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Court allows case vs Northrail to proceed

Vol. XXII, No. 101 [ BusinessWorld Online ]

Monday, December 15, 2008 | MANILA, PHILIPPINES


THE ISSUE over the legality of a controversial multimillion-dollar railway project can be pursued, insofar as the Court of Appeals is concerned.


The court has denied with finality the move of its contractor, China National Machinery & Equipment Corp. (CNMEC), that the case questioning the $503-million Northrail project be junked in the interest of diplomatic relations.


In a resolution penned by Associate Justice Remedios A. Salazar-Fernando, the fifth division found "no new matter of substance that would warrant the modification or reversal of the decision...."


In its first decision issued on Sept. 30, the appellate court said CNMEC failed to establish itself as an agent of [China] entitled to sovereign immunity and, thus, "it must submit itself to our jurisdiction and abide by our rules and regulations."


Lawyers and nongovernmental organizations, led by international law expert Herminio Harry L. Roque, Jr., have asked the Makati Regional Trial Court to annul the contract entered into by the government and the Chinese firm for being disadvantageous to the country, noting the project did not undergo bidding.


The project is expected to link Metro Manila to the Clark Economic Zone in Angeles City, Pampanga.


The parties signed a Joint Statement on the Framework of Bilateral Cooperation in the Twenty-First Century on May 16, 2000, agreeing to cooperate in the fields of trade, investment, agriculture and taxation, among others.


The Northrail project was bared more than two years after the framework signing. The government-owned and -controlled North Luzon Railways Corp. and CNMEC conducted a feasibility study of the state of the railway line.


In a memorandum of agreement dated Aug. 30, 2003, China finally agreed to finance the project through a preferential buyer’s credit from the Exim Bank of China.


As it was deemed an executive agreement, China designated CNMEC as the prime contractor of the project.


The lower court, in different orders issue on May 15, 2007 and March 10, 2008, however denied CNMEC’s motion to dismiss the annulment of the contracts.


The appellate court eventually affirmed the ruling.


In fact, CNMEC failed to get a certification from the Department of Foreign Affairs, which is necessary to prove its status as an agent of China, the court further noted. — Ira P. Pedrasa

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