What are patrimonial assets? Lambino rejects China debt trap fears

MANILA, Philippines – The Philippines waiving sovereign immunity to score loans with China has been a cause of concern for legal experts and critics alike.

Supreme Court (SC) Senior Associate Justice Antonio Carpio recently warned that the waiver indicated in the Chico River irrigation project means China can take any "patrimonial assets" in case the Philippines fails to pay off its debt.

Carpio said the Philippines may lose the gas-rich Reed Bank due to the clause.

Meanwhile, senatorial bet Neri Colmenares said that the Kaliwa Dam project, another China-funded deal, is "as onerous" as the Chico River agreement.

But what exactly is a patrimonial asset? In an interview with CNN Philippines on Tuesday, March 26, Finance Assistant Secretary Antonio Lambino threw the question back at Carpio, the most senior among the justices in terms of stay in the SC.

"How does his 2002 Supreme Court decision, that he penned, relate to this case? What he wrote there is that patrimonial assets are not things that can increase the national wealth, that have a public purpose or have a public use," Lambino said.

"Wouldn't a gas reserve increase national wealth? And that is what I would ask him, and what is his thinking about that?"

Lambino was pertaining to a 2002 case between the Public Estates Authority and Amari Coastal Bay Development Corporation.

In the decision, Carpio cited Article 422 of the Civil Code which states that "property of public dominion, when no longer needed for public use or public service, shall form part of the patrimonial property of the state."

Lambino then went on to clarify that patrimonial assets are those that are not of public use, serve no public purpose, do not increase national wealth, or are declared by government to have no public value.

He added that Reed Bank, if indeed proven to have gas deposits, would increase national wealth.

Lambino also said that waivers, in general, are present in any loan agreement with any country, but worded "differently."

He said the waiver just means that the Philippines agrees it can be sued in case it breaches the loan agreement.

What can be used as payment in an event of a default? Lambino, who is not a lawyer but consulted some of the country's "top" lawyers, said patrimonial assets may include seized goods by the Bureau of Customs, money, or gold.

How likely is a default? How would it be settled? Lambino reiterated that a default is "highly unlikely."

He emphasized that the Philippines' debt-to-gross domestic product (GDP) ratio, a measure which looks at a country's debt relative to the size of the economy, stood at 41.9% in 2018. 

Lambino said it could go down to 38.6% in 2022.

According to him, the Philippine government is managing debt well, as opposed to countries like Sri Lanka, which has a debt-to-GDP ratio of over 75%.

Should the Philippines fail to pay China, the contract for the Chico River project states that arbitration would be held in Beijing, while the Kaliwa Dam project arbitration would be in Hong Kong.

Lambino said such provisions are "templates" in Chinese loans. Moving forward, he said the government will look for "other options" in future dealings with Beijing. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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