Gov’t asks int’l court to dismiss Fraport claim on NAIA-3

The Philippine government has asked the Washington-based International Court for Settlement of Investment Disputes (ICSID) to dismiss the claim of German firm Fraport AG of $425 million as just compensation for the construction of the Ninoy Aquino International Airport Terminal 3 (NAIA-3).

The government’s legal panel, composed of Solicitor General Eduardo Nachura, retired Supreme Court Justice Florentino Feliciano and Carolyn Lamm of the US-based White and Case law firm, said in its supplemental post-hearing reply to the ICSID that the construction of the airport terminal cost only $275 million.

This was based on the Interim Payment Certificates (IPC) issued by Takenaka, the contractor of the project.

The panel also cited Fraport’s alleged violation of the Bilateral Investment Treaty (BIT) between the two countries.

In documents obtained by reporters, Nachura, Feliciano and Lamm argued that Fraport failed to disprove the government’s statement alleging that the German company engaged in illegal investment operations.

An investment that violates the law of the host state is not entitled to treaty protection, the lawyers argued.

The legal panel said the protection being sought by Fraport on its NAIA-3 investment should be dismissed by ICSID because it was tainted by massive corruption and violated the host country’s laws and regulations, as well as international public policy.

Contrary to Fraport’s claim that it invested $425 million in the construction of NAIA-3, government said Takenaka was paid only $275 million. So far, Fraport has failed to explain the discrepancy.

The government panel also presented volumes of evidence pointing to the fact that Fraport’s investment was not made in accordance with the country’s laws and regulations as required by the BIT. There were also violations of the anti-dummy law, alleged payments to corrupt government officials, kickback schemes and unexplained "soft costs."

They said Fraport allegedly spent $29 million in "soft expenses," which has not been defined.

Fraport is one of the several member corporations of the Philippine International Air Terminals Co. Inc. (Piatco) consortium, which was awarded the contract to build NAIA-3.

The award was later nullified by the Supreme Court due to changes made on the provisions of the concession agreement, which was found to be disadvantageous to the government. — Sandy Araneta