Chico River project as loan template will pose problem to PH — Carpio

/ 02:18 PM March 27, 2019

MANILA, Philippines–Using the Chico River Pump Irrigation Project loan contract as template for other loan agreements with China will pose problems for the country, Supreme Court Senior Associate Justice Antonio Carpio said Wednesday.

“The total loan from China will be from P12 billion to P24 billion. If all loan agreements will follow the Chico River template, that will be a huge problem,” he said in a text message.


Carpio earlier warned that China could seize Reed Bank if the Philippines defaults on the $62 million loan agreement for the Chico River Pump Irrigation Loan Agreement.

Under paragraph 8.1 of the Loan Agreement, the Philippines expressly waived immunity over all its assets except those used properties of Philippine embassies and missions; those under Philippine military control; and those assets for “public or governmental use as distinguished from patrimonial assets and assets dedicated to commercial use.”


Carpio said patrimonial assets and assets dedicated to commercial use includes the rich gas fields of Reed Bank.

READ: China could seize gas in Reed Bank if PH can’t pay loans-Carpio

But Justice Secretary Menardo Guevarra downplayed the fears of Carpio and that of other critics saying there are mechanisms in place should there be a default on the part of the Philippines.

READ: Guevarra to critics of PH loan contract with China: Don’t jump the gun

But according to Carpio, under the Chico River loan agreement, “the arbitral award will be ‘final and binding upon both parties.’ The Philippines expressly waived sovereign immunity on the ‘enforcement of any award.’

“The Philippines undertook that the award ‘will be recognized and be enforceable in the Republic of the Philippines.’ This is not an ordinary arbitral award between parties. There is here a waiver of sovereign immunity on jurisdiction and on execution of the award,” Carpio added.

He said following the Chico River agreement as template for other loans with China which with an estimate amount of $12 billion to $24 billion could be problematic.


Aside from making the arbitral ruling final and binding, dispensing the need for its examination by the Philippine courts, Carpio said China has been given the authority to pre-select three Chinese contractors and the Philippines can bid out the project only among the selected Chinese contractors.

“There must be public bidding,” Carpio said.

He added that “future loan agreements with China must do away with arbitration under CIETAC (China International Economic and Trade Arbitration Commission (CIETAC) rules and with collateralization of our patrimonial assets.”

“Collaterals are not standard in ODA [loans] (Official Development Assistance),” Carpio added.  /muf

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TAGS: Chico River Project, China, Justice Carpio, loan agreement, loan default
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