In a pivotal decision concerning the National Broadband Network (NBN) project, the Supreme Court addressed several consolidated petitions questioning the legality of the ZTE-DOTC Broadband Deal. The Court ultimately dismissed the petitions, emphasizing that the Philippine Government’s decision to discontinue the project rendered the cases moot. This decision underscores the judiciary’s commitment to resolving actual controversies, while also reinforcing the critical role of appropriation laws and fund availability in government contracts.
ZTE-NBN Deal: Mootness or Mandate for Constitutional Compliance?
The focal point of the consolidated petitions revolved around the ZTE-DOTC Broadband Deal. The petitioners raised concerns regarding the absence of public bidding and the lack of an appropriation law to fund the contract. Rolex Suplico, along with Amsterdam Holdings, Inc. (AHI), and others, sought to annul the deal and compel compliance with procurement laws. The Office of the Solicitor General (OSG), representing the respondents, countered that the government’s decision to discontinue the project due to several constraints rendered the petitions moot. Additionally, the OSG contended that there was no perfected contract and insisted on the absence of prejudice to the government or public interest.
The Supreme Court, in its resolution, concurred with the OSG’s position, holding that the petitions had become moot because the Philippine Government had decided not to proceed with the ZTE-NBN project. The Court further stated it cannot completely rule on the merits of the case because the resolution of the three petitions involves settling factual issues which definitely requires reception of evidence. The decision took judicial notice of the official act of the President in informing China’s President Hu Jintao that the Philippine Government had decided not to continue with the project due to several constraints. The Court underscored the importance of actual controversies in judicial power, indicating it would not sit to adjudicate academic questions.
Despite this decision, dissenting opinions argued the case’s transcendental importance warranted a ruling on the merits. Justice Carpio contended that the ZTE Supply Contract was void from the beginning due to the absence of an appropriation from Congress and a public bidding process. He underscored that this violates Section 29(2), Article VI of the Constitution and emphasized the principle that only Congress authorizes public fund spending. He argued for annulling the deal, emphasizing the constitutional mandate against contracts without appropriation.
The Court also considered the principles laid down in the Administrative Code of 1987, explicitly stating that contracts involving the expenditure of public funds require both an appropriation law and a certificate from the proper accounting official, noting Sections 46, 47 and 48, Chapter 8, Subtitle B, Title I, Book V of the Administrative Code of 1987, the provisions are implemented in Sections 85, 86 and 87 of the Government Auditing Code of the Philippines. A procurement of goods and services for the Philippine Government was signed without any appropriation law passed by congress that authorizes to fund the said contract, or even a certificate of appropriation and fund availability attached to the ZTE supply contract.
The implications of the Suplico v. NEDA ruling are significant. It highlights that Presidential decrees and resolutions do not allow the President to bypass statutory law requirements. However, at the same time it does not provide a categorical conclusion on the constitutionality or legality of the assailed contract.
| What was the central issue? | Whether to annul the ZTE-DOTC Broadband Deal and compel compliance with procurement laws due to the absence of public bidding and appropriation law. |
| What was the Court’s ruling? | The Court dismissed the petitions, deeming them moot as the Philippine government decided not to continue with the ZTE-NBN project. |
| Why did the Court deem the case moot? | The President’s decision to discontinue the project removed any actual controversy. The Supreme Court only takes cognizance of factual questions during a real and actual judicial exercise. |
| Was there public bidding for the ZTE-DOTC Broadband Deal? | Respondents admitted there was no public bidding for the ZTE Supply Contract, due to an executive agreement. |
| What constitutional provision was at issue? | Section 29(2), Article VI of the Constitution, requires an appropriation law before public funds can be spent. |
| Why didn’t the loan proceeds count as a valid appropriation? | The loan proceeds have to undergo an appropriation law approved and enacted by Congress to authorize the procurement of goods and services, otherwise those loan proceeds cannot be spent by the Executive Branch. |
| What codes provide basis for the appropriation of government funding? | The Administrative Code of 1987 and Government Auditing Code of the Philippines mandates the need to have no contract involving the expenditure of public funds to be entered unless there is an appropriation. |
| Are there provisions on procurement policy on government funding? | The Department of Justice opinion ventured that phrases such as ‘as may be necessary and upon terms and conditions as may be agreed upon’ provides power to exempt foreign-funded procurement contracts from public bidding. |
The Supreme Court’s decision highlights the judiciary’s role in ensuring that cases brought before it involve an active issue or controversy. This ruling will reinforce practices in adherence with statutory law requirements in contracting agreements.
For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Rolex Suplico v. NEDA, G.R. No. 178830, July 14, 2008
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