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REPUBLIC OF THE PHILIPPINES SUPREME COURT

MANILA

HERMINIO HARRY L. ROQUE, JR., JOEL R. BUTUYAN, ROGER R. RAYEL, GARY S. MALLARI, ROMEL R. BAGARES, CHRISTOPHER FRANCISCO C. BOLASTIG, DANILO M. CALDERON, MA. TERESA D. ZEPEDA, ANASTASIA D. ILUSTRE, NATIVIDAD S. PALLASIGUE, EMILY A. REALINO, LUCINIA C. DICHOS, SERGIO C. LEGASPI, JR., VICENTE C. ALBAN, CONCHITA G. GOZO, FELICIANO F. REYES, RICARDO D. LANOZO, JOSEFINA P. LANOZO, ADELAIDA P. PEN, Petitioners, Case No. ______________ -- versus -- HON. EXECUTIVE SECRETARY EDUARDO ERMITA, HONORABLE SECRETARY MARGARITO TEVES, DEPARTMENT OF FINANCE (DOF), HONORABLE SECRETARY ROMULO NERI, DEPARTMENT OF BUDGET AND MANAGEMENT (DBM), HONORABLE SECRETARY AUGUSTO SANTOS, NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY (NEDA), NORTH LUZON RAILWAYS CORPORATION, and CHINA NATIONAL MACHINERY AND EQUIPMENT CORPORATION, Respondents. x ---------------------------------------------------------x

PETITION (For Certiorari and Prohibition with Prayer for the issuance of a Writ

of Preliminary Injunction and/or Temporary Restraining Order) PETITIONERS, by counsel, most respectfully state that:

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NATURE OF THE PETITION

1. This is a Petition for Certiorari and Prohibition seeking the

nullification and immediate enjoinment of the implementation of: 1) the

Contract Agreement (“Northrail Contract”) dated December 2003 between

the North Luzon Railways Corporation (“Northrail”) and the China

National Machinery and Equipment Corporation (“CNMEC”); and 2)

Buyer Credit Loan Agreement No. BLA 04055 (“Loan Agreement”) dated

26 February 2004 between the Export-Import Bank of China (“China

EXIM Bank”) and the Government of the Republic of the Philippines

(“Government”) for having been entered into in grave abuse of discretion

amounting to lack or excess of jurisdiction by the officials involved. Said

loan agreement and contract were executed in clear violation of the

Constitution and the laws, to the great disadvantage of Filipino taxpayers

and despite their implementation resulting in the displacement of

thousands of families who dwell and derive income in the areas to be

affected.

THE PARTIES

2. Petitioners Herminio Harry L. Roque, Jr., Joel R. Butuyan,

Roger R. Rayel, Gary S. Mallari, Romel R. Bagares, Christopher Francisco

C. Bolastig are all lawyers and taxpayers who stand to suffer direct

injury as a result of the impending disbursement of public funds in order

to enforce void and illegal contracts. Petitioners are concerned that, while

the Government constantly devises ways to obtain more revenues from

taxpayers to address a fiscal deficit, it sometimes puts public funds to

unfair, inefficient, injudicious and illegal use. The Petitioner may be

served with pertinent papers and processes through the Roque and

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Butuyan Law Offices, of which they are all part, at Unit 1904 Antel

2000 Corporate Centre, 121 Valero Street, Salcedo Village, Makati

City. For easy reference, a copy of one of Petitioners’ Income Tax Return

is attached hereto as Annex “A.”

3. Petitioners Danilo M. Calderon, Ma. Teresa D. Zepeda,

Anastasia D. Ilustre, Natividad S. Pallasigue, Emily A. Realino, Lucinia C.

Dichos, Sergio C. Legaspi, Jr., Vicente C. Alban, Conchita G. Gozo,

Feliciano F. Reyes, Ricardo D. Lanozo, Josefina P. Lanozo, Adelaida P.

Pen (“Petitioners Settlers”) are taxpayers and settlers who either reside or

derive income from the areas that are set to be cleared in the

implementation of the Northrail Contract involved in this case. As

taxpayers, they are liable to suffer direct injury from the unscrupulous

spending of scarce government resources, while as settlers in the areas

affected, they stand to directly suffer material injury in terms of damaged

property, lost income, and displacement if the questioned contract is

implemented. They may be served with pertinent papers and processes

through their counsel the Roque and Butuyan Law Offices, Unit 1904

Antel 2000 Corporate Centre, 121 Valero Street, Salcedo Village,

Makati City.

4. Public Respondent Honorable Eduardo Ermita is impleaded

in his capacity as Executive Secretary of the President of the Philippines.

He may be served with pertinent papers and processes through the Office

of the Executive Secretary, Malacañan Palace, City of Manila.

5. Honorable Secretary Margarito Teves is being impleaded in

his capacity as the Secretary of Department of Finance. He may be

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served with pertinent papers and processes at the Department of Finance

Building, BSP Complex, Roxas Boulevard, Manila.

6. Public Respondent Department of Finance is the government

agency that acts as custodian and manager of all financial resources of

the government. It may be served with pertinent papers and processes at

the Department of Finance Building, BSP Complex, Roxas Boulevard,

Manila.

