Corruption and Illegality in Asian Investment Arbitration: The Philippines

Abstract

Corruption is deeply rooted in Philippine culture. Much legislation was passed to strengthen the country’s legal frameworks to prosecute corruption cases. However, the abundant local anti-corruption laws have yet to produce the desired results. For most of the latter half of the twentieth century, the Philippines relied on protectionist policies conducive to corruption to shelter its domestic economy from the burgeoning highly competitive international markets. The succeeding adoption of trade liberalization policies enabled the country to attract foreign investments to bolster its economy. Unfortunately, it also exposed investors to the pitfalls of local corruption. The country’s first major investment dispute involving its main international airport was not a pleasant experience. The Philippines is no longer in a bubble. As an active member of the international community, it must adjust its law enforcement efforts, legal systems, treaty practice and business culture to match global anti-corruption standards.

1 Introduction: Socio-Legal Development and Corruption

The international community acknowledges international investment as an integral tool for promoting developmental goals and greater economic integration.¹ The massive global destruction caused by World War II prompted the leaders of the international community to create a blueprint for a post-war economic order. The Bretton Woods system established the International Bank for Reconstruction and Development (now the World Bank) and the International Monetary Fund. These institutions promoted international investment, trade liberalization and rapid economic growth.²

However, the Bretton Woods system failed to account for the preference of developing countries to adopt import-substitution policies.³ For instance, the Philippines adopted an Import Substitution Industrialization strategy after it gained independence from the United States (US). Piecemeal trade liberalization was only initiated in the 1980s. A more comprehensive effort to open the economy to foreign trade only materialized in the 1990s.⁴ To address the insufficiency of the Bretton Woods system, Bilateral Investment Treaties (BITs) and then Free Trade Agreement investment chapters were used to establish legal frameworks to protect foreign investments by imposing obligations on host states to provide adequate protection to foreign investors.⁵ BITs usually stipulate an investor–state dispute settlement (ISDS) clause which allows foreign investors to address purported violations of investment agreements via international investment arbitration. The proceedings may be governed by the arbitration rules of the International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL), or (much more rarely) other agreed arbitral bodies.⁶

BITs therefore create binding legal frameworks that establish stability in international investment. It is a mutually beneficial system for both investors and the host states, as access to arbitration reduces business costs and encourages foreign investment.⁷ Nevertheless, BITs must also account for the existing local legal systems of the host state, as well as the socio-political and economic realities of its government. The global fight against corruption necessarily involves the municipal laws of the states. Questions of jurisdiction arise when these laws are invoked in the prosecution of erring officials, which may undermine the arbitration proceedings between a state and an investor.

The wider context of corruption prosecutions and the involvement of private parties in corrupt practices concerning state agents muddle the arbitral proceedings on international investment arbitration. Corruption is used as a defense against claims raised in arbitral proceedings. A state may assert the presence of corruption to establish the inadmissibility of the claim or even the lack of jurisdiction of an arbitral tribunal. It may also raise corruption as a ground to void a contract.⁸ An arbitral tribunal must thus make a tough decision—whether to refer the matter to local civil courts or to adjudicate on the issues raised.⁹ Either way, the arbitral tribunal will solicit criticism since it may either be accused of eagerly abandoning its mandate by declaring lack of jurisdiction or be denounced for taking cognizance of a matter which is best left to be adjudicated by the courts of a sovereign state.

The history of the Philippines is replete with corruption issues. After more than three decades of Spanish colonial rule, the First Philippine Republic, also known as the Malolos Republic, was inaugurated in the Province of Bulacan in 1899, making it the first constitutional republic in Asia.¹⁰ However, the Philippine Revolution coincided with the Spanish–American War. The Philippines was ceded by Spain to the US by virtue of the Treaty of Paris of 1898. The Americans took over the Spanish regime and defeated the Filipino revolutionary forces in the Philippine–American War. The US only recognized the independence of the Philippines in 1946.¹¹

The civil and criminal codes of the Philippines are respectively based on the Spanish Civil Code and the 1850 Penal Code of Spain, as amended by the Codigo Penal Reformado de 1870.¹² The civil law system of Spain was retained by the Philippines despite the introduction of American legal concepts. The Philippine Judiciary was organized during the American period and the 1935 Constitution, which was in effect when the Philippines was granted independence by the US, was largely inspired by the US Constitution. Post-war Philippines was therefore the product of two worlds. On the one hand, its system of government was installed by the US, the primary champion of the post-war Bretton Woods economic system. On the other hand, the Philippines was a developing country which had to fend off stiff economic competition from industrialized and fellow developing nations. This led to the Import Substitution Industrialization strategy and protectionist policies of the Philippines in the decades following World War II.

The prioritization of domestic trade led to the economic and political stranglehold of wealthy oligarchs, which resulted in tolerated (and, in some instances, encouraged) corrupt practices. The regime of former President Ferdinand E. Marcos, Sr. saw the rise of cronies, close friends of the ruling family who allegedly gained preferential access to government contracts and joint ventures with foreign investors.¹³ The patrimonial polity of the Philippines was centralized, creating a climate that fostered state monopolies and subcontracting of important sectors of the economy to political allies.¹⁴ The Philippines eventually opened its doors to greater foreign trade under the administrations of the leaders who succeeded President Marcos, Sr. In fact, incumbent President Ferdinand R. Marcos, Jr., the son of the former President, is known for actively engaging foreign investors. However, the oligarchy continues to rule the country regardless of whoever is in power.

The type of corruption in the Philippines is described as an ‘oligarch-and-clan’ system, which is often seen in countries with recent major liberalization efforts, but with weak economic institutions and insufficient state capacity to handle the new markets.¹⁵ This form of corruption is characterized by disorderly or even violent attempts by competing oligarchs to amass wealth and power by capitalizing on various illegitimate assets such as organized crime and access to bureaucratic and judicial connections.¹⁶ The country is ruled by around 80 families which have converted certain segments of the state into their own fiefdoms.¹⁷ New political families who recently earned the patronage of influential national leaders have also joined this elite circle.

The relatively low salaries of civil servants in the Philippines also cultivate a culture of corruption. These salaries are standardized by periodic laws passed by Congress. Unfortunately, the pace of adjustment of public sector salaries could not match inflation and the changing economic conditions of the country.¹⁸ Civil servants are forced to engage in corrupt practices due to their low salaries, especially government employees with low salary grades. While recent standardization laws have increased the salaries of high-ranking officials to respectable amounts, junior civil servants still earn very little compared to their superiors. The lowest Salary Grade (SG 1) has a monthly compensation of PHP13,000 (USD235), while the highest official (the President, SG 33) is paid PHP419,144.00 (USD7,571.12).¹⁹ The salary of civil servants with the lowest pay grade is just 3.1% of the salary of the country’s top official.

