SC asked to junk China loan deal based on Charter ‘violations’ | Inquirer News

SC asked to junk China loan deal based on Charter ‘violations’

/ 05:36 AM April 05, 2019

Opposition lawmakers on Thursday asked the Supreme Court to strike down as unconstitutional the government’s $62-million loan deal with China to fund the Chico River Irrigation Pump Project.

In a petition, they cited several instances of violations of the Constitution and  urged the high court to issue a temporary restraining order (TRO) against enforcing the financial agreement.

Named as respondents were President Duterte, Executive Secretary Salvador Medialdea, Finance Secretary Carlos Dominguez III, Socioeconomic Planning Secretary Ernesto Pernia, Justice Secretary Menardo Guevarra and Administrator Ricardo Visaya of the National Irrigation Administration.


Led by Bayan Muna chair Neri Colmenares, the petitioners said the confidentiality clause in the China loan agreement violated the right to information on foreign loans contracted by the government under Article XII Sections 21 and 22, Art. II Sec. 28, and Art. III Sec. 7 of the Constitution.


The agreement reportedly did not have prior concurrence from the Monetary Board as required under Art. VII Sec. 20 and Art. XII, Sec. 21.

It is conditioned on awarding the project to a Chinese contractor, which violated the country’s procurement laws and the Filipino First policy under Art. XII Sec. 10.

It hauls the country to a Chinese arbitration tribunal governed by Chinese laws in violation of Art. II Sec. 7.

The lawmakers also said the loan deal contained an express waiver of sovereign immunity over the state’s patrimonial assets in favor of China, in viola tion of Art. XII Sec. 7, Art. II Sec. 7 and Art. XII Sec. 2.


“Collateralization of patrimonial property for unpaid obligations under a foreign loan contract or as an award in an arbitral proceeding is unconstitutional and illegal,” the petition read.


“These assailed provisions open the possibility for China to acquire patrimonial properties in the Philippines which is tantamount to ceding in favor of China certain territories in the Philippines by virtue of our default in our contractual obligations,” it added.

“This situation obviously impacts negatively on our national sovereignty, territorial integrity and is inimical to our national interest,” it argued.

Oil-rich Recto Bank

The petition came a week after Senior Associate Justice Antonio Carpio said that the terms of the Chico River project could allow China to seize oil-rich Recto (Reed) Bank off Palawan province if the Philippines failed to pay the loan.

China has laid claim to Reed Bank, forcing the Philippine government to put on hold the commercial exploration for oil and natural gas in the area.

Aside from Colmenares, a senatorial candidate, the petitioners included Bayan Muna Rep. Carlos Zarate, Anakpawis Rep. Ariel Casilao, ACT Teachers Representatives Antonio Tinio and France Castro, Gabriela Representatives Emmi De Jesus and Arlene Brosas, Kabataan Rep. Sarah Jane Elago, Kilusang Magbubukid ng Pilipinas Chair Danilo Ramos and Kalinga leader Elma Tuazon.

In the petition, they questioned the government’s choice of China International Economic and Trade Arbitration Commission as arbitration tribunal in case of dispute and the choice of Chinese law as the governing law of the agreement.

They said the arbitration provision was “manifestly and grossly disadvantageous to the [Philippine government] and so one-sided in favor of China.”

Automatically awarding the contract to a Chinese contractor also violated the constitutional preference given to qualified Filipino contractors, they added.

Ecuador, Sri Lanka precedent

The militant lawmakers warned that the Philippines could go the way of Ecuador and Sri Lanka, which both reportedly fell to China’s “debt trap.”

Ecuador was forced to cede control of 80 percent of its oil produce after it defaulted on its Coca Codo Hydro Dam, while Sri Lanka surrendered control of its Hambantota port after it failed to pay its loan to China.

Aside from asking for a TRO, the petitioners  asked the Supreme Court to order concerned government agencies to produce all loan agreements with China.

At the Kapihan sa Senado forum on Thursday, Senate Minority Leader Franklin Drilon said the Philippines could ignore oppressive provisions of a foreign-funded loan, but this could lead to worse consequences.

Foreign Secretary Teodoro Locsin Jr. earlier said the administration could ignore a provision in a contract that it would consider to be onerous, even if the deal had been signed.

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Drilon said the Philippines could do so but the creditor might take more drastic steps, such as immediately declaring that all its other loans as immediately demandable. —WITH REPORTS FROM LEILA B. SALAVERRIA AND MELVIN GASCON

TAGS: China loan, Colmenares, Dominguez, Medialdea, Rodrigo Duterte, Supreme Court, Violations

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