Carpio on Chico River irrigation loan: China can seize assets if PHL defaults on payment

Senior Associate Justice Antonio Carpio expressed concern over the Chico River irrigation loan agreement between the Philippines and China, saying the latter could seize oil and gas-rich Philippine assets in the West Philippine Sea (WPS) if the country defaults on payment.

"In case of default by the Philippines in the repayment of the loan, China can seize, to satisfy any arbitral award in favor of China, patrimonial assets and assets dedicated to commercial use of the Philippine government," Carpio explained in a presentation shared with reporters.

Carpio said that this is expected to be the "template" for all other loans to the Philippines. 

Citing paragraph 8.1 of the Loan Agreement, Carpio said the Philippines "expressedly waived any sovereign immunity" over all its assets except for some, including "public or governmental use as distinguished from patrimonial assets and assets dedicated to commercial use."

He explained that the term "patrimonial assets and assets dedicated to commercial use" includes the oil and gas within the Philippine exclusive economic zone (EEZ) in the WPS.

"This includes the rich gas fields in Reed Bank," he stressed.

As the agreement is "governed by Chinese Law," Carpio said that, in case of a dispute, "arbitration shall be conducted by the China International Economic Trade Arbitration Commission (CIETAC) under CIETAC arbitration rules."

He also noted that the award of CIETAC is "final and binding" and that the arbitration shall be held in Beijing.

According to Carpio, the term “patrimonial assets and assets dedicated to commercial use” is "defined under Chinese law, interpreted by a Chinese-majority tribunal in Beijing, and enforced by the Chinese Government in the Philippines."

He added that "China will always have a majority in the arbitral panel," citing CIETAC rules.

The 20-year loan deal for the Chico River Pump Irrigation Project was inked by Department of Finance Secretary Carlos Dominguez and Ambassador Extraordinary and Plenipotenciary of China Zhao Jianhua last April 10, 2018.   

The P3.6-billion agreement had been described by former Bayan Muna party-list Representative Neri Colmenares as "onerous" and highly favorable to China. — MDM, GMA News