G.R. No. 218388 , October 15, 2019
MANILA INTERNATIONAL AIRPORT AUTHORITY, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

On August 16, 1993, the Governments of the Philippines and Japan entered into an Exchange of Notes, leading to Loan Agreement No. PH-136, where the Overseas Economic Cooperation Fund loaned amounts for the Ninoy Aquino International Airport (NAIA) Terminal 2 Development Project. Under this loan, the Manila International Airport Authority (MIAA) entered into a Consultancy Agreement with the Aeroports de Paris-Japan Airport Consultants, Inc. Consortium for 795 man-months of services. Due to project delays, MIAA and the Consultant executed four Supplementary Agreements, extending the total man-months to 1,221.65 and increasing the costs. The Commission on Audit (COA) issued Notices of Disallowance, finding that the added costs under the Supplementary Agreements caused the total payments to exceed the five percent (5%) ceiling for contingency payments prescribed by the National Economic and Development Authority (NEDA) Guidelines for the Procurement of Consultancy Services for Government Projects. MIAA filed a Petition for Certiorari, arguing that the NEDA Guidelines’ contingency ceiling does not apply, as the Loan Agreement, being an executive agreement, governs the payments.

ISSUE

Whether the added costs under the four Supplementary Agreements should be charged as contingencies subject to the five percent (5%) ceiling under the NEDA Guidelines.

RULING

The Separate Opinion of Justice Leonen agrees that Loan Agreement No. PH-136 is an executive agreement subject to the doctrine of pacta sunt servanda. However, it differs from the ponencia’s characterization of the added costs. The opinion elaborates on the incorporation of international law into Philippine domestic law through two constitutional methods: (1) incorporation, where generally accepted principles of international law become part of the law of the land under Article II, Section 2 of the Constitution ; and (2) transformation, where treaties or international agreements become binding through Senate concurrence under Article VII, Section 21 of the Constitution . The opinion emphasizes that Senate concurrence is necessary for treaties and international agreements to become effective as domestic law, serving as a check on executive power and maintaining the system of separation of powers. While concurring with the ponencia’s result regarding the binding nature of the Loan Agreement, the Separate Opinion expresses a different view on the proper classification of the disbursed amounts, suggesting a need to scrutinize whether the added costs were legitimately part of the consultancy services or should have been treated as contingency expenditures.