Solicitor General Francis Jardeleza was appointed to the Supreme Court in 2014, Hilbay took over, but only in an acting capacity for eight months until Aquino appointed him formally to the post in June 2015.

Solicitor General

Did Aquino need that much time to decide who the solicitor general would be? Was it just coincidental that after Maynilad filed its suit on March 2, 2015 and Manila Water on April 23, 2015, Hilbay was appointed permanent solicitor general about two months later on June 16, 2015?

Why would Aquino and Hilbay agree to make secret arbitration proceedings and rulings that would affect over 10 million Filipinos, the captive market of the two water monopolies? Indeed, Maynilad got the arbitral panel to order the Philippine government to pay it the P3.4 billion it asked for, while Manila Water got panel to agree for the government to pay it P11.4 billion. Did the two companies want to hide things from the public?

For all we know Hilbay might have just sent the tribunal a one-page defense or asked his clerk to write it. Sources claim that neither Hilbay nor any other staff from the Office of the Solicitor General had asked MWSS to help them draft their defense before the arbitral panels.

Technically called “rebasing” undertaken every five years, the process for computing reasonable tariffs the water companies can charge is complex, and involves the expertise of teams of accountants, auditors and technicians who even physically inspect the firms’ facilities, to determine how much the firms can charge given the need both for their captive consumers’ right to clean, accessible water and a reasonable return on capital for them.

Objectionable
The MWSS found objectionable many items the two firms included as part of their costs, which reduced their income, on paper. The most scandalous was their inclusion of corporate income taxes, as part of their costs. This is such a blatant violation of accounting principles and even of plain logic. How can something (a tax) that is computed after expenses is deducted from income (to yield taxable profit) be included among the expenses?

Congress must call Aquino and Hilbay to a public hearing and ask them why they agreed to keep the arbitration cases confidential. It must subpoena all of the documents involved in the arbitration cases, to determine if Hilbay really defended the MWSS stand against the water companies. Congress must summon Manila Water’s owners, the Ayalas and Maynilad’s Manuel Pangilinan, who runs the firm for Indonesian owner Anthoni Salim, to its halls to ask them if they, or their representatives, ever consulted with Hilbay over their firms’ suits against the government.

During the last elections in which he ran for senator (where the hell did he get the funds to dare to do so?), Hilbay’s sole claimed qualification for that post, which he boasted about, was that it was he who filed the arbitration case against China, which the country purportedly won. Anti-China, but pro-oligarch?

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Report from  Manila Times