NORTH LUZON Railways Corporation (Northrail) has resolved a long-standing dispute with its contractor over the 80-kilometer (km) Caloocan-to-Malolos segment of the Northrail Project.
“After a series of negotiations that started in January 2017, North Luzon Railways Corporation,…represented by its ex-officio Chairman, Department of Transportation (DoTr) Secretary Arthur P. Tugade, together with Bases Conversion and Development Authority (BCDA) President Vivencio B. Dizon, recently concluded an out-of-court Settlement Agreement over its dispute with China National Machinery & Equipment Corp. Group (now named China National Machinery Industry Corporation or SINOMACH), the former contractor of the 80-km Caloocan-to-Malolos segment of the NORTHRAIL Project,” a joint statement by the DoTr and the BCDA said, adding:
“The historic Settlement Agreement, which was approved by the Commission on Audit (CoA), and was likewise reviewed and certified legal and enforceable under Philippine law by the Office of the Government Corporate Counsel (OGCC), will save the Philippine government upwards of $100 million, or more than P5 billion in potential payment of claims to SINOMACH (China National Machinery Industry Corporation), as well as hundreds of millions of pesos in legal fees and arbitration costs.”
Under the terms of the Settlement Agreement, the parties have agreed to waive their claims against each other and share the remaining arbitration fees in equal proportions.
According to the statement, Northrail, as of March this year, has spent P161 million for its participation in arbitration proceedings, including fees for its legal consultants.
Without the Settlement Agreement, the BCDA subsidiary “expects to spend an additional P500 million if the arbitration hearings originally scheduled in November 2017 would take place,” the statement noted.
The statement also said the agreement will ensure there will be no more contractual issues to “hamper or compromise the development of the DoTr-Philippine National Railways (PNR) Manila-to-Clark Railway project,” a top priority under the Duterte Administration’s Build, Build, Build program.
“In February 2016, Northrail lost the first phase of the arbitration proceedings. The Arbitral Tribunal in Hong Kong published a Partial Award, which upheld the validity of the contracts with SINOMACH,” the statement also said, citing this controversy’s background.
“Having found SINOMACH’s claims meritorious, the Tribunal also ordered NORTHRAIL to bear all costs relating to the first phase of arbitration. It thereafter directed the parties to proceed with the next phase, which is the determination of liability and extent of liability. SINOMACH is claiming almost $106 million from NORTHRAIL for costs it incurred under the contracts and for damages.”
“Despite the signing of the Settlement Agreement, both DoTr Secretary Tugade and BCDA President Dizon said…the administration will still go after the government officials involved in the allegedly anomalous and/or overpriced contracts,” the statement also noted.
According to the statement, the signing of the Settlement Agreement was witnessed by Foreign Affairs Secretary Alan Peter S. Cayetano, Executive Secretary Salvador C. Medialdea, Budget Secretary Benjamin E. Diokno, and Chinese Ambassador to the Philippines Zhao Jianhua.