Monday, October 13, 2008 CA junks plea to dismiss Northrail project case
THE Court of Appeals (CA) over the weekend denied for lack of merit the petition filed by a private Chinese firm seeking the dismissal of a suit for the annulment of another alleged anomalous US$503-million Northrail project contract.
The Northrail project, a flagship project of the Arroyo administration, was being questioned by the group of University of the Philippines (UP) College of Law Professor Harry Roque on the ground that there was no proper or competitive bidding held before it was awarded to China National Machinery and Equipment Corp. Group (CNMEG).
Joining the suit as plaintiffs before the Regional Trial Court (RTC) are non-government organizations, such as the League of Urban Poor for Action (Lupa), Kilusan ng Maralita sa Meycauayan, and private individuals representing some 45,000 families who were displaced with the implementation of the project.
Named respondents in the suit were Executive Secretary Eduardo Ermita, Finance Secretary Margarito Teves, Budget Secretary Rolando Andaya Jr., National Economic and Development Authority (Neda) Director Augusto Santos, the North Luzon Railways Corp. (NLRC), and CNMEC.
Associate Justice Remedios Salazar-Fernando of the appellate court's Fifth Division gave the go-signal for Judge Cesar Santamaria of the Makati Regional Trial Court (RTC) Branch 145 to set the case for summary hearing for the determination of whether or not there are grounds for the issuance of injunctive relief.
The court said CNMEG failed to establish that it is an agent of the People's Republic of China (PROC) entitled to sovereign immunity from suit and the assailed agreements between the two countries are not executive agreements exempted from compliance with Republic Act 9184 or the Government Procurement Act.
Thus, CNMEG must submit itself to the court's jurisdiction and abide by the rules and regulations, including the bidding process, the court ruled.
Granting for the sake of argument that the Northrail project was conceived within the framework of the bilateral relations between the Philippines and the PROC, the court said CNMEG does not exercise sovereign powers to claim immunity from suit.
When a government enters into a commercial business, it abandons its sovereign capacity and is to be treated like any other private corporation, it added.
The appellate court further said even if CNMEG is an agent of the PROC, the transaction it entered with Northrail is not incidental to a government function, which may be taken as "jure imperii" or an act of government to support its claim for sovereign immunity.
"Whether the act is in pursuit of a sovereign activity or an incident thereof, petitioner CNMEG acted in its proprietary or private capacity. It is only when a state or its agent acted in pursuit of sovereign activity that its act can be considered act jure imperii," the Court of Appeals (CA) said.
Concurring in the ruling were Associate Justices Rosalinda Asuncion-Vicente and Ramon Bato Jr.
In a phone interview, Roque said the CA decision sustaining their position is a "triumph for the Filipino taxpayers."
"I think it's a conclusion of positive development for us. It would not be very difficult for the executive department to insist on the validity of contract," he said.
The petition was filed by CNMEG before the CA following the twin legal defeat from the Makati court that denied their motions to dismiss the suit filed by opponents of the Northrail project.
The plaintiffs asked the Makati court to nullify and enjoin for being unconstitutional, illegal and immoral the implementation of the (1) December 30, 2003 contract agreement between the NLRC and CNMEC; and (2) Buyer-Credit Loan Agreement 04055 dated February 26, 2004 between the Export-Import Bank of China.
They alleged that the Northrail contract was rendered void as it was entered into by the NLRC without conducting a competitive public bidding as required under Republic Act (RA) 9184, that there was no prior appropriation of public funds for the contract, or was there any certification of availability of such funds by appropriate accounting officials, before undertaking the demolition of houses of thousands of settlers along the 320-kilometer railway from Caloocan to Bulacan.
Northrail critics further claimed that the loan agreement was entered with Exim bank without the prior concurrence by the Monetary Board of the Bangko Sentral ng Pilipinas, in violation of the Constitution. (ECV/Sunnex)
