Assignment No, 2 Deadiine: September 16, 11:55 pm Your answers should not be less than 180 words for each question. Email your answers to wg SoughE in Chis case? 2) What is COA’s basis for its decision? Do you agree with the government in this regard? 3} Do you agree or disagree with the opinion of Roya Dutch Shell official Andy Brown that sanctity of contracts is needed to sustain investor interest in the Philippines? Explain your answer. Has (Becreesnn tas coal agiod sogtt prevent investors from leaving the Phitippines. What is your opinion about our present regulatory and investment climate in our country? is it helping attract and keep investors or not? Nothing followsForeign Malampaya contractors set to sue PH over taxes By Riza T. Olchondra ‘THE FOREIGN operators of the ee natural gas platform led by Royal Dutch Shell PLC, Europe's top oil firm, ate seeking ‘international arbitration over the Commis- sion on Audits (COA) recaleulation of what they should be paying the Philippine gov- emment, In a letter to President Aquirlo, Royal Dutch Shell chief financial officer’ Simon Henry said recent GOA decisions billing the ‘Malampaya consortium $2.9 billion in in- ‘come taxes on top of the government's 60- percent share of net proceeds had become a “cause for concern” because they go against the terms of the service contract covering the mulbiion dolar natural gas develop ‘mentproject The COA, in decisions dated April 6 and May 11 this year, ordered the Department ‘of Energy to collect the back taxes from the Malampaya consortium, which operates in the waters off Palavran. The DOE appealed the COA% decisions bur this was denied (COA order ‘erroneous’ 4 Henzy said the COAs order was “erro: ‘neous” since the income taxes payable over the period 2002 to 2014 were tobe deemed paid by the Department of Energy out of the 60-pereent government share of net proceeds. “This s expressly provided forunder Ser vice Contract No. 98,” Henrysaid, | “Lwanted tolet you know that in orderto preserve our rights under the Service Con- ‘tract No, 38, Shell Philippines Exploration BY, (SPEX), together with the other foreign inyestor in the consortium, intend to initi- ate international arization shortly" Hen= | rysaid inthe letter The last thing desired by Shell after | more than 100 years of productive parmer- ship isto find that our approaches contlics, but the scale and nature ofthis challenge is such that [believe we have no choice, ‘Various sources, from both sides con- firmed that the Shell-led investors had “served notice” that they were initiating in- ternational arbitration, ( Back-channel talks are ongoing, howev- x to tryto resolve the issue “in @collabora- tive way” berween the consortium and the Philippine government, the sources sald. In an exclusive interview, Royal Duich Shell's upstream, international director ‘Andy Brown said, “Ido believe that we are going to get a fair hearing,” He declined to get into details but added, “Our ambition is toresolve that amicably.” Sanctity of contracts Brown, who leads Shell's oll exploration, production and natural gas business, also stressed that “sanctity of contracts,” as well a good regulacory and investment li ‘males, are needed to sustain {avestarinter- estin the Philippines, ‘The Malampaya consortium includes Shell Philippines Exploration BY. (SPEX; 45 per- cent), Chevron Malampayal..G (45 percent) and PNOG Exploration Corp. (10 percent), Other recent arbitration cages faced by the Philippine government were initiated by water service providers Manila Water Co, Ine. and Maynilad Water Services Inc. in response to the Metropolitan Water works and Sewerage System's (WSS) reinterpretation of their concession con- tracedisallowing them from recovering cor- orate income tax. Maynilad won in local arbitration and +has moved to the international courein Sin- japore to claim losses as the MWSS drags feet in implementing a water rate hike incorporating provisions for income tax payments, Manila Water lost and was disal- Towed to tuek in corporate income tax pro- visions from its water rates. ‘Meanwhile, the Philippines has yet 10 fully investigate allegations that some P900 million of the government's share of ‘Malampaya funds ended up lining the pockets of lavmakers and executives in ca- hhoots with fake nongovernment organiza- tionsin 2009 alone, This s separate from the seandals involv" ing the alleged diversion of up to P10 bil- lion of the legislative pork barcel (Priority. Development Assistance Funds), also using fakencos