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In February, Maynilad invoked a Philippine government undertaking to pay for the losses it supposedly

incurred because MWSS continued to refuse the rate adjustments sought by the company

This stemmed from the letters of undertaking which the Republic issued in favor of Maynilad on July 31,

1997 and on March 17, 2010, according to Maynilad.

The company said the undertaking provides that the Philippine government indemnify the concessionairefrom losses as a result of any delay caused by the Republic or any government-owned agency in

implementing any increase in the standard rates beyond the date of its implementation based on the

concession agreement.

Maynilad Water Services Inc. is seeking arbitration against the Philippine government for not

compensating the water utility firm on revenue losses from unimplemented rate adjustment.

Maynilad decided to take matters to an arbitration panel in Singapore after the Philippine government

snubbed its claim to be paid P3.44 billion after the Metropolitan Waterworks and Sewerage System

Regulatory Office (MWSS-RO) failed to implement a water rate increase in favor of the company.

Maynilad asked for a 28.35 percent increase to P8.58 per cu.m in its average basic charge but Metropolitan

Waterworks and Sewerage System (MWSS) denied the petition and instead approved a downward

adjustment.

The Appeals Panel, led by the International Chamber of Commerce (ICC), upheld the alternative rebasing

adjustment of Maynilad in a decision on December 29, 2014 -- the Appeals Panel decided that Maynilad is

entitled to include its Corporate Income Tax in its Future Cash Flows for each year of operations.

the International Chamber of Commerce (ICC) awarded Maynilad its proposed three-year implementation

of an adjustment in basic charges.

But this was not honored and implemented by the MWSS, which argued that Maynilads claims have no

legal basis.

Manila Water Inc rate dispute with the Metropolitan Waterworks andSewerage System (MWSS)Manila Water originally proposed a P5.83percu!ic meter ("cu.m.)increase in its !asic water charge o# P$5.%&"cu.m.' !ut MWSS insteadordered the company in Septem!er $%3 to cut taris !y P&.$*"cu.m.+he MWSS decision prompted Manila Water to ele,ate the case to theInternational -ham!er o# -ommerce that same month' triggering anar!itration process

The Appeals Panel rendered its Final Award in favor of MWSS and the Regulatory Office disallowing the

recovery of corporate income tax (CIT) by Manila Water.

In its Final Award dated 21 April 2015, the Appeals Panel confirmed the determination of the Regulatory

Office that CIT is not recoverable because the concessionaire is a public utility and that CIT is not one of

the expenditures that the Concession Agreement allows to be recovered.

http""www.!worldonline.com"content.php/section0+opStory1title0manilawaterratecuta#terar!itration1id0%255

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The Appeals Panel, by majority, ruled that CIT is not an allowed expenditure under the Concession

Agreement by virtue of the application of the principles enunciated in the Meralco case to the effect that the

people of the Philippines should not be burdened directly or indirectly with CIT which has to be paid by the

Claimant as a result of the profits made from its business operations.

With the conclusion of the arbitration with Manila Water, MWSS decided to partially implement the

arbitral award. The Regulatory Office resolved to implement an adjustment with respect to the other itemsnot related to CIT.

The partial implementation translates to an adjustment of Php0.64 per cu.m. or 2.11% of its 2012 average

basic charge of Php30.28 per cu.m. The CIT represents Php3.42 per cu.m. of the Php4.06 per cu.m. tariff

adjustment awarded to Maynilad by the Appeals Panel.

Incorporating the annual inflation adjustment for 2014 and 2015, and the provisional 3.2% adjustment in

2013, the average basic charge of Maynilad is estimated to increase by Php2.00 per cu.m. or 6.39% of the

prevailing basic charge of Php31.25 per cu.m.

With the discontinuance of CERA (Currency Exchange Rate Adjustment) of Php1.00 per cu.m., the

adjustment in the average water charge is reduced to a net increase of Php1.00 per cu.m. on Mayniladsprevailing rates.

The Regulatory Office maintains that it has to be consistent in the exercise of its regulatory mandate under

the Concession Agreement. Dr. Joel C. Yu, Chief Regulator of the Regulatory Office, stated that the Office

has the moral and the legal obligation to uniformly apply the General Rate Setting Policy under the

Concession Agreements.

