SGS loses arbitration case against RP

The international arbitration court has decided in favor of the Philippine government, ordering the Switzerland-based Societe Generale de Surveillance (SGS) to take its P6-billion claim before Philippine courts.

In a decision handed down by the three-man panel of the International Center for Settlement of Investment Disputes (ICSID), SGS was directed to take its case to the courts specified under its contract with the Philippine government.

ICSID said it could not take precedence over a clause in SGS’ Comprehensive Import Supervision Service (CISS) contract which gives exclusive jurisdiction to the Makati or Manila courts in case of disputes arising from the agreement.

The panel also said SGS was not able to sustain its claim that the Philippine government had expropriated SGS’ property nor acted indiscriminately against it. "No claims for breach… can be sustained on the facts presented by SGS," the panel said.

Finance Secretary Juanita Amatong said the government is "pleased with the outcome" of the ICSID arbitration. "We will treat SGS fairly and we trust that they will maintain the same attitude towards us," she said.

The Philippine 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 in the General Appropriations Act.

The Department of Budget Management said the 2004 budget does not include any provision for the P6 billion that the government still owes SGS for pre-shipment inspection services that it provided over a period of over two years from September 1998 to March 2000.

Although the 2004 budget is still up for ratification by Congress, it is unlikely that the administration will be willing to load it up with the P6-billion appropriation, considering the pressures of meeting its target deficit.

Thus far, SGS has agreed to the government’s proposal to settle the debt in several installments over several years.

SGS billed the Philippine government an equivalent of P6.48 billion for services rendered from September 1998 to March 2000. After reviewing the billing, the government validated SGS’ claims and said it was willing to pay only P6.05 billion. Government wanted to deduct P117.5 million from the final bill while conducting further reviews on other claims worth P314 million.