NINOY AQUINO INTERNATIONAL AIRPORT TERMINAL 3 (PIATCO CASE) BACKGROUND The original proposal for the construction of a third

terminal was proposed by Asia's Emerging Dragon Corporation (AEDP). AEDP eventually lost the bid to PairCargo and its partner Fraport AG of Germany, who went on to begin construction of the terminal under the administration of Joseph Estrada. Terminal 3 was approved for construction in 1997 and the structure was mostly completed several years ago and was originally scheduled to open in 2002. The ultramodern US$640 million, 189,000 square meter facility was designed by Skidmore, Owings and Merrill (SOM) to have a capacity of 13 million passengers per year. However, a legal dispute between the government of the Philippines and the project's main contractor, Philippine International Air Terminals Co. Inc. (PIATCO), over the Build-Operate-Transfer (BOT) contract, delayed the final completion and opening of the terminal. While the original agreement was one in which PairCargo and Fraport AG would operate the airport for several years after its construction, followed by a handing over of the terminal to the Philippine Government, the government offered to buy out Fraport AG for $400 million, to which Fraport agreed. However, before the terminal could be fully completed, President Gloria Macapagal-Arroyo, called the contract "onerous," formed a committee to evaluate the agreement to buy out Fraport AG. It is this action that has sparked the most controversy. The Philippine Supreme Court eventually found the PIATCO contract "null and void" citing a variety of anomalies. The current administration of President Gloria Macapagal-Arroyo eventually abrogated PIATCO's BOT Contract for allegedly having been anomalous in certain important respects. In a subsequent decision, the Philippine Supreme Court upheld the Philippine Government's position on the matter and declared the BOT contract "null and void" for, among other things, having violated certain provisions of the BOT law. More specifically, the Court found that the original contract was revised to allow for a Philippine Government guarantee of PIATCO's obligations to its creditors, contractors and suppliers. The BOT law disallows the granting of such sovereign guarantees. PIATCO begs to differ and continues to maintain that the provisions cited by the Supreme Court do not amount to a prohibited sovereign guarantee by the Philippine Government. On December 2004, the Philippine Government expropriated the terminal project from PIATCO through an order of the Pasay City Regional Trial Court (RTC). However,

speaking through its lawyers. The case filed in Washington was decided in favor of the Philippine Government while the case in Singapore continues to be under litigation. because another factor that delayed the terminal's opening was the ongoing investigation into the collapse of a 100 sq m. 1996 – The DOTC/ Manila International Airport Authority (MIAA) Prequalification.C. Andrew Gotianun. Lucio Tan. By Executive Order No. March 1995 – DOTC endorsed the proposal to Investment Coordinating Council (ICC) November 1995 – A meeting was requested by AEDC and the approval of the 10 million passenger new terminal was made by President Fidel V. The government was then in the process of negotiating a contract with the builder of the terminal. has stated in the local Philippine press that it remains open to reaching an amicable settlement with the Philippine Government. 2008 as head. Ramos.the court only allowed the Philippine Government to take over the terminal upon payment of an initial amount of PHP3 billion (approx. According to the Philippine Government. 2008 TIMELINE Under the Reign of President Fidel V. The Philippine Government formally paid PIATCO the said amount on the second week of September 2006. USD64 million) to PIATCO. February 13. PIATCO (and its German partner Fraport) have instituted arbitration proceedings before different international bodies (Piatco in Singapore before the ICC and Fraport in Washington D. Ramos (1993 – 1998) • • • • • • 1993 – Asia’s Emerging Dragon Corporation or AEDC. NAIA-3 initially opened for domestic flights of Cebu Pacific on July 22. an unsolicited proposal was submitted by AEDC to the Department of Transportation and Communication (DOTC) to undertake the NAIA 3 project. PIATCO." The order provides for the NAIA-3 opening based on decisions of the Supreme Court and applicable laws. And inaugurated its first international flight with Cebu Pacific’s aircraft bound for Hong Kong on August 1. 1996 – The NEDA Board granted the first pass approval of the project. October 5. and Alfonso Yuchengco. 2008. before the ICSID) to recover a fair settlement. NAIA-3 was 98% complete (prior in 2006) and required at least an additional USD6 million to complete. Bids and Awards Committee (PBAC) for the NAIA 3 opened the third . George Ty. offer to construct the Ninoy Aquino International Airport (NAIA) Terminal 3 under a build-operate-transfer (BOT) scheme. creating the Presidential Task Force on the NAIA-3 that was "mandated to ensure the immediate opening and operation of Terminal III. consisting of the six taipans namely: John Gokongwei. Henry Sy. Takenaka of Japan. the NAIA Terminal 3 Task Force was made and Michael Defensor was appointed on June 19. 1994 – A year later. area of the terminal's ceiling. October 13. 732.

