The University of the Philippines

Law Debate and Moot Court Union

MAGALLONA CUP 2024

Dean Merlin M. Magallona Constitutional and International Law Moot Court

Competition

The case is entirely fictional. The participants should confine themselves to the facts supplied.
Neither the petitioners nor respondents may introduce new facts. Participants may
nonetheless draw reasonable inferences from the facts.

PROBLEM

G.R. No. 696966

Light Dynamic Metro United (LDMU) Rail Corporation, petitioner,

vs.

The Executive Secretary and the Secretary of Transportation,, respondents

1. Since rapid urbanization and de-zoning in the 1990s, Metro Manila has been plagued
by traffic congestion. The Public Utility Vehicle Modernization Program (PUVMP)
caused uproar across many jeepney transport groups. The growing opposition to the
PUVMP culminated on February 14, 2024, when tens of thousands of public utility
drivers and operators stormed the streets, paralyzing public transportation in Metro
Manila. This transport action was estimated by leading economic experts to cost the
Philippine economy PHP 5 Billion.

2. In response to this transport crisis, Congress passed Republic Act No. 921081 or the
Public Utility Takeover Act of 2024 on February 29, 2024. The law provided for a
legislative authorization for the President to exercise emergency take-over powers in
order to address transportation crises and emergencies.

3. The salient features of the Public Utility Takeover Act of 2024 are as follows:

SECTION 2. Declaration of Policy. – In light of the alarmingly

increased loss of productivity and disruption to the economy caused
by the persistent traffic congestion and the increased vulnerability to

1
 disruptions in the transportation sector in the Philippines, there is an
urgent need to promote and protect the welfare of Filipinos and the
transporting public, and mitigate other health and economic effects,
by implementing sound and enhanced transportation systems.

xxx

SECTION 5. Take over power. – When the public interest so

requires, the President may direct the operation of any
privately-owned public utility or business affected with public
interest to be used in addressing the transportation needs of the public
during the transportation emergencies and crises as determined by the
President, including but not limited to, jeepneys, buses, railways,
airports, seaports, transport network companies, and other similar
establishments; Provided, that to the extent feasible, management
shall be retained by the owners of the public service or enterprise,
under the direction and supervision of the President or his duly
designated representative who shall render a full accounting to the
President of the operations of the utility or business taken over;
Provided, further, That whenever the President shall determine that
the further use or operation by the Government of any such public
service or enterprise is no longer necessary under existing conditions,
the same shall be restored to the person entitled to the possession
thereof; Provided, finally, That if the foregoing enterprises
unjustifiably refuse or signify that they are no longer capable of
operating their enterprises under the imposed circumstances, the
President may temporarily take over their operations subject to the
provisions of the Constitution.

4. In 2021, the BLUE-Philippines Multilateral Investment Treaty took effect. The

contracting parties to the treaty are the Republic of the Philippines and the European
countries of Belgium, Luxembourg, Ukraine, and Estonia. The treaty’s goal was,
among others, to form “a conducive investment environment that will enhance freer
flow of capital, goods and services, technology and human resource, and overall
economic and social development in the State Parties.” The treaty was concurred in
by all members of the Senate. Salient provisions of the Multilateral Investment Treaty
are provided in Annex A.

5. Light Dynamic Metro United (LDMU) Corporation is a duly organized

corporation under the laws of the Philippines. LDMU operates multiple railway lines
connecting Metro Manila within its cities and municipality. Their trains operate on
electricity that is generated by renewable sources of energy, keeping it insulated from
oil price fluctuations. The corporation is 100 percent owned by the M’Davay
Railway Company of Belgium, a corporation duly organized under the laws of the
Kingdom of Belgium, which acquired LDMU after the passage of Republic Act No.

2
 11659 or the 2022 Amendments to the Public Service Act.