7. Honorable Secretary Romulo Neri is being impleaded in his

capacity as the Secretary of the Department of Budget and Management,

the government agency that authorizes the release and disbursement of

public funds. He may be served with pertinent papers and processes at

the Department of Budget and Management, General Solano Street, San

Miguel, Manila.

8. Public Respondent Department of Budget and Management

is the government agency that authorizes the release and disbursement

of public funds. It may be served with pertinent papers and processes tat

the Department of Budget and Management, General Solano Street, San

Miguel, Manila.

9. Honorable Secretary Augusto Santos is being impleaded in

his capacity as Secretary of the National Economic and Development

Authority. He may be served with pertinent papers and processes at the

National Economic and Development Authority, 12 Saint Jose Maria

Escriva Drive, Ortigas Center, Pasig City.

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10. Public Respondent National Economic and Development

Authority is the primary agency tasked with formulating and

implementing social and economic development policies including

recommendations on priority infrastructure projects. It may be served

with pertinent papers and processes at 12 Saint Jose Maria Escriva

Drive, Ortigas Center, Pasig City.

11. Private Respondent North Luzon Railways Corporation

(“Northrail”) is a corporation organized and existing under the laws of the

Philippines. It may be served with papers and other pertinent processes

at its principal office address at the BCDA Corporate Center, Gozar

corner Lucas Streets, Villamor Air Base, Pasay City.

12. Private Respondent China National Machinery and

Equipment Corporation (“CNMEC”) is a corporation purportedly

organized and existing under the laws of the People’s Republic of China

(“PROC”), with principal office address at 46 Sanlihe Road, West District,

Beijing, China. It may be served with papers and other pertinent

processes through its agents Mr. Ren Hongbin and/or Jibsen

International Trading Corporation, 12th Floor, Sage House, 110 Herrera

Street, Legaspi Village, Makati City.

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STATEMENT OF FACTS

13. On December 30, 2003, a Contract Agreement (“Northrail

Contract”) was executed between North Luzon Railways Corporation

(“Northrail”), a Philippine government owned and controlled corporation,

and the China National Machinery & Equipment Corporation (“CNMEC”),

a corporation purportedly organized and created under the laws of

China. The contract involved Northrail employing CNMEC as prime

contractor for the construction of railways from Caloocan City to Malolos,

Bulacan (Section I, Phase I of Philippine North Luzon Railways Project).

14. On February 26, 2004, a Buyer Credit Loan Agreement

(“Loan Agreement”) was executed between the Export-Import Bank of

China and the Government of the Republic of the Philippines. Among

other things, the said Loan Agreement provided that China EXIM Bank,

as the lender, will extend Four Hundred Million US Dollars

(US$400,000,000.00) in loans called Preferential Buyer’s Credit, to the

Government of the Republic of the Philippines. The loan will be for the

financing of the construction of the Northrail Project Section I, Phase I.

The Loan Agreement also mandated that CNMEC will act as the Prime

Contractor for the project.

15. Further documents reveal that the total project cost is Five

Hundred and Three Million US Dollars (US$503,000,000.00), of which

One Hundred Seven Million US Dollars (US$107,000,000.00) will be

provided as counterpart funds by the Philippine Government, through

the Northrail.

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16. The Northrail Contract and the Loan Agreement however

appear to be illegal and void for not having complied with the following

laws:

1) REPUBLIC ACT NO. 9184; 2) THE GOVERNMENT AUDITING CODE;

3) THE ADMINISTRATIVE CODE OF 1987

4) R.A. NO. 4566 OR THE CONTRACTOR’S LICENSE

LAW; and

5) THE PHILIPPINE CONSTITUTION.

In particular, the Northrail Contract was awarded without compliance

with a competitive bidding process. It is not supported with a proper

certification of availability of funds and proof of CNMEC’s license to act

as a contractor either. And the Loan Ageement does not appear to have

had prior concurrence of the Monetary Board, in violation of the

Constitution. The instruments are therefore invalid and should not be

implemented, nor should they have any effects.

17. Regardless of their invalidity, billions of pesos in public

funds will be spent by the government pursuant to these instruments in

the implementation of the Northrail project. These expenditures

constitute illegal disbursements of public funds by government officials

which should be corrected at the earliest possible time to avoid further

unnecessary bleeding of government funds. The wasted funds will

ultimately be shouldered by an already weary public who will later have

to pay these through more taxes.

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18. Moreover, Petitioners Settlers all either reside or derive

income from the project site in Bulacan which is to be cleared in the

implementation of the Northrail Contract involved in this case. They have

all peacefully existed on the land on which they have lived and worked

for more than twenty years now and have a legal right to stay in said

land and continue their livelihood until they are legally and validly

relocated. They therefore stand to suffer direct material injury in terms of

damaged property and lost income, and irreparable injury in the form of

illegal displacement due to the implementation of the questioned

contract. The implementation of the Northrail Contract, a void contract,

will result in the demolition of their homes and their unjust dislocation

and deprivation of livelihood.

