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Philippine Supreme Court orders government to pay $510M to airport terminal builder

MANILA, Philippines — The Philippine Supreme Court has ordered the government to pay at least $510.3 million in compensation and interest to a consortium led by German airport operator Fraport AG that built Manila's newest airport terminal.

The decision, issued Tuesday but made public Wednesday, ends years of legal wrangling over how much Philippine International Air Terminals Co. should receive after the government expropriated Terminal 3, built by the consortium at the Ninoy Aquino International Airport.

The court said the government cannot gain title to the terminal until the consortium is fully paid.

Most of the construction of the terminal was completed in 2002. A year later the Supreme Court nullified the contract after finding that the consortium did not have the minimum equity needed to qualify for the project and had also violated other terms of the original concession agreement.

Under the contract, the consortium would have been able to operate the terminal for 25 years. Instead, the government sought and received a writ of possession in December 2004.

In its 10-0 decision, the Supreme Court set the "principal amount" of compensation for the expropriation at $267.5 million, and said the government should also pay interest until the amount is fully paid. It calculated the interest through December 2014 at $242.8 million.

"The state's taking of the property is not based on trust or contract, but is founded on its inherent power to appropriate private property for public use," the court said.

The terminal began operating in 2008, serving one domestic budget airline, and gradually expanded to include several foreign carriers to reduce congestion at Terminal 1, now 34 years old.

In 2013, Terminal 3 handled 13.8 million passengers, 800,000 more than its rated capacity. Subsequent improvements have allowed it to handle more international flights.

Terminal 1, originally designed for 4.5 million passengers yearly, handled 8.2 million passengers in 2012. Terminal 2 is mostly used for domestic flights.

In 2005, the German government urged the Philippines to compensate Fraport, warning that failure to do so would discourage future foreign investment. At the time, the consortium said it had invested $650 million in the project.

The Associated Press

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