DOE defers to OSG on Malampaya arbitration award

By Myrna M. Velasco

The Department of Energy (DOE) will formally consign to the Office of the Solicitor General (OSG) the next legal step that the government will pursue to enforce the P146.8-billion “partial award” on the tax case that was won by the Malampaya consortium from recent international arbitration proceedings.

Energy Secretary Alfonso G. Cusi Energy Secretary Alfonso G. Cusi

“I will leave that up to our Solicitor General. Those are legal matters, so I will leave it to them,” Energy Secretary Alfonso G. Cusi told reporters, referring to Solicitor General Jose Calida.

The Malampaya consortium (comprising of Shell Philippines Exploration B.V., Chevron Malampaya LLC and state-run Philippine National Oil Company-Exploration Corporation) already filed a petition for the enforcement of the International Chamber of Commerce (ICC) ruling before the Supreme Court, hence, the next legal move awaited is that of the government.

The energy department acknowledged that it has been duly informed of the legal step taken by the Malampaya consortium at the high court, but it will need to defer subsequent legal moves to the other relevant agencies, the OSG in particular.

Often, the enforcement of ICC rulings warrant the filing of a petition before a local court – including at the level of the regional trial court, so a decision can be secured and affirmed for any final award that shall be carried out.

But in the case of the Malampaya suit, the SPEX-led consortium opted to file its petition before the Supreme Court because it already has a pending case on the same matter.

Cusi acknowledged that the impending Malampaya partial award has been re-igniting a lot of interest in the country’s upstream oil and gas sector, so the department also wants this concern sorted at the soonest possible time.

The ICC award had been based on the notices of charge served by the Commission on Audit (COA) to the Malampaya consortium due to the former’s “differing interpretation” on how tax payments of the contractor shall be settled.

The State auditor questioned the integration of the income tax payment of the contractor in the 60 percent royalty share of the Philippine government, but the Malampaya consortium invoked “sanctity of contract” and argued that the tax payment arrangement had been prescribed in their Service Contract (SC) 38 and had been based on the provision of Presidential Decree 87 or the Philippine Oil and Gas Law.

The Malampaya tax case had been among the distressing concern that caused the “anemic appetite” of investors in recent Philippine petroleum bidding rounds, but with this dilemma getting resolved, there is high expectation that investment dollar flows in the sector could finally be invigorated.