19. Petitioners requested certified true copies of the Northrail

Contract and the Loan Agreement from both Northrail and the Export-

Import Bank of China, but their reasonable request for the production of

certified true copies were denied by said companies. Petitioners therefore

attach copies of the Northrail Contract and the Loan Agreement hereto as

Annexes “B” and “C.” Petitioners also attach proof of their efforts at

acquiring said certified true copies hereto as Annex “D.” As regards the

fact that the total project cost is Five Hundred and Three Million US

Dollars (US$503,000,000.00), this is contained in a letter dated January

6, 2004 by Socioeconomic Planning Secretary Romulo L. Neri to Jose L.

Cortes, President of Northrail, which letter is attached hereto as Annex

“E.”

20. On 29 September 2005, the Senate continued its

investigation into the Northrail Agreements and invited resource persons

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from the University of the Philippines Law Center to present their

findings regarding the validity of the agreements. Public Respondents

were also invited to comment on said findings, but they refused to appear

on orders of the President, who earlier issued Executive Order No. 464,

prohibiting Cabinet officials from appearing in Senate investigations

without prior clearance from the Chief Executive. Thus, Petitioners are

compelled to air their grievances through this Petition, which is based

primarily on the findings of the University of the Philippines Law Center

that the Northrail Agreements are illegal, unconstitutional and void.

21. Meanwhile, Respondents have begun the implementation of

the Northrail Contract and Loan Agreement and have commenced the

Northrail Project, thereby opening the channels of illegal disbursements

in millions of pesos and threatening to immediately cause the demolition

of Petitioner Settlers’ homes. Hence, Petitioners have no other recourse in

law to prevent such illegal acts but to file the instant Petition.

JURISDICTION OF THE SUPREME COURT

22. Petitioners humbly beseech the Honorable Court to take

cognizance of the instant case, invoking the Court’s power to set aside

rules of procedure in assuming jurisdiction over matters of paramount

public interest and when issues presented are of transcendental

importance to the public. The Court, as the branch constitutionally

tasked “to settle actual controversies involving rights which are legally

demandable and enforceable, and to determine whether or not there has

been a grave abuse of discretion amounting to lack or excess of

jurisdiction on the part of any branch or instrumentality of the

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Government,” has historically and heroically performed this

constitutional mandate by going beyond procedural restrictions in order

to serve a higher public purpose. Such is the situation being presented

by the Petitioners in the instant case.

23. In Chavez vs. PCGG,1 the Court upheld the right of a citizen

to bring a taxpayer's suit on matters of transcendental importance to the

public, especially when the matter involves the recovery of the ill-gotten

wealth of the Marcoses. In Chavez vs. PEA,2 the Court recognized a

taxpayer’s right to bring suit to enforce the public’s right to information

and to stop the government from alienating public land in violation of the

Constitution.

24. In the landmark Francisco vs. House of Representatives,3 the

Court cited numerous case in the past where the court “accorded

standing to taxpayers, voters, concerned citizens, legislators in cases

involving paramount public interest and transcendental importance,”

and held that “procedural matters are subordinate to the need to

determine whether or not the other branches of the government have

kept themselves within the limits of the Constitution and the laws and

that they have not abused the discretion given to them.”4

25. In addition, the court has already held that in the case of a

taxpayer, he is allowed to sue where there is a claim that public funds

are illegally disbursed, or that public money is being deflected to any

1 Chavez v. PCGG, 299 SCRA 744 (1998). 2 G.R. No. 133250, July 9, 2002. 3 G.R. No. 160261, November 10, 2003. 4 Citing Kilosbayan, Inc. v. Morato, 250 SCRA 130 (1995), Tatad v. Secretary of the Department of Energy, 281 SCRA 330 (1997), Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, 163 SCRA 371, 378 (1988).

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improper purpose, or that there is a wastage of public funds through the

enforcement of an invalid or unconstitutional law.5 In the discussion that

follows, the Petitioners will establish that such is the situation in the

instant case.

26. Petitioners are also constrained to air their grievance and

seek relief with this Honorable Court because of the provisions of

Republic Act No. 8975, also known as “An Act to Ensure the Expeditious

Implementation and Completion of Government Infrastructure Projects

by Prohibiting Lower Courts from Issuing Temporary Restraining Orders,

Preliminary Injunctions or Preliminary Mandatory Injunctions.” The said

Act, particularly Section 3 thereof, makes exclusive to the Supreme

Court the issuance of temporary restraining orders, preliminary

injunctions or preliminary mandatory injunctions on government

infrastructure projects, which relief are being prayed for in the instant

case.6

5 Del Mar v. PAGCOR 346 SCRA 485, 501 (2000) citing Kilosbayan, Inc., et.al. v. Morato, 250 SCRA 130 (1995); Dumlao v. COMELEC, 95 SCRA 392 (1980); Sanidad v. Comelec, 73 SCRA 333 (1976); Philconsa v. Mathay, 18 SCRA 300 (1966); Pascual v. Secretary of Public Works, 110 Phil 331 (1960); Vide Gonzales v. Narvasa, 337 SCRA 733 (2000); Pelaez v. Auditor General, 15 SCRA 569 (1965); Philconsa v. Gimenez, 15 SCRA 479 (1965); Iloilo Palay & Corn Planters Association v. Feliciano, 13 SCRA 377 (1965). 6 Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. -No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private, acting under the government's direction, to restrain, prohibit or compel the following acts:

(a) Acquisition, clearance and development of the right-of-way and/or site or location of any national government project; (b) Bidding or awarding of contract/project of the national government as defined under Section 2 hereof; (c) Commencement, prosecution, execution, implementation, operation of any such contract or project; (d) Termination or rescission of any such contract/project; and (e) The undertaking or authorization of any other lawful activity necessary for such contract/project.