6. Traffic conditions in Metro Manila continued to deteriorate. On March 15, 2024, a

new regional war in the Middle East erupted, causing disruptions to the global oil
supply chain. As a result of the massive decreases in supply of crude oil in the
markets, local gasoline and diesel prices rose by 400 percent. As a result of previous
administrative issuances of the Land Transportation Franchising and Regulatory
Board (LTFRB), small jeepney and bus operators were constrained from raising their
fares to meet the respective increase in oil prices. The government refused to lift these
issuances or provide for a subsidy to public utility vehicle (PUV) operators. Hence,
thousands of jeepney drivers and operators were forced to either operate at a
significant loss or cease operations. Many commuters were left with limited viable
transportation options such as rail transport.

7. Bop Suayboracay, a train operator of an LDMU train, organized the other operators to
join in the upcoming March 16, 2024 nationwide transportation strike.

8. On March 16, 2024, the nationwide transportation strike immobilized all public
transportation options. The riding public was outraged at the collapse of the
transportation system within Metro Manila. Even private transportation network
companies were unable to cope with the increased demand on that day. Many users of
public transportation were left stranded for up to 20 hours without any other
alternatives. Furthermore, many businesses were forced to halt their operations due to
the lack of manpower posed by the transportation crisis. This second transport action
was estimated by leading economic experts to cost the Philippine economy PHP 7
Billion.

9. On March 17, 2024, the President declared a state of transportation crisis and
emergency. As a result of the second crippling transport crisis, the Department of
Transportation (DOTr) issued Department Order No. 24-5 on March 18, 2024. The
Order directed LDMU to maintain operations and access to its train lines for 24 hours
each day on weekdays or from Monday to Friday. This was 8 hours more each day
compared to its regular operating hours. Additionally, LDMU was directed to increase
the frequency of its trips from every 6 minutes to every 4 minutes. This was done by
increasing the usual operating speed of the trains.

10. LDMU initially complied with the order of the DOTr for 3 days. Afterwards, LDMU
faced significant difficulty in complying with the directives. It complained to the
DOTr that its maintenance and the day-to-day staff were overwhelmed with the
increased demand in its operations and volume of riders. The company was
constrained to hire additional manpower but stated that continued compliance with the
government’s directive would jeopardize the safety of its passengers and its overall
economic viability.

3
11. On March 22, 2024, in a press conference live streamed on Facebook Live, YouTube,
and X (formerly Twitter), Mackie Muntinlupa, the President of LDMU, and
Motherignacia Villareal, the President of M’Davay, decried the state’s continued
directives which they claimed diminished company value by 50 percent. Further, they
stated that they will from now on refuse to comply with the DOTr directives or risk
more significant losses for the company. They also claimed that the State’s actions
were in violation of Article IX and X of the BLUE-PH Multilateral Investment Treaty.

12. The DOTr Secretary, Unodostres Nasser, stressed the importance of keeping the
public transportation systems viable to keep up with public demand. Secretary Nasser
informed President Muntinlupa that considering the belligerence of LDMU in not
complying with state directives and the gravity of the crisis, the state would have no
other option but to take over the operations of LDMU for the good of the riding
public. This is in light of the recent announcement of the various transport groups to
continue the transport strikes regularly every month, indefinitely. Negotiations
between the government and these organizations have reached a stalemate with no
agreement in sight.

13. On March 27, 2024, the President of the Philippines, Jetski Hikin, issued Executive
Order (E.O.) No. 247 ordering the takeover of the operations of LDMU for 90 days
after the issuance of the E.O. Pursuant to this, the DOTr commenced the operation of
LDMU’s trains. After the lapse of this period, the President issued E.O. No. 365
extending the takeover period to “when the transport strike would end.”

14. On July 10, 2024, LDMU filed a petition for certiorari and prohibition under Rule 65
of the Rules of Court assailing the actions of the state before the Supreme Court of the
Philippines.

15. The Court is, therefore, set to resolve the following issues on oral arguments:

a. Whether the take over of LDMU, pursuant to Section 5 of the Public

Utility Takeover Act of 2024, is constitutional.

b. Whether LDMU is entitled to compensation under the BLUE-Philippines

Multilateral Investment Treaty for the actions of the Philippine
government.

