Sereno's Piatco case fee illegal: CA

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MANILA - Attorney’s fees received by former Chief Justice Maria Lourdes Sereno as part of the government’s legal team in the arbitration case against the Philippine International Air Terminals Co. Inc. (Piatco), builder of the Ninoy Aquino International Airport (NAIA) Terminal 3, have been declared illegal by the Court of Appeals (CA).

In a 50-page decision written by Associate Justice Ramon Bato, Jr., the appeals court's 11th Division reinstated the ruling of the Mandaluyong City Regional Trial Court (RTC) Branch 213, which denied the government’s bid for enforcement of $6 million for the cost of arbitration proceedings before the International Chamber of Commerce (ICC) International Court of Arbitration.

These costs, described as “five times more than that of Piatco,” include Sereno’s legal fees from 2003 to 2009, amounting to US$ 275,973.21 after deducted 15 percent by the government.

The $6 million constituted 25 percent of government’s total arbitration cost of $24 million, which the ICC International Court of Arbitration ordered Piatco to pay.

The RTC handed down its decision on August 29, 2014 that denied government’s bid for recognition and enforcement of the foreign arbitral award dated May 10, 2011.

The RTC ruled that the "recognition and enforcement of the Final Award is contrary to Philippine law and public policy” for being “in violation of the Philippines’ public policy mandating public bidding and its long-standing policy against the incurrence of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or use of funds and property of the government.”

Previous ruling

The appeals court's 11th Division reversed the decision, dated January 20, 2017, of the 17th Division. The 17th Division recognized the award of arbitration cost as it ruled that “no public policy is transgressed when the government is the one receiving the money duly awarded by an Arbitral Tribunal.”

This led Piatco to file a motion for reconsideration.

The motion for reconsideration was granted by the 11th Division as it agreed with the RTC ruling.

“[T]his is because the arbitration costs and expenses were incurred in ‘violation of the Constitution, relevant statutes, and other rules governing government expenditures’ of public funds,” the CA amended decision read.

The appellate court said Mandaluyong RTC Branch 213 Presiding Judge Carlos Valenzuela was correct in ruling that the arbitration costs and expenses were in violation of government’s “long-standing policy against the incurrence of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or use of funds and property by the government.”

The high court explained that Republic Act (RA) 9184, also known as the Government Procurement Reform Act, “undoubtedly applies to all the component costs listed by [government] as comprising its arbitration expenses.”

Not exempted

The Court of Appeals said the government violated the fundamental public policy in the hiring of expert witnesses or consultants when the Office of the Solicitor General (OSG) did not follow the provisions of RA 9184 and its Implementing Rules and Regulations (IRR) in hiring Sereno and her co-counsels.

“The contention of the [Office of the Solicitor General] that RA No. 9184 and its IRR is not applicable in the hiring of local and foreign lawyers because the said law applies only to consulting services in government infrastructure projects deserves scant consideration. The theory of the OSG is not supported by law or jurisprudence,” the amended decision explained.

The appeals court also highlighted the findings of the Commission on Audit (COA) on the arbitration proceedings, which state that OSG's hiring of consultants White and Chase; retired SC Associate Justice Florentino Feliciano; then Prof. Maria Lourdes Sereno; Allen Gledhill; Justice Vicente Mendoza; Sycip Salazar, Hernandez and Gatmaitan; and Follosco Moralos and Herce, “constitute unlawful expenditure.”

The OSG, in hiring Sereno and the other lawyers, should have secured first “the concurrence of COA as required under COA Circular No. 98-002,” but did not.

“In summation, as exhaustively discussed by the RTC and bolstered by the findings of the COA (Commission on Audit) Special Audit Team, in the hiring of local and foreign lawyers, the petitioners (Government of the Philippines, represented by the Department of Transportation and Communications and the Manila International Airport Authority) violated the fundamental public policy on the use of public funds,” the amended decision explained.

“As such, the RTC correctly refused the recognition and enforcement of the Final Award,” it added.

The case went to the Special 11th Division after the inhibition of six justices.