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ISSUES

I. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR

HAVING BEEN AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION OF THE PROVISIONS OF REPUBLIC ACT NO. 9184;

II. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR

FAILURE TO COMPLY WITH THE PROVISIONS OF THE GOVERNMENT AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987;

III. WHETHER OR NOT THE NORTHRAIL CONTRACT IS VOID FOR

CNMEC’S FAILURE TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S LICENSE LAW;”

IV. WHETHER OR NOT THE LOAN AGREEMENT (BCLA No. BLA

04055) IS VOID AB INITIO; V. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE

ISSUANCE OF A WRIT OF CERTIORARI AND PROHIBITION TO DECLARE AS NULL AND VOID THE NORTHRAIL AGREEMENTS AND TO PERMANENTLY PROHIBIT THE IMPLEMENTATION OF THE SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE;

VI. WHETHER OR NOT PETITIONERS ARE ENTITLED TO A

PRELIMINARY INJUNCTION AND/OR A TEMPORARY RESTRAINING ORDER IMMEDIATELY ENJOINING THE IMPLE-MENTATION OF THE NORTHRAIL CONTRACT AND THE LOAN AGREEMENT AND THE DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE, DURING THE PENDENCY OF THIS CASE.

ARGUMENTS

I. THE NORTHRAIL CONTRACT IS VOID FOR HAVING BEEN

AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION OF THE PROVISIONS OF REPUBLIC ACT NO. 9184;

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that the applicant was not entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice to any liability that the guilty party may incur under existing laws.

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II. THE NORTHRAIL CONTRACT IS VOID FOR FAILURE TO

COMPLY WITH THE PROVISIONS OF THE GOVERNMENT AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987;

III. THE NORTHRAIL CONTRACT IS VOID FOR CNMEC’S FAILURE

TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S LICENSE LAW;”

IV. THE LOAN AGREEMENT (BCLA No. BLA 04055) IS VOID AB

INITIO; V. PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT OF

CERTIORARI AND PROHIBITION TO DECLARE AS NULL AND VOID THE NORTHRAIL AGREEMENTS AND TO PERMANENTLY PROHIBIT THE IMPLEMENTATION OF THE SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE;

VI. PETITIONERS ARE ENTITLED TO A PRELIMINARY INJUNCTION

AND/OR A TEMPORARY RESTRAINING ORDER IMMEDIATELY ENJOINING THE IMPLEMENTATION OF THE NORTHRAIL CONTRACT AND THE LOAN AGREEMENT AND THE DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE, DURING THE PENDENCY OF THIS CASE.

DISCUSSION

I. THE NORTHRAIL CONTRACT IS VOID FOR HAVING BEEN AWARDED WITHOUT COMPETITIVE BIDDING, IN VIOLATION OF THE PROVISIONS OF REPUBLIC ACT NO. 9184.

27. The Northrail Contract was awarded to CNMEC without

competitive bidding, in violation of the provisions of Republic Act No.

9184, otherwise known as the “Government Procurement Reform Act,”

particularly Section 10 thereof, to wit:

“Sec. 10. Competitive Bidding.- All Procurement shall be done through Competitive Bidding, except as provided for in Article XVI of this Act.”

28. Under Section 4 of the Act, the law covers procurement of

infrastructure projects, described under Section 5(k) as including “the

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construction, improvement, rehabilitation, demolition, repair, restoration

or maintenance of roads and bridges, railways, airports, seaports, xxxx.”

29. From this alone, the said contract is already illegal and void

ab initio.7

The Contract was not awarded pursuant to any alternative method of procurement that falls under the exceptions provided in R.A. No. 9184.

30. The Northrail Contract purports to have been awarded

pursuant to a negotiated procurement, which is an alternative method of

procurement provided for in Section 48 of R.A. No. 9184.8 This, however,

7 Caltex v. Delgado Bros., 96 Phil. 368. Likewise, the Civil Code says: Art. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law." (Emphasis supplied.)

