In a media interview on 30 March 2015, Chief Regulator Joel C. Yu of the Metropolitan Waterworks Sewerage System Regulatory Office said that it recognizes the right of Maynilad Water Services, Inc. (Maynilad) to exercise its options under the Concession Agreement.
On 27 March 2015, Metro Pacific Investments Corporation and DMCI Holdings, Inc., majority owners of Maynilad disclosed in the Philippine Stock Exchange that it served the Republic of the Philippines, represented by the Department of Finance, a Notice of Arbitration and Statement of Claim. Maynilad is invoking the Letters of Undertaking which the Republic issued on 31 July 1997 and 17 March 17 2010. Paragraph 4 of the Letters of Undertaking provides that “if the Republic or any Government-owned agency shall cause MWSS or the Regulatory Office to reduce Standard Rates below the level that would otherwise be applicable in accordance with the Agreement, or to defer implementation of any increase in Standard Rates beyond the date for implementation thereof in accordance with the Agreement, the Republic shall indemnify the Concessionaire in respect of any loss to the Concessionaire occasioned by such action.”
Chief Regulator Yu said, “The Regulatory Office maintains that there is no ground to invoke the Government’s Letter of Undertaking. The prerequisites for such action are not present.”
The Republic’s Letters of Undertaking can be invoked only upon the occurrence of the following:
The Republic or any government agency causes MWSS or the Regulatory Office to reduce Standard Rates below the level that would otherwise be applicable, in accordance with the Concession Agreement; or
- The Republic or any government agency causes the MWSS and the Regulatory Office to defer the implementation of the Standard Rates.
There is no doubt that none of the foregoing has occurred. The Republic has obviously not interfered with any of the processes or mechanisms in the determination and implementation of the Standard Rates. More, neither the Republic nor any government agency has “caused” MWSS and the Regulatory Office to delay said implementation.
Lastly, Maynilad’s alleged loss revenue cannot be substantiated. The suspended implementation of the Arbitral Award does not translate to loss revenue for Maynilad because both Concessionaires are allowed to recover their investments within the remaining life of the Concession Agreement, which ends in 2037.