Initiatives For Dialogue And Empowerment Through Alternative Legal Services v. PSALM
Initiatives for Dialogue and Empowerment Through Alternative Legal Services, Inc. (IDEALS, Inc.) v. Power Sector Assets and Liabilities Management Corporation (PSALM), G.R. No. 192088, October 9, 2012
- Procedural (Remedial Law)
- Political Law
- Civil Law
- EPIRA
- privatization
- Angat Hydro-Electric Power Plant
- PSALM
- K-Water
- right to information
- water rights
- Water Code
- Section 2 Article XII
- foreign ownership
- National Power Corporation
- MWSS
- legal standing
- mootness
- public bidding
I. Facts of the Case
IDEALS, Inc., Freedom from Debt Coalition, Akbayan, Alliance of Progressive Labor and Rep. Walden Bello filed a petition for certiorari and prohibition against PSALM, MWSS, NIA, K-Water and other bidders. They sought to permanently enjoin the sale of the Angat Hydro-Electric Power Plant (AHEPP) to Korea Water Resources Corporation (K-Water), the winning bidder in a public bidding under the EPIRA. They argued the sale violated the right to information, the constitutional and Water Code limits on foreign use of water and natural resources, the rules on co-ownership, and the EPIRA.
December 4, 1965
Presidential Proclamation No. 505 transferred administration of the Angat and other watersheds to NPC. The Angat Reservoir and Dam were built from 1964 to 1967 and became operational in 1968. They serve irrigation, Metro Manila water supply, power generation and flood control.
September 10, 1971
R.A. No. 6395 revised the NPC charter and extended its corporate life to 2036. NPC continued to exercise complete jurisdiction over the Angat Dam, Reservoir and AHEPP.
2001
R.A. No. 9136 (EPIRA) created PSALM to manage the orderly sale, disposition and privatization of NPC assets in order to liquidate NPC's obligations within PSALM's 25-year term. Sec. 47 required sale through public bidding and exempted only the Agus and Pulangui complexes and SPUG.
August 2005
PSALM commenced the privatization of the 246-MW AHEPP in Norzagaray, Bulacan, together with the Magat and Amlan plants. By December 2005, MWSS was working with PSALM through a Technical Working Group on a privatization protocol and on terms for managing and operating the Angat Dam Complex.
May 27, 2008
After PSALM sought advice in March 2008, the Government Corporate Counsel issued OGCC Opinion No. 107, s. 2008. It said PSALM was not limited to selling and could transfer the Angat facility to a government entity such as MWSS without public bidding.
August 20, 2008
The OGCC clarified that its earlier opinion was only permissive. Sale through public bidding remained PSALM's primary option, provided State water policy was not contravened.
September 2009
MWSS sought to have AHEPP excluded from privatization. NEDA replied on September 16, 2009 that there was no basis for exclusion and that MWSS lacked the technical capability to run a hydropower plant. On September 24, 2009, MWSS asked DPWH Secretary Ebdane for support, and he recommended to the President that the dam be transferred to MWSS.
December 15, 2009
PSALM's Board approved the Bidding Procedures for the AHEPP.
January 11, 12 and 13, 2010
An Invitation to Bid was published for 4 main units and 3 auxiliary units (218 MW), excluding MWSS's two auxiliary units. The sale was "as is, where is", and the buyer would operate and maintain the non-power components and might have to enter into a water protocol agreement.
April 20, 2010
Petitioners asked PSALM for documents such as the Terms of Reference and the bids. PSALM denied the request because petitioners had not submitted a Letter of Interest, Confidentiality Undertaking and Participation Fee. The Angat Water Protocol final draft was also completed that day.
April 28, 2010
PSALM, NPC and K-Water executed an Operations and Maintenance Agreement covering the non-power components of the Angat Dam, in furtherance of the Asset Purchase Agreement. Six bids were received, and K-Water's US$440,880,000 was the highest.
May 5, 2010
After post-bid evaluation, PSALM's Board approved a Notice of Award to K-Water as the highest bidder.
May 14, 2010
Petitioners sent a second letter asking for details on the winning bidder, including its profile, address and Philippine registration.
May 19, 2010
Before PSALM could answer, IDEALS, FDC, AKBAYAN, Alliance of Progressive Labor and Rep. Bello filed this petition for certiorari and prohibition with a prayer for TRO. They invoked the right to information, EPIRA's policy of widest participation, co-ownership rules, nationality limits on water rights, and the human right to water.
May 21, 2010
PSALM replied that petitioners' request had been referred to K-Water's counsel.