8 (R.A. No. 9184) Sec. 48. Alternative Methods. - Subject to the prior approval of the Head of the Procuring Entity or his duly authorized representative, and whenever justified by the conditions provided in this Act, the Procuring Entity may, in order to promote economy and efficiency, resort to any of the following alternative methods of Procurement:

a. Limited Source Bidding, otherwise known as Selective Bidding - a method of Procurement that involves direct invitation to bid by the Procuring Entity from a set of pre-selected suppliers or consultants with known experience and proven capability relative to the requirements of a particular contract; b. Direct Contracting, otherwise known as Single Source Procurement - a method of Procurement that does not require elaborate Bidding Documents because the supplier is simply asked to submit a price quotation or a pro-forma voice together with the conditions of sale, which offer may be accepted immediately or after some negotiations; c. Repeat Order. - a method of Procurement that involves a direct Procurement of Goods from the previous winning bidder, whenever there is a need to replenish Goods procured under a contract previously awarded through Competitive Bidding; d. Shopping - a method of Procurement whereby the Procuring Entity simply requests for the submission of price quotations for readily available off-the-shelf Goods or ordinary/regular equipment to be procured directly from suppliers of known qualification; or e. Negotiated Procurement - a method of Procurement that may be resorted under the extraordinary circumstances provided for in Section 53 of this Act and other instances that shall be specified in the IRR, whereby the Procuring Entity

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is a defective contention because none of the conditions for a negotiated

procurement, provided for in Section 53 of the law, exists in this case.9

31. Even the mere circumstance that the Northrail project is

financed through a “tied loan” from EXIM Bank under an arrangement

which requires EXIM Bank to nominate/select the contractor for the

project to be financed by the loan does not help the Respondents. Such

an arrangement is by no means among the alternative methods of

procurement enumerated under Section 48 of R.A. No. 9184, which

allows exceptions to the rule on public bidding; meanwhile, the law

contemplates no other alternative method of procurement as an

exception to the competitive public bidding requirement; hence, the time

honored doctrine of expressio unius est exclusio alterius applies.

directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant.

In all instances, the Procuring Entity shall ensure that the most advantageous price for the government is obtained. 9 (R.A. No. 9184) Sec. 53. Negotiated Procurement. - Negotiated Procurement shall be allowed only in the following instances:

a. In case of two (2) failed bidding as provided in Section 35 hereof; b. In case of imminent danger to life or property during a state of calamity, or when time is of the essence arising from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities; c. Take-over of contracts, which have been rescinded or terminated for causes provided for in the contract and existing laws, where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities; d. Where the subject contract is adjacent or contiguous to an on-going infrastructure project, as defined in the IRR: Provided, however, That the original contract is the result of a Competitive Bidding; the subject contract to be negotiated has similar or related scopes of work; it is within the contracting capacity of the contractor; the contractor uses the same prices or lower unit prices as in the original contract less mobilization cost; the amount involved does not exceed the amount of the ongoing project; and, the contractor has no negative slippage: Provided, further, That negotiations for the procurement are commenced before the expiry of the original contract. Wherever applicable, the principle shall also govern consultancy contract, where the consultants have unique experience and expertise to deliver the required service; or, e. Subject to the guidelines specified in the IRR, purchases of Goods from another agency of the government, such as the Procurement Service of the DBM, which is tasked with a centralized procurement of commonly used Goods for the government in accordance with Letters of Instruction No. 755 and Executive Order No. 359, series of 1989.

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None of the agreements is a treaty.

32. Both the Northrail Contract and the Loan Agreement

(collectively the “Northrail Agreements”) are not treaties, international

agreements, or executive agreements, that fall under the exempting

proviso of Section 4 of R.A. No. 9184, which mandates their effectivity

although they run contrary to some provisions of the said law.

33. First of all, Article 2(a) of the Vienna Convention of the Law

of Treaties (“Vienna Convention”), defines a treaty as an international

agreement concluded between states and governed by international

law, to wit:

“[T]reaty means an international agreement concluded

between States in written form and governed by international law, whether embodied in a single instrument or two or more related instruments and whatever its particular designation[.]”

By the legal standards set out in this provision, neither of the

agreements in question qualifies as a treaty, because neither agreement

is between states and because neither is governed by international law.

34. The Northrail Contract is an agreement between a

government corporation (Northrail) created under the laws of the

Republic of the Philippines, which has a separate juridical personality,

and a state-corporation created under the laws of the People’s Republic

of China, which also has a juridical personality of its own; while the Loan

Agreement is an agreement between the Philippine Government and

China EXIM Bank, a banking agency of the People’s Republic of China,

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which also has its own juridical personality. None of the contracts

therefore is between states.

35. Except for the Government as a party to the Loan

Agreement, all parties to the Northrail Agreements are juridical persons

under the national or internal law of either the Philippines or the PROC.

They are not subjects or persons of international law. They do not have

the competence to create international obligations, nor do they have the

capacity to conclude treaties. They are not states. This being so, none of

the agreements in question can be considered a treaty.

36. It must be added that agreements concluded by states with

individual or juridical persons are excluded from the coverage of the

Vienna Convention. And, having been concluded by entities which are

not international organizations under international law, the Northrail

Agreements are likewise outside the purview of the Vienna Convention on

the Law of Treaties between states and international organizations or

between international organizations.

37. Moreover, the Northrail Agreements themselves provide that

they are not governed by international law, but by the national laws of

either the Republic of the Philippines and of the PROC. Clearly, the

Northrail Contract states that:10

“The Contract shall in all respects be read and

construed in accordance with the laws of the Philippines.”

