DOJ Opinion No. 016, s. 1980

DOJ OPINION NO. 016 , s. 1980 February 4, 1980 Asian Development Bank Roxas Boulevard Manila Gentlemen: This has reference to the Loan Agreement (Loan No. 417 PHI [Bicol River Basin Irrigation Project]), dated November 7, 1979, between the Republic of the Philippines (Borrower) and the Asian Development Bank (ADB), whereby the latter agreed to lend the former an amount in various currencies equivalent to S41 Million (Sec. 2.01, Art. II, Loan Agreement), the proceeds of which shall be made available to the National Irrigation Administration (NIA), the Ministry of Public Works (MPW), the Ministry of Natural Resources (MNR) and the Ministry of Public Highways(MPH) for use in the financing of expenditures on the Project described in Schedule I of said Agreement (Sec. 3.01, Art. III, Loan Agreement). In accordance with Section 9.02, Article IX of the ADB Ordinary Operations Loan Regulations, dated February 17, 1977, which is expressly incorporated in the Agreement aforementioned (Sec. 1.01, Art. I, Loan Agreement), opinion is requested showing "on behalf of the Borrower, that the Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and is legally binding upon the Borrower in accordance with its terms". llcd The statutory authority for the Republic of the Philippines to contract such a loan is found in Section I (A) of Republic Act No. 4860, as amended, and which, insofar as pertinent provides: "SECTION 1. The President of the Philippines is hereby authorized, in behalf of the Republic of the Philippines, to contract such loans, credits, including supplier's credit, deferred payment arrangements, and to enter into and conclude bilateral agreements involving other forms of official assistance such as grants and commodity credit arrangements or indebtedness as may be necessary and upon such terms and conditions as may be agreed upon, not inconsistent with this Act, with Governments of foreign countries with whom the Philippines has diplomatic or trade relations or which are members of the United Nations, their agencies, instrumentalities or financial institutions or with reputable international organizations or non-governmental national or international lending institutions or firms extending supplier's credit or deferred payment arrangements to enable the government of the Republic of the Philippines to: (A) Undertake, through any government office, agency or instrumentality, or government-owned or controlled corporation, industrial, agricultural or other economic and social development projects and feasibility studies, which are authorized by law including but not limited to those enumerated in Annex "A" including lists 1, 2, 3 and 4 hereof, which are made integral parts of the Act and such projects which may form time to time be recommended by the National Economic and Development authority and approved by the President of the Philippines: Provided , That at least seventy-five per cent of the loans, credits or indebtedness authorized be obtained under this paragraph shall be spent for projects which are income-generating. Such foreign loans, credits or indebtedness shall be used to meet the direct and indirect foreign exchange requirements and peso costs of the project, including studies, technical surveys, equipment, machineries, supplies, construction, installation and related technical services: Provided, further , That whenever necessary, part of the proceeds of such loans, credits or indebtedness shall be used for environmental, health and ecological management and control; While the President of the Philippines is the official authorized under the foregoing provision of law to contract, on behalf of the Republic of the Philippines, foreign loans, credits and indebtedness for the Purposes indicated therein, he may designate a representative and clothe him with the authority to do the formal act of signing the agreement. (See Ops., Secretary of Justice, dated Nov. 22, 1966, May 26, 1969, Feb. 22, 1972, Aug. 2, 1974, May 26, 1976 and March 22, 1978). This was done in the instant case when, on August 31, 1979, he designated the Honorable Cesar Virata, Minister of Finance, "to sign such agreement, and other documents related thereto, with the Asian Development Bank", pertaining to "a loan of approximately FORTY TWO MILLION U.S. DOLLARS (US S42,000,000) or its equivalent in other currencies to finance the Bicol River Basin Irrigation Development Project" and invested the latter with full power and authority for that purpose. (Annex "A") Thus, the signature of Minister Virata on the Loan Agreement is in pursuance of the said authority conferred upon him by the President of the Philippines and the loan amount secured under the said agreement is within the amount authorized to be borrowed. As stated above, the proceeds of the herein loan are intended for the financing of the Bicol River Basin Irrigation Project, a project with is approved for financing by the National Economic and Development Authority (Annex "B") and likewise approved by the President of the Philippines, can be deduced from his grant of authority to Minister Virata to sign the instant Loan Agreement. (See Annex "A", supra ) Compliance with the ceiling requirement provided in Section 2 of Republic Act No. 4860, as amended, supra , is shown by the certification of the Acting Minister of Finance, dated November 29, 1979, that the herein loan "is within the ceiling of Five Billion United States Dollars (or its equivalent on other foreign currencies) direct loans, credits or indebtedness which the President (of the Philippines) is authorized to incur under R.A. No. 4860, as amended". (Annex "C") And the condition imposed in the same section that the loans, credits or indebtedness should be incurred "at terms of payment of not less than 10 years" is satisfied, considering that the principal amount of the loan shall be repaid within a period of 22 years. (See Schedule 2, Amortization Schedule, Loan Agreement) Wherefore, after having closely examined the term and conditions of the subject Agreement in the light of pertinent provisions of law, this Office is of the opinion that the Loan Agreement has been duly authorized or ratified by, the Philippines and is legally binding upon the Republic of the Philippines in accordance with its terms. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice