NEC seeks arbitration on Digitel supply contract

NEC Corp. of Japan has filed a request for arbitration with the international court as it demanded the immediate payment of $237 million or about P12 billion from the Gokongwei-owned Digital Telecommunications Inc. (Digitel) for a telecommunications network project.

NEC officials told The STAR that they have declared Digitel in default after it failed to make installment payments amounting to $52 million and filed a request for arbitration before the International Court of Arbitration at the International Chamber of Commerce in Paris, France in accordance with the terms of the supply contract.

If in the arbitration, the two parties fail to come to an agreement, NEC officials said they will go to court to demand payment of the whole contract value.

Digitel is the Philippines‚’ second largest landline telephone company whose service area covers mostly Central Luzon, next only to the Philippine Long Distance Telephone Co. (PLDT).

The company said in a statement that although NEC had agreed to a payment rescheduling with Digitel in 1999, attempts to resolve further difficulties which arose in September 2001 have not been successful.

It also categorically rejected allegations raised in the interim by Digitel that NEC is responsible for a breach of contract.

NEC on Oct. 8 declared Digitel in default of certain provisions of a supply contract dated July 8, 1999 covering Digitel’s telephone project. As a result of the default, NEC has accelerated the payment date of the total contract value and demanded the immediate payment of the principal amount of $220.4 million, accrued interests of $14.6 million, and overdue interests of around $2 million.

But Digitel assistant corporate secretary and legal counsel William Pamintuan said the notice of default was issued after Digitel gave NEC a letter last Oct. 3 which alleged material violations by NEC of certain terms and conditions in the supply contract.

Pamintuan noted delays in the delivery of the contracted subscriber lines, the intermittent and unreliable performance of the wireless local loop system, and failure to post the required performance bond, among others.

The Digitel official said they will contest the notice of default and pursue all legal options available to the company.