Finance Secretary Jose Isidro Camacho told reporters yesterday that the government has responded to the move of SGS‚ questioning the venue for arbitration, especially since both parties had agreed to keep the case within Philippine jurisdiction.
"Both parties had agreed to handle the situation in the Philippines," Camacho said. "This has been the agreement since the beginning."
The government has been insisting that it had every intention of honoring its contract with SGS but the Switzerland-based company still filed a petition asking the International Center for the Settlement of Investment Disputes to intervene and help settle the conflict.
The government owes SGS at least P6 billion for services already rendered but the company has not been paid because Congress has still not made any allocation for the expense in the General Appropriations Act.
The Philippines is the second sovereign state that SGS has taken to court. Two months ago, the company also sued the government of Pakistan for violations of its $20-million contract.
According to Camacho, however, the Philippine government had full jurisdiction over the case and it was prepared to resolve the conflict as soon as possible. "Our policy is to honor the obligation," he said. "We have every intention of resolving this expeditiously."
However, Budget Secretary Emilia Boncodin told reporters that the 2003 budget has made no provision for the P6 billion that the government still owed SGS for pre-shipment inspection services that it provided over a period of over two years from September 1998 to March 2000.
"There is no appropriation for it in the 2003 budget," Boncodin said simply.
Although the 2003 budget has not been approved by Congress, it was unlikely that the administration would be willing to load it up with the P6 billion appropriation, considering the pressures of meeting its target deficit.
According to the influential Philippine Chamber of Commerce and Industry (PCCI), it was only right for the government to settle its obligations with SGS. PCCI president Sergio Ortiz Luis told reporters that government would have to make provisions for the settlement of the SGS claim since the services have already been rendered.
"A contract is a contract, unless it was proven illegal," Ortiz-Luis said. "The government must sit down and negotiate."
Based on the website of the International Center for Settlement of Investment Disputes (ICSID) under entry no. 36 of the list of pending cases, the SGS case against the Philippines has been accepted and registered on June 6, 2002.
The status of proceeding has been noted as pending or, in other words, the tribunal has not yet been constituted.
The tribunal is composed of three persons, one from the World Bank and one representative each from the two parties involved in the litigation.