Supreme Court upholds termination of P2-billion DFA machine contract

MANILA, Philippines - The Supreme Court (SC) has upheld the termination of the P2-billion contract forged by the Department of Foreign Affairs (DFA) with Philippine-Thai BCA International Corp. for the earlier implementation of its machine-readable passports and visa (MRP/V) project.

In a 53-page decision, the first division of the High Court gave the DFA go-signal to pursue its new e-Passport project with a new contractor pending arbitration proceedings sought by BCA before the Philippine Dispute Resolution Center, Inc. (PDRCI).

The High Court ruled that the Pasig Regional Trial Court Branch 71 erred in granting a motion of BCA and issuing a writ of preliminary injunction on Feb. 14, 2007 stopping the DFA from proceeding with the e-Passport project with the Bangko Sentral ng Pilipinas (BSP).

“In all, we agree with petitioners DFA and Bangko Sentral ng Pilipinas that the trial court’s issuance of a writ of preliminary injunction, despite the lack of sufficient legal justification for the same, is tantamount to grave abuse of discretion,” stated the ruling penned by Associate Justice Teresita Leonardo-de Castro.

Chief Justice Renato Corona and Associate Justices Mariano del Castillo, Presbitero Velasco Jr. and Jose Perez concurred in the ruling.

The SC directed the Pasig RTC to dismiss BCA’s petition as it held that the e-Passport project is covered by Republic Act 7718 (Build-Operate-Transfer Law), and in turn, “considered a national government project” under RA 8795, which prohibits trial courts from issuing a TRO, preliminary injunction against the bidding or awarding of a contract or project of the national government.

The Court also noted that RA 7718 also allows government to terminate a BOT agreement, even without fault on the part of the project proponents, subject to the payment of actual expenses incurred by the proponent plus a reasonable rate of return.

The Court junked BCA’s claim that it would suffer grave and irreparable injury since the bidding out and award of the e-Passport project would be tantamount to a violation of its right against deprivation of property without due process of law under Article III Section 1 of the Constitution.

“In all, BCA failed to demonstrate that there is a constitutional issue involved in this case, much less a constitutional issue of extreme urgency,” it stressed.

DFA is not obliged to set aside funds

The Court also noted that the failure of the DFA to appropriate funds to pay for liquidated damages to BCA does not support the latter’s claim that it will suffer grave and irreparable injury if its prayer for a temporary restraining order or writ of injunction was not granted.

It stressed that the DFA has no obligation to set aside funds for BCA unless there is a final and executor judgment ordering such payment.

“It is illogical and impractical for the DFA to set aside a significant portion of its budget for an event that may never happen when such idle funds should be spent on providing necessary services to the populace,” the SC said.

The BCA won the public bidding in 2000 for the DFA’s MRP/V project but the contract was terminated in December 2005 due to violations of the Build-Operate-Transfer agreement.

This prompted the BCA to refer the matter before the PDRCI for arbitration and file a petition interim relief before the Pasig RTC seeking for the issuance of a TRO or a writ of preliminary injunction enjoining the DFA from entering into an agreement with the BSP in connection with the project.

However, the DFA and BSP, in 2006, entered into a memorandum of agreement for the latter to provide the former passports compliant with international standards after the Department of Justice issued an opinion upholding the legality of the termination of the MRP/V project with BCA.

The BSP then solicited bids for the supply, delivery, installation and commissioning of a system for the production of e-passport booklets or the so-called e-Passport project.