The low compensation of civil servants is one of the root causes of corruption. Low-income earners resort to petty corrupt practices to augment their income.²⁰ Bureaucratic red tape also fosters corrupt behavior. Intermediaries known as fixers offer their services for a fee to hasten transactions and falsify or alter official documents.²¹ Patronage politics is also a huge part of Filipino culture. Parents usually choose rich and powerful people to act as godparents to their children. In turn, the godparents are expected to act as intermediaries in government or private sector transactions.²² The padrino system also encourages people to establish close ties with influential leaders in both the public and private sectors to secure promotions and favorable business deals.

In 2022, the Philippines was ranked 116 among 180 countries surveyed by Transparency International for its Corruption Perceptions Index (CPI). It has a score of 33, with 100 being very clean and zero being highly corrupt. The score of the country is below the average global grade of 43.²³ Among Association of Southeast Asian Nations (ASEAN) members, the Philippines is only ahead of Cambodia, Laos and Myanmar in terms of CPI.²⁴

Transparency International published its Global Corruption Barometer Asia 2020 based on surveys involving 20,000 respondents in various Asian countries.²⁵ Data from the Philippines show that 86% of the respondents believe that government corruption is a big problem, 19% paid a bribe to access public services within 12 months of the survey, 22% used personal connections for public services within the same period, 28% were offered bribes in exchange for votes, and 9% experienced or knows someone who experienced sextortion.²⁶ Survey respondents from the Philippines found that most or all people in the following institutions are corrupt: local government unit (LGU) officials (19%), government officials (18%), business executives (17%), police officers (13%), and members of Congress (12%). Nine percent of the respondents found that members of the Philippine Judiciary, religious leaders, and non-governmental organizations (NGO) are corrupt. Some respondents also view army leaders (8%), the President (7%), and bankers (3%) as corrupt.²⁷ Statistics from the Office of the Ombudsman are in line with the Transparency International survey results.

In 2022, the majority of the cases filed against officials or employees of government agencies were from LGUs (1729). Agencies under the national government in general, excluding Congress and the Philippine National Police (PNP), accounted for 692 total cases. This is followed by the PNP (173) and the House of Representatives (48). The Office of the Ombudsman posted a 27% conviction rate in 2022.²⁸

Corruption in the Philippines not only permeates due to economic conditions and poor law enforcement; it is deeply entrenched in local society due to long-established cultural factors. Policymakers and legislators have therefore created a government structure with strong checks and balances and passed numerous laws to curb corruption.

2 Governance and Anti-Corruption Legal Frameworks

2.1 Structure of the Philippine Government

The current government of the country is considered the Fifth Republic of the Philippines. After the ouster of President Marcos, Sr. in 1986, a Philippine Constitutional Commission was formed to draft a new constitution. The 1987 Constitution, which was ratified on February 2, 1987, is the fundamental law of the Fifth Republic.

Taking stock of the experience of the country during the martial law regime, the framers of the 1987 Constitution designed a system of checks and balances to forestall potential abuse by the sitting President.²⁹ The Constitution provides that the Philippines is both a democratic and a republican state. In a democracy, the people directly run the government via majority rule.³⁰ Republicanism is present in a representative type of government in which the ultimate source of authority is the popular sovereign will of enfranchised citizens.³¹ The framers of the Constitution deliberately added the word ‘democratic’ as a redundancy to ‘republican’ to emphasize the role of the people in government.³² One of the manifestations of direct participation is the system of recall for erring elected officials.³³

The Philippine government has a tripartite separation of powers: the Executive branch is headed by the President, the Legislature is composed of a bicameral Congress (Senate and House of Representatives), and the Judiciary is led by the Chief Justice of the Supreme Court. The distribution of powers in democratic governments ensures that no single branch may dominate another.³⁴ It is necessary to have three co-equal branches to prevent a tyrannical or arbitrary government from taking power.³⁵

The Constitution also created three independent constitutional commissions: the Civil Service Commission (CSC), the Commission on Elections (COMELEC) and the Commission on Audit (COA). The independent constitutional commissions are not under the control of the President despite having functions which are executive in nature.³⁶ The independent constitutional commissions are also granted fiscal autonomy.³⁷ Fiscal autonomy allows the concerned government agencies to work with financial certainty since their operating budgets are protected from the political whims and caprices of the organs they review or regulate. It is noteworthy that the framers of the Constitution gave fiscal autonomy to the three independent constitutional commissions, the Judiciary and the Ombudsman. These are the frontline agencies engaged in monitoring, auditing, prosecuting and adjudicating cases involving corruption.

The Office of the Ombudsman is a constitutional body tasked by the Constitution to act as protector of the people. The Ombudsman and his or her deputies are mandated to promptly act on complaints filed against public officials or employees.³⁸ The Office of the Ombudsman has the power to investigate, motu proprio, or acting on a complaint, any government office, including its officials and employees, concerning acts or omissions that appear illegal, unjust, improper, or inefficient. It may direct the concerned office or individuals to refrain from committing certain acts or to perform or expedite its legal duties. The Office of the Ombudsman may also recommend imposing disciplinary sanctions and initiating criminal prosecution against erring government officials and employees. For this purpose, it may request the disclosure of relevant information from concerned government agencies.

As the primary government agency tasked to protect the people from possible government abuse, the Office of the Ombudsman is empowered to lead inter-agency efforts to eliminate corruption and red tape in the bureaucracy.³⁹

The 1973 Constitution also tasked the Batasang Pambansa, then the unicameral Legislative branch of the national government, to create the Sandiganbayan, a special court with jurisdiction over criminal and civil cases involving graft and corrupt practices.⁴⁰ President Marcos, Sr, exercising legislative powers by virtue of a constitutional amendment which gave him powers to legislate until martial law was lifted, issued Presidential Decree No. 1486 which officially became the organic law of the Sandiganbayan.⁴¹ The Sandiganbayan is one of the three third-level appellate courts of the Philippines, the other two being the Court of Appeals (general jurisdiction) and the Court of Tax Appeals (special tax court).

The LGUs of the Philippines are based on territorial and political subdivisions, classified as provinces, cities, municipalities and barangays (small administrative units also called barrios). Bangsamoro is an autonomous region in the predominantly Muslim areas of Mindanao. Apart from Muslim Mindanao, the Constitution also allows for the creation of an autonomous region in the Cordilleras in the northern part of Luzon, the main island of the Philippine archipelago.⁴²

2.2 Local Laws on Corruption

The Constitution provides that it is the policy of the state to maintain honesty and integrity in the public service and take positive and effective measures against graft and corruption.⁴³ It also states that public office is considered a public trust. As such, public officers and all members of the civil service are accountable to the people.⁴⁴ The President, Vice President, members of the Supreme Court, members of the Constitutional Commissions and the Ombudsman are impeachable officials. The grounds for impeachment include graft and corruption, bribery, treason, culpable violation of the Constitution, betrayal of public trust and other high crimes.⁴⁵ An impeachment proceeding may be initiated by any member of the House of Representatives, or by any citizen upon the endorsement of any member of the said Chamber. Support of at least one-third of all the members of the House is necessary before the articles of impeachment are transmitted to the Senate, where trial shall forthwith proceed. Two-thirds of all the members of the Senate is necessary to secure a conviction.⁴⁶