As a government entity, the Regulatory Office has the overriding duty to protect and defend the

constitutional guarantee to equal protection.

The identical issues raised by Concessionaires involve matters of law and public policy.

The MWSS has the plain legal duty under its Charter to set just and equitable rates.

.

On 22 January 2013, the

Philippines formally conveyed

to China the Philippine Notification

and Statement of Claim that

challenges before the Arbitral

Tribunal the validity of Chinas nine -

dash line claim to almost the entire

South China Sea (SCS) including

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the West Philippine Sea (WPS) and

to desist from unlawful activities that

violate the sovereign rights and

jurisdiction of the Philippines under

the 1982 UN Convention on the Law

of the Sea (UNCLOS).

This Notification initiated the arbitral

proceedings under Article 287 and

Annex VII of UNCLOS. The

Philippines has exhausted almost all

political and diplomatic avenues for

a peaceful negotiated settlement of

its maritime dispute with China.

Chinas nine

-

dash line claim is

contrary to UNCLOS and unlawful.

The Philippines is requesting the

Tribunal to, among others:

Declare that Chinas rights to

maritime areas in the SCS, like

the rights of the Philippines, are

established by UNCLOS, and

consist of its rights to a

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Territorial Sea and Contiguous

Zone under Part II of UNCLOS,

to an EEZ under Part V, and to a

Continental Shelf under Part VI

Declare that Chinas maritime

claims in the SCS based on its

so

-

called nine

-

dash line are

contrary to UNCLOS and invalid

Require China to bring its

d o m e s t i c l e g i s l a t i o n i n t o

conformity with its obligations

under UNCLOS; and

Require China to desist from

activities that violate the rights of

the Philippines in its maritime

domain in the WPS.

The Arbitral Tribunal has jurisdiction

to hear and make an award as the

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dispute is about the interpretation

and application by States Parties of

t h e ir o b l ig a t io n s u n d e r t h e

UNCLOS.

The Philippines position is well

founded in fact and law

Manilas quest could take

several years of legal proceedings,

but it is not quixotic. The

submission was carefully put. It is

not asking for maritime

boundaries to be delineated.

Instead, it is asking for a ruling

on the validity under UNCLOS of

Chinas expansive Nine

-

Dashed

Line, and on whether the land

features in the South China Sea

are rocks or submerged features

rather than islands.

Rory Medcalf

The Diplomat

Tokyo, 25 March 2013

By asking the tribunal to decide

on the legality of China's nine

-

dash line under UNCLOS, the

Philippines has essentially dealt a

clever hand

-

China might have to

clarify the extent and basis for itsnine

-

dotted line claim. . . . This

is something that many analysts

have been calling for.

William Choong

The Straits Times/Asia News

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Network

Singapore

30 January 2013

In any event, I

think it is safe to

say this it a gamechanger in the

long

-

running

South China Sea

dispute. It is also,

without question, the most

important case that has ever been

filed under the dispute resolution

procedures of UNCLOS. It will

be a crucial test of the UNCLOS

institutions, as well as of

UNCLOS members.

Julian Ku

Opinio Juris Blog

Professor of Law and Faculty

Director of International Programs

Maurice A. Deane School of Law at

Hofstra University, New York

22 January 2013

Photo credits:www.dfa.gov.ph (pp.1

-

3)

www.aseansec.org (p.3)

www.osg.gov.ph (p.4)

The Department of Foreign Affairs Statement on Chinas Response

to the Philippines Arbitration Case, 20 Feb 2013

The Department received this afternoon from Chinese Ambassador to the

Philippines Ma Keqing a Note Verbale stating that China rejects and

returns the Philippines Notification and Statement of Claim.

The Department stresses that Chinas action will not interfere with theprocess of Arbitration initiated by the Philippines on 22 January 2013. The

Arbitration will proceed under Annex VII of UNCLOS and the 5

-

member

arbitration panel will be formed with or without China.

