Officials deny China loans call for territorial seizure

CABINET OFFICIALS have denied that the terms of a loan obtained from China contain provisions for the surrender of territory in the event of default by the Philippines, and dismissed the prospect of default as remote because the loan is small.
At a news conference in Malacañang, Finance Undersecretary Bayani H. Agabin said the funding arrangements for the Chico River Pump Irrigation Project have no such provisions identifying collateral that can be seized in the event of a default.
“May mga pangambang kumakalat na ang Reed Bank o Recto Bank ay maaaring angkinin ng mga ibang bansa kung sakaling ang Pilipinas ay hindi makabayad ng kaniyang mga utang. Nais po naming linawin na ang ating mga loan agreements — kasama na po dito ang ating mga loan sa China — ay hindi naglalaman ng ganitong probisyon. Walang anumang collateral na nagdudulot ng pagsuko ng ating teritoryo (There are fears that Reed Bank or Recto Bank could change hands in the event the Philippines cannot pay its loans. We would like to make clear that all the loan agreements, including the ones with China, have no such provisions. Absolutely no terms involving the surrender of territory),” he said on Wednesday.
Justice Secretary Menardo I. Guevarra also described the $62.8 million Chico River project in Northeastern Luzon as “small,” making the prospect of default “kind of far-fetched.”
“Unang-una maliit lang ‘yung loan e. Kayang-kaya namang bayaran ‘yon. (First, the loan is small. We can pay easily.) Second, assuming for the sake of argument (that there is a delay or default), I’m sure that there are mechanisms in place which will take care of that situation like probably restructuring of the loan or maybe an arbitration clause,” Mr. Guevarra told reporters on Tuesday evening.
“So (on the matter) of attaching or levying properties belonging to the nation, maybe (that is), in my opinion, kind of far-fetched,” he added.
Last week, Supreme Court Associate Justice Antonio T. Carpio said that if the Philippines defaults on its Chico River project loan, China can seize the country’s “patrimonial assets and assets dedicated to commercial use,” including the gas reserves in Reed Bank located in the West Philippine Sea.
Citing Article 8, paragraph 8.1 of the Chico River Pump Irrigation Project loan deal, Mr. Carpio said the Philippines “irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding.”
At his Palace briefing, Mr. Agabin also called the possibility of a default “remote.”
“Ang waiver of sovereign immunity ay hindi nagpapahintulot sa sinumang dayuhan o foreign party na kunin o angkinin ang ating mga likas na yaman. Ibig sabihin lamang nito ay pinahihintulutan ang mga counter-party ng Pilipinas sa isang kasunduan na dalhin sa korte ang kaso kung umabot man na ang Pilipinas ay hindi makabayad sa utang nito (A waiver of sovereign immunity does not mean that any foreigner can seize our natural resources. It only means that we consent to a counterparty bringing us to court in the event the loan cannot be paid),” he added.
Mr. Carpio has noted that in the event of a dispute, the arbitration will be conducted by the China International Economic Trade Arbitration Commission (CIETAC) in Beijing “under CIETAC arbitration rules,” which will then be “final and binding.”
On the Chico River project, Mr. Agabin said: “Nakasaad sa kasunduan na kung sakaling hindi na makabayad ng utang ang Pilipinas (the provisions in the loan agreement for default), which again is very remote, ay dapat maunang ayusin ang anumang problema sa labas ng arbitration (call for, first, to resolve the matter outside of arbitration).”
“If worse comes to worst at hindi maganda ang resulta ng arbitral tribunal (and the ruling of the arbirtral tribunal is unfavorable), inuulit po namin na kailangan pa ring dalhin ng counter-claimant ang desisyon sa korte ng Pilipinas (we repeat that a counter-claimaint must obtain a ruling from a Philippine court), usually the Regional Trial Court, upang magpatibay ng arbitral award (to enforce an arbitral award).
Ito po ang prosesong tinatawag natin na ‘enforcement of arbitral award.’ (This part of the process is called ‘enforcement of arbitral award).’”
Finance Assistant Secretary and spokesperson Antonio Joselito Lambino II, when asked what assets can be used as payment if the Philippines defaults, said after the briefing that the foreclosure on patrimonial property could include shares of stock, but ruled out land because of the prohibition on foreign ownership of land.
Mr. Guevarra also said he has yet to read the loan agreement but described it as broadly similar to a “standard commercial contract.” and “something like a template that has been used for many other loan agreements.”
“I guess we’re just really worrying too much. I don’t think we even have to think about that problem in the future because the intention of the government is to honor all of its loan obligations. And that one is a small amount,” he added. — Arjay L. Balinbin and Vann Marlo M. Villegas