Gov’t can ignore onerous provisions in contracts but there are consequences — Drilon

MANILA, Philippines — The Philippines may ignore onerous provisions in the contracts it has entered into but there will be consequences, Senate Minority Leader Franklin Drilon warned on Thursday.

Drilon made the remark after Foreign Affairs Secretary Teodoro Locsin Jr. said government could just ignore any provision it later deemed onerous even if the contracts were signed.

READ: PH can ignore onerous terms of China loan – Locsin

“Of course, sovereign power, we can ignore,” Drilon said in a Kapihan forum at the Senate.

“But there are consequences,” he added.

The senator explained that the consequences could include a cross default provision, which would trigger a domino effect if one contract will be defaulted.

“There are consequences like a cross default provision, which means that a default in contract A will trigger a default in contract B, C,  D, E, and so on. There are consequences that may not be good for us,” he said.

Drilon also agreed with Locsin’s statement that Philippine courts can choose to not recognize arbitration outcomes should the other party decides to sue the country.

However, he noted that if the other party declares all loans are due and demandable, it will require the Philippines to pay the balance of all other loans.

“I agree. If the Philippine court will not recognize that award, fine,” the senator said.

“But China can declare all the loans are due and demandable because of the cross default provisions. They will require the Philippines to pay the balance of all the other loans,” he added.

Drilon’s statements come in the heels of President Rodrigo Duterte’s order to review all contracts entered into by the government to remove any onerous provision detrimental to public interest.

READ: Duterte orders review of all gov’t contracts

The Minority Leader had recently cautioned against canceling government contracts found to be onerous, saying that the state “must respect the sanctity of agreements.”  /muf

Senators wary over gov’t contracts being canceled during review