Crimes committed by public officers are considered felonies under the Revised Penal Code (RPC).⁴⁷ A public officer is defined as any person who, by direct provision of law, election, or appointment by a competent authority, takes part in the performance of the public functions of the Philippine government, or shall perform public duties in the government as an employee, agent, or subordinate official of any rank or class.⁴⁸ Public officers involved in the justice system such as magistrates,⁴⁹ prosecutors, police officers,⁵⁰ and lawyers may be prosecuted under the RPC for anomalies in the performance of their official duties.⁵¹

The RPC also holds liable public officers who directly⁵² or indirectly receive bribes,⁵³ commit fraud in public transactions, or become interested in any government contract or business wherein they have a legal duty to intervene by reason of the official functions.⁵⁴ Private citizens involved in bribery⁵⁵ or who take advantage of the financial affairs of their clients or wards by virtue of the professional or legal relationship may also be prosecuted.⁵⁶ Both public officers and private citizens may be prosecuted for malversation of public funds.⁵⁷

Republic Act No. 1379 provides that ill-gotten wealth shall be declared forfeited in favor of the state if public officials or employees fail to prove in a court of law that the concerned properties alleged to be the fruits of wrongdoing were acquired via legitimate means.⁵⁸

Aside from the felonies relating to public officers in the RPC, Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act specifically defines corrupt practices which are relevant to foreign investment. The said law prohibits directly or indirectly requesting or receiving any pecuniary or other form of benefit in connection with a public officer’s intervention in a government transaction. Government officials are also prohibited from influencing other public officers to intervene in government transactions. Public officers and their family members are not allowed to gain employment in a private enterprise that has pending official business with their respective government offices. Moreover, public officers are not allowed to have financial interest over the transactions that they process in their official capacities.

It is also noteworthy that Republic Act No. 3019 penalizes a government official who enters, on behalf of the government, into any contract that is manifestly and grossly disadvantageous to the Republic. Giving unfair preference or advantage to any party to a government transaction is also prohibited.⁵⁹

Republic Act No. 3019 also holds liable the private individuals who are involved in the acts described above. Furthermore, it is illegal to exploit family or close personal ties with public officials to gain favor in government dealings. The spouse and relatives by consanguinity or affinity up to the third civil degree are considered family. Close personal relations include social and fraternal connections, close personal friendships and professional employment.⁶⁰ Family members of top government officials are also prohibited from exerting influence in government appointments and transactions.⁶¹ Members of Congress who author a law or resolution which favors a business enterprise are not allowed to receive any pecuniary interest during the term for which they were elected. Public officers who lobby for a law or resolution which benefits certain businesses are likewise prohibited from receiving pecuniary interest.⁶²

Public officers are obliged to file their Statement of Assets, Liabilities and Net Worth (SALN) upon assumption of office, every year while employed by the government, and upon leaving office.⁶³ The regular filing of SALNs is important since Republic Act No. 3019 considers property and money manifestly out of proportion to a public servant’s salary and other lawful income as prima facie evidence of unexplained wealth, which is a ground for dismissal from office.⁶⁴ The filing of SALNs, and what must be specifically reported therein, remains a controversial issue in the Philippines. Two Chief Justices were removed from office, one via impeachment for allegedly failing to declare certain assets in his SALN and the other by the Supreme Court in a quo warranto case for failing to submit SALNs for certain years while in office.

Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees also mandates all public officials and employees to regularly file their SALNs.⁶⁵ The said law declares it a state policy that public officials and employees should lead modest lives appropriate to their positions and income. They must refrain from extravagant and ostentatious displays of wealth.⁶⁶ Republic Act No. 6713 directs all public officials and employees to avoid conflicts of interest. Should a conflict of interest arise, they must resign from their position in the private enterprise involved within 30 days from assumption of office and/or divest themselves of shareholdings or interest within 60 days from assumption.⁶⁷

The crime of plunder is defined under Republic Act No. 7080, as amended.⁶⁸ A public officer who acquires ill-gotten wealth in an aggregate amount of at least PHP50,000,000 (USD905,068), either alone or in connivance with other people, is guilty of the crime of plunder which is punishable by reclusion perpetua. The cohorts of a person convicted of plunder shall likewise suffer the same penalty.⁶⁹

Republic Act No. 9160 or the Anti-Money Laundering Act of 2001 declares it a state policy to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the country is not used as a site for money laundering for the proceeds of unlawful activities.⁷⁰ The said law considers acts and omissions punished by the RPC, Republic Act No. 3019 and Republic Act No. 7080, among others, as unlawful activities.⁷¹

Public procurement is governed by Republic Act No. 9184 or the Government Procurement Reform Act.⁷² This penalizes public officers for committing acts in violation of the public bidding process. Moreover, private individuals who rig the bidding process by creating an appearance of competition or by suppressing competition, submitting fabricated documents, providing false information, using the name of another to participate in a bid, or withdrawing a bid or refusing to accept an award without just cause after qualifying as the lowest bidder may face criminal prosecution.⁷³

Republic Act No. 9485 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, as amended,⁷⁴ addresses red tape and delays in government processes. The said law enforces a zero-contact policy, which prohibits government officials and employees to have any contact with any applicant or requesting party concerning an application or request, except during the preliminary assessment of the request and the evaluation of the sufficiency of the submitted requirements. Web-based business registration systems should be used to transact business and to avoid personal contact, thus eliminating one of the avenues for corruption.⁷⁵ Concerned government officials and employees may also be charged for refusing to accept applications with complete requirements, imposing additional requirements and costs apart from those published, failing to give an applicant or requesting party a written notice of disapproval, failing to render services within the prescribed processing time without due cause, failing or refusing to issue official receipts, or colliding with fixers.⁷⁶

Republic Act No. 11232 or the Revised Corporation Code of the Philippines⁷⁷ safeguards against corrupt practices by corporations. It penalizes corporations which conduct their business through fraud, corporations which are used for fraud or to conceal graft and corrupt practices, corporations which appoint intermediaries who engage in graft and corrupt practices, and corporations whose directors, trustees or officers tolerate graft and corrupt practices.⁷⁸ Corporations are also prohibited to retaliate against whistleblowers, by means of interfering with their employment or livelihood, who provide truthful information on the commission or possible commission of violations of the said law.⁷⁹

Apart from the Office of the Ombudsman and the courts of the Judiciary, there are also other government organs tasked to implement anti-corruption measures. President Corazon C. Aquino established the Presidential Commission on Good Government (PCGG) in 1986 as the primary body tasked to recover alleged ill-gotten wealth accumulated by the immediately preceding administration, investigate cases of graft and corruption and adopt anti-corruption safeguards.⁸⁰ President Rodrigo R. Duterte created the Presidential Anti-Corruption Commission (PACC) in 2017 to hear, investigate, receive, gather and evaluate evidence, intelligence reports and information in administrative cases against presidential appointees in the Executive branch occupying senior positions (SG 26 and above), including members of the governing board of Government Owned or Controlled Corporations (GOCCs).⁸¹ President Ferdinand R. Marcos, Jr abolished the PACC in 2022 and transferred its jurisdiction, powers and functions to the Office of the Deputy Executive Secretary for Legal Affairs.⁸²

