DOTr, BCDA settle Sinomach dispute involving Northrail project

The Department of Transportation (DOTr) on Monday said it has settled a dispute involving the 80-kilometer segment of the Northrail project connecting Caloocan City to Malolos in Bulacan.

In an emailed statement, the DOTr said it, along with the Bases Conversion and Development Authority (BCDA) president Vivencio Dizon, concluded an out-of-court settlement agreement with China National Machinery & Equipment Corp. Group, now named China National Machinery Industry Corp. or Sinomach.

Sinomach was awarded the rail project in 2003 in partnership with Northrail, a fully-owned subsidiary of the BCDA, for an initial $431 million to build the Caloocan-Malolos stretch of the railway.

"Under the terms of the settlement agreement, the parties have agreed to (1) waive their claims against each other and declare that there will be no more payment by Northrail to Sinomach and vice versa, and (2) share the remaining arbitration fees in equal proportions," it said.

Sinomach initiated arbitration proceedings in 2012 after it was notified that it can no longer proceed with the project due to serious legal issues in the contracts.

Northrail lost the first phase of arbitration proceedings in Hong Kong, and was ordered to bear all costs relating to the first phase of arbitration.

According to the DOTr, the settlement will save the Philippine government more than $100 million in potential claims payment in favor of Sinomach. These are supposedly on top of the hundreds of millions of pesos in legal fees and arbitration costs.

"Besides avoiding the potential $106 Million liability and more than P500 Million additional legal expenses, the settlement agreement will ensure that there will be no more contractual issues that may hamper or compromise the development of the DOTr-Philippine National Railways Manila-to-Clark Railway project, which is one of the top priorities under the Duterte administration’s Build, Build, Build program," the DOTr said. — Jon Viktor Cabuenas/VDS, GMA News