10 Please see Clause 2.

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And the Loan Agreement likewise requires that:11

“This Agreement shall be governed by and construed

in accordance with the laws of the People’s Republic of China.”

Hence, neither constitutes an agreement governed by international law

within the purview of the Vienna Convention.

None of the agreements is an executive agreement 38. None of the agreements can be considered an executive

agreement either, which is defined in Executive Order No. 459 (dated

November 25, 1997), Providing for the Guidelines in the Negotiation of

International Agreements and its Ratification, as “similar to treaties

except that they do not require legislative concurrence.” Said definition

only relaxes the requirement of Senate concurrence which is required by

the Constitution, but leaves in place the requirement that it be an

international agreement entered into by the Philippines, i.e., that it be

concluded between states in written form and governed by international

law, as defined by the Vienna Convention.

II. THE NORTHRAIL CONTRACT IS VOID FOR FAILURE TO

COMPLY WITH THE PROVISIONS OF THE GOVERNMENT AUDITING CODE AND THE ADMINISTRATIVE CODE OF 1987;

39. Both the Government Auditing Code of the Philippines

(Presidential Decree No. 1445) and the Administrative Code of 1987

(Executive Order No. 292) specifically proscribe the making of any

contract by any government agency involving the expenditure of public

11 Please see Section 15.1.

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funds unless there is an appropriation therefor and a proper certification

thereof by the proper accounting official which should be attached to the

proposed contract. A proposed government contract involving the

expenditure of public funds that is unsupported by a certificate as to the

existence of appropriation and the availability of the necessary funds,

which is to be attached as an integral part of the proposed contract, is

fatally defective and in the words of the Supreme Court, “suffers the vice

of nullity.” Indeed, “fund availability is, as it has always been, an

indispensable prerequisite to the execution of any government contract

involving the expenditure of public funds by all government agencies at

all levels.”12

40. From an examination of the records, it is also obvious that

the Northrail Contract was executed prior to the execution of the Loan

Agreement. The conclusion to be drawn, therefore, is that the Contract

was perfected while it was still unfunded, thus it is contrary to the

above-discussed law.

41. As the Northrail Contract is not supported by the required

certificate as to the availability of funds, and because it appears to have

been executed with no funds to support it, it is illegal and void from the

beginning.

III. THE NORTHRAIL CONTRACT IS VOID FOR CNMEC’S FAILURE TO COMPLY WITH R.A. NO. 4566 OR THE “CONTRACTOR’S LICENSE LAW.”

12 Osmeña vs. CA 230 SCRA 585.

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42. R.A. No. 4566 requires that any prospective contractor for

infrastructure projects must obtain a Contractor’s License before it can

engage in business as a contractor in the Philippines. In particular,

Sections 20 and 23 thereof provide that:

“Section 20. Qualifications of applicants for contractors' licenses. The Board shall require an applicant to show at least two years of experience in the construction industry, and knowledge of the building, safety, health and lien laws of the Republic of the Philippines and the rudimentary administrative principles of the contracting business as the Board deems necessary for the safety of the contracting business of the pubic.

“For the purpose of this section, a partnership, corporation, or any other organization may qualify through its responsible managing officer appearing personally before the Board who shall prove that he is a bona fide responsible officer of such firm and that he exercises or is in a position to exercise authority over the contracting business of his principal or employer in the following manner: (1) to make technical and administrative decisions; and, (2) to hire, superintend, promote, transfer, lay off, discipline or discharge employees.

(xxx)

“Section 23. Issuance of licenses. Upon the payment of the corresponding fee and the filing of the application, and after examination and investigation as may be required, the Board within fifteen days after the approval of the application shall issue a license to the applicant permitting him to engage in business as a contractor under the terms of this Act for the remaining part of the fiscal year.”

43. A Special License is required of a foreign contractor who

wishes to participate in a foreign-funded project. One of the requirements

for the grant of a Special License is that the foreign contractor must

prove that it is a bona fide contractor in its home country. The

information obtained by Petitioners is that CNMEC’s name in China is

actually China National Machinery and Equipment Import and Export

Corporation, which means that it is a mere trading company with no

prior venture into railway construction, both at home and abroad.

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44. CNMEC cannot therefore engage as a contractor in the

Philippines and the Northrail Contract is therefore void for failure to

comply with R.A. 4566.

IV. THE LOAN AGREEMENT (BCLA No. BLA 04055) IS VOID AB

INITIO. 45. Article VII, Section 20 of the Constitution provides:

Section 20. The President may contract or guarantee foreign loans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. The Monetary Board shall, within thirty days from the end of every quarter of the calendar year, submit to the Congress a complete report of its decisions on applications for loans to be contracted or guaranteed by the Government or government-owned and controlled corporations which would have the effect of increasing the foreign debt, and containing other matters as may be provided by law. (Emphasis supplied.)

46. The Loan Agreement as it stands, and its schedules and

annexes, contains no certification that it has been approved or concurred

to by the Monetary Board prior to its execution, a requirement that is

unequivocally made in the above-quoted provision of the Constitution.

