PSAA opposes cargo-handling ‘monopoly’ in Subic Bay

PSAA opposes cargo-handling ‘monopoly’ in Subic Bay
Subic Bay Freeport Zone
  •  Philippine Ship Agents Association is opposed to what it calls an impending monopoly in cargo-handling services at the Subic Bay Freeport Zone
  • The situation is due to the joint venture agreement between Harbour Centre Port Terminal Inc and Subic Bay Metropolitan Authority
  •  In a recent manifesto, PSAA argued a monopoly would harm consumers, hinder innovation, and negatively impact the maritime industry and the national economy while discouraging new market players
  •  The association called for a transparent and impartial review by government and regulators, emphasizing legal and ethical considerations

The Philippine Ship Agents Association (PSAA) is against what it says is the impending monopoly of cargo-handling services in the Subic Bay Freeport Zone by Harbour Centre Port Terminal Inc. (HCPTI).

In a recent manifesto, the association called for a review of the P6.5-billion joint venture agreement between HCPTI and Subic Bay Metropolitan Authority (SBMA) signed in 2010 to operate the Naval Supply Depot for 25 years. The JV also intended to develop other areas in Subic such as the ports/wharves of Boton, Alava, Rivera, and Bravo.

The agreement envisioned a consolidation of the break-bulk, bulk and other essential port services to achieve efficiency of port resources.

PSAA, which counts 40 ship agents as members, argued the HCPTI monopoly would harm consumers, hinder innovation, and contradict Philippine laws promoting competition. In addition, it would discourage new market players, impede business negotiations, inflate prices, and hinder the maritime industry’s growth, affecting employment and the national economy.

“This alarming development not only raises serious concerns about market competition but also infringes upon several legal and ethical principles that are fundamental to a just and fair business environment,” PSAA said.

“We firmly believe that competition in the cargo-handling services sector is essential for the growth and prosperity of the Subic Freeport Zone, the Philippine maritime industry, and the national economy,” the group said.

SC decision

The impending monopoly is an offshoot of a Supreme Court (SC) Third Division ruling in December 2021 that reversed Court of Appeals decisions in 2013 and 2014, and reinstated a 2012 Olongapo City Regional Trial Court (RTC) ruling in favor of HCPTI.

The Olongapo RTC had ordered SBMA to issue the Notice of Award (NOA) and Notice to Proceed (NTP) for the JV agreement between HCPTI and SBMA.

Over the years, the case has had many twist and turns.

After the HCPTI-SBMA JV agreement was signed, the National Economic and Development Authority (NEDA) in 2011 withdrew its endorsement of the project based on alleged violation of the 2008 Guidelines and Procedures for entering into JV agreements between government and private entities issued by the agency.

The SBMA sought a reconsideration but its Board, in a resolution, deferred action on the award of the project to HCPTI pending NEDA’s response.

During the pendency of the RTC proceedings, NEDA denied SBMA’s request for reconsideration, reiterating its withdrawal on September 30, 2011.

HCPTI filed a petition for mandamus before the Olongapo RTC due to SBMA’s failure and refusal to issue the NOA and NTP.

The Office of the Government Corporate Counsel, which initially found the agreement valid, recommended suspending issuance of the NOA due to NEDA’s withdrawal of its endorsement and pending further study of the JV agreement.

The CA in 2013 reversed the 2012 Olongapo RTC decision favoring HCPTI, and held that SBMA has no legal duty to issue the NOA and NTP because “the SBMA has the discretion to either approve or reject the recommendation to award” and that HCPTI “has no vested right to the issuance of the NOA and the NTP.”

HCPTI moved for reconsideration but this was denied by the CA in 2014.

“In sum, there is no law justifying the non-issuance of the NOA due to the withdrawal of the NEDA (National Economic and Development Authority) endorsement. Petitioner (HCPTI) has complied with all the legal requisites for the issuance of the NOA. As such, a writ of mandamus may issue to compel SBMA to perform its legal duty,” the SC, in a decision penned by Associate Justice Rodil Zalameda and only made public last May 18, said.

“It appears that there is no legal or contractual obstacle to the issuance of the NTP. Hence, the same must also be issued to petitioner in preparation for the implementation of the JVA (joint venture agreement), and so that the parties may start complying with other conditions precedent stipulated therein,” the high court added.

It reminded government entities to observe laws and rules it set governing its projects being undertaken with private entities.

“The one duty-bound to ensure observance with laws and rules should not be the ones to depart therefrom. The violation by the government of the rules itself would stain the credibility of the investment environment,” the Court said.

Call for review

PSAA called on the Philippine government and regulators to review the HCPTI and SBMA agreement “transparently and impartially, considering legal and ethical principles”.

PSAA cited Republic Act No. 8479, the Downstream Oil Industry Deregulation Act, as a model for safeguarding consumers from monopolies and encouraging competition. The law was passed to liberalize and regulate the downstream oil industry to ensure a competitive market.

PSAA suggested applying principles of RA 8479 to cargo handling—that is, open the market to competition.

“Granting a monopoly to a single entity in the cargo-handling services sector risks unjust enrichment at the expense of fair and equitable competition, which may lead to the exploitation of market power and undue financial gain for the monopolist,” PSAA said.
Further, HCPTI’s takeover may potentially lead to job losses among existing cargo handling service providers and the downstream industries that rely on their services, the association said.

Current SBMA port operators, namely Amerasia International Terminal Services, Mega Subic Terminal Services, and Subic Seaport Terminal Services, have sought clarity on the management takeover by HCPTI. As of press time, SBMA has yet to issue a statement. — Roumina Pablo