SC affirms RTC ruling on P3.8-B MRT-3 contract

Published July 20, 2020, 4:25 PM

by Rey Panaligan 

The Supreme Court (SC) has affirmed the ruling of the Quezon City Regional Trial Court (RTC) which denied the plea of Busan Universal Rail Inc. (BURI) to stop the termination of its P3.8-billion contract with the government for the maintenance of the facilities of Metro Rail Transit-3 (MRT-3).


In a decision written by Associate Justice Henri Jean Paul B. Inting, the SC ruled that under Republic Act No. 8975, trial courts are barred from issuing restraining orders or injunctions against national government projects.

RA 8975 is an “Act to Ensure the Expeditious Implementation and Completion of Government Infrastructure Projects by Prohibiting Lower Courts from Issuing Temporary Restraining Orders, Preliminary Injunctions, or Preliminary Mandatory Injunctions, Providing Penalties for Violations Thereof, and for Other Purposes.”

The SC junked BURI’s argument in its petition that the RTC has authority to issue a restraining order or other interim measures of protection in cases involving disputes that are proper for arbitration under the Government Procurement Reform Act, Republic Act No. 9184.

Under the 2016 MRT-3 contract with the Department of Transportation (DoTr), BURI – a Korean-Filipino firm – was to deliver certain number of trains, to undertake general overhauling of light rail vehicles (LRVs), to replace the signaling system, and to do additional maintenance cost for a period of three years.

BURI was paid for its initial billings.  But in 2017, Transportation Undersecretary Cesar Chavez directed the firm to explain why the contract should not be terminated with the happening of a series of serious incidents. The serious incidents were not mention in the SC decision that was made public early this month.

BURI requested a meeting. But in another letter, the firm was again asked why the contract should not be terminated for failure to deliver 17 overhauled LRVs.

With its pleas for consultation unheard, BURI notified its intention to proceed to arbitration. It then filed with the Quezon City RTC on Oct. 6, 2017 a petition for the issuance of interim measures of protection and a plea for a status quo that would stop the termination of its contract.

On Oct. 13, 2017, DoTr issued the notice to terminate the contract. On Nov. 3, 2017, it terminated its MRT3 contract with BURI.

On Dec. 11, 2017, the RTC denied BURI’s pleas in its petition with a ruling that it has no jurisdiction since the issues involved are arbitrable.  With the denial, BURI elevated the issue before the SC.

BURI told the SC that the dispute in its MRT3 contract should be settled through arbitration proceedings governed by RA 9285 or the Alternative Dispute Resolution Act of 2004.

It insisted that under RA 9285, the grant of an interim measure of protection by the proper court before the constitution of an arbitral tribunal is allowed.

In affirming the RTC’s ruling, the SC said that while RA 9285 allows trial courts to grant interim or provision relief, including preliminary injunction to parties in arbitration case prior to the constitution of the arbitral tribunal, the law must give way to a special law governing national government projects, such as RA 8975.

“With respect to other matters raised. We note that most of the parties’ factual allegations and counter-allegations already touch upon the merits of the main controversy, i.e. the propriety of respondent’s termination of the MRT3 contract,” the SC said.

“We deem it best to refrain from ruling on this issue and the matters surrounding its since they should be threshed out and litigated in the appropriate arbitration proceedings between parties,” it added.