DOJ Opinion No. 076, s. 1990

DOJ OPINION NO. 076 , s. 1990 To the Banks parties to the Second Amendment referred to below and to Manufacturers Hanover Trust Company, as Agent Gentlemen : This opinion is furnished to you pursuant to Part C-1(b)(iv) of the Second Amendment, dated as of January 22, 1990 (the "Second Amendment"), to the Credit Agreement, dated as of May 20, 1985 (as modified or amended, including as amended by the First Amendment and the Second Amendment, the "New Money Agreement"), among the Central Bank of the Philippines (the "Borrower"), the Republic of the Philippines (the "Guarantor"), the financial institutions listed as Banks therein and Manufacturers Hanover Trust Company, as Agent. Unless otherwise defined herein, terms defined in the New Money Agreement are used herein as therein defined. I am the Secretary of Justice of the Philippines and have acted in such capacity in connection with the preparation, execution and delivery of, and the satisfaction of the conditions precedent to the Second Amendment Effective Date under, the Second Amendment. In that connection, I have reviewed the Constitution of the Republic of the Philippines (the "Constitution"), the Charter of the Central Bank (Republic Act No. 265, as amended, of the Philippines), the Foreign Borrowings Act (Republic Act No. 4860, as amended, of the Republic of the Philippines), Presidential Decree No. 1961 dated January 11, 1985, as amended by Presidential Decree No. 1977 dated June 21, 1985, Executive Order No. 218 dated July 14, 1987, Presidential Decree No. 1309 dated March 3, 1978, as amended by Presidential Decree No. 1685 dated March 17, 1980 and Presidential Decree No. 1938 dated June 27, 1984, Presidential Decree No. 1807 dated January 16, 1981 and such treaties, laws, presidential decrees, executive orders, and the like as I have deemed necessary for the opinions hereinafter expressed. prcd I have also examined the originals or copies, photocopied, certified or otherwise identified to my satisfaction, of: (1) a counterpart of the Second Amendment executed by the Borrower, the Guarantor and the Agent and the New Money Agreement as amended by the First Amendment); and (2) the documents furnished pursuant to clauses (i), (ii) and (iii) of Part C- 1(b) of the Second Amendment; (3) the documents furnished pursuant to clauses (vii) and (xi) of part C-1(b) of the Second Amendment (the "Process Agents Letters"); and (4) such official records, certificates, rulings and orders of agencies and officers of the Guarantor, such corporate and official records and certificates of the Borrower and such other agreements and documents as I have deemed appropriate as bases for the opinions expressed herein. In my examination of the documents listed above, I have assumed that, except for all documents executed by the Guarantor, (i) all such documents are authentic and have been duly executed and delivered by or on behalf of each of the parties thereto, (ii) all signatures on all such documents are genuine and copies of all documents submitted to me are complete and conform to the original documents, and (iii) the Second Amendment and the New Money Agreement have been duly authorized by each of the Banks and the Agent. Insofar as the opinions expressed herein relate to factual matters, information with respect to which is in the possession of the guarantor but not in my possession, I have made inquiries with respect to such matters and relied upon representations of officers of the Guarantor, and nothing has come to my attention leading me to question, or giving me reasonable grounds to question, the accuracy of such information. As I am qualified to advice the Guarantor regarding the laws of the Philippines and do not represent myself to be familiar with the laws of any jurisdiction other than the Philippines, I do not pass upon and express no opinion in respect of those matters governed by or construed in accordance with the laws of any such other jurisdiction. Based upon the foregoing and subject to the qualifications and observations set forth below, I am of the opinion that: (a) The Borrower is the custodian of the International Monetary Assets of the Philippines, and, by law, the Borrower is vested with all right, title and interest in such International Monetary Assets. The Borrower is wholly-owned by the Guarantor. (b) The execution and delivery by the Guarantor of the Second Amendment and the performance by the Guarantor of the Second Amendment and the New Money Agreement are within the Guarantor's powers, have been duly authorized by all necessary legislative, executive, administrative and other governmental action, and do not contravene (i) the Constitution, (ii) any treaty, law, regulation, decree, or to the best of my knowledge after due inquiry, any judgment, award, injunction or similar legal restriction applicable to the Guarantor, or (iii) to the best of my knowledge after due inquiry, any contractual restriction which binds or affects (or purports to bind or affect) the Guarantor or its assets. The Guarantor has full power and authority to execute and deliver the Second Amendment and to perform and observe the provisions of the Second Amendment and the New Money Agreement on its part to be performed or observed and to guarantee, in accordance with the terms of the Second Amendment and the New Money Agreement, the obligations of the Borrower under the Second Amendment and the New Money Agreement. (c) No authorization or approval (including exchange