This flaw renders the agreement not only illegal but unconstitutional,

which renders it and other contracts flowing from it, such as the

Northrail Contract, null and void.

V. PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A WRIT

OF CERTIORARI AND PROHIBITION TO DECLARE AS NULL AND VOID THE NORTHRAIL AGREEMENTS AND TO PERMANENTLY PROHIBIT THE IMPLEMENTATION OF THE

22

SAME AND ANY DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE.

47. The execution of the Northrail Agreements with grave abuse

of discretion amounting to lack or excess of jurisdiction and in clear

violation of the Constitution and the law, makes the same patently void

ab initio. The public and private Respondents have commenced work on

the Contract, some of which include the forced removal of settlers from

the implementation areas. This too constitutes grave abuse of

discretion amounting to lack or excess of jurisdiction on the part of

Respondents.

48. The continued implementation of the Northrail Agreements

stands to cause grave and irreparable injury and damage to the

Government and taxpayers as it will surely entail the expenditure of a

huge amount of public funds for the execution of illegal and

unconstitutional acts. In a climate where the Government imposes

austerity measures and new taxes on the people to address a budget

deficit, the expenditure of public money on contracts that are clearly

illegal, unconstitutional and unfavorable to the Government is

particularly unconscionable.

49. A failure to nullify and prohibit the Northrail Agreements

also stands to cause grave and irreparable injury to law-abiding citizens

of the country such as Petitioners through the erosion of Rule of Law and

the weakening of reformative laws such as R.A. No. 9184.

50. The Petitioners as informal settlers in the project areas of

implementation will also suffer grave and irreparable material injury in

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terms of lost homes, livelihoods and other property with the Northrail

Contract’s implementation.

51. Therefore, it is clear that Respondents are implementing the

patently void Northrail Agreements in violation of the Petitioners’ rights

as taxpayers and as law-abiding citizens, thereby causing them grave

and irreparable injury. Unless Respondents are prohibited from

continuing their acts, the taxpayers’ rights and the Republic’s welfare

will be severely and permanently damaged. Hence, a Writ of Prohibition

should immediately be issued to prohibit public and private Respondents

from proceeding with the implementation of the questioned Northrail

Agreements. The Writ should also prohibit the public Respondents from

authorizing the release of public funds for the implementation of the

agreements.

VI. PETITIONERS ARE ENTITLED TO A PRELIMINARY

INJUNCTION AND/OR A TEMPORARY RESTRAINING ORDER IMMEDIATELY ENJOINING THE IMPLEMENTATION OF THE NORTHRAIL CONTRACT AND THE LOAN AGREEMENT AND THE DISBURSEMENT OF PUBLIC FUNDS FOR SUCH PURPOSE, DURING THE PENDENCY OF THIS CASE.

52. Petitioners likewise pray for the immediate issuance of a

Temporary Restraining Order enjoining public and private Respondents

from implementing the Northrail Agreements. Such restraining order

should also enjoin the disbursement of public funds by the public

Respondents for the purpose.

53. The Petitioners as informal settlers in the project areas of

implementation will also suffer grave and irreparable material injury in

24

terms of lost homes, livelihoods and other property with the Northrail

Contract’s implementation.

54. Already, work on the Northrail Contract has commenced and

operational expenses amounting to millions of pesos in public money are

already being spent for its implementation.

55. Unless injunctive relief is immediately afforded to restrain

the disbursement of public funds and the continued implementation of

the Northrail Agreements, Petitioner’s rights, and the people’s welfare,

will be severely and permanently damaged and the acts of the public and

private Respondents will render any judgment that may be issued in this

case ineffectual. It is therefore respectfully prayed for that a Preliminary

Injunction and/or Temporary Restraining Order be immediately issued in

this case.

APPLICATION FOR PRELIMINARY INJUNCTION

AND TEMPORARY RESTRAINING ORDER

56. As previously stated, the continued implementation of the

Northrail Agreements stands to cause grave and irreparable injury and

damage to the Government and taxpayers as it will surely entail the

expenditure of a huge amount of public funds for the execution of illegal

and unconstitutional acts. It is unconscionable that the Government

asks the people to observe austerity measures and demands from them

new taxes while it spends public money on contracts that are clearly

illegal, unconstitutional and unfavorable to the Government.

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57. A failure to stop the implementation of the Northrail

Agreements also stands to cause grave and irreparable injury to law-

abiding citizens of the country such as Petitioners through the erosion of

Rule of Law and the weakening of reformative laws such as R.A. No.

9184.

58. The Petitioners as informal settlers in the project areas of

implementation will also suffer grave and irreparable material injury in

terms of lost homes, livelihoods and other property with the Northrail

Contract’s implementation.

59. Already, work on the Northrail Contract has commenced and

operational expenses amounting to millions of pesos in public money are

already being spent for its implementation. Moreover, said

implementation threatens to immediately cause the demolition of

Petitioner Settlers homes and unlawfully dislocate them and deprive

them of their source of livelihood. Hence, Petitioners will suffer

irreparable damage unless injunctive relief is had.

