Arbitration ruling favors corporate greed over people’s rights—WPN

August 14, 2017

by IBON Foundation

Advocacy group Water for the People Network (WPN) said that the decision by the International Arbitration Court (IAC) requiring the Philippine government to pay Php3.4 billion to Maynilad Water Services, Inc. reflects the corporate bias of international mechanisms for resolving disputes between governments and private corporations. The Philippine government should learn from the public’s negative experience under 20 years of water privatization and rescind onerous and business-biased concession agreements (CAs) that undermine public welfare, said WPN.

The IAC’s recent ruling on the Php3.4 billion compensation to Maynilad is supposedly for the losses the latter incurred between March 11, 2015 to August 16, 2016 after the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS – RO) denied the water firm’s petition for a rate hike. The IAC also decided that Maynilad may recover from the government its losses from September 1, 2016 onwards. Government could be compelled to pay more should Maynilad further seek the IAC’s ruling to reverse the MWSS’s continued deferment of implementing the IAC’s previous decision favoring Maynilad’s petition for a Php3.06 rate increase. This covers purported monthly losses of Php180 million to 200 million from January 1, 2013 to March 10, 2015.

WPN said that under the CA, rate rebasing or adjustment of basic water rates is determined every five years so that water firms can recover their expenses and ensure their rate of profit. In 2013, Maynilad and Manila Water Service, Inc. sought rate rebasing increases of Php8.58 and Php5.83, respectively, for the 2013-2018 period. However, the MWSS-RO rejected the rate hike petitions due to mounting public pressure after it was revealed that the water firms were passing on questionable charges to consumers, such as corporate income tax recovery, donations, advertising, rest and recreation, the cost of future projects, etc.

According to WPN, corporate income tax recovery comprised 31% and 26% of the rates charged to consumers by Manila Water and Maynilad, respectively, in 2008 and 2012. The group noted however that the CAs with the two firms did not mention corporate income tax as part of the “Philippine business taxes” listed among the recoverable expenses entitled to them. Both corporations should thus give back to consumers the amount of corporate income taxes collected from 2007 to 2012, said WPN.

The IAC decision, said the group, is detrimental to the millions of Filipino consumers who have been increasingly burdened by expensive water rates since water privatization in 1997. Water rates have since gone up by 973% for Manila Water and 583% for Maynilad. Filipino consumers are even made to shoulder millions-of pesos of IAC arbitral costs for the cases filed by the private concessionaires.

WPN stated that the latest decision of the IAC further proves that the CA undermines public welfare and interest, and should be rescinded immediately in line with a strategic reversal of the MWSS’ 20 years of privatization. The group said that instead of paying billions to Maynilad, government should start putting capital into regaining control of water service that is genuinely publicly accessible and affordable.(end)