The Supreme Court established the Judicial Integrity Board (JIB) and the Corruption Prevention and Investigation Office (CPIO) to promote integrity and curb corruption in the Judiciary.⁸³ The Revised Rules of Court classifies direct and indirect bribery, dishonesty, violations of the Anti-Graft & Corrupt Practices Act and other grave offences, as serious charges which, upon recommendation by the JIB to the Supreme Court, may lead to dismissal from service, forfeiture of benefits, disqualification from reinstatement or appointment to public office, suspension from office without pay, or a fine (Fig. 13.1).⁸⁴

Fig. 13.1

Anti-Corruption Agency Approval Rating, by Country (%)

3 Treaty Obligations of the Philippines Related to Anti-Corruption Measures, Investment, and Arbitration

3.1 United Nations Convention Against Corruption

The United Nations Convention Against Corruption (UNCAC)⁸⁵ aims to strengthen measures against corruption, enhance international cooperation and technical assistance in combating corruption, and promote integrity, accountability and proper management of public affairs and public property.⁸⁶ The Philippines ratified the UNCAC on November 8, 2006,⁸⁷ which has an Implementing Review Mechanism (IRM) to monitor and assess the progress of the compliance of parties with the Convention. However, it has been observed that while state parties are obliged to pass local legislation to align with the Convention, the UNCAC lacks sufficient power to compel countries to actively enforce the anti-corruption laws.⁸⁸

The first review cycle (2010–2015) reviewed Chapters III (criminalization and law enforcement) and IV (international cooperation) of the UNCAC, while the ongoing second review cycle (2016–2020, extended to 2024) covers Chapters II (preventive measures) and V (asset recovery).⁸⁹ The process includes two state parties which will conduct the review. The state party under review should also be involved in the review process.⁹⁰ Bangladesh and Egypt were the reviewing states for the first cycle review of the Philippines. The Philippine government created a Joint Technical Working Group (JTWG) headed by the Office of the President and the Office of the Ombudsman, with representatives from the concerned government agencies, to facilitate the country’s compliance with the UNCAC.

The first cycle review found that the Philippines employs laudable practices such as a witness protection program, a system of incentives and rewards under the Code of Conduct and Ethical Standards for Public Officials and Employees,⁹¹ the Sandiganbayan’s specialized jurisdiction over high-ranking public officials, and the full cooperation of local authorities with other states on matters concerning similar proceedings in foreign jurisdictions.⁹² It was also reported that the Philippines has not refused requests for extradition or Mutual Legal Assistance (MLA).⁹³

The report also found several challenges in the implementation of the UNCAC. It was recommended that the Philippines should harmonize the definition and coverage of ‘public officials’ and ‘bribery’ in local laws such as the RPC and Republic Act No. 3019 with the provisions of the UNCAC. The country may also consider legislation on private sector bribery, active and passive trading in influence, and the criminalization of the preparatory acts of corruption-related offences. The reviewing states also found that SALNs are not automatically reviewed unless a complaint is filed. Lack of inter-agency coordination and the limited resources of law enforcement and anti-corruption organs were also noted. The report stressed that the grant of executive clemency should not establish a culture of impunity.⁹⁴ The Philippines was also urged to enhance its extradition and MLA legal frameworks with other countries.⁹⁵

3.2 Trade Agreements and Efforts of the Philippines to Harmonize Laws with International Standards

The United Nations Commission on International Trade Law (UNCITRAL) is mandated to promote harmonization and unification of laws concerning international trade. The Philippines had ratified/adopted UNCITRAL instruments such as the 1958 New York Convention, the UN Convention on the Use of Electronic Communications in International Contracts, the UNCITRAL Model Law on International Commercial Arbitration, the UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Cross-Border Insolvency.⁹⁶

The New York Convention governs the recognition and enforcement of foreign arbitral awards. It promotes common legislative standards for the recognition of arbitration agreements and court recognition and enforcement of non-domestic arbitral awards.⁹⁷ The UNCITRAL Model Law on International Commercial Arbitration is incorporated in Republic Act No. 9285 or the Alternative Dispute Resolution (ADR) Act of 2004.⁹⁸

The Philippines was among the first signatories of the New York Convention. It acceded to the said Convention in 1967,⁹⁹ which was conceived in recognition of the importance of international arbitration as a means to settle commercial disputes. It is meant to provide common legislative standards for the recognition of agreements resulting from international arbitration, as well as court recognition and enforcement of foreign non-domestic arbitral awards.¹⁰⁰

The ADR Act provides that it is a state policy to actively promote party autonomy in dispute resolution. The Philippines encourages the use of ADR as a means to achieve speedy and impartial justice. The ADR Act applies the New York Convention to foreign arbitral awards. The recognition and enforcement of foreign arbitral awards are filed with the appropriate regional trial court in accordance with domestic rules of procedure. Applicants must establish that the country in which the foreign arbitration award was made is a party to the New York Convention.¹⁰¹ For foreign arbitral awards not covered by the New York Convention, local courts may consider grounds of comity and reciprocity in deciding whether to recognize a nonconvention award.¹⁰² Once confirmed as a foreign arbitration award, it shall be enforced as such and not as a judgment of a foreign court. A confirmed foreign arbitration award shall be enforced in the same manner as a final and executory decision of local courts.¹⁰³

The ADR Act adopts the UNCITRAL model law as the governing mechanism covering international commercial arbitration.¹⁰⁴ Philippine courts are obliged to refer the parties to arbitration if the subject matter is covered by an arbitration agreement, provided that at least one party requests to bring the matter to arbitration not later than the pre-trial conference,¹⁰⁵ or upon the request of both parties thereafter. Local courts may only proceed without referring the matter to arbitration if the arbitration agreement is null and void, inoperative, or incapable of being performed.¹⁰⁶

The Philippine Supreme Court also issued the Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules) to govern the procedural aspect of recognizing arbitral awards.¹⁰⁷ It specifically recognizes the New York Convention as the governing law on recognition and enforcement of foreign arbitral awards.¹⁰⁸ A local court is not allowed to set aside a foreign arbitral award. However, it may refuse to recognize and enforce the same based on the grounds stated in the Special ADR Rules.¹⁰⁹

The Supreme Court also recognizes that when a party enters into a contract stipulating a foreign arbitration clause and submits itself to arbitration, it becomes bound by the contract, by the arbitration, and by the result of arbitration, conceding thereby the capacity of the other party to enter into the contract, participate in the arbitration, and cause the implementation of the result.¹¹⁰

