Year: 2019

We lost our islands with arbitration award

Third of 4 parts
AS discussed in my last column, the arbitral tribunal declared only one feature occupied by China in the Spratlys, Mischief Reef, as within our exclusive economic zone (EEZ), which the superpower cannot claim since as a “low-tide elevation,” or one which sinks to the sea at high tide, it cannot be appropriated by any country.

Even that victory is doubtful because China argues that it claims Mischief Reef not as a separate feature, but as part of its Nansha islands.

Whether China is right or not, that the tribunal declared Mischief Reef as within our EEZ is dwarfed in significance by what we lost as a result of the award, which prompted not a few scholars to conclude that the arbitration ruling was a pyrrhic victory for the Philippines. The term’s origins refer to King Pyrrhus of Epirus who lost so many of his troops in one victorious battle with the Romans. In this case, the Philippines lost so much in getting the tribunal to rule that Mischief Reef is ours. Continue reading

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Sovereignty claims, not maritime entitlements

Second of 4 parts
AT the core of the arbitral tribunal’s errors in its ruling was its refusal to recognize that the dispute between China and the Philippines involved sovereign claims over territory. The Philippines’ lawyers though deviously tried to package the suit as involving which country has the right maritime entitlements such as exclusive economic zones (EEZ) if such exist in the South China Sea (SCS) under the provisions of the United Nations Convention on the Law of the Sea (Unclos).

They did so because they knew full well that neither the tribunal nor any international panel nor the Unclos has the authority to rule on territorial disputes between nations.

“The tribunal should have got below the surface of the Philippines’ claims, but it did not,” Chris Womersley, an international law expert who has been an adviser to the British government on territorial issues pointed out. (In “The South China Sea: The Award of the Tribunal in the Case Brought by Philippines Against China — A Critique.”)

Similarly, Oxford University professor on public international law Antonios Tzanakopoulos pointed out: “The dispute between the Philippines and China is obviously over sovereignty over… features in the SCS, and only relatedly over maritime zones and the entitlements that the relevant features generate.” Continue reading

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Arbitral PH vs China: A colossal deception

First of 4 parts
IT is a colossal deception that the Philippines in 2016 won the arbitration suit against China involving our disputes in the South China Sea and that the country should pursue the “enforcement” of the arbitral tribunal’s “award.”

If it was a victory at all, it was a pyrrhic one, not a few international law scholars have concluded, That means that the damage to Philippine interests, and to the integrity of arbitration based on the provisions of the UN Convention on the Law of Sea (Unclos), made it tantamount to defeat.

(Salako, S. E. in “Entitlement to Islands, Rocks and Low-tide Elevations in the South China Sea: Geoeconomics versus Rule of Law” and Nordquist, Myron, “Unclos Article 121 and Itu Aba in the South China Sea Final Award: A Correct Interpretation”)

President Benigno Aquino 3rd and his foreign secretary Albert del Rosario told the country when it filed the suit in January 2013 that it would recover Scarborough Shoal (Bajo de Masinloc), which Aquino and del Rosario lost to China in June 2012 because of their bungling of the two-month-long stand-off between Philippine and Chinese vessels in the area, as extensively discussed in previous columns. Aquino’s plea for the US to intervene for us to get back Bajo de Masinloc, through American warships escorting our ships back into its lagoon, was also rejected by President Obama.Continue reading

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Never before such a foreign-controlled media empire

HOW has the Indonesian Anthoni Salim been able to defy the constitutional ban on foreign ownership in media? Through an entity under the Philippine Long Distance Telephone Co. (PLDT) which he controls as its biggest single stockholder, through several intermediate corporate layers.

As in his takeover of Meralco**, Salim did not use his own funds brought in from Indonesia or Hong Kong, but local capital to establish his media empire.

He used the pension funds of PLDT, called the Beneficial Trust Fund (BTF). One of the biggest such private pension funds in the country, the BTF had grown over the decades in order to pay for the PLDT staff’s retirement pensions and other benefits, as agreed upon in so many collective bargaining agreements with its unions and as part of the company’s incentive scheme for its employees.

In its 2012 annual report, PLDT reported that BTF had invested — when exactly it wasn’t disclosed — a huge P14.5 billion in a firm called MediaQuest. That accounted for 80 percent of the pension fund’s P18.4 billion assets, a total reversal of its portfolio mix before, for instance in 2005, when 60 percent of its assets were in blue chip companies (including shares in PLDT itself) and 23 percent in risk-free, fixed income securities.

