The Department of Finance (DOF) recently uploaded on its website a summary of infrastructure flagship projects funded in part through official development assistance, with signed agreements. It also uploaded all the loan agreements involved.
Don’t roll your eyes just yet, Reader. This week a “controversy” arose between Senior Associate Justice Antonio Carpio (whom I consider the foremost Philippine expert on China and its moves to claim the whole of the West Philippine Sea) and presidential spokesperson Sal Panelo. The DOF then joined in to “clarify” the issues (and you can watch the video on the DOF website also).
The controversy is in quotes, because they never actually spoke or debated with each other. It was well covered by the press, in particular this paper. The issue, as I see it, is: Are the China loans onerous? Are there any provisions in the loan agreement that would in effect give China the opportunity to take over the patrimonial assets of the Philippines?
Carpio, in a lecture to the Integrated Bar of the Philippines, said there are, and cited provisions from the Chico River loan agreement. Specifically, in case of default by the Philippines in repayment of the loan, China can seize, to satisfy any arbitral award in favor of China, “patrimonial assets and assets dedicated to commercial use” of the Philippine government.
These patrimonial assets, etc., include oil-and-gas-rich Reed Bank in the West Philippine Sea, according to Carpio, and it will be easy for the Chinese to get a hold of them because according to the loan agreement, (1) any arbitration will be held in Beijing; and (2) any court cases will have to be brought in China, because Chinese law will apply. In other words, the deck is stacked against us. Lutong macao, pun very much intended.
Panelo weighed in, and said that the Reed Bank was not part of the patrimonial assets, because patrimonial assets have to be declared as such by law. Carpio then pointed out that there IS a law which makes Reed Bank a patrimonial asset. Panelo, checking his facts, agreed with Carpio, but then shifted arguments and said the Philippines will never default on the loan, as the loan amount is too small.
Excuse me, Sal, but didn’t President Duterte crow about how much he got from China when he went there? Something like $23 billion worth of loans, if I remember correctly. The loan agreements signed with China—the Chico Dam and the Kaliwa Dam projects—are just the beginning.
But, in any case, the DOF also weighed in, and you can see its arguments in a video on its website. These were to the effect that waiver of immunity is not just with China, it is “standard” and it is no big deal—that even our Supreme Court ruled that waiver of immunity is actually implied in arbitration cases. Also, and here I am completely confused, the decision of the arbitral court will have to be brought to a regional court in the Philippines, and subsequently to higher courts.
So, are the China loans onerous? Carpio, yes. Panelo, it won’t happen anyway. DOF, no, practically boilerplate.