Since 2002, the project to construct and operate Terminal 3 at the Ninoy Aquino International Airport has been the subject of numerous civil and criminal investigations into claims of violations of Philippine law by Philippine International Air Terminals Co., Inc. (“PIATCO”), which procured the concession to construct and operate Terminal 3, and Fraport AG Frankfurt Worldwide Services (“Fraport”), the primary investor in PIATCO.

In December 2002, a Senate Blue Ribbon Committee issued a report concluding that the Terminal 3 concession was void because PIATCO violated the BOT Law and illegally attempted to purchase government approvals through a consultant.

In May 2003, the Philippine Supreme Court held that the Terminal 3 concession was null and void ab initio due to PIATCO’s violations of the Constitution, the BOT Law, banking laws, and public policy.

The Department of Justice, Office of the Ombudsman, and Anti-Money Laundering Council initiated criminal investigations against PIATCO and Fraport officials, including for charges of violations of the Anti-Dummy Law and the Anti-Graft and Corrupt Practices Act.

In August 2007, an international tribunal in an arbitration before the International Centre for Settlement of Investment Disputes (“ICSID”) dismissed Fraport’s claims based on a finding that Fraport violated the Anti-Dummy Law.

In July 2010, another international tribunal in an arbitration before the International Court of Arbitration of the International Chamber of Commerce (“ICC”) similarly dismissed PIATCO’s claims due to Anti-Dummy Law violations.

Both Fraport and PIATCO challenged these international arbitral awards.

On December 23, 2010, an ICSID ad hoc Committee annulled the ICSID Award of August 2007 based on the Committee’s conclusion that the ICSID Tribunal failed to provide enough opportunity for the parties to comment upon the evidentiary record before the DOJ Special Prosecutor in the Anti-Dummy criminal proceedings.

The annulment decision does not validate any of Fraport’s claims and does not result in any liability against the Republic.  Rather the decision merely provides Fraport the opportunity to commence a new arbitration and to present its claims again.  Likewise, the Republic is entitled to present the evidence against Fraport again.

The Republic therefore retains the right to reassert all of its defenses against Fraport’s claims, including its arguments relating to Fraport’s violation of the Anti-Dummy Law and anti-corruption laws.

Should Fraport choose to refile its treaty claims, the Republic therefore will call upon Fraport to disclose the evidence of its expenditures on the Terminal and will call upon Fraport and the German Government to produce all of the evidence relating to the project seized by German prosecutors from Fraport and from the offices and homes of its officials and former officials.