2005-01-03

NPM 001-2005

Requesting Entity: Bases Conversion Development Authority

Issues Concern: Applicability of the Guidelines for Contract Price Escalation on Foreign-Funded Projects

 

Details

Whether or not the Guidelines for Contract Price Escalation may be applied to projects started prior to the effectivity of the said Guidelines for purposes of negotiations with the donor institution.

Section 4 of the Civil Code of the Philippines provides that laws shall have no retroactive effect, unless the contrary is provided. Thus, there being no express nor implied authorization embodied in the Guidelines for Contract Price Escalation allowing retroactive application, prospective construction is called for.

Accordingly, we are of the opinion that if the negotiations for the Project started prior to the effectivity of the Guidelines for Contract Price Escalation on 26 October 2004, there is no sufficient legal basis for its adoption. However, this does not preclude the negotiators from pushing for the employment of the ten percent (10%) threshold as part of the provision on Price Escalation presently being negotiated with the Japanese proponents.