Law Summary

Introduction

This Executive Order (EO) No. 126, issued on February 28, 2013, by President Benigno S. Aquino III, repeals EO No. 855 (s. 2010) and sets forth the framework for the implementation of the Equity Value Buyout (EVBO) of the Metro Rail Transit Corporation (MRTC) under the Build-Lease-Transfer (BLT) Agreement.

Background and Context

• The Government, through the Department of Transportation and Communications (DOTC), entered into a BLT Agreement with MRTC for the construction of the MRT Line 3.
• 77% of MRTC's original shareholders divested their economic interest in MRTC via securitization of Equity Rental Payments (ERP).
• MRTC issued EVBO Notices to the Government, requiring the purchase of its interest in MRT Line 3.
• An arbitration case filed by MRTC against the Philippines in Singapore remains pending due to non-payment of ERPs.
• The Government aims to improve MRT Line 3 operations, resolve the arbitration case, and manage financial burdens arising from the BLT Agreement.

Section 1: Directing the Implementation of EVBO

• The DOF, DOTC, DBP, and LBP are tasked with implementing the EVBO of MRTC as outlined in the BLT Agreement.
• Key Components:
  • Acquisition Options:
    • (i) Purchase of all outstanding shares or (ii) all rights and interests in MRT Line 3.
  • Compromise Agreement: Execute with MRTC to dismiss the arbitration case without admitting fault.
  • Tax Settlement: Local tax liabilities to be settled by the Government.
  • BLT Agreement Termination: The existing BLT Agreement will be terminated.

Section 2: Implementation of EVBO

• The responsible agencies will determine whether to proceed with an equity or asset purchase, including cost assessments.
• The DOF is authorized to purchase and retire all outstanding securities.
• Financial, legal, and technical advisors may be engaged to assist with the purchase.

Section 3: Compromise Agreement with MRTC

• The DOTC and Office of the Solicitor General (OSG) must enter into a Compromise Agreement with MRTC to conclude the arbitration case.
• The agreement must include conditions that do not harm the interests of the Philippines.

Section 4: Settlement of Local Tax Liabilities of MRTC

• The DOF, DOTC, OSG, and Department of Budget and Management (DBM) must recommend a law-compliant mechanism for the settlement of MRTC's local tax liabilities.

Section 5: Termination of the BLT Agreement

• A review of all agreements related to the BLT Agreement is mandated to recommend termination, considering legal and financial implications.

Section 6: Funding for the EVBO

• The Secretary of Finance is authorized to raise funds through new borrowing to implement the EVBO.
• This includes executing necessary documents related to the borrowing.

Section 7: Coordination among Government Agencies and Instrumentalities

• All relevant government agencies must provide full support for the successful implementation of the EVBO.

Section 8: Separability Clause

• If any provision of this EO is found invalid or unconstitutional, other unaffected provisions remain in effect.

Section 9: Repealing Clause

• EO No. 855 (s. 2010) and all inconsistent issuances are repealed or modified accordingly.

Section 10: Effectivity Clause

• This Executive Order takes effect immediately upon signing.

Key Takeaways

• EO No. 126 officially repeals EO No. 855 and facilitates the EVBO of MRTC to resolve outstanding issues and improve MRT Line 3 operations.
• There are clear guidelines for acquisition, tax liabilities, compromise agreements, and termination of existing agreements.
• The Secretary of Finance has explicit authority to secure funding for the EVBO.
• All relevant government entities are required to cooperate for effective execution of the order.