1999 – The NEDA Board granted the second pass approval of the project. 771 (BOT law). Tan offered $ 300 million directly to the government. they required DOTC and MIAA to comment on AEDC’s petition. Paircargo and associates. 2002 – President Gloria Macapagal Arroyo decided to nullify the contract with Fraport. who led the consortium with PIATCO. Mr. March 27. AEDC also claimed that with the nullification of PIATCO’s contract. 2005 . bidding. a 100 square meter portion of the ceiling collapsed. 1997 – The Securities and Exchange Commission issued the Certificate of Registration of Philippine International Air Terminals Co. or awarding the contract over NAIA 3. Emilio Yap. asked the Supreme Court to issue a temporary restraining order (TRO) that would stop the DOTC and the MIAA from negotiating. 2004 – The government filed an expropriation case against PIATCO. 2003 – PIATCO filed a claim against the government with the International Chamber of Commerce of the International Court of Arbitration in Singapore. they have the status as the unchallenged original proponent of the project under the R.• • envelope submitted by another bidder. May 5. (PIATCO) to PairCargo and its partner Fraport of Germany. 2005 – Mr. 1996 – AEDC failed to match the challenger’s offer of P 300 million for the two years of construction and P 510 million annually for the next two years. made a bid to control NAIA 3 has been disputed by Mr.Later on. 2006 – Part of NAIA 3. Lucio Tan of AEDC. . because of its perceived onerous and burdensome provisions. March 7. December 3. through DOTC and MIAA to award to it the contract for the operation of NAIA 3. 2000 – The construction of the NAIA terminal 3 began. 2003 – The Supreme Court nullified PIATCO’s concession agreement and contracts to build the NAIA 3. he threw in $ 200 million to buy 40% share of Fraport in PIATCO to build and manage NAIA 3.A.A. Yap’s bidder. Under the Reign of President Gloria Macapagal Arroyo (2001 – present) • • • • • • • • • • November 29. 2005 – The Supreme Court affirmed the decision of slain Pasay City Judge Henrick Gingoyon ordering the government to pay an initial P 3 billion to the PIATCO for expenses incurred in the construction of NAIA 3. 2000 – Committee on Transportation and Communications of the House of Representatives found PIATCO’s contract regular and aboveboard. Although the Supreme Court did not issue a TRO. AEDC’s lawyer Perfecto Yasay Jr. and by AEDC which contained their respective financial proposals to the government. Under the Reign of President Joseph Estrada (1998 – 2001) • • • August 19. December 19. 6957 as amended by R. September 8. Late 2005 – The AEDC filed a petition asking the Supreme Court to force the government. Using Manila Hotel as Mr. February 27. owner of the Manila Hotel and the Manila Bulletin. P 610 million for the next two years and finally P 710 million thereafter up to the end of concession agreement against their offer of P 5 million a year for the duration of agreement. Late 2003 – PIATCO wants the government to pay just compensation for costs in constructing the airport.

August 23. In the decision. The inaugural flight is bound for Caticlan. a World Bank-affiliated international court. 2008 – President Arroyo signed Executive Order No. . 732 creating the Presidential Task Force on the NAIA-3 that was “mandated to ensure the immediate opening and operation of Terminal III. 2006 – Three members of the congress. there has to be a winning bidder first to meet the standard set under the BOT law.” June 19. 2008 – NAIA-3 initially opened for domestic flights as Cebu Pacific began operating in the country’s newest airport. Eduardo K. and Eduardo C. 2006 – The International Chamber of Commerce (ICC) Court of Arbitration in Singapore issued on order to MIAA to give up NAIA-3 to PIATCO or pay the P3 Billion. 2008 – NAIA-3 inaugurated its first international flight with Cebu Pacific’s aircraft bound for Hong Kong.The Philippine Government formally paid an initial amount of PHP3 billion (approx. issues a 194-page decision dismissing the $425-million arbitration case filed by Fraport AG against the Philippines. August 1. 2008 – The President has appointed former presidential chief of staff Michael Defensor as the head of the new powerful task force. September 2006 . Zialcita told the Supreme Court that the nullification of PIATCO’s contract did not automatically entitle AEDC to the award of the project as in Section 5 of the BOT law. USD64 million) to PIATCO. July 22.• • • • • • • • July 4. Paras. The decision in the Washington tribunal will help us even further to facilitate the remediation work to be done for Terminal 3 as well as the completion work. the ICSID in Washington DC claimed no jurisdiction over the Fraport case because the German airport builder was found to have violated Philippine laws. Veloso. June 9. Representatives Jacinto V. In this case. August 2007 – The International Center for the Settlement of Investment Disputes (ICSID).

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