SC: China contractor in Northrail may be sued

Purple S. Romero

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Northrail signed contract with a private company, not the Chinese government, says the Supreme Court

MANILA, Philippines – Saying the Chinese company involved in the botched US$400 million Northrail project is not immune from suit, the Supreme Court gave a lower court the go-signal to hear the case calling for the annulment of the allegedly overpriced contract.

In a decision released on March 2, the SC was unanimous in voting that the contract to build the Luzon Railways was executed not between the Philippine and Chinese governments, but between Northrail Corp and the China National Machinery & Equipment Corp Group (CNMEG), considered a private corporation.

The SC said that the Northrail contract is a commercial transaction and not an executive agreement, as shown in the letter of Chinese Ambassador to the Philippines Wang Chungu. The letter specified CNMEG as the contractor in the project.

At stake is the long-delayed railway line connecting Manila to areas in central and northern Luzon. The crucial infrastructure was planned as a 2-phase project with the endpoint in San Fernando City in La Union. 

In the decision penned by Associate Justice Lourdes Sereno, the High Court said that even if CNMEG carried out government functions, it did not submit a certification from the Department of Foreign Affairs stating that it enjoyed sovereign or diplomatic immunity.

The SC also stressed that the contract agreement is covered by Philippine law, and, like any other commercial transaction “could be questioned before the local courts.”

Furthermore, the SC said that the contract agreement states that any dispute could be submitted to the Hong Kong International Arbitration Center, which means the transaction could be subject of a suit. 

Invalidate contract

The SC upheld the decision by the Court of Appeals (CA) 5th division, which ruled in 2008 that the Makati Regional Trial Court Branch 145 had jurisdiction over CNMEG.

CNMEG filed a case with the CA after the Makati court issued an omnibus order on May 15, 2007 dismissing the petition for dismissal lodged by CNMEG.

Lawyers Harry Roque and Jose Butuyan asked the lower court to invalidate the contract, which they claimed, was finalized without public bidding. They added the project would also displace thousands of people who live near the project site.

The Northrail project is also crucial in the transfer of the main international airport from the congested Ninoy Aquino International Airport (NAIA) to Clark in central Luzon, a sprawling location ideal for the fast-growing aviation industry.

Transportation Secretary Mar Roxas has said that, despite the legal issues hounding the Northrail project, the Aquino government has started renegotiations of the contract provisions with CNMEG to get the construction of the rail project going. –

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