In its

Note Verbale

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, China reiterated its often stated position that it has

indisputable sovereignty over the entire South China Sea encompassed

by its 9

-

dash line claim. This excessive claim is the core issue of the

Philippines arbitration case against China.March 3 $%* 4 Philippines su!mitted its memorial to the ar!itral tri!unal which is

hearing the case. It presents presents the

Philippines case on the jurisdiction

of the Arbitral Tribunal and the merits

of its claims.

rdinarily the ne6t step would !e a a counter memorial #rom china howe,er On 21

May 2014, the Permanent Court of

Arbitration (PCA) received a Note

Verbale from China reiterati

ng its position that it does

not accept the arbitrationinitiated by the Philippines and that t

he Note Verbale shall not be regarded as

Chinas acceptance of or parti

cipation in the proceedings.

The Arbitral Tribunal nevertheless

adopted and issued its second Procedural

Order on 3 June 2014.

Amid the rising tensions between both claimant and non-claimant parties

in the South China Sea, the Philippines officially proposed a Triple Action

Plan that consists of an immediate, intermediate, and final approaches to

address the escalating tensions in the South China Sea. The immediate

approach is a moratorium on destabilizing activities in the South China

Sea.

T

he Philippine delegation, consisting of high-level officials from all

branches of the government and international lawyers, appeared before

the Permanent Court of Arbitration at The Hague, The Netherlands, on 7-13

July 2015 for the hearing on the Arbitral Tribunals jurisdiction over the case

filed against China. The hearing, which was set by the Arbitral Tribunals

third meeting on 20-21 April 2015, addressed the issue of jurisdiction and

the admissibility of Philippine claims.Secretary of Foreign Affairs Albert F. del Rosario explained the Philippines

reason for submitting the maritime dispute with China to international

arbitration. He also emphasized how the issue is important not only to the

Philippines and the littoral states around the South China Sea but also to

all parties to the UN Convention on the Law of the Sea (UNCLOS), stating

that the case is about the integrity of the Convention and the very fabric

of the legal order for the seas and oceans.

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Chief Counsel Mr. Paul Reichler led the presentation of arguments on why

the case falls within the jurisdiction of the Tribunal. The delegation argued

that the Philippine case neither raises issues of land sovereignty and

maritime delimitation nor touches on specific exemptions in UNCLOS that

would bar the Tribunal from exercising jurisdiction over it. The delegation

also highlighted environmental and fishing issues against China.The Tribunal has given China an opportunity to respond to the oral

arguments before 17 August 2015. However, China has reiterated that it is

neither accepting nor participating in the arbitration process initiated by the

Philippines, and referred to the Position Paper released in December 2014

as the statement of its views on the issue.

T

he Philippines presented before the Arbitral Tribunal the merits and

other remaining issues of jurisdiction and admissibility on the case that it

initiated against China regarding the West Philippine Sea / South China Sea.

The hearings were held from 24 to 30 November 2015 at the Peace Palace,

the headquarters of the Permanent Court of Arbitration (PCA) at The Hague,

The Netherlands.

The hearings followed the 29 October 2015 release of the Arbitral Tribunals

decision on the jurisdiction issue, in which the five judges unanimously affirmed

that the Tribunal was properly constituted and that non-participation by China

does not deprive it of jurisdiction over the case.

Solicitor-General Florin Hilbay, who heads the Philippine delegation,

introduced the countrys case. The Philippine legal team headed by Mr. Paul

Reichler explained why Chinas nine-dashed line and claims to historic rights

to waters of the South China Sea have no basis under the UN Convention on

the Law of the Sea (UNCLOS). They also pointed out that the features usedby China as basis to generate claims to exclusive economic zones (EEZ) and

continental shelf are either rocks or low-tide elevations, which at best can only

generate up to 12 nautical miles of maritime entitlements.

The delegation also presented how Chinas conduct has interfered in the

Philippines right to exercise sovereign rights and jurisdiction over its own

EEZ. They also called attention to how Chinas island-building and fishing

activities have caused irreversible damage to the marine environment of the

South China Sea.

Secretary of Foreign Affairs Albert F. del Rosario closed the Philippine

presentation by stressing anew the importance of the arbitration process to

the peaceful and rules-based resolution of disputes in the South China Sea.The Tribunal has given China until 1 January 2016 to respond to any matter

raised during the hearing. Afterward, the Tribunal will deliberate and issue a

final decision in 2016.

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