Arbitration sought by Manila Water and Maynilad Water on rates shows frailty of concession deal – FDC

Water utility companies seeking arbitration against a Metropolitan Waterworks and Sewerage System (MWSS) decision to lower water rates, instead of agreeing to an increase, reveals the "fundamental infirmities" of the concession agreement signed in 1997, the Freedom from Debt Coalition (FDC) said Wednesday.

 

In an e-mailed statement, FDC president Ric Reyes said concession agreement was lop-sided considering consumers were given no legal recourse but to swallow rate increases.

 

“While the water concessionaires may appeal unfavorable decisions to international arbiters, no such recourse is available to ordinary consumers,” he said. “All previous rate-rebasing exercises had resulted in unpopular hikes in water rates. Yet, consumer complaints were simply brushed aside,” Reyes added.

 

In a Sept. 12 resolution, MWSS denied a Maynilad Water petition to raise by 28.35 percent to P8.58 per cubic meter its average basic charge. Instead the regulator approved a downward adjustment of 4.82 percent or P1.46 per cubic meter in five equal tranches of minus 0.964 percent or P0.29 per cubic meter per year.

 

Lower water rates should be effective starting October but the concessionaires sought arbitration, placing water rates on as they were until a final decision is reached by an arbitration panel.

 

On September 24, Manila Water filed a dispute notice before the International Chamber of Commerce, challenging a rate reduction imposed by regulator MWSS. Maynilad did the same on October 4.

 

The arbitration alternative does not bode well for the partnership between government and private sector, DMCI Holdings Inc. president Isidro Consunji said on the sidelines of the Philippine Real Estate Industry Forum organized by BDO Unibank Inc. and The Asset in Makati City.

 

"It doesn't give a good image [to the foreign investors]," he said.

 

DMCI holds 25.24 percent economic interest in Maynilad Water, with Metro Pacific Investments Corp. holding 52.8 percent. Marubeni Corp. holds the remaining 21.54 percent.

 

"There will always be differences between regulatory and proposals. The perception between foreign and local investors differs and should be resolved prior to arbitration," Consunji said.

Time for a change?

 

FDC said the move by Manila Water Company Inc. and Maynilad Water Services Inc. to block a pro-people adjustment in water rates should lead the Philippine government to re-evaluate its penchant for signing agreements and investment treaties.

 

Manila Water has two foreign partners – United Utilities of UK and Mitsubishi of Japan, and Maynilad has Marubeni as partner.

 

“FDC and other civil society organizations have long cautioned government to think twice about signing off our right to set regulations within our own borders,” Reyes noted.

 

“Entering into multilateral and bilateral trade agreements which favor investor’s rights over people’s welfare erodes our sovereignty and weakens our ability to defend people’s rights,” he added.

 

The Philippine government entered into a bilateral investment treaty (BIT) with UK in 1981, which includes provisions for investment dispute settlement by international arbitrators. With Japan, it was Japan-Philippines Economic Partnership Agreement (JPEPA) which was considered a free trade agreement and bilateral investment treaty.

 

“The move by the water concessionaires to go to arbitration highlights the dangers of bilateral investment treaties as well as investment rules embedded in bilateral and multilateral trade agreements that our government has either signed or is planning to sign,” Reyes said.

 

FDC cited two cases filed with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), one by German company Fraport related to the construction of NAIA Terminal 3, and the other by Belgian dredging firm Baagerwerken Decloedt En Zoon (BDZ) in connection with the canceled Laguna Lake dredging project.

 

“It’s time to renegotiate the concession agreement with Manila Water and Maynilad and to rethink international investment agreements,” Reyes noted.

 

Maynilad earlier argued that the decision to reduce its water tariff is "unjustified" and may cause disruption in its operations to the detriment of customers. – VS, GMA News