Fraport may be fined $320M for dummy violation, says Yasay

Fraport’s violation of the country’s anti-Dummy Law could cost in punitive fines equivalent to the project cost of the NAIA Terminal 3 or P17.75 billion ($320 million) while its officers and those of Piatco could go to jail for five to 15 years.

"Owning more of Piatco than is allowed by law was one of Fraport’s strategic errors in a string of poor corporate behavior and judgment," said Perfecto Yasay Jr., former chairman of the Securities and Exchange Commission and now chairman of the MIAA-NAIA Association of Service Operators (MASO).

MASO has taken Piatco to court because its members’ valid contracts to operate at the airport had been revoked under the Piatco contract. Their services were to be absorbed by Piatco, whose permission was required before they could operate again at the airport.

Yasay said Fraport admitted before the International Commission on the Settlement of Investment Disputes (ICSID) that it owns more than 61 percent of Piatco when the law allows only a 40-percent foreign ownership.

The Anti-Dummy Law, he said, provides for a fine that is "not less than the value of the right, franchise, or privilege enjoyed" which in this case was equivalent to $323 million, the value for the franchise to build and operate the Terminal 3.

Yasay said Fraport is also in trouble in its home country of Germany and other countries as well for other forms of questionable conduct.

He said it has been accused of irregular conduct during the public bidding for the Berlin Airport, faces monopolistic charges in Lima, Peru, and recently lost before the European Commission when Air France and six other airlines accused it of overcharging and monopolistic practices.

"Here in the Philippines, MASO members found out only several months later that their valid contracts with airport authorities to provide catering, cargo handling and other airport services had been revoked by the Piatco contract. How can Pedro revoke Juan’s contract when they are actually competing co-equal private service operators?" he asked.

Piatco and Fraport have taken liberties with Philippine laws, changed drastically the terms of the Terminal 3 contract which also led to the destruction of Nayong Pilipino when Piatco, apparently to save about P18 million, dropped the construction of a critical tunnel under the runway which would have allowed the free and safe passage of passengers between terminals and the transport of cargo, he said.

Instead a much cheaper road around the runway was proposed but Piatco has not started work. Meanwhile, a huge portion of Nayong Pilipino had already been destroyed.