It is also noteworthy that the Philippines is currently engaged in 32 active BITs and had signed 8 other agreements which are not in force.¹¹¹ It is also party to 16 treaties with investment provisions, most of which in its capacity as a member of ASEAN.¹¹² The Philippines had also adopted 22 investment related instruments, including the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States.¹¹³

4 The Ninoy Aquino International Airport’s Terminal 3 PIATCO Disputes

The arbitration proceedings involving the construction of the Ninoy Aquino International Airport’s (NAIA) Terminal 3 raised jurisdictional issues involving corruption. Prior to the arbitrations involving this terminal, the country was a respondent in SGS Société Générale de Surveillance v. Republic of the Philippines.¹¹⁴ The Philippines advanced in the jurisdictional hearing of the ICSID arbitration that there was alleged fraud related to SGS inspection operations in China. However, this matter did not become material to the determination of the tribunal that it had jurisdiction over the dispute. Nevertheless, the arbitration proceedings were held in abeyance until the scope or extent of the obligation to pay off the Philippines was clarified by either agreement between the parties or by the Philippine courts, in accordance with the relevant provision of the Comprehensive Import Supervision Service Agreement. The award in Baggerwerken Decloedt En Zoon NV v. Republic of the Philippines is not public,¹¹⁵ while the ICSID case between Shell Philippines and the Republic involving the Malampaya deepwater gas-to-power project in the South China Sea/West Philippine Sea is still ongoing. Hence, the NAIA Terminal 3 ICSID disputes are the only known investment treaty arbitration cases of the Philippines that clearly dealt with the issue of corruption.

4.1 Local Court Proceedings

In 1994, Asia’s Emerging Dragon Corp. (AEDC) gave an unsolicited proposal to the Philippine government for the construction and development of the NAIA Terminal 3 project under a Build-Operate-and-Transfer (BOT) scheme. Thereafter, the government opened the bidding process to the public. Paircargo Consortium submitted a bid superior to AEDC’s offer. While both companies offered to build the project for at least USD350 million at no cost to the government and to pay similar shares of the gross revenues during the concession period, Paircargo offered a higher guaranteed payment of PHP17.75 billion for 27 years compared to AEDC’s offer of PHP135 million over the same period. Paircargo was later reorganized as Philippine International Air Terminals Co., Inc. (PIATCO).¹¹⁶ Fraport AG Frankfurt Services Worldwide acquired a direct and indirect interest in PIATCO in 1999. By 2001, its direct and indirect ownership of PIATCO amounted to 61.44%.¹¹⁷

PIATCO was awarded a concession contract to build, operate and maintain the NAIA Terminal 3 for 25 years. It contracted Takenaka, a local branch of a Japanese corporation, for the construction of the project. It also engaged the services of Asahikosan, a Japanese corporation, for the design, manufacture, test and delivery of the plant (as defined in the Concession Agreement) in NAIA Terminal 3. PIATCO defaulted on its obligation to pay both corporations in 2002. Takenaka and Asahikosan agreed to defer PIATCO’s payment, provided that adequate security was given. On November 29, 2002, Takenaka and Asahikosan stated that it was suspending the construction of NAIA Terminal 3 due to PIATCO’s failure to provide adequate security. On that date, President Gloria Macapagal Arroyo declared in a speech that the Philippines would not honor its contracts with PIATCO.¹¹⁸

In Agan v. PIATCO, the Supreme Court nullified the PIATCO contracts for the following reasons. Paircargo Consortium (before its incorporation in PIATCO) failed to meet the bid requirement on minimum equity; Security Bank (part of Paircargo Consortium) invested its entire net worth in a single undertaking or enterprise, in violation of Philippine banking law; and the PIATCO contracts were substantially modified compared to the draft concession agreement considered in the public bidding.¹¹⁹ The Supreme Court also denied the motion for reconsideration filed by PIATCO. However, the Supreme Court stated that for the government to take over the NAIA Termina 3 facility, it had to compensate PIATCO in accordance with law and equity.¹²⁰

On December 21, 2004, the Philippine government initiated expropriation proceedings over NAIA Terminal 3 before the Regional Trial Court (RTC), Branch 117, Pasay City. It deposited PHP3,002,125,000, the assessed value of NAIA Terminal 3, with the Land Bank of the Philippines. On even date, the RTC issued a writ of possession in favor of the Philippine government. However, it modified its decision on January 4, 2005 by directing the amount of USD62.3 million to be released to PIATCO, deductible from the just compensation, and prohibiting the Philippine government from maintaining and preserving NAIA Terminal 3, as well as to refrain from performing acts of ownership until the expropriation proceedings were terminated. The RTC, without consulting both the Philippine government and PIATCO, also appointed three commissioners to determine just compensation. The Republic sought for the inhibition of the RTC’s presiding judge in view of the adverse rulings against the government. The presiding judge denied the motion for inhibition. Subsequently, Takenaka and Asahikosan informed the RTC that both corporations successfully sued PIATCO in two collection cases in London, England. Takenaka and Asahikosan moved for leave to intervene and to hold the release of PIATCO’s just compensation in abeyance until the London awards were recognized. In the meantime, the Republic went directly to the Supreme Court to inhibit the presiding judge, nullify the order releasing USD62.3 million to PIATCO, and void the appointments of the Commissioners.¹²¹

In Republic v. Gingoyon, the Supreme Court ruled that:

• (1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in accordance with law and equity. Any ruling in the present expropriation case must be conformable to the dictates of the Court as pronounced in the Agan cases.

• (2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation standards or methods for the determination of just compensation.

• (3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law.

• (4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA 3 Airport terminal project by performing the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession, subject to the conditions above-stated. As prescribed by the Court, such authority encompasses “the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport.”

• (5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days from finality of this Decision. In doing so, the RTC is obliged to comply with “law and equity” as ordained in Again and the standard set under Implementing Rules of Rep. Act No. 8974 which is the “replacement cost method” as the standard of valuation of structures and improvements.

• (6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the Court in Agan.

• (7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO immediately upon the finality of the said decision.

• (8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.¹²²

The Philippine government filed a motion for reconsideration which raised the issue of Takenaka and Asahikosan’s claims. The Supreme Court denied the motion for reconsideration and ruled that Takenaka and Asahikosan’s alleged liens were not judicially established.¹²³

Thereafter, the Philippine government, PIATCO, Takenaka and Asahikosan, and the Board of Commissioners (BOC) arrived at different valuations for just compensation. The RTC ordered the Philippine government to pay USD116,348,641 as just compensation, which is way below the computations of PIATCO, Takenaka and Asahikosan, and the BOC. The RTC considered the failed structural elements of NAIA Terminal 3, inferior quality of materials, construction of areas which were deemed unnecessary, cost of gravity load and seismic structural retrofits for the failed structural elements, and other assessed costs. The amount of just compensation was modified by the Court of Appeals to USD371,426,688.24 (inclusive of interest).¹²⁴

In Republic v. Mupas, the Supreme Court fixed the amount of just compensation to USD510,304,535.80 (inclusive of interest). It also held that PIATCO, not its subcontractors Takenaka and Asahikosan, was the proper party to receive just compensation. The High Tribunal noted that PIATCO, as the property owner, was entitled to just compensation despite the liens of Takenaka and Asahikosan (which were the subject of a separate judicial proceeding).¹²⁵

4.2 ICSID Disputes Involving the NAIA Terminal 3 PIATCO Case

There are two ICSID cases related to the local proceedings outlined above, entitled Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines. The first case (ICSID Case No. ARB/03/25)¹²⁶ was registered on October 9, 2003. The second case (ICSID Case No. ARB/11/12)¹²⁷ was subsequently registered on April 27, 2011.

