A court has ruled that the fees received by Chief Justice Lourdes Aranal-Sereno and other lawyers employed by the government in pressing its case against the Philippine International Air Terminals Co. Inc. (Piatco), the builder of the Ninoy Aquino International Airport (NAIA) Terminal 3, were illegal.
Judge Carlos A. Valenzuela of the Mandaluyong Regional Trial Court (RTC) Branch 213 declared as unlawful the P15 million given to Sereno, as well as the other fees paid to foreign and local legal consultants hired by the Philippine government.
In its decision promulgated on August 29, the court denied the government’s petition for recognition and enforcement of a foreign arbitral award because the hiring of legal consultants did go through public bidding.
The government, through the Department of Transportation and Communications (DOTC) and the Manila International Airport Authority, asked the court to recognize the final ruling of the International Court of Arbitration of the International Chamber of Commerce (ICC) in Singapore issued on May 10, 2011, by ordering Piatco to pay $6,009,351.66 in litigation expenses and attorney’s fees.
Valenzuela said the court will not be a tool in allowing unconscionable attorney’s fees as “public interest dictates that the courts should not assist in the enforcement of a judgment based on something illegal or immoral according to the views of the forum.”
“This court cannot condone such blatant and shameless violation of the Constitution and other mandatory or prohibitory statues,” he added.
As one of the lawyers hired by the government, Sereno, earned a whopping $336,287.66 or P15 million.
The foreign lawyers who were hired were from the White & Case LLP, Allen & Gledhill LLP, Rajah & Tan LLP and Drew & Napier LLC.
The local lawyers and consultants included Sereno’s mentor, retired SC Justice Florentino Feliciano, who earned $332,636.25.
But the court said the fees paid to the lawyers were excessive.
“This court found that the recognition and enforcement of the final award is contrary to Philippine law and public policy because the items comprising of the award i.e. the GRP’s (Government of the Republic of the Philippines) arbitration costs and expenses were incurred in violation of the provisions of the Constitution, relevant statutes and other rules promulgated pursuant to law governing government expenditures and government procurement,” it added.
“The GRP’s arbitration costs and expenses were incurred in violation of the Philippines’ public policy mandating public bidding and its long-standing policy against the incurrence of irregular, unnecessary, excessive, extravagant or unconscionable expenditures or use of funds and property by the government,” the court said.
It observed that the government “incurred its arbitration costs and expenses, be they legal fees or otherwise,” in violation of the Procurement Act or Republic Act 9184 and Government Auditing Code of the Philippines (Presidential Decree 1445).
“The fact the government failed to comply with the relevant statutory requirements before incurring such expenses, the bulk of which consists of private lawyers’ fees, and failed to abide by the public policy that government procurement be effected through public bidding, makes the arbitration expenses illegal and the contracts upon which they are based, void,” the court said.
It added that there was no appropriation for the hiring of lawyers and consultants in the General Appropriations Act, neither were the expenses audited by the Commission on Audit.
“In this case, as shown by the summary of costs and expenses incurred, the bulk of the arbitration costs and expenses were expended to engage the services of foreign law firms and legal experts. Evidently, the engagement of the foregoing requires the prior written conformity and acquiescence of the Solicitor General and the prior written concurrence of the Commission on Audit. It appears that the government never complied with those requisites,” the court said.
“There can, thus, be no doubt that the arbitration costs and expenses were not only irregular and unnecessary, these were also excessive, extravagant and unconscionable,” it added.
The Supreme Court in 2003 nullified Piatco’s contract to build NAIA 3 because of irregularities. Piatco sued the government before the ICC in Singapore to recover at least $565 million in damages.
The ICC, in July 2010 ruled that Piatco and its German investor Fraport AG violated the Philippines’ Anti-Dummy Law, which requires that operation, management and control of public utilities such as airports should remain with Filipinos.
It also ordered Piatco to pay the Philippine government over $6 million in costs of proceedings. The Singapore High Court upheld the ICC’s decision.
The Mandaluyong court ordered the government to pay P5 million to Piatco “by way of attorney’s fees plus costs of litigation.”