May 24, 2010
The Court issued a Status Quo Ante Order directing respondents to maintain the status quo and to file comments.
PSALM sought dismissal for improper certiorari, mootness, political question and lack of standing. It said the bidding was open, that only the power plant and not the dam was being sold, that NWRB retained water allocation, and that there was no co-ownership. MWSS asserted control over the dam under its Charter and cited its financial contributions. The other respondents said they were not real parties-in-interest or took no position, and First Gen asked the Court to declare the nationality requirements.
Petitioners filed a Consolidated Reply arguing the petition was not moot because no deed of sale had been executed. They cited David v. Arroyo on exceptions to mootness and reiterated their standing as citizens and taxpayers. The Court then resolved the petition, partly granting it.
II. Issues
Whether the petition was rendered moot by the issuance of the Notice of Award to K-Water.
Whether petitioners have legal standing to file the suit.
Whether PSALM violated petitioners' constitutional right to information on matters of public concern in the sale of AHEPP to K-Water.
Whether PSALM committed grave abuse of discretion in proceeding with the privatization of AHEPP through public bidding instead of transferring it to MWSS or excluding it from the sale.
Whether the sale of AHEPP to a foreign corporation, K-Water, under the EPIRA privatization violates Sec. 2, Art. XII of the 1987 Constitution.
Whether the stipulation in the APA and O&M Agreement consenting to the transfer of NPC's water rights to K-Water violates the Constitution and the Water Code.
Whether Section 6(a), Rule 23 of the IRR of the EPIRA, requiring transfer of water rights in the privatization of multi-purpose hydropower facilities, is mandatory or merely directory.
Whether the bidding conducted and the Notice of Award issued by PSALM in favor of K-Water are valid.
III. Ruling
Whether the petition was rendered moot by the issuance of the Notice of Award to K-Water.
The petition was not mooted by the Notice of Award. It also seeks to permanently stop the sale and raises grave constitutional issues, and no deed of sale had yet been executed.
How the Court reasoned
- A case is moot when it no longer presents a justiciable controversy. Courts usually decline to decide moot cases.
- The Notice of Award was only a step in the sale process. No deed of absolute sale had been executed, so the petition could still give effective relief.
- The petition sought to permanently enjoin the privatization, not just to stop the issuance of the Notice of Award.
- It raised grave constitutional issues, including the right to information and the nationality limits on natural resources, which fall within the recognized exceptions to the mootness rule.
- If the sale violated the Constitution, it is the Court's duty to annul the award and its implementation, so the case remained alive.
“PSALM's contention that the present petition had already been mooted by the issuance of the Notice of Award to K-Water is misplaced.”
Rule applied
Exceptions to the mootness doctrine (David v. Arroyo); the Court's duty to annul an unconstitutional contract award
Whether petitioners have legal standing to file the suit.
Petitioners have legal standing as citizens and taxpayers. The issues are of transcendental importance and involve the right to information on matters of public concern.
How the Court reasoned
- Legal standing requires a personal and substantial interest in the case. The Court may relax this when the issues are of transcendental importance.
- Petitioners sued as citizens and taxpayers, asserting the public's right to information about a major privatization.
- The matter concerned adequate water supply for domestic use, which is of paramount public importance.
- The sale of a major public asset also raised serious constitutional questions about natural resources.
- The Court therefore found that petitioners had the requisite standing.
“We also rule that petitioners possess the requisite legal standing in filing this suit as citizens and taxpayers.”
Rule applied
Rules on locus standi; transcendental importance doctrine; Sec. 7, Art. III, 1987 Constitution
Whether PSALM violated petitioners' constitutional right to information on matters of public concern in the sale of AHEPP to K-Water.
PSALM's referral of petitioners' request to the winning bidder's counsel was insufficient compliance and evasive. PSALM must allow petitioners access to documents on the winning bidder's company profile and legal capacity.
How the Court reasoned
- The Constitution recognizes the right of the people to information on matters of public concern, and the State has a policy of full public disclosure of transactions involving public interest.
- Information on ongoing negotiations becomes accessible once there are definite propositions by the government, subject to recognized exceptions.
- Where no enabling law exists, posting information on government websites and bulletin boards satisfies the duty to disclose. The separate duty to allow access requires a demand and must be granted.
- Petitioners made a demand in their second letter, asking for the winning bidder's profile and Philippine registration. PSALM only referred the request to K-Water's counsel.
- That response was evasive and inconsistent with EPIRA's mandate to privatize NPC assets in an open and transparent manner.
