Legal issues caused rift with Smartmatic, says TIM

MANILA, Philippines – The internal rift in a joint venture tasked to automate Philippine elections was caused by heavier legal risks that would be shouldered by the local partner, Total Information Management (TIM). If electronic polls encounter any problems, TIM would bear more legal responsibilities than the Barbados-based Smartmatic International Corp., which will provide automated poll technology,TIM president Jose Mari Antunez claimed on Monday Antunez said that while TIM's contribution in the automation work would only be minimal, its legal liabilities would be much higher than that of its foreign partner. “The truth of the matter is they have to do 90 percent of the work and our contribution as a value partner is only about 10 percent," Antunez told the Senate Blue Ribbon committee in a hearing. He was referring to the automation technology that Smartmatic would provide in the elections. “However, in the (legal) responsibility, we are 60 per cent and they are 40 (per cent)," Antunez explained. Under the law, foreign companies such as Smartmatic can only own up to to 40 percent of a Philippine-based enterprise, and they have to get local partners that will take the majority share of 60 percent. Smartmatic and TIM won the automation contract with the Commission on Elections last month after submitting a bid of P7.2 billion for the procurement of 82,000 machines using the Precinct Count Optical Scan (PCOS) technology. "There is no way that I can manufacture the PCOS," said Antunez. “So in this project it is really an impossibility for me to contribute anymore. Now however, if something goes wrong…" Antunez was not able to finish the sentence, as committee chairman Senator Richard Gordon interrupted to ask if TIM was just a “token partner" that Smartmatic had taken in to comply with Philippine laws. Antunez denied the charge. The poll automation project was jeopardized early last week after Antunez said his company would pull out of its partnership with Smartmatic reportedly due to disagreements over the control of funds for the automation project. The Comelec stepped in and gave the two firms until July 3 to settle their differences. After a three-hour meeting last Friday, Comelec chairman Jose Melo said the two companies had agreed to be “held liable severally and jointly" as a joint venture entity if they fail to provide services in accordance with the contract. Monday’s hearing marked the first time that Antunez revealed the cause of his company’s disagreement with Smartmatic, but both sides still refused to provide details on how they were able to thresh out their differences. However, officials of both companies admitted that they had agreed to bring any future disagreement to the Singapore Chamber of Commerce for arbitration, after their incorporation papers are filed with the Securities and Exchange Commission this week. The city-state’s chamber of commerce closely coordinates with the Paris-based International Chamber of Commerce’s International Court of Arbitration and Singapore’s International Arbitration Centre. Armando Yanes, Smartmatic chief financial officer, said the Singapore Chamber of Commerce “is not a public court but a private entity that will look into the issue. It protects the joint venture." He assured the Senate committee, which had called the hearing to look into the rift between the two companies, that the partnership between TIM and Smartmatic would still be covered by Philippine laws even though arbitration would be in Singapore. - AMITA O. LEGASPI, GMANews.TV