4
 ANNEX A

AGREEMENT BETWEEN THE BELGIUM-LUXEMBOURG-UKRAINE-ESTONIA

ECONOMIC UNION

AND

THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES

ON THE RECIPROCAL PROMOTION AND PROTECTION OF INVESTMENTS

Article II

Scope of Application

1. This Agreement shall apply to measures adopted or maintained by a Contracting Party

relating to:

(a) investors of any other Contracting Party; and

(b) investments, in its territory, of investors of any other Contracting Party.

2. This Agreement shall apply to existing investments as at the date of entry into force of this
Agreement as well as to investments made after the entry into force of this Agreement.

3. For the purpose of liberalization and subject to Article 8 (Reservations), this Agreement
shall apply to the following sectors:

[omitted]

(f) transportation; and

(g) any other sectors, as may be agreed upon by all Contracting Parties.

Article III

Definition

For the purpose of this Agreement:

(a) “covered investment” means, with respect to a Contracting Party, an investment in

its territory of an investor of any other Contracting Party in existence as of the date of
entry into force of this Agreement or established, acquired or expanded thereafter, and
has been admitted according to its laws, regulations, and national policies, and where
applicable, specifically approved in writing by the competent authority of a
Contracting Party;

5
 (b) [omitted]

(c) “investment” means every kind of asset, owned or controlled, by an investor,

including but not limited to the following:

(i) shares, stocks, bonds and debentures and any other forms of participation in a
juridical person and rights or interest derived therefrom;

[omitted]

(iv) claims to money or to any contractual performance related to a business and

having financial value;

(v) rights under contracts, including turnkey, construction, management, production or

revenue-sharing contracts; and

(vi) business concessions required to conduct economic activities and having financial
value conferred by law or under a contract, including any concessions to search,
cultivate, extract or exploit natural resources.

(d) “investor” means a natural person of a Contracting Party or a juridical person of a

Contracting Party that is making, or has made an investment in the territory of any
other Contracting Party;

(e) “measures” means any measure of a Contracting Party, whether in the form of
laws, regulations, rules, procedures, decisions, and administrative actions or practice,
adopted or maintained by central, regional or local government or authorities, or
non-governmental bodies in the exercise of powers delegated by such authorities.

Article IX

Treatment of Investments

1. Each Contracting Party shall accord to covered investments of investors of any other
Contracting Party, fair and equitable treatment and full protection and security.

2. For greater certainty:

(a) fair and equitable treatment requires each Contracting Party not to deny justice in
any legal or administrative proceedings in accordance with the principle of due
process; and

(b) full protection and security requires each Contracting Party to take such measures
as may be reasonably necessary to ensure the protection and security of the covered
investments.

6
 Article X

Expropriation and Compensation

1. A Contracting Party shall not expropriate or nationalize a covered investment either

directly or through measures equivalent to expropriation or nationalization (“expropriation”),
except:

(a) for a public purpose;

(b) in a non-discriminatory manner;

(c) on payment of prompt, adequate, and effective compensation; and

(d) in accordance with due process of law.

2. An action or a series of related actions by a Contracting Party cannot constitute an

expropriation unless it interferes with a tangible or intangible property right or property
interest in a covered investment.

3. Article 10(1) addresses two situations:

(a) the first situation is where an investment is nationalized or otherwise directly

expropriated through formal transfer of title or outright seizure; and

(b) the second situation is where an action or series of related actions by a Contracting
Party has an effect equivalent to direct expropriation without formal transfer of title or
outright seizure.

4. The determination of whether an action or series of actions by a Contracting Party, in a

specific fact situation, constitutes an expropriation of the type referred to in subparagraph
3(b), requires a case-by-case, fact-based inquiry that considers, among other factors:

(a) the economic impact of the government action, although the fact that an action or
series of actions by a Contracting Party has an adverse effect on the economic value
of an investment, standing alone, does not establish that such an expropriation has
occurred.

(b) whether the government action breaches the government’s prior binding written
commitment to the investor whether by contract, license or other legal document; and

(c) the character of the government action, including, its objective and whether the
action is disproportionate to the public purpose referred to in Article 10(1).

5. Non-discriminatory measures of a Contracting Party that are designed and applied to

protect legitimate public welfare objectives, such as public health, safety and the
environment, do not constitute an expropriation of the type referred to in subparagraph 3(b).