60. Unless injunctive relief is immediately afforded to restrain

the disbursement of public funds and the continued implementation of

the Northrail Agreements, Petitioner’s rights, and the people’s welfare,

will be severely and permanently damaged and the acts of the public and

private Respondents will render any judgment that may be issued in this

case ineffectual. It is therefore respectfully prayed for that a Preliminary

Injunction and/or Temporary Restraining Order be immediately issued in

this case.

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61. Hence, public and private Respondents should be stopped

through the issuance of a Writ of Preliminary Injunction enjoining them

from the implementation of the Northrail Contract and the Loan

Agreement. Public Respondents should also be enjoined from disbursing

public funds for such purpose.

62. In this connection, Petitioners are willing and able to execute

a bond in such reasonable amount to be fixed by the Court, to the effect

that the Petitioners/Applicants will pay to such party or person all

damages which it may sustain by reason of the injunction or temporary

restraining order if the court should finally decide that the applicant was

not entitled thereto.

63. Petitioners likewise pray for the immediate issuance of a

Temporary Restraining Order enjoining Respondents from proceeding

with the implementation of the Northrail Contract and the Loan

Agreement. Public Respondents should also be enjoined from disbursing

public funds for such purpose.

PRAYERS

WHEREFORE, PREMISES CONSIDERED, it is hereby most

respectfully prayed for that this Honorable Court issue:

1) A WRIT OF CERTIORARI REVERSING AND SETTING ASIDE THE NORTHRAIL CONTRACT AND LOAN AGREEMENT BE ISSUED, for having been executed in grave abuse of discretion amounting to lack or excess of jurisdiction;

27

2) AN ORDER DECLARING NULL AND VOID AB INITIO BOTH THE NORTHRAIL CONTRACT AND LOAN AGREEMENT, for being violative of the Constitution and the laws;

3) A WRIT OF PROHIBITION PERPETUALLY

PROHIBITING THE PUBLIC AND PRIVATE RESPONDENTS FROM IMPLEMENTING THE NORTHRAIL CONTRACT AND LOAN AGREEMENT AND FROM DISBURSING PUBLIC FUNDS FOR SUCH PURPOSE;

4) A WRIT OF PRELIMINARY INJUNCTION

AND/OR TEMPORARY RESTRAINING ORDER IMMEDIATELY ENJOINING THE IMPLEMENTATION OF THE NORTHRAIL CONTRACT AND LOAN AGREEMENT, DURING THE PENDENCY OF THIS CASE.

Respectfully submitted.

Makati City for Manila. 11 October 2005.

ROQUE & BUTUYAN LAW OFFICES Unit 1904, Antel 2000 Corporate Centre

121 Valero St., Salcedo Village Makati City

28

ROQUE & BUTUYAN LAW OFFICES Unit 1904, Antel 2000 Corporate Centre

121 Valero St., Salcedo Village Makati City

By:

H. HARRY L. ROQUE

PTR No. 0008545, January 7, 2005, Makati IBP No. 499912, January 25, 2000, Lifetime, Makati

Roll No. 36976

JOEL RUIZ BUTUYAN PTR No. 0008546, January 7, 2005, Makati

IBP No. 500459, January 25, 2000, Lifetime, Q.C. Roll No. 36911

ALFREDO C. LIGON, III PTR No. 0009175, January 7, 2004, Makati IBP No. 638441, January 15, 2005, Makati

Roll No. 47533

GARY S. MALLARI

PTR No. 0009170, January 7, 2005, Makati IBP No. 638439, January 14, 2005, Q.C.

Roll No. 48459

29

COPY FURNISHED: Honorable Eduardo Ermita Office of the Executive Secretary Malacañan Palace, City of Manila Honorable Secretary Margarito Teves Office of the Secretary Department of Finance Building BSP Complex, Roxas Boulevard Manila Department of Finance Department of Finance Building BSP Complex, Roxas Boulevard Manila

Honorable Secretary Romulo Office of the Secretary Department of Budget and Management General Solano Street, San Miguel Manila.

Department of Budget and Management General Solano Street, San Miguel Manila. Honorable Secretary Augusto Santos Office of the Secretary National Development Authority 12 Saint Jose Maria Escriva Drive Ortigas Center, Pasig City

National Development Authority 12 Saint Jose Maria Escriva Drive Ortigas Center, Pasig City

North Luzon Railways Corporation BCDA Corporate Center Gozar corner Lucas Streets Villamor Air Base, Pasay City

China National Machinery and Equipment Corporation c/o Mr. Ren Hongbin and/or Jibsen International Trading Corporation 12th Floor, Sage House, 110 Herrera Street, Legaspi Village Makati City Office of the Solicitor General Amorsolo Street, Makati City

30

EXPLANATION

Due to the shortage of messengerial services and lack of time this Petition is being served to the other parties by registered mail in accordance with Section 11, Rule 13 of the Revised Rules of Court. GARY S. MALLARI C:\Documents and Settings\Atty. Joan\My Documents\Gary\petition northrail.doc