EXPLAINER: City Council adopts proposed MOA to 'cure' defects of Carbon Market deal and asks Labella to renegotiate. Will mayor push for new terms? If he does, will Megawide agree?

·5 min read

WHAT JUST HAPPENED. The Cebu City Sanggunian in its regular session Wednesday, September 1, 2021, decided to submit to Mayor Edgardo Labella a proposed MOA or memorandum of agreement aimed to “cure” defects in the joint venture agreement (JVA) of the City with Megawide Construction Corp. on developing Carbon Market.

In effect, Mayor Labella and the executive department’s JVA Selection Committee are being asked to review the contract and talk again with Megawide Construction for the adoption of a MOA that will “modify and supplement” the JVA.

The proposals -- researched by Vice Mayor Michael Rama’s staff and presented by Rama after yielding the presiding officer’s chair -- would have “drastic” changes, from sharing of profits to collection of vendors’ fees to titling of lands not yet registered in the name of the City Government.

WHERE COUNCILORS DISAGREE. The City Council last March 24 decided to seek the correction of defects in the JVA, going along with the move of VM Rama to press for changes. In a resolution, it asked Megawide to “defer” work on the project until the Sanggunian’s concerns are addressed.

Rama, speaking as a member, last Wednesday presented specifics of the defects in the form of a proposed MOA. These are the things that need to be corrected, he said, especially in the wake of the lawsuit filed last August 25 by an alliance of groups against Megawide and city government officials.

But Minority Bando Osmeña–Pundok Kauswagan (BOPK), led by Minority Floorleader Nestor Archival, in response to VM Rama’s move appeared to harden its stand: from correction to rescission of the JVA. Rama, who advocates with the majority Barug for “curative processes,” asked Archival: “What made you change your mind?”

BOPK opposed the Rama motion to adopt the proposed MOA and submit it to the executive department for use in new talks with Megawide. Stung by the lesson of having approved the JVA without reading it (100+ pages, including annexes), they now would not vote for the vice mayor’s move without first studying his draft MOA. Given 30 minutes to read and study the document (six pages), BOPK councilors still voted “no” but lost, six against 10.

[Seven questions: Megawide says Carbon market deal has no defects, June 7, 2021. Jolting claims in lawsuit to stop P5.5B Carbon project, Aug. 27, 2021.]

TWO TOUGH PROBLEMS. Whether the goal is for correction or rescission of the JVA, there are two major obstacles to any change in the Carbon Market deal:

[1] Would Mayor Edgar Labella -- whose JV Selection Committee negotiated the terms of the contract and whose baby the Carbon Market project is – agree to re-negotiate with Megawide? If he would, would he put his heart and energy into it, since the terms are also in effect his? It can amount to admitting he assessed the JVA poorly by accepting terms disadvantageous to the City.

Councilor Eugenio Gabuya (BOPK) raised the question of whether it was the Sanggunian’s job (partly, yes) and they wouldn’t be guilty of sub-judice (no, lawyers say). Councilor Phillip Zafra (Barug) said it is a referral to the executive, even as the councilors will study the MOA until it is returned to the legislature. Councilor Alvin Dizon (BOPK) said, "We’ve learned our lesson; we should study this one."

[2] Even if Mayor Labella heeds the City Council’s request, if Megawide won’t budge, the contract is already perfected (signed and sealed and performance has already started) and remains valid until it is ordered rescinded in court, a legal battle which may go all the way to the Supreme Court.

The position of Megawide, confirmed to SunStar in a June 7 Explainer, is that it sees no defect in the JVA. The Sanggunian authorized last January 6 the mayor to sign and Mayor Labella signed.

That stand is firmed up by the fact that the City Council admits it didn’t do a thorough review of the JVA. All of them, including VM Rama, had not yet read at the time the voluminous document or even an abstract of its major provisions. In last Wednesday’s session, some councilors cited the legislature’s omission, without mentioning that majority Barug didn’t give minority BOPK the one-week delay it had sought.

WHAT’S AHEAD. Mayor Labella may not be eager for a new negotiation with Megawide. Anyhow, it may not reach the point that he’ll have the work suspended, which the City Council asked in its March resolution.

He might even ignore the request. Last March 24, during the groundbreaking ceremony, Labella “slammed” criticisms of the JVA by some councilors, saying, You gave me the authority to sign.

The executive department has often snubbed requests relayed in past Sanggunian resolutions. The request for more than a dozen documents relating to the JVA? Very unlikely that it will be granted, as what happened to the City Council’s plea for the papers on its P4.5 billion anti-Covid spending.

Megawide might give some concessions but not such big ones as increasing the revenue share due the City or the location of the new market or new Freedom Park. The City Council, which is amending the Market Code, has some bargaining chip, which might induce Megawide to give in to some of the terms in Rama’s proposed MOA.

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