It is strange though that PLDT’s annual reports before 2012 had not reported that its BTF had such huge investments in MediaQuest, a largely unknown unlisted firm. PLDT in fact hadn’t even reported the distribution of BTF’s investments in unlisted firms and listed companies. Continue reading

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Maynilad owner Salim’s media empire

First of 2 parts
PRESIDENT Duterte, in going against what he calls the oligarchs exploiting the masses of metropolitan Manila through their water monopoly’s onerous rates, will be battling one of the most powerful magnates in our country — although he has remarkably succeeded in hiding from public view in the past 38 years.

This is the Indonesian Anthoni Salim who, through many corporate layers, controls through his Hong Kong-based First Pacific Co. Ltd., the Metro Pacific Investments conglomerate, one of whose firms — not the largest largest in the group* — is Maynilad Water Services Inc. This is the monopoly distributor of water in the metropolitan Manila’s so-called West Sector as well as parts of Cavite, which made an astonishing P65 billion in the past 10 years.

Salim though has been so clever as to have brainwashed most people in this country that his top executive Manuel V. Pangilinan owns the conglomerate. A brilliant executive Pangilinan has been indeed that he has led the Metro Pacific through nearly four decades to become one of the country’s biggest conglomerates.

Yet, Salim for some reason has allowed Pangilinan to own only 1.6 percent of First Pacific and less than 2 percent of the conglomerate’s firms here, according to the company’s public records which anybody can access through the internet.

What makes Salim a dangerous foe is that unlike other oligarchs, he controls what could be the biggest media conglomerate in the country, the only entity that is both in print and broadcast media — the Philippine Star-TV5 Group. Continue reading

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Move over, ‘tubong lugaw,’ it’s now ‘tubong tubig’

MARK Dumol was the chairman of the Metropolitan Waterworks and Sewerage System (MWSS) when the state firm was privatized in 1997, and he became then-President Fidel Ramos’ chief implementer of that project that eventually turned over the government’s water business monopoly to two tycoons — the Indonesian Anthoni Salim and the Ayalas.

In his book* published by the World Bank (which pushed and financially supported the project), Dumol pointed out:

“While the total estimated investment was in the range of $7 billion, the estimated equity was in the range of only $200 million, and this was for the two zones. The equity per zone was even less and this would be split between the local and international companies. Most of the investment was actually going to be sourced from the cash flow. Later on, when I explained this to the owner of a relatively large local firm, he was extremely surprised and suddenly became very eager to participate. Can you imagine having a significant share in a company that provided water to Metro Manila for only $10 million?”

Dumol proved to be prescient, and that local company, if it had followed his advice owes him billions of pesos.

Metro Pacific Investment Corp., majority owned by the Indonesian tycoon Anthoni Salim through corporate layers, acquired Maynilad Water Services Inc. in 2006, after the financially troubled Lopez group had to give it up. Salim bid $60 million to get Maynilad and paid for its $31 million debts to MWSS.

Continue reading

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Hilbay: A bad liar or bad lawyer

I WROTE in a recent column that former president Benigno Aquino 3rd and his solicitor general Florin Hilbay bent over to the water concessionaires’ demand to keep their arbitration suit against the government confidential, and therefore away from the prying eyes of the public.

When the Singapore-based arbitral panel’s ruling for Manila Water Co. Inc. became public a few weeks ago, it was so anomalous that President Duterte blew his top. He got so mad he threatened to throw in jail the oligarchs who owned Manila Water and Maynilad Water Services Inc.

Indeed, the arbitration by a mostly foreign arbitration panel was so scandalous that when it was made public, Filipinos were so outraged. Shamed so much by their greed, the water companies the other day announced that they are giving up the payments ordered by the two Singapore panels, P3.4 billion in the case of the Indonesian-controlled Maynilad Water and P7.4 billion for the Manila Water of the Ayalas.

But Hilbay wrote to his friends to claim that they had no choice since “the Uncitral rules mandate that the arbitration proceedings be confidential.” Hilbay claimed he was “fact-shaming” me on this.

Let’s do some real fact-checking.

Uncitral
The Uncitral, or the United Nations Commission on International Trade Law’s rules, adopted eventually by over 60 countries, govern arbitration between companies from different countries or between companies and governments. This was first adopted in 1976, and then amended in 2010 as well as in 2013. The Uncitral also issued in 2010 a template for adoption of the rules by countries, called the Uncitral Model Law on International Commercial Arbitration.

Florin Hilbay

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Concession pacts turned over water rate setting to foreigners

PRESIDENT Fidel Ramos in effect surrendered the Republic’s sovereign powers to foreigners in the water concession agreements that his government entered into in 1997 with two oligarchs that had been close to all Yellow administrations: the Ayalas and the Lopezes.

