Supreme Court orders govt to pay airport builder $510M
The Supreme Court (SC) ordered the government on Wednesday to pay $510.3 million in compensation to a consortium that built Terminal 3 of the Ninoy Aquino International Airport (NAIA 3).
NAIA 3 has been the subject of a legal dispute since the government seized it in 2004, citing breach of contract and failure to conform with safety standards.
The builders consortium—which also includes Germany’s Fraport AG and Philippine International Air Terminals Co., also known as Piatco — had sought compensation and the row has been seen as a test of how the country handles foreign investments.
The total compensation represents the airport’s $327 million replacement cost when the government took over in 2004 plus $243 million in interest until December 2014, according to the court’s ruling.
The tribunal also deducted $59.4 million that it said the government had initially paid Piatco.
The SC in an en banc session voted 10-0 in favor of Piatco.
Those who inhibited from the voting were Chief Justice Maria Lourdes Sereno, and Associate Justices Antonio Carpio, Mariano del Castillo and Francis Jardeleza. Justice Biemvenido Reyes was on leave.
The decision was penned by Associate Justice Arturo Brion.
This amount has escalated from the original ruling of the Regional Trial Court and the Court of Appeals (CA).
“Wherefore, premises considered, we partially reverse the August 22, 2013 amended decision and the October 19, 2013 resolution of the Court of Appeals,” the decision read.
NAIA 3 was built by Piatco in 1997.
Piatco is a consortium, which in turn subcontracted Japanese firms Takenaka and Asahikosan for the project.
The $600-million Terminal 3, designed to decongest air traffic in the capital city of 12 million people, was mothballed for years until it was partly opened in 2008.
With 140 check-in counters and 188 immigration counters, the airport was designed to handle some 13 million passengers a year.
But the legal wrangling and structural defects have caused it to operate below capacity.
As a result, part of international air traffic to Manila continues to pass through decades-old Terminal 1, once voted by a travel website as one of the world’s worst.
Air congestion, the cause of frequent flight delays, has prompted the government to scout for an alternative site for an international airport in nearby provinces.
The appellate court ordered the Philippine government to pay over $371 million to Piatco.
It modified the 2011 ruling of a Pasay City Regional Trial Court awarding just compensation to Piatco in the amount of $175.79 million, still less than the over P3 billion or $59.44 million already paid to the consortium in compliance with an SC ruling in 2004 that it had to be paid first for building the terminal before its actual takeover could proceed.
The current SC decision has pegged the total amount to be paid to Piatco to $510 million as of December 2014.
The ruling has used the replacement cost method under Republic Act 8974, the law that governs right-of-way acquisition for national government projects.
“The government is hereby ordered to make direct payment of the just compensation due to Piatco,” the decision said.
The High Court based the amount on depreciated value of Terminal 3.
“The use of depreciated replacement cost method is consistent with the principle that the property owner shall be compensated for his actual loss…. The government should not compensate Piatco based on the value of a modern equivalent asset that has the full functional utility of a brand-new asset,” it said.
The SC held that the Philippine government may continue to operate Terminal 3 but the ownership would have to remain with the consortium until Piatco was fully compensated.