The disputes involve Fraport AG Frankfurt Services Worldwide (Fraport, for brevity), a German company which invested in PIATCO both as a shareholder and lender. Fraport was enticed to invest in PIATCO after the Philippine government conferred concession rights to the latter for the construction and operation of NAIA Terminal 3. The Federal Republic of Germany and the Republic of the Philippines has an existing BIT treaty with ICSID arbitration provisions.

Fraport brought the case before the ICSID due to alleged breaches of the Philippine government of its obligations to Fraport. It claimed that the tribunal had jurisdiction since its substantial investment in the NAIA Terminal 3 project was made in accordance with the laws of the Philippines. Fraport also submitted that the Philippines never took legal action against the company despite knowing the manner in which its investment was structured.

The Philippine government questioned the jurisdiction of the tribunal since Fraport allegedly violated the foreign ownership and control laws of the Philippines, particularly the Anti-Dummy Law.¹²⁸ The Anti-Dummy Law is a criminal statute that penalizes the unlawful use, exploitation, or enjoyment of a right, franchise, privilege, property, or business which is reserved by the 1987 Philippine Constitution to Filipino citizens or to corporations or associations which are at least 60% Filipino-owned. It posited that the BIT between Germany and the Philippines was of limited nature. Only investments that fall within the limited scope defined therein could trigger the arbitration provisions. In addition, the investor could only avail itself of its rights and benefits under the BIT if it overcomes the burden of proof of compliance with the investment laws of the host state.

The Philippine government also alleged that PIATCO shareholders, including Fraport, engaged in fraud and corruption. Philippine officials were also involved in the purported illicit acts. It was noted that the Philippine Senate Blue Ribbon Committee conducted hearings on the alleged grossly anomalous agreement between the Philippine government and PIATCO. A high-ranking government official testified before the Committee that PIATCO’s controlling shareholder purportedly took ‘kickbacks’ and received ‘under-the-table’ payments.¹²⁹ President Arroyo also declared in a public engagement that the deal with PIATCO was a disreputable example of ‘vested interest’ in the Philippines.¹³⁰

The tribunal found that Fraport had to secretly arrange for management and control of the NAIA Terminal 3 project in a way that did not conform to Philippine laws. Fraport used secret shareholder agreements to circumvent the Anti-Dummy Law.¹³¹ It was also observed that while states can be estopped from raising violations of their own laws in rejecting jurisdiction when governments deliberately overlooked the violations, a covert arrangement which escapes the scrutiny of regulators cannot be used as a basis for estoppel.¹³² The tribunal thus accepted the objection of the Philippines to the jurisdiction of the ICSID.

However, on December 23, 2010, an ad hoc Committee issued a Decision annulling the August 16, 2007 award in ICSID Case No. ARB/03/25. It held that Fraport was not afforded the right to be heard when the tribunal admitted and considered new evidence after the close of the proceedings, thus violating a fundamental rule of procedure.¹³³

In the second ICSID dispute (ARB/11/12), Fraport submitted that it was subject to uncompensated and unlawful expropriation of its NAIA Terminal 3 investment. On the other hand, the Philippine government asserted again that the tribunal did not have jurisdiction under the BIT since Fraport violated Philippine laws on nationality restrictions. The Philippines also reiterated its allegations that Fraport had engaged in corruption.

It was held that Fraport had violated the Anti-Dummy Law, thus excluding its investment from the protection of the BIT due to illegality. The tribunal lacked jurisdiction since a state cannot be considered to have given its consent to arbitrate using ICSID dispute settlement mechanisms if the investments made were in violation of its own law.¹³⁴

The Philippine government also raised corruption as a jurisdictional ground. It alleged that Fraport was engaged in illicit activities, such as: hiring a consultant to bribe government officials; overbilling the government as part of a kickback scheme that allowed PIATCO and its allies to profit; and engaging in money-laundering activities.¹³⁵ The Philippines particularly alleged that Fraport was aware of, and engaged in, corrupt and fraudulent activities when it made its initial investment. However, the tribunal found that the Philippines failed to adduce clear and convincing evidence that Fraport was engaged in corruption and fraud when it made its initial investment. It also held that there was insufficient evidence to prove that Fraport had knowledge at the time of its initial investment of PIATCO’s alleged misrepresentations to obtain the NAIA Terminal 3 concession agreement.¹³⁶

However, it must be stressed that the Fraport v. Philippines ICSID dispute was not dismissed for lack of jurisdiction due to corruption. The Philippines raised three jurisdictional defenses in the second ICSID dispute (ARB/11/12). The tribunal only found merit in one jurisdictional objection—that Fraport violated the Anti-Dummy Law. Notably, the tribunal held that the Philippine government submitted insufficient evidence to prove its other jurisdictional defenses, that is (1) Fraport’s claims were inadmissible due to corruption and fraud; and (2) Fraport knew of PIATCO’s misrepresentations to obtain the NAIA Terminal 3 concession award. While corruption was used by the Philippine government as one of its defenses, the tribunal eventually ruled that it had no jurisdiction over the dispute because its investment in PIATCO contravened the mandate of the Philippine Constitution to limit the operation of public utilities to Philippine citizens or corporations/associations organized under Philippine laws of which at least 60% of whose capital is owned by Philippine citizens.¹³⁷

Interest in the Fraport disputes was revived when a quo warranto case was filed against a former Chief Justice of the Philippines. Among the allegations were her alleged failure to submit her SALNs for the years while she was employed by a state university, which is considered public employment covered by the mandatory yearly filing of SALNs. Some of her years of service as legal counsel of the Republic in the Fraport disputes overlapped with her employment as a public university professor. Her alleged failure to file her SALNs and to declare her significant earnings in the Fraport international arbitrations, among other reasons, led to her ouster as Chief Justice.¹³⁸

5 Conclusion and Recommendations

The question of corruption as a jurisdictional matter necessarily involves the issue of state sovereignty. The UNCAC specifically provides that the obligations of state parties therein must be carried out in a manner which is consistent with the principles of sovereign equality and territorial integrity.¹³⁹ On paper, investments can be made into a host state without an investment contract with the host state. Such contracts and BITs usually have ISDS arbitration commitments but not necessarily undergo arbitration should disputes arise. But corrupt activities may be viewed as factual circumstances that vitiate consent. Thus, a state is only considered to have given its consent to exclusively refer a dispute to international arbitration via ICSID, based on existing BITs, if the investment contract is above board. Badges of corruption may lead to a rejection of jurisdiction since it can be argued that the BIT provision on mandatory arbitration was never triggered, considering that a valid agreement was not reached.

The corruption defense ultimately leads to the issue of sovereignty. Acts of corruption are punished by local criminal laws. As such, it can be reasonably argued that local courts have exclusive jurisdiction over charges of corruption. Investment tribunals organized to hear disputes with corruption allegations should carefully study the case before exercising jurisdiction since legal proceedings may exclusively fall within the ambit of local courts. For instance, the principle of territoriality of penal laws, including the anti-corruption laws stated above, governs in the Philippines. Hence, these laws must govern and must apply to everyone regardless of nationality, for as long as the criminal act is committed within the territorial jurisdiction of the Philippines. The Philippine government is also prohibited from surrendering its constitutional mandate and treaty obligation via the UNCAC by waiving criminal liability on matters covered by international commercial arbitration. Can charges of corruption be entirely divorced from the contractual obligation of the parties in an investment contract or other investment made covered by a BIT? If the corruption issues are directly relevant to the initial investment of the foreign party, it may be difficult to remove the criminal aspect of the alleged illicit acts from the investment dispute.

The concept of necessity in international law can also be used in analogy. The defense of necessity is used in international law as a consequence of sovereignty to excuse a state for violating a preexisting obligation.¹⁴⁰ For instance, Argentina invoked the necessity defense in the ICSID tribunals hearing its disputes with investors based on its BIT with the US. The economic crisis of Argentina in 2001 led to drastic state measures which dramatically changed the business environment, to the detriment of the investors. The tribunals thus had to balance the protection of the investors with the compelling sovereign interest of Argentina. Furthermore, applying a strict application of ICSID rules may cause countries to become wary of entering into BITs.¹⁴¹

Tribunals must therefore balance the interest of the state and the investor whenever the necessity defense or the corruption defense are raised. Both concepts substantially modify the context of the contractual obligation of the parties. However, the difference is that in necessity, a supervening event may cause the state to breach its contractual obligation in the exercise of its sovereign functions to address an emergency situation. Contrarily, corruption can lead to two possible legal defenses involving jurisdiction. First, the contract is void ab initio since the negotiations that led to the initial investment were tainted with fraud and other corrupt activities. Thus, the BIT provision on the exclusivity of investment arbitration does not apply since there is no valid investment contract. Second, if the issues of corruption are deeply entangled with the alleged breach, it may be impossible to separate the prosecution of corruption based on local laws with the arbitration proceedings. Hence, a tribunal may be forced to deny jurisdiction or at least rule some investor claims inadmissible in view of the exclusive sovereign functions of the host state to prosecute and adjudicate on the corruption charges. However, it may be possible to separate the prosecution of the erring individuals who commit corrupt practices in the implementation of the contract while also maintaining access to arbitration mechanisms, for as long as the original deal itself was not a product of blatant corruption.

In the Fraport v. Philippines ICSID dispute, the tribunal had carefully navigated the corruption and misrepresentation issues by exhaustively discussing the objections raised by the Philippine government sans a finding of guilt. It respectfully acknowledged the issues raised by the host state without compromising future local legal proceedings, if any, and without overstepping its jurisdictional mandate. Furthermore, it prevented the establishment of a precedence of successfully using corruption as a defense in investment arbitration proceedings involving the Philippines, thus maintaining investment contracts under BITs as attractive options for foreign investors.

Nevertheless, the Fraport ICSID disputes raised awareness of the deeply entrenched culture of corruption in the Philippines. While corruption is often dismissed as part of transactional costs in the local economy, the Philippine government must step up its anti-corruption drive to attract more foreign investors who are less tolerant of corrupt practices. It is not only the presence of corruption, but also the perception of corruption that drives foreign investments away. Regardless of the merits and outcomes of the Fraport ICSID disputes and local PIATCO cases, the NAIA Terminal 3 fiasco created a perception of corruption and unreliability of the host state.

The aversion of the Philippine government to engage in matters that delve into sovereign jurisdiction issues is also a concern. The Philippines withdrew from the Rome Statue of the International Criminal Court after investigations were initiated against state organs and agents who were purportedly involved in extrajudicial killings in relation to the government’s war against illegal drugs.¹⁴² The sensitivity of the Philippine government on issues of sovereignty, and its reluctance to accept neutral proceedings undertaken by international bodies and tribunals, may further weaken the confidence of foreign investors.

The Philippine government must therefore endeavor to rebuild its brand as a stable foreign investment hub with a strong rule of law.

Notes

• 1. Bulovsky 2019, p. 120.

• 2. Ibid., 121.

• 3. Ibid., 122.

• 4. Coxhead and Jayasuriya 2004, p. 614.

• 5. Bulovsky 2019, p. 123.

• 6. Ibid., 124.

• 7. Ibid. For a summary of the (somewhat mixed) empirical evidence recently on the impact of ISDS-backed treaties for expanding foreign direct investment, see Nottage 2022.

• 8. Low 2019, p. 341.

• 9. Bishara 2019, pp. 461–462. See also Schwenzer 2023.

• 10. Proclamation No. 533 dated January 9, 2013. Declaring January 23 of every year as ‘Araw ng Republikang Filipino, 1899’.

• 11. The Philippines officially celebrates its Independence Day on June 12, in recognition of the declaration of independence from Spain on June 12, 1898.

• 12. People v. Escote, Jr., G.R. No. 140756. April 4, 2003.

• 13. Schock 1999, p. 364.

• 14. Ibid., 357.

• 15. Johnston 2008, p. 208.

• 16. Ibid., 209.

• 17. Ibid., 214.

• 18. Batalla 2015, p. 62.

• 19. Republic Act No. 11466 or the Salary Standardization Law of 2019. January 8, 2020.

• 20. Quah 2018, p. 58.

• 21. Ibid., 59.

• 22. Ibid., 60.

• 23. Transparency International 2023.

• 24. Congressional Policy and Budget Research Department, House of Representatives, Philippines 2022.

• 25. Vrushi 2020, p. 4.

• 26. Ibid., 49.

• 27. Ibid.

• 28. Statistics from the Office of the Ombudsman 2022.

• 29. Lagman v. Pimentel III, G.R. Nos. 235935, 236061, 236145 & 236155. February 6, 2018.

• 30. Aquino III v. Commission on Elections, G.R. No. 189793. April 7, 2010.

• 31. Ching v. Bonachita-Ricablanca, G.R. No. 244828. October 12, 2020.

• 32. Akbayan Citizens Action Party v. Aquino, G.R. No. 170516. July 16, 2008.

• 33. Section 3, Article X of 1987 Philippine Constitution.

• 34. Almonte v. People, G.R. No. 252117. July 28, 2020.

• 35. Lambino v. Commission on Elections, G.R. Nos. 174153 & 174299. October 25, 2006.

