‘Classic case of regulated coopting regulator’

I have always admired the analytical thought that goes into Peter Wallace’s column and support his advocacies, among them the creation of a Department of Information Communication Technology. From a lofty view, unhampered by blocks to the usual horizontal view, he is able to see what would be good for the country’s development.

I agree with his view in his July 11 column that water concessionaires Maynilad and Manila Water “must be fairly recompensed” and that “the privatization of water supply to Manila has been one of the very few PPP successes.”

It is in this spirit that EO 78 issued by President Aquino seeks to protect investors from being tied down to lengthy litigation before the courts by mandating the use of alternative dispute resolution (ADR) mechanisms of negotiation, mediation, conciliation and arbitration. This conforms with the declaration of policy stated in RA 9285 (the ADR of 2004) to “encourage and actively promote the use of ADR as an important means to achieve speedy and impartial justice and declog court dockets.” As a consultant of the National Economic and Development Authority, I helped craft the implementing rules of EO 78.

However, when Wallace simply stated that the “noisy opposition” to an increase in water rates was “mindless” (the title of the column is “Mindless opposition”), I MUST strongly object to such a general denigration of all opposers.

I am one of those opposers, not because, as he wrote, I “don’t want to pay more,” but because passing on the concessionaires’ income taxes to their unsuspecting consumers is “contrary to law, morals, good customs, public order, or public policy.” This is the statutory limit set by Article 1306 of the Civil Code of the Philippines to any contract, whether between private parties, or a “sovereign contract,” as he terms it. Any contract that exceeds those limits is null and void.

The law violated is that requiring the payment by all persons—individual or corporate—of annual income taxes. It is grossly immoral for a corporation to pass on that obligation to its consumers. It is against public policy that the consumers are in effect being taxed twice—on their own income and also on the concessionaires’ income.

On the concessionaire agreement being a “sovereign contract,” let me say that this is only a contract between the Metropolitan Waterworks and Sewerage System and private parties. It was not entered into by the national government, a case where the term could be more appropriately used. But even in that case, the government, having chosen to do so, sheds its immunity from suit.

The situation that I am strongly objecting to is an instance where an agency that is in effect a regulator enters into a contract with those it regulates. And it looks like an an abdication of MWSS’ duty—a classic case of the regulated coopting the regulator!

I would like to see what provision has been made in the concessionaires’ agreement for the resolution of disputes arising therefrom.

—ALFREDO F. TADIAR,

retired UP Law professor, arbitrator