Date: January 14, 2019

To: Atty. Gladys Velasco

From: Amapola Bulusan
Subject: Justification for Remedies in case of Grantor’s Delay under the Draft CA

I. Remedies of the Concessionaire in case of Grantor’s Delay Event

The Concession Agreement provides that in case of Grantor’s Delay, the

concessionaire is entitled to a Project Timeline Extension and to Grantor’s
Compensation. These remedies are cumulative in nature in order to protect the
parties’ rights as provided in the agreement.

II. Justifications for the Remedies provided in the Concession Agreement

a) Project Timeline Extension is not a remedy in all cases of breach under

the Concession Agreement

The Grantor has obligations under the Concession Agreement which, in case of
breach, shall entitle the Concessionaire to Grantor’s Compensation. By the nature
of these obligations, breach thereof may cause damage to the Concessionaire
which cannot be compensated by an Extension of the Project Timeline.
Consequently, Grantor’s compensation may not be removed as a remedy under
the Concession Agreement, otherwise, it would render futile other Grantor’s
obligation provided in the Agreement.

The following are Grantor’s obligations which, in case of breach, cannot be

remedied by Project Timeline Extension:
1. Grantor grants the concessionaire the exclusive right to finance, design,
develop and undertake the Project (Section 2.2;
2. Grantor represents and warrants the following:
a. Grantor can sue and be sued in relation to its dealing with the
Concessionaire;
b. Grantor has all the requisite legal power, authority and right to
execute and deliver this Agreement, and to perform its obligation
hereunder;
c. Grantor has taken all appropriate legal and/or other required or
appropriate actions to authorize the execution, delivery, and
performance of this Agreement and any or all other agreements,
instruments or documents contemplated hereunder;
 d. This Agreement constitutes the legal, valid, direct and binding
obligations of the Grantor, enforceable against the latter in
accordance with its terms. This Agreement is in satisfactory and
proper legal form under the laws of the Republic of the Philippines
(3.2).
3. Grantor undertakes that the warranties and representations made on the
signing date shall continue and remain true and correct for the duration of
the Concession Period (Section 3.3).
4.Grantor shall cooperate and coordinate with the Concessionaire in relation
to the arrangement for its financing of the Project by assisting in the due
diligence to be conducted by the Finance Parties (Section 5.3).

b) New Civil Code

Article 1179 of the New Civil Code states that those who in the performance of
their obligations are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.

In line with this, Grantor’s Delay is defined under the Concession Agreement as
delay caused by an (a) interruption of the possession of the Project Site and/or
Project Assets, and/or reasonable access to the Project Site, regardless of the
period; (b) acts or omissions of the Grantor that results in the interruption of the
Concessionaire’s right to possession of the Project Site or any of the access roads
and related properties / sites, to the extent that the interruption of possession or
the prevention of such access materially affects the implementation of the
Project in accordance with this Agreement; or (c)failure of the Grantor to comply
with their other obligations under this Agreement.
Therefore, in any of these cases, the Grantor should be held liable for damages in
accordance with Article 1179 of the New Civil Code.

III. Other Supporting Materials

As provided in the Concession Agreement, the Grantor/Government shall be

liable in case of interruption of the possession of the Project Site and/or Project
Assets, and/or reasonable access to the Project Site, regardless of the period; (b)
acts or omissions of the Grantor that results in the interruption of the
Concessionaire’s right to possession of the Project Site or any of the access roads
and related properties / sites, to the extent that the interruption of possession or
the prevention of such access materially affects the implementation of the
Project.
The provision is supported by Generic Preferred Risk Allocation Matrix dated 2
August 2016 which states that risks arising from permits, approval, and site
preparation shall be borne by the party responsible for the delay. Also, risk arising
from the availability of the site shall be borne by the Government unless the site is
provided by the private party. In this case, the Project Site will be provided by the
PCSO, the Grantor. Therefore, any interruption of the possession or availability of
the Project Site shall be for the account of the Grantor.

Furthermore, in a handbook released by NEDA, it is stated that risk must be

allocated to the party who has the most influence over it so that such party will
bear the cost of such risk or its benefit, as the case may be (Structuring Public-
Private Partnerships 2009). Consequently, the Government/Grantor should bear
risk which they have control or strong influence (Government Guarantees:
Allocating and Valuing Risk in Privately Financed Infrastructure).

IV. References
1. Generic Preferred Risk Allocation Matrix as of August 2, 2016
Risks to be assumed solely by the Government or to be shared with Private Partner:

Type of Risk Allocation/Rationale Rationale

1. Permits, approval, site Each party shall bear the Government will file an
preparation (1.3) risk of the delay for which application for
it was responsible. Environmental
Compliance Certificate
(ECC) pre-bid since
implementing agencies
prepare the Feasibility
Study and design (in
case of solicited), but
private will have the
primary responsibility of
obtaining and
complying with the ECC,
with the help of the
Government.

Government is better
informed and positioned
so that the necessary
approval, particularly in
situations that are

2. Availability of Site (1.7)
complex or sensitive, is
secured.
Solely by the Government has a
Government unless the better understanding of
site is provided by the procedures, has special
Private Party powers of acquisition
and use of land for
infrastructure and is
usually in the best
position to manage.

Reference:
(https://ppp.gov.ph/wp-content/uploads/2017/02/GPRAM_2Aug2016.pdf)

2. Structuring Public-Private Partnerships 2009; Philippine- Australia Reform for

Economic Governance Reforms (National Development Authority and Australian
Government – AusAID)

Allocate the risk to the party best able to control the likelihood of the risk occurring
event. The risk must be allocated to the party who has the most influence over it
so that such party will bear the cost of such risk or its benefit, as the case may be
(Principle 1, page 59).

Reference:
(http://www.neda.gov.ph/wp-content/uploads/2014/01/Structuring-Public-
Private-Partnerships-PPPs-Handbook.pdf)

3. Government Guarantees: Allocating and Valuing Risk in Privately Financed

Infrastructure by Timothy C. Irwin. Washington D.C.: The World Bank. 2007

Risk should be allocated to the best party that can effectively manage such risk.
Consequently, Government should bear risk which they have control or strong
influence (pp 5-6).

Reference:
(http://siteresources.worldbank.org/INTSDNETWORK/Resources/Government_Gu
arantees.pdf)