Case Summary (G.R. No. 124293)
Background and Development of Joint Ventures
On January 27, 1977, NIDC entered into a Joint Venture Agreement (JVA) with Kawasaki to manage and operate the Subic National Shipyard, which later became PHILSECO. Under the JVA, NIDC and Kawasaki held shares in a 60%-40% ratio. A key provision of the JVA afforded the parties a right of first refusal should either party decide to sell its share in the venture, which specifically excluded transfer to certain affiliated entities of Kawasaki or the Government.
Transfer of Interests and Government Involvement
In late 1986, NIDC transferred its rights in PHILSECO to the Philippine National Bank (PNB), which subsequently transferred its interests to the National Government. In December 1986, the government formed the Committee on Privatization (COP) and the Asset Privatization Trust (APT) through Proclamation No. 50, tasking these bodies with the management and disposal of non-performing government assets, including PHILSECO.
Share Ownership Changes
By 1989, following a quasi-reorganization, the government's holdings in PHILSECO escalated to 97.41%, diminishing Kawasaki's stake to 2.59%. The APT, noting the economic value of privatizing PHILSECO, initiated the sale of 87.67% of the company's shares.
Bidding Process and Kawasaki's Response
Kawasaki, in negotiations with APT, exchanged its original right of refusal for a right to top the highest bid by 5%. On September 7, 1990, Kawasaki indicated that Philyards Holdings, Inc. would exercise this topped bid option.
Legal Protests by JG Summit Holdings
After a public bidding held on December 2, 1993, where JG Summit’s consortium was declared the highest bidder, they protested against PHI topping their bid. JG Summit raised multiple legal objections, alleging that the bidding rules violated principles of fair competition, suggested that only Kawasaki should be allowed to top the bid, and argued that the exercises of these rights were unconstitutional.
Court of Appeals' Ruling
The Court of Appeals dismissed JG Summit's petition for mandamus, holding that such a remedy was inappropriate for questioning actions already undertaken and stating that JG Summit had estopped itself by participating in the bidding with knowledge of the right to top.
Key Legal Issues and Arguments
JG Summit raised several constitutional and statutory grounds against the legality of the right to top and the purported joint venture. The issues included whether PHILSECO constituted a public utility and the legality of Kawasaki’s right of first refusal under Constitutional provisions requiring 60% ownership by Filipinos in public utilities.
Constitutional Interpretation of Capitalization Provisions
The ruling emphasized that
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Background of the Case
- On January 27, 1977, the National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. (Kawasaki) for the construction and operation of the Subic National Shipyard, later known as the Philippine Shipyard and Engineering Corporation (PHILSECO).
- The shareholding structure under the JVA was 60% for NIDC and 40% for Kawasaki, with a right of first refusal provision in case of sale, transfer, or assignment of interests.
- NIDC transferred its rights in PHILSECO to the Philippine National Bank (PNB) on November 25, 1986, which were then transferred to the National Government on February 3, 1987.
- President Corazon C. Aquino established the Committee on Privatization (COP) and the Asset Privatization Trust (APT) on December 8, 1986, to manage non-performing assets.
Developments Leading to the Dispute
- By 1989, a quasi-reorganization of PHILSECO increased the National Government's shareholdings to 97.41%, reducing Kawasaki's to 2.59%.
- In 1990, Kawasaki negotiated with APT to exchange its right of first refusal for a right to top by 5% the highest bid in the privatization of PHILSECO.
- On September 7, 1990, Kawasaki announced that Philyards Holdings, Inc. (PHI), nominated by Kawasaki, would exercise this right.
- The public bidding for 87.67% of PHILSECO shares was held on December 2, 1993, with JG Summit Holdings, Inc. (petitioner) declared