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DOF: China loan provisions not alarming.

THE provisions in the country's loan agreements with China are standard in all other loan accords with other states and even with multilateral institutions such the World Bank and the Asian Development Bank (ADB), the Department of Finance (DOF) has reiterated, allaying concerns that vital Philippine assets used as collateral would be seized under the terms of default.

'No takeover of our state assets is possible because we do not provide any collateral for any of the loan agreements we have entered into with any government,' Finance Undersecretary Bayani H. Agabin said.

In a statement issued on Wednesday, Agabin pointed out that the waiver-of-immunity and arbitration clauses under loan accords are standard in any loan agreement forged between countries.

'These clauses are present not only in the loan agreements between the Philippines and China under the current government, but also in other loans accords entered into by previous administrations, with, among others, France, and China,' said Agabin, who heads the DOF's Legal Affairs Group.

Although in some agreements, the waiver of immunity is not explicitly stated, Agabin noted that 'all of them have arbitration clauses, which is effectively an implied waiver of immunity.'

He further explained that the country's Supreme Court already affirmed this in one of its rulings, which states that 'an agreement to submit any dispute to arbitration may be considered as an implicit waiver to immunity from suit.'

'Thus, even if the loan agreements with China do not contain the waiver-of-immunity provision, the arbitration clause in the accords already imply a waiver of immunity from suit,' Agabin added.

Supreme Court Senior Associate Justice Antonio Carpio was earlier reported as saying that China may seize oil and gas fields in the Reed Bank in case of default in the repayment of the $62-million loan accord for the Chico River Pump Irrigation Project with China.

This in turn spurred queries on the country's loan agreements with China.

Agabin emphasized that concerns over the waiver-of-sovereign immunity clause in the loan accord between the Philippines and China for the Chico River Irrigation Project are unfounded, given that this part of the agreement only allows the 'counterparties' to seek arbitration in case of a loan default, but not a Chinese takeover of any of the country's properties.

Earlier, former Bayan Muna Party-list Rep. Neri J. Colmenares also pointed out that the Chico River Pump Irrigation project, with the loan agreement signed by the Philippines and China, are 'onerous and one-sided' and that it 'is a disaster for the Philippines.'

In March, the DOF explained that loan agreements entered into by the government with other countries undergo a rigorous vetting process, with the agreement going through an Interagency Committee composed of the Department of Justice (DOJ), Bangko Sentral ng Pilipinas (BSP) and DOF.

The process was pointed out to help ensure that the terms of the loans are within the parameters of the Philippine government.

DOF Assistant Secretary Antonio Joselito G. Lambino II earlier said that apart from the rigorous vetting process undergone by the loan agreements, an arbitration clause is also negotiated, which protects the interest of the Philippines.

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Publication:Business Mirror (Makati City, Philippines)
Geographic Code:9PHIL
Date:Apr 18, 2019
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