NORTHRAIL - SINOMACH Settlement

After a series of negotiations that started in January 2017, North Luzon Railways Corporation (NORTHRAIL), represented by its ex-officio Chairman, Department of Transportation (DOTr) Secretary Arthur P. Tugade, together with Bases Conversion and Development Authority (BCDA) President Vivencio B. Dizon, concluded an out-of-court Settlement Agreement over its dispute with China National Machinery & Equipment Corp. Group (now named China National Machinery Industry Corporation or SINOMACH), the former contractor of the 80-km Caloocan to Malolos segment of the NORTHRAIL Project.



The historic Settlement Agreement saved the Philippine government upwards of $100-M, or more than PhP5-B in potential payment of claims to SINOMACH, as well as hundreds of millions of pesos in legal fees and arbitration costs.

Under the terms of the Settlement Agreement, the parties have agreed to (1) waive their claims against each other and declared that there will be no more payment by NORTHRAIL to SINOMACH, and vice versa, and (2) share the remaining arbitration fees in equal proportions.

As of March 2017, NORTHRAIL, a fully-owned subsidiary of BCDA, has already spent PhP 161-M for its participation in arbitration proceedings, including fees for its legal consultants. Without the Settlement Agreement, NORTHRAIL expects to spend an additional PhP 500-M if the arbitration hearings originally scheduled in November 2017 would take place.

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