Malilong: The P18B SRP Joint venture: legal questions

THE draft of the joint venture (JV) agreement on the P18 billion development of the old Kawit island into an integrated resort and casino complex has been referred to an ad hoc committee of the city council for study. The chairperson, JunJun Osmeña, is not a lawyer. Neither is the vice chairman, Margot Osmeña. But all the three members – Bebs Andales, Raymond Garcia and Joey Daluz – are and they are sure to go over the legal aspect of the agreement with a fine-tooth comb.

A lawyer friend cites four possible legal flashpoints that, unless addressed at the committee level, could spark heated debates when Mayor Tomas Osmeña’s request for authority to sign the agreement with the John Gokongwei conglomerate is finally brought to the council floor. This is what he said:

First, the planned development is prohibited. Kawit (or Cauit) Island was formerly reserved for quarantine and marine hospital services. However, in 2008 it was declared alienable and disposable by Presidential Proclamation No. 1505 to form part of the Cebu South Reclamation project. Consequently, its administration and ownership were transferred from the Department of Health (DOH) to the city government, subject to certain conditions.

To document the terms of the transfer, the DOH and the city entered into a Memorandum of Agreement (MOA). One of the salient provisions of the MOA was that the property can be used only for socio-commercial development. A casino and entertainment complex does not fall within that category since it is merely a place for recreation and enjoyment. It does not meet a societal need or address a societal problem.

Besides, there is nothing in the draft JV that says that the project shall be part of the SRP as required under Proclamation 1505 and Special Patent No. 3755. To meet this requirement, it is necessary to show a master plan and the basis for including a resort and a casino in the SRP.

Second, the DOH-Cebu City MOA specifies that taxes from income from the development of the island should be given to a charity chosen by the DOH. The city cannot therefore grant tax exemptions, as proposed in the draft JV, to the joint venture without violating the MOA.

Third, under Special Patent No. 3755, all other income that the city will earn from the development of the island shall be used exclusively for health purposes. The proposed joint venture agreement has omitted this.

Fourth, the Right of First Refusal provision of the JV agreement violates the bidding-competitive challenge requirements for Public Private Partnership projects. The project is a horizontal development and yet, the draft JV grants a right of first refusal to the Gokongwei group for the reclamation of the areas adjacent to the project. Reclamation is an entirely different field from horizontal development requiring a different set of skills and experience.

I repeat that all the above arguments are not mine. I am only quoting from an email sent to me by a lawyer who is apparently very familiar with the history of Kawit Island and the SRP. If anyone has a contrary opinion, I will gladly print it in this space.

Or maybe he can bring it directly to the city council’s ad hoc committee which has scheduled three days of public hearing starting tomorrow at 1 p.m. at the SP Caucus Room. The first day is reserved for the financial aspect, the second (March 23), technical and the third (April 4), legal.
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