- The Court therefore directed PSALM to give petitioners access to the relevant papers.
“We find such action insufficient compliance with the constitutional requirement and inconsistent with the policy under EPIRA to implement the privatization of NPC assets in an "open and transparent" manner.”
Rule applied
Sec. 7, Art. III and Sec. 28, Art. II, 1987 Constitution; Chavez v. PEA; EPIRA policy of open and transparent bidding
Whether PSALM committed grave abuse of discretion in proceeding with the privatization of AHEPP through public bidding instead of transferring it to MWSS or excluding it from the sale.
PSALM had no discretion to exclude AHEPP from privatization or transfer it to MWSS. It committed no grave abuse of discretion in starting the sale under the EPIRA.
How the Court reasoned
- Sec. 47 of EPIRA requires privatization of NPC assets through public bidding. It exempts only the Agus and Pulangui complexes and SPUG.
- Under the maxim expressio unius est exclusio alterius (the express mention of one thing excludes others), AHEPP is not exempt.
- NPC had complete jurisdiction over the Angat Dam and AHEPP, and the operation of a hydroelectric plant is not among MWSS's statutory powers.
- COA Circular No. 89-296 on transfers of government property cannot prevail over EPIRA, a special law, and does not cover serviceable NPC assets needed to pay NPC's debts.
- The OGCC opinions were only permissive, and NEDA found no basis to exclude AHEPP.
- With no such discretion, PSALM committed no grave abuse of discretion.
“Having no such discretion in the first place, PSALM committed no grave abuse of discretion when it commenced the sale process of AHEPP pursuant to the EPIRA.”
Rule applied
Sec. 47, R.A. No. 9136 (EPIRA); expressio unius est exclusio alterius; R.A. No. 6395; R.A. No. 6234
Whether the sale of AHEPP to a foreign corporation, K-Water, under the EPIRA privatization violates Sec. 2, Art. XII of the 1987 Constitution.
The sale of the power plant to a foreign corporation does not violate Sec. 2, Art. XII. K-Water owns only the power plant and merely uses water already extracted and impounded, which is not appropriation of water. Foreign ownership of a hydropower facility is not prohibited.
How the Court reasoned
- Sec. 2, Art. XII reserves the use and enjoyment of natural resources, including water, to Filipino citizens and corporations at least 60% Filipino-owned. Under the Water Code, water rights may be granted only to qualified persons and entities.
- The dam, reservoir and watershed, which are the non-power components, remain with the State.
- Only the power plant is sold, and the water that reaches it has already been diverted, collected and impounded by the dam.
- Using such water to turn turbines is not the appropriation or utilization of natural resources that the Constitution reserves to Filipinos.
- This is consistent with DOJ Opinion No. 122 (1998) and DOJ Opinion No. 52 (2005), which allowed foreign ownership of power plants beside government-controlled dams.
- The Court therefore found that foreign ownership of a hydropower facility is not prohibited.
“Foreign ownership of a hydropower facility is not prohibited under existing laws.”
Rule applied
Sec. 2, Art. XII, 1987 Constitution; Arts. 9 and 15, Water Code (P.D. No. 1067); DOJ Opinion No. 122, s. 1998; DOJ Opinion No. 52, s. 2005
Whether the stipulation in the APA and O&M Agreement consenting to the transfer of NPC's water rights to K-Water violates the Constitution and the Water Code.
The stipulation consenting to transfer NPC's water rights to K-Water contravenes the Constitution and the Water Code. NPC must remain the holder of Water Permit No. 6512 and authorize K-Water to use the water for hydropower generation.
How the Court reasoned
- Water rights are the right to appropriate and use water. Under the Constitution and the Water Code they may be held only by Filipino citizens and qualified juridical entities.
- K-Water is a foreign corporation and so cannot hold the water permit.
- The APA and O&M Agreement stipulated NPC's consent to transfer Water Permit No. 6512 to K-Water, which would give a foreign entity water rights.
- That stipulation is invalid and must be amended.
- NPC keeps the permit while operational control and day-to-day management of AHEPP go to K-Water. NPC authorizes K-Water to use the diverted waters for hydropower generation.
- NPC also becomes a co-party with K-Water in the Water Protocol Agreement with MWSS and NIA.
“In this case, we hold that NPC shall continue to be the holder of the water permit even as the operational control and day-to-day management of the AHEPP is turned over to K-Water under the terms and conditions of their APA and O & M Agreement, whereby NPC grants authority to K-Water to utilize the waters diverted or collected in the Angat Dam for hydropower generation.”