control or transfer approval) or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by the Guarantor of the Second Amendment and the performance by the Guarantor of its obligations under the Second Amendment and the New Money Agreement, except for the authorizations contained in the letter of the General Counsel of the Borrower delivered to the Agent pursuant to parts C- 1(b)(i) of the Second Amendment, which have been duly obtained, are unconditional and are in full force and effect (except as the 1985 Authorizations and the 1987 Authorizations referred to in such letter may have been modified by the Authorizations and approvals referred to in clauses (1) through (8) of such letter). (d) The Second Amendment has been duly executed and delivered by the Guarantor. The Second Amendment and the New Money Agreement are the legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their respective terms, except as enforceability in the Philippines may be limited or affected by moratorium or similar laws affecting creditors rights generally. (e)The Second Amendment and the New Money Agreement and the Guarantor's guarantee obligations thereunder are the direct, unconditional and general obligations of the Guarantor, for the payment of which the full faith and credit of the Philippines is pledged. (f) The obligations of the Guarantor under the Second Amendment and the New Money Agreement rank at least pari passu with all other existing unsecured External Indebtedness of the Guarantor. There is no (and there will not be as result of the execution and delivery of the Second Amendment or the performance of the Second Amendment or the New Money Agreement any) Lien upon or with respect to any of the properties (including, but not limited to, International Monetary Assets of the Philippines) or revenues of the Guarantor which secures, or otherwise provides for the payment of, Indebtedness, which Lien would be prohibited by Section 8.02 of the New Money Agreement. (g) There is no pending or, to the best of my knowledge after due inquiry, threatened action or proceeding affecting the Guarantor before any court, governmental agency or arbitrator, which may individually or in the aggregate materially adversely affect the financial condition or operations of the Guarantor or which purports to affect the legality, validity or enforceability of the Second Amendment of the New Money Agreement. (h) The Guarantor is subject to civil and commercial law with respect to its obligations under the Second Amendment and the New Money Agreement and the execution and delivery by the Guarantor of the Second Amendment and the performance by the Guarantor of the Second Amendment and the New Money Agreement constitute and will constitute private and commercial acts rather than public or governmental acts. The Guarantor is a sovereign entity which has given its consent to be sued in respect of its obligations under the Second Amendment and the new Money Agreement. Except as provided in Section 12.08(d) of the New Money Agreement, the provisions of the Second Amendment and such Section 12.08(d) are effective to waive, on behalf of the Guarantor and its property, whether or not held for its own account, any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any Philippine court or from set-off or any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise under the laws of the Philippines in respect of its obligations under the Second Amendment and the New Money Agreement. The waiver of immunities, the submission to the jurisdiction of the New York State and Federal courts sitting in the City of New York, the High Court of Justice in London, the competent courts of the Philippines, any competent court in the jurisdictions in which the Agent's Account for each Loan Currency is located and in Frankfurt/Main, Federal Republic of Germany, the agreement to suit therein and the appointment of the New York Process Agent and the London Process Agent and other agreements contained in Section 12.08 of the New Money Agreement and incorporated by reference in the Second Amendment, are irrevocably binding on the Guarantor. The Process Agents letters have each been duly authorized and executed by and are irrevocably binding on, said Process Agents. prcd (i) The Philippines is a member, and is eligible to use the general resources, of the IMF. (j) There are no Philippine Taxes or Other Applicable Taxes imposed by the Philippines either (i) on or by virtue of the execution, delivery or enforcement of the Second Amendment, the New Money Agreement or any other document to be furnished by the Guarantor thereunder or (ii) on any payment to be made by the Guarantor pursuant to the Second Amendment or the New Money Agreement, except for Philippine withholding tax in respect of payment of interest on the 1989 Advances and the Relending Advances. (k) To ensure the legality, validity, enforceability or admissibility in evidence of the Second Amendment and the New Money Agreement in the Philippines, it is not necessary that the Second Amendment or the New Money Agreement or any other document be filed, registered or recorded with, or executed or notarized before, any court or other authority in the Philippines or that any registration charge or stamp or similar tax be paid on or in respect of the Second Amendment or the New Money Agreement or any other document. (l) The Second Amendment and the New Money Agreement are in proper legal form under the laws of the Philippines for the enforcement thereof