• 36. Funa v. Chairman, Civil Service Commission, G.R. No. 191672. November 25, 2014.

• 37. Section 5, Article IX-A of 1987 Philippine Constitution.

• 38. Ibid., Section 12, Article XI.

• 39. Ibid., Section 13, Article XI.

• 40. Section 5, Article XIII of 1973 Philippine Constitution.

• 41. Presidential Decree No. 1486 (as amended by Republic Act No. 7975 and Republic Act No. 8249). June 11, 1978.

• 42. Section 1, Article X of 1987 Philippine Constitution.

• 43. Ibid., Section 27, Article II.

• 44. Ibid., Section 1, Article XI.

• 45. Ibid., Section 2, Article XI.

• 46. Ibid., Section 3, Article XI.

• 47. Title 7 of Act No. 3815 (as amended) December 8, 1930.

• 48. Ibid., Article 203.

• 49. Ibid., Articles 204 to 207.

• 50. Ibid., Article 208.

• 51. Ibid., Article 209.

• 52. Ibid., Article 210.

• 53. Ibid., Article 211.

• 54. Ibid., Articles 213–215.

• 55. Ibid., Article 212.

• 56. Ibid., Article 216.

• 57. Ibid., Articles 217–222.

• 58. Republic Act No. 1379. June 18, 1955.

• 59. Section 3 of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act. August 17, 1960.

• 60. Ibid., Section 4.

• 61. Ibid., Section 5.

• 62. Ibid., Section 6.

• 63. Ibid., Section 7.

• 64. Ibid., Section 8.

• 65. Section 8(A) of Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees. February 20, 1989.

• 66. Ibid., Sections 2 and 4(h).

• 67. Ibid., Section 9.

• 68. Republic Act No. 7080. July 12, 1991.

• 69. Ibid., Section 2. The law provides that the penalty is reclusion perpetua to death. However, the imposition of the death penalty in the Philippines was suspended by virtue of Republic Act No. 9346.

• 70. Section 2, Republic Act No. 9160. September 29, 2001.

• 71. Ibid., Section 3(i).

• 72. Republic Act No. 9184. January 10, 2003.

• 73. Ibid., Section 65.

• 74. Republic Act No. 9485. June 2, 2007. The title and provisions were amended by Republic Act No. 11032.

• 75. Ibid., Section 7.

• 76. Ibid., Section 21.

• 77. Republic Act No. 11232. February 20, 2019.

• 78. Ibid., Sections 165–168.

• 79. Ibid., Section 169.

• 80. Executive Order No. 1 (as amended). February 28, 1986.

• 81. Executive Order No. 43. October 4, 2017.

• 82. Executive Order No. 1. June 30, 2022.

• 83. Supreme Court En Banc Resolution in Administrative Matter No. 18-01-05-SC dated July 7, 2020. https://www.transparency.org/en/news/how-does-corruption-shape-asia

• 84. Ibid.; Supreme Court En Banc Resolution in Administrative Matter No.18-01-05-SC dated December 15, 2020 (Internal Rules of the Judicial Integrity Board).

• 85. UN General Assembly, October 31, 2003. United Nations Convention against Corruption. A/58/422.

• 86. Ibid., Article 1.

• 87. United Nations 2023.

• 88. Hough 2017, p. 352.

• 89. Resolution 3/1 of the States Parties to the UNCAC, available at: https://www.unodc.org/documents/treaties/UNCAC/COSP/session3/V1051985e.pdf.

• 90. Ibid., B(1)(18), 6.

• 91. Section 6 of Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees. February 20, 1989.

• 92. UNODC 2023.

• 93. Ibid., 12–13.

• 94. Ibid., 7–9.

• 95. Ibid., 13.

• 96. UNCITRAL 2023.

• 97. Mabuhay Holdings Corp. v. Sembcorp Logistics Limited, G.R. No. 212734. December 5, 2018.

• 98. Korea Technologies Co., Ltd. V. Lerma, G.R. No. 143581. January 7, 2008.

• 99. Mabuhay Holdings Corp. v. Sembcorp Logistics Limited.

• 100. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), available at: https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/new-york-convention-e.pdf.

• 101. Section 42 of Republic Act No. 9285. April 2, 2004.

• 102. Ibid., Section 43.

• 103. Ibid., Section 44.

• 104. Ibid., Section 19.

• 105. A pre-trial conference is conducted by trial courts before trial on the merits ensues.

• 106. Ibid., Section 24.

• 107. Administrative Matter No. 07-11-08-SC dated September 1, 2009.

• 108. Ibid., Rule 13.4.

• 109. Ibid.

• 110. Tuna Processing, Inc. v. Philippine Kingford, Inc., G.R. No. 185582. February 29, 2012.

• 111. UNCTAD n.d.

• 112. Ibid.

• 113. Ibid.

• 114. SGS Société Générale de Surveillance v. Republic of the Philippines, ICSID Case No ARB/02/6 (Decision dated January 29, 2004).

• 115. Baggerwerken Decloedt En Zoon NV v. Republic of the Philippines (Award dated January 23, 2017—not public). See https://www.italaw.com/cases/5170.

• 116. See Republic v. Mupas, G.R. No. 181892. September 8, 2015.

• 117. Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25 (Award dated August 16, 2007).

• 118. Ibid.

• 119. Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. Nos. 15501, 15547, & 15561. May 5, 2003.

• 120. Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. Nos. 15501, 15547, & 15561 (Motion for Reconsideration). January 21, 2004.

• 121. Republic v. Mupas.

• 122. Republic v. Gingoyon, G.R. No. 166429. December 19, 2005.

• 123. Republic v. Gingoyon, G.R. No. 166429 (Motion for Reconsideration). February 1, 2006.

• 124. Republic v. Mupas.

• 125. Ibid.

• 126. Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25 (Award dated August 16, 2007).

• 127. Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/11/12 (Award dated December 10, 2014).

• 128. Commonwealth Act No. 108 (as amended). October 30, 1936.

• 129. ICSID Case No. ARB/03/25, p. 85.

• 130. Ibid., 88.

• 131. Ibid., 189–191.

• 132. Ibid., 165.

• 133. Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25 (Decision dated December 23, 2010).

• 134. ICSID Case No. ARB/11/12, at [148].

• 135. Ibid., 149.

• 136. Ibid., 164.

• 137. Section 11, Article XII of 1987 Philippine Constitution.

• 138. Republic v. Sereno, G.R. No. 237428. May 11, 2018.

• 139. Article 4 of the United Nations Convention against Corruption.

• 140. Galvez 2013, pp. 143–144.

• 141. Ibid., 148–149.

• 142. Pangilinan at. al. v. Cayetano, et. al., G.R. Nos. 238875, 239483 and 240954. March 16, 2021. (The Philippine Supreme Court validated the unilateral withdrawal of then President Duterte from the Rome Statute without requiring the concurrence of the Philippine Senate. The case discussed in detail the history of the participation of the Philippines in the Rome Statute/ICC).