Chinese firm in Northrail project seeks relief from Supreme Court

The Chinese contractor in the controversial North Luzon Railways Corp. (Northrail) project has brought to the Supreme Court its appeal seeking dismissal of a pending suit filed by a group of lawyers for the annulment of the deal hounded by alleged anomaly.

The China National Machinery and Equipment Corp. Group (CNMEG) has asked the High Court to reverse the ruling of the Court of Appeals that upheld an earlier decision of the Makati City Regional Trial Court (RTC) to conduct a summary hearing over the details of the contract agreement for the Northrail project.

In a 63-page petition for review filed last Jan. 28, the foreign firm reiterated its claim of diplomatic immunity being a state-owned firm of the People’s Republic of China.

CNMEG again argued that the Makati RTC erred when it ordered the petitioner to appear and explain the details of the contract with Northrail since it had “no jurisdiction over the person of herein petitioner and over the subject matter of the said case.”

Counsels of the firm from Policarpio, Pangulayan and Azura Law Office cited RA 8975, which prohibits lower courts from issuing restraining orders and injunctions on government infrastructure projects.

“Petitioners stand to suffer grave and irreparable injury by being compelled to answer private lawyers’ unjust and baseless claims.

Petitioner has already commenced its duties and responsibilities under the Northrail project and invested its precious time, skills, industries and finances for the said project. All of these will be put to naught if the proceedings will continue before the RTC,” the Chinese firm argued.

The CNMEG also warned that allowing the proceedings at the Makati RTC would “disrespect the sovereignty of the People’s Republic of China.”

In its petition, the Chinese contractor specifically asked the SC to issue temporary restraining order or writ of preliminary injunction pending review of the CA ruling issued on Sept. 20 last year.

The Fifth Division of the appellate court had junked the petition of CNMEG in the 18-page ruling penned by Associate Justice Remedios Salazar-Fernando for lack of merit, saying there was no grave abuse of discretion from the lower court when it summoned the contractor.

The CA said CNMEG “must request the Foreign Office of a state where it is sued to convey to the court that it is entitled to such privilege. In this country, the practice is for the foreign entity to first secure an executive endorsement of diplomatic immunity.”

“The bottom line is, (the request) must come from the DFA (Department of Foreign Affairs) which is the proper government agency with administrative competence to perform the task associated with diplomacy and foreign relations,” the CA added.

The Chinese firm appealed the decision, but was again denied in a decision dated Dec. 5, 2008. The CA junked the motion for reconsideration again for lack of merit, saying no new argument was raised in the appeal.

The case stemmed from a complaint for annulment of contract and injunction filed by University of the Philippines law professor Harry Roque and his group against the Office of the Executive Secretary, represented by Secretary Eduardo Ermita.

The respondents also included the Department of Finance, the Department of Budget and Management, the National Economic and Development Authority, Northrail and CNMEG.

Roque sought to nullify the $503-million project contract and the Buyer Credit Loan Agreement No. BLA 04055 dated Feb. 26, 2004 between the Export-Import bank of China (Eximbank) and the Philippine government for being unconstitutional and illegal.

The Northrail project refers to the rehabilitation of the old Philippine National Railway’s north line, an estimated 80.2-kilometer railroad project from Caloocan City in Metro Manila to Clark Field in Pampanga.

In its petition, CNMEG argued they represent the Chinese government in the executive agreement with the Philippine government in the Northrail project and therefore enjoy diplomatic immunity.

Roque, however, pointed out the Northrail project should have undergone public bidding as required by Republic Act 9184, or the Government Procurement Act.

Roque argued further the contract is void since there was no prior appropriation of public funds for the purpose.

He said the Philippine government entered into the loan agreement with China’s Eximbank without the concurrence of the Bangko Sentral ng Pilipinas, which is a violation of the Constitution.

On April 17, 2006, CNMEG filed before the Makati RTC a motion to dismiss Roque’s petition, claiming the court has no jurisdiction over them being an agent of the Chinese government.

CNMEG argued the Northrail project is covered by an executive agreement between China and the Philippine government.

Makati RTC Judge Cesar Santamaria denied CNMEG’s motion to dismiss.

CNMEG then filed a motion for reconsideration, which was later denied.