against the Guarantor under the laws of the Philippines. (m) In any action or proceeding arising out of or relating to the Second Amendment or the New Money Agreement in any court in the Philippines, such court would recognize and give effect to the provisions of Part E-4 of the Second Amendment and Section 12.11 of the New Money Agreement wherein the parties thereto agree that the Second Amendment and the New Money Agreement, respectively, shall be governed by, and construed in accordance with the laws of the State of New York. Accordingly, such court would apply the laws of the State of New York in any legal action seeking enforcement of the Second Amendment of the New Money Agreement. Such court would also award a judgment in the currencies in which such obligations are payable. The foregoing opinion is subject to the qualification that in the event of any such action or proceeding in a Philippine court, such court would apply the laws of the Philippines with respect to (i) matters bearing upon the power and authority of the Borrower and the Guarantor to enter into and perform the Second Amendment and the New Money Agreement and the other agreements contemplated thereunder, and (ii) compliance with all requirements of governmental approvals, authorizations and consents under Philippine laws, decrees and administrative regulations. (n) It is not necessary under the laws of the Philippines (i) in order to enable the Banks and the Agent or any of them to enforce their respective rights under the Second Amendment or the New Money Agreement or (ii) by reason of the execution of the Second Amendment or performance of the Second Amendment or the New Money Agreement that any of them should be licensed, qualified or entitled to carry on business in the Philippines. The foregoing opinion is subject to the qualification, with respect to any Bank or the Agent otherwise carrying on business in the Philippines (other than by reason only of the execution, performance, or enforcement of the Second Amendment or the New Money Agreement) that such Bank or the Agent will not be permitted to maintain by itself or by an assignee any suit for recovery of any debt, claims or demand whatsoever unless it has or shall have obtained upon order of the Monetary Board of the Borrower, a license to transact business in the Philippines from the Philippine Securities and Exchange Commission. (o) Neither the Agent and the Banks nor any of them is or will be deemed to be resident, domiciled, carrying on business or subject to taxation in the Philippines by reason only of the execution of the Second Amendment or the performance or enforcement of the Second Amendment or the New Money Agreement. The performance by the Agent and the Banks or any of them of any action required or permitted under the Second Amendment or the New Money Agreement will not violate any law or regulation of the Philippines. (p) If any judgment of a competent court outside the Philippines were rendered against the Guarantor in connection with any action arising out of or relating to the Second Amendment or the New Money Agreement, such judgment would be recognized and could be sued upon in the courts of the Philippines, and such courts would grant a judgment which would be enforceable against the Guarantor in the Philippines without any retrial unless it is shown that (i) the foreign court did not have jurisdiction in accordance with its jurisdictional rules, (ii) the party against whom the judgment of such foreign court was obtained had no notice of the proceedings, or (iii) the judgment of such foreign court was obtained through collusion or fraud or was based on clear mistake of law or fact. (q) All conditions precedent on the part of the Guarantor provided for in the Second Amendment relating to the Second Amendment Effective Date have been duly complied with and the other documents (including this opinion) being delivered to the Agent and the Banks by or on behalf of the Guarantor pursuant to Part C-1(b) of the Second Amendment conform to the requirements of the Second Amendment. This opinion is further subject to the following qualifications: (i) I express no opinion as to the enforceability in the Philippines of Section 12.07(b) of the New Money Agreement to the extent that it purports to permit a second or separate suit, after recovery on a judgment in a judgment currency, for recovery of the difference between the amount of judgment currency stated in such judgment and the amount of the Agreement currency due under the New Money Agreement. (ii) Nothing in this opinion should be taken as indicating that the remedy of specific performance or injunction under any particular provision of the Second Amendment or the New Money Agreement would necessarily be granted by a Philippine court in any particular instance, if there is otherwise available an adequate compensatory remedy with respect thereto. prcd (iii) The enforceability of the obligations of the Guarantor under the Second Amendment and the New Money Agreement is subject to general principles of equity. In applying these principles, a Philippine court might require that parties exercising any right under the Second Amendment or the New Money Agreement act reasonably and in good faith. Such a requirement might be applied, among other situations, to the provisions of the New Money Agreement purporting to authorize conclusive determinations by the Agent, any Bank or any other party. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary