• SC to govt: Pay air consortium $510M


    The Supreme Court (SC) on Tuesday ordered the Philippine government to pay, by way of just compensation, the Philippine International Air Terminals Company Inc. (Piatco) more than $510 million for the expropriation of Ninoy Aquino International Airport (NAIA) Terminal 3.

    During deliberations of the SC en banc for their last summer session in Baguio City, it denied a motion for reconsideration filed by the government through the Office of the Solicitor General (OSG).

    In its unanimous ruling, written by Associate Justice Arturo Brion, the tribunal “partially grant[s]the Republic’s motion for reconsideration that the full ownership over NAIA [Terminal 3] shall be vested to the Republic upon full payment of the just compensation as computed.”

    But it rejected a plea of the OSG asking the High Court to delete award of interests to Piatco in the amount of $242,810,918.54.

    The SC was also asked by the Solicitor General to deduct the amount of $113,944,044, which represents non-compliance with contract specifications by Piatco, from the principal amount of compensation due.

    The OSG pleaded that the amount of just compensation must only be pegged at $163,959,441 less the proferred value of $59,438,604 already paid to the consortium.

    It said imposing 12 percent interest would be tantamount to allowing Piatco to profit from its own misdeeds.

    The SC en banc, however, ruled that there was no error of judgment committed by the Court of Appeals (CA) and shall affirm its findings with some modifications.

    It ruled that no new arguments were presented that will warrant reversal of their original ruling on September 9, 2015.

    The SC has set the amount of just compensation at $267,493,617.26 as of December 2004 plus annual interest of 12 percent from September 2006 and another annual interest of six percent from July 2013 until full payment.

    “The principal amount of just compensation is fixed at $326,932,221.26 as of December 21, 2004. Thereafter, the amount of $267,493,617.26, which is the difference between $326,932,221.26 and the proffered value of $559,438,604.00, will earn a straight interest of 12 percent per annum from September 11, 2006 until June 30, 2013, and a straight interest of 6 per annum from July 1, 2013 until full payment,” it said.

    “The Republic is hereby ordered to make direct payment of the just compensation due to Piatco; and … the Republic is hereby ordered to defray the expenses of the BOC [Bureau of Customs] in the sum of $3,5000,000.00,” the court added.

    This amount has escalated from the original ruling of the Regional Trial Court (RTC) and the Court of Appeals (CA).

    In the CA decision, the Philippine government was ordered to pay over $371 million to the air consortium.

    The appellate court modified the 2011 ruling of the Pasay City RTC Branch 117 awarding just compensation to Piatco in the amount of $175.79 million, still less the over P3 billion or $59.44 million already paid to the consortium in compliance with a Supreme Court (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 pegs the total amount to be paid to Piatco at $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,” it read.

    The SC based the amount on depreciated value of the NAIA 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 ruling held that the Philippine government may continue to operate the NAIA Terminal 3 but the ownership would have to remain with the air consortium until full payment of the compensation was made.


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    1. If the government has no cash, they can just issue interest-bearing bonds so that the government can now fully own and operate the terminal and get a private airport management firm to run it – which firm will put up the cash to cover those bonds issued.