Rule applied
Sec. 2, Art. XII, 1987 Constitution; Arts. 9, 15 and 22, Water Code (P.D. No. 1067)
Whether Section 6(a), Rule 23 of the IRR of the EPIRA, requiring transfer of water rights in the privatization of multi-purpose hydropower facilities, is mandatory or merely directory.
Section 6(a), Rule 23 of the EPIRA IRR is merely directory, not mandatory. Nothing in the EPIRA requires PSALM or NPC to transfer water rights to buyers of multi-purpose hydropower facilities.
How the Court reasoned
- An implementing rule cannot go beyond the law it implements. It must be read in harmony with the statute and the Constitution.
- The EPIRA itself does not say that water rights must be transferred to buyers of NPC's multi-purpose hydropower facilities.
- Reading the IRR provision as mandatory would require a transfer to foreign buyers that the Constitution and Water Code forbid.
- To keep the rule valid, the Court read it as merely directory, so the transfer of water rights is not an absolute condition of privatization.
- Privatization can proceed with NPC keeping the water permit and authorizing the buyer to use the water.
“Section 6 (a) of the IRR of R.A. No. 9136 insofar as it directs the transfer of water rights in the privatization of multi-purpose hydropower facilities, is thus merely directory.”
Rule applied
Rule 23, Sec. 6(a), IRR of R.A. No. 9136; Sec. 47(e) and (f), EPIRA
Whether the bidding conducted and the Notice of Award issued by PSALM in favor of K-Water are valid.
The bidding and the Notice of Award to K-Water are valid and legal. Only the stipulations on the transfer of water rights need to be corrected.
How the Court reasoned
- EPIRA requires NPC assets to be sold through open and transparent public bidding.
- PSALM published the Invitation to Bid in three national newspapers, held pre-bid conferences and stakeholder forums, and received six bids.
- K-Water submitted the highest bid, US$440,880,000, and the Board approved the Notice of Award after post-bid evaluation.
- Petitioners showed no grave abuse of discretion in the bidding process, and the only defect, the water rights stipulation, can be cured by amendment.
- The Court therefore upheld the bidding and award and lifted the Status Quo Ante Order.
Rule applied
Sec. 47, R.A. No. 9136 (EPIRA); Rule 23, IRR of EPIRA
Doctrines
A petition is not moot where it seeks to permanently enjoin an act that has not been fully consummated and raises grave constitutional issues. If the sale violates the Constitution, the Court must annul the award and its implementation.
Citizens and taxpayers have legal standing to sue on issues of transcendental importance, including the right to information on matters of public concern.
The right to information on ongoing negotiations attaches once there are definite propositions by the government. Posting on government websites and bulletin boards satisfies the duty to disclose where there is no enabling law, but the separate duty to allow access must be granted upon demand. Referring a request to the winning bidder's counsel is evasive and insufficient.
Under Sec. 47 of the EPIRA, only the Agus and Pulangui complexes and SPUG are exempt from privatization. Under expressio unius est exclusio alterius, PSALM has no discretion to exclude other NPC assets or transfer them to another agency without public bidding.
Foreign ownership of a hydropower facility is not prohibited. Using water already extracted and impounded by a dam is not an appropriation of water under the Water Code, but water rights themselves may be held only by Filipino citizens and qualified juridical entities.
Sec. 6(a), Rule 23 of the EPIRA IRR, which directs the transfer of water rights in privatizing multi-purpose hydropower facilities, is merely directory. NPC may remain the water permit holder and authorize the buyer to use the water.
Final Disposition
WHEREFORE, the petition is PARTLY GRANTED. The bidding conducted by PSALM and the Notice of Award to K-Water are declared valid and legal, and the sale of AHEPP to K-Water does not violate Sec. 2, Art. XII of the Constitution. The stipulation in the Asset Purchase Agreement and O&M Agreement consenting to the transfer of NPC's water rights to K-Water is declared contrary to the Constitution and the Water Code, and those agreements must be amended so that NPC remains the holder of Water Permit No. 6512 and authorizes K-Water to use the water for hydropower generation. NPC shall be a co-party with K-Water in the Water Protocol Agreement with MWSS and NIA. PSALM is directed to allow petitioners access to documents on the company profile and legal capacity of the winning bidder. The Status Quo Ante Order is LIFTED and SET ASIDE.
Notes
Decided En Banc, with Justice Villarama as ponente. The Court upheld the privatization but corrected the contractual stipulations on the transfer of water rights.