Gov’t to SC: Piatco not entitled to interest, should be paid only $104M

The government on Tuesday insisted that the Philippine International Air Terminals Company Inc. (Piatco) was entitled to a just compensation of only US$104.52 million, without any interest and considering a penalty on PIATCO, for building the Ninoy Aquino International Airport (NAIA) Terminal 3.

In a motion for reconsideration, the government, through the Office of the Solicitor General, the award of US$242,810,918.54 in interest was unwarranted and unfair.

The OSG also wanted deducted from the just compensation US$113,944,044, representing PIATCO’s penalty for non-compliance with contract specifications.

Then subtracting the US$59,438,604.00 "proffered value" already paid by the government to PIATCO, the total just compensation that the government is left to pay the firm is US$104.52 million.

The OSG cited a January 2004 SC ruling (Agan vs PIATCO) that held that “the compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.”

The OSG said under the Agan ruling, the idea was to return the value of what PIATCO invested not to return it with opportunity costs. “The incept of mutual restitution is to make PIATCO ‘whole,’ not ‘whole with benefits.’”

“The final resolution of this case should be just and equitable, both to PIATCO (the guilty party) and the Republic (the innocent party). The operative concept is return, not return on investment,” said the OSG.

The OSG said a return on investment would imply profit, which is contrary to the obligation to undertake mutual restitution.

It added that the SC's award of a 12% interest rate on the amount of restitution until June 30, 2013 and six percent after that until the full amount is paid was already equal to a reasonable return on investment in public utilities.

“To impose a 12% interest would, in fact, be equivalent to allowing PIATCO to ‘profit’ by its own misdeeds. Precisely, the point of restitution is simply to return the investment (to avoid unjust enrichment) but certainly not to allow a rate of return equivalent to the profits of law-abiding investors in public utilities,” read the motion.

The OSG insisted that the return should only be the value of what PIATCO invested into the NAIA Terminal 3 project, and not the value of that investment plus a return on that investment.

The OSG acknowledged that PIATCO should get restitution adjusted to inflation and current prices, but said interest should not be included in it.

“The idea should only be to maintain the real value of PIATCO’s investment, not what that investment may have generated had it been invested for profit,” read the motion.

In its MR, the OSG also asked the high court to declare that upon payment of just compensation, full ownership of the NAIA Terminal 3 be given to the government “free from any liens and encumbrances.”

The OSG also instead that the SC erred in denying the government’s claims for exclusion from the base construction cost valuation (CCV).

The amount of just compensation as of Dec. 21, 2004, when the complaint was filed was $325,932,221.26. The SC deducted $59,932,221.26 from that amount, accounting for the "proffered value" which the government had already paid earlier.

The SC said the resulting difference of $267,493,617.26 will be charged with a 12 percent straight interest per annum or $32.099 million a year from September 11, 2006 to June 30, 2013, for a total of $218,450,677.9 million interest for the six years and nine months.

Then from July 1 until full payment, the government will pay an additional 6 percent interest per annum or $16,049,617.0356.

This would mean that as of September 2015, the total amount that the government has to pay to Piatco stands at $521,341,395.7079, accounting to:

- $267,493,617.26 base amount,

- $218,450,677.9 million interest for September 2006 to June 30, 2013, and

- $35,397,100.5479 million interest from July 1, 2013 to September 8, 2014 (day of en banc session).

The NAIA Terminal 3 was built by Piatco, a consortium which in turn subcontracted Japanese firms Takenaka and Asahikosan for the project in 1997.

A separate assessment by the government placed the CCV of the NAIA Terminal 3 as of December 2002 at $300,206,693. When the expropriation was filed, the CCV had gone down to $263,392,081 due to depreciation which the government said should be deducted from the construction cost.

The government added that the CCV should be reduced further to $149,448,037 to account for deductions due to Piatco's non-compliance with contract specifications. —NB, GMA News