The agreements that turned over the running of the water and sewerage system in metropolitan Manila and several adjacent provinces had provisions that ultimately gave foreigners the ultimate authority to determine how much they could charge their 12 million customers, their captive market, as Manila Water and Maynilad Water Services are monopolies in the areas they serve.

While the government agency Metropolitan Manila Waterworks and Sewerage Water (MWSS) sets the basic tariff rates every five years in the so-called rate-rebasing procedures, the concession agreements gave the two companies the right to appeal the government’s decision in two ways.

One was for them to appeal to a so-called appeals panel, as provided for in the concession agreements’ Article 12. This panel has three members, with the concessionaire and the MWSS each appointing one member. The third member though, the panel’s chairman, is appointed by the president of the International Chamber of Commerce (ICC). In all the appeals so far, the two concessionaires appointed foreigners, who together with another foreigner appointed by the ICC president, outvoted the sole Filipino designated by the MWSS.

One would be too naïve to think that conglomerates like the Ayala Corp. and the Hong Kong First Pacific Group (which bought out the Lopezes in Maynilad in 2007) do not have strong connections with the ICC. And why would a social club of global capitalists like the International Chamber of Commerce have a say in determining how much water Filipinos should pay for?

Photos, chart, data from First Pacific 2018 annual report and Maynilad 2017 report

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Aquino, Hilbay agreed to keep water arbitration suits secret

FORMER President Aquino 3rd and his solicitor general Florin Hilbay agreed to the two water companies’ demand to have the arbitration suits that the latter had filed against the government kept secret.

The two arbitration panels, one each for Maynilad Water Services Inc. and Manila Water Co. Inc., in decisions announced in July 2017 and November 2018, upheld the two concessionaires’ claims, and ordered government to pay them P3.4 billion and P7.4 billion, respectively. Each panel had three members, two of which were foreigners, and one Filipino. The suits were heard by a three-man panel the two parties agreed to, with the Singapore unit of the Hague-based Permanent Court of Arbitration acting as registrar.

What’s so outrageous about this is that the water companies in their suit claimed that these amounts represented their losses when the regulatory body Metropolitan Waterworks and Sewerage System (MWSS) refused to grant their petitions to raise their tariffs from 2014 to 2018. (The other day though, the Ayala-led, majority foreign-owned Manila Water claimed the suit was filed for “breaches of procedure” it hasn’t explained.)

But the MWSS proved to have been correct in its computations. Even without the rate increases they demanded, these firms’ income in those years totaled P67 billion; their average annual income of P13.4 billion during those five years was even higher than the P10.5 billion of the previous five years.

Yet the firms still wanted to recover those amounts that they claimed in 2015 when they filed the case they would lose, but didn’t.

Hilbay at the arbitration hearing against China at The Hague. Did he also appear in the hearings for the suits filed by the water companies, even if these were only in Singapore, which the government lost?

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Water monopolies’ overflowing with greed

YOU can’t blame President Duterte for blowing his top when he was told that the Ayala-owned Manila Water Co. Inc. had asked Finance Secretary Carlos Dominguez 3rd to pay ASAP the P7.4 billion that an arbitration panel in Singapore had awarded the firm just two weeks ago.

The panel ordered the Philippine government to compensate the firm for the alleged losses it incurred from 2015 to 2018 from slashing the tariffs it charges its customers.

How the hell could that arbitration panel have ruled that way? How the hell could Manila Water allege that, when its own financial reports show that its net income from 2015 to 2018 totaled P25 billion. In fact, its average annual earnings in that period was P6.2 billion, increasing from the previous four years’ (2011 to 2014) P5.6 billion (See table).

In fact, Manila Water was so profitable that during those years that it claimed the government had been making it lose a lot of money, it paid out to its shareholders dividends of P7 billion. From 2006 to 2018, profits from the monopoly that was put in its owners’ banks totaled P16 billion. Manila Water has indeed been so profitable that its share prices have increased five times, from P6.2 in 2006 to P28 in 2018.

The two water concessionaires — Manila Water and Maynilad Water Services Inc. — have in fact been so profitable, or have been engaging in so much profit-seeking, that they have set up water distribution companies — which however are not monopolies — in other countries. Manila Water has operations in Vietnam, Indonesia and Thailand, and Maynilad in two Vietnam provinces.

And Manila Water still wants to wrench another P7.4 billion in taxpayers’ money, ordered by a three-man panel of foreigners in Singapore, the country of the Ayalas’ biggest partner in Globe Telecom Inc., the Singapore Telecommunications Ltd. or Singtel?

They own and/or control the water monopolies: the Zobel brothers; insets, the Indonesian tycoon Anthoni Salim and his executive. PHOTOS FROM COMPANY WEBSITES

If that’s not overflowing greed, I don’t know what is. Continue reading

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