THE Supreme Court (SC) has upheld the legality of the P65 billion Light Rail Transit (LRT) Line 1 extension project from Baclaran in Parañaque to Bacoor in Cavite.
In a 75-page decision promulgated on October 8, 2024 but only made public recently, the Court en banc dismissed the petition for certiorari and prohibition filed by Bagong Alyansang Makabayan (BAYAN) and the Train Riders Network assailing the validity of the concession agreement for the LRT Line 1 extension project, which was one of the priority infrastructure projects under the Public-Private Partnership of the administration of the late president Benigno “Noynoy” Aquino III.
The petitioners alleged that the concession agreement entered into by the government with the Light Rail Manila Consortium (LRMC) was “unconstitutional and detrimental to the Filipino people,” and as such, should be declared null and void.
They also said that the agreement allowed respondents Department of Transportation and Communication (now the Department of Transportation), the Light Rail Transit Authority and LRMC to periodically adjust LRT fares without notice or hearing as required under the Public Service Act.
They also said that the deal infringed on the constitutional rights of LRTA employees to security of tenure as the concessionaire has absolute discretion to dismiss them due to economic reasons.
The petitioners also said the concession agreement is essentially a public utility franchise which can only be granted by Congress, and not the DOTC or LRTA.
The contract, they argued, is also disadvantageous to the government as the balancing payment methods render the concession payment contingent on the grantors’ liabilities to the concessionaire, adding that under this scheme, the amount of concession payment to be received by the grantors is not guaranteed.
They also claimed that the grantors assumed substantial financial risks equating to unconscionable financial guarantees in favor of the concessionaire.
Lastly, they argued that the powers and functions of the DOTC over railways do not include the authority to grant a franchise for the LRT’s construction, operation, and maintenance.
The SC en banc disagreed with the arguments raised by the petitioners.
On the issue of fares, the High Court said it found the petitioner’s arguments “unavailing,” adding that the powers of the LRTA to fix and determine fares was recognized in the recent case of Syjuco, Jr. v. Abaya, and in Executive Order No. 603 establishing the agency.
“We find that the concession agreement does not violate the public’s right to due process. It merely provides for a mechanism through which the concessionaire may apply for an increase of the LRT fare. Any fare increase shall be subject to the grantor’s approval, who in turn are required to comply with the notice and hearing requirements,” said the SC ruling, which was penned by Senior Associate Justice Marvic Leonen.
“As correctly argued by the LRMC, the adjustment of the approved fare is not automatic. Approved fare adjustment requires authorization from the grantors, who in turn are obligated to obtain the relevant consents for such adjustment,” it added.
As to the petitioners’ claim that the grantors’ financial obligations, which include the assumption of the real property tax, are considered as government subsidies that would render useless the Build-Operate-Transfer law, the SC said the jurisprudence in the Agan case where it invalidated the agreements between the Philippine International Air Terminals Co., Inc. (PIATCO) and the Manila International Airport Authority and the DOTC could not be applied in the case as “the factual setting in Agan differs from this case.”
The SC said the agreement in the Agan case emanated from an unsolicited proposal for the development of NAIA Terminal 3, while the concession agreement with LRMC pertains to a priority infrastructure project of the government.
“Second, while the agreement in Agan contained stipulations on direct government guarantee, the petitioners in this case admit that the concession agreement does not involve direct government guarantees,” it said.
“Based on the foregoing, the rulings in the Napocor and Agan cannot be used as bases to invalidate the concession agreement,” it added.
The SC also held that the petitioners’ argument that the concession agreement left LRTA employees with no job security “have no merit” as the agreement ‘”is not a means to circumvent the Labor Code.”
“The concessionaire is not given the absolute prerogative of dismissing or transferring employee(s) due to economic causes,” the SC said, adding that the agreement states that the termination of a transferring employee shall be in accordance with the relevant rules and procedures of all domestic laws and statutes, such as the Labor Code.
“Accordingly, we find that the concession agreement does not violate the constitutional right to security of tenure,” it ruled.
The SC also stressed that congressional approval or legislative franchise is not a prerequisite for the execution of the assailed concession agreement as Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities.
“One of the administrative agencies delegated with the power to grant licenses or authority to operate public utilities is respondent DOTC, now DoTr,” it said, adding that the agency is therefore vested with the power to grant or issue authorization for the operation of the light rail system.
“In this case, the authority was granted through the concession agreement wherein the LRMC was permitted to construct and operate the LRT Line 1. Thus, the concession agreement was validly executed notwithstanding the absence of a legislative franchise,’ it added.
Lastly, the SC said the concession agreement does not constitute an invalid delegation of LRTA’s franchise.
“It is an arrangement permitted under the BOT Law, which the parties entered into to effectuate LRTA’s mandate of providing transportation services to the people,” it said.
