By P. Gunasegaram
The Oxford Dictionary defines sanctity as this: “The state or quality of being holy, sacred, or saintly.” In terms of contracts then, that begs the question of what contracts are holy, sacred and saintly and whether the term “sanctity” is being used in vain by those who want to preserve them.
At a time when the taps of some seven million people in the KL/Klang Valley are running dry for two days and then are on for two days and dire forecasts are being made for the coming months, one can be forgiven for thinking that at least some contracts which contribute to this sad state of affairs are unholy and therefore not to be sanctified.
And it is not only water contracts that are affected, there is a whole slew of them – toll roads, independent power producers (IPPs), defence suppliers (heard about the rescue ship being kept on standby at RM6 million a month?), supplying drugs (as in pharmaceuticals) to the government etc.
But let’s start with water – the place where all this thing about sanctity seems to flow to now. It was Gamuda group managing director Lin Yun Ling who set the ball rolling in the latest back-and-forth when he asked, in a report in The Edge Financial Daily whether the sanctity of contracts was being violated if the federal government invoked Section 144 of the Water Services Industry Act 2006 (Wasia) to take over Selangor’s water operations.
Lin’s remarks met with an outburst from PKR leaders who called Lin’s and Gamuda’s stand hypocritical.
Gamuda owns 40% of Selangor’s largest water treatment plant Syarikat Pengeluar Air Sungei Selangor Sdn Bhd or Splash. Businessman Wan Azmi Wan Hamzah and Selangor’s investment arm Kumpulan Perangsang Selangor hold 30% each.
Selangor had offered to buy out the water concessionaires, including Splash, for RM9.65 billion. The other concessionaires include Puncak Niaga Sdn Bhd which is ultimately owned by Rozali Ismail. Apart from those owned by the Selangor government, none of them accepted the offers which led to the possibility of Wasia being now invoked.
Without going into the many intricacies of Selangor’s water deals, the question to ask over this issue is whether this contract has sanctity. If the water concessionaires are unreasonably holding out for better prices is the government justified in acting against them? And does not the Wasia actually provide for the takeover of water assets under precisely those conditions? And don’t the concession agreements themselves provide for the quantum of compensation under those conditions?
One of the reasons that the water impasse in Selangor is not much closer to getting things flowing again is that the concession agreements have simply vested too much power with the concessionaires. This could have been due to incompetence of the state authorities, or even their connivance with the concessionaires for profit.
If for instance there was a corrupt government or government official or politician with substantial influence, it would be quite easy for him to agree to some terms in contracts which will give the concessionaire unusual terms for profit and control.
The very favourable terms given to concessionaires, and the needless secrecy for such agreements which are often classified under the Official Secrets Acts naturally gives rise to suspicion that the government has given much away through such contracts.
If indeed that has been done, then it is necessary to examine all means available to cancel the contract. There is no need to uphold the sanctity of a lopsided contract if indeed it is one because an unholy contract cannot be sanctified.
But before that can be done, there has to be process. In the case of the water concessionaires, the Wasia was such a process. It ensures that an important resource will continue to flow to consumers and they and the nation will not be held to ransom by the concessionaires.
One has to realise that the water conundrum arises because of those contracts with the concessionaires in the first place which has tied both the federal and state government’s hands. Whatever possessed them to sign such contracts in the first place?
Unfortunately it appears that there is no such law for most of the other concession contracts. But let us not despair. Even under existing contract laws there can be circumstances under which contracts can be broken.
This occurs in instances where consent may have been given in circumstances where there was coercion, undue influence, fraud, misrepresentation, or mistake. Of course, there is the matter of proof and depending on the authorities and the competence of investigation we may or may not get that.
The way around that is to introduce legislation that will presume foul play if a contract is very clearly against the interests of the state and the people. Thus if one were to allocate a forest concession for a nominal sum, that would be considered immediately to be be an invalid contract. Ditto for cheap land allocations.
Of course, it is not envisaged that the current government will do anything like that anytime soon simply because we continue to be in the dark age of patronage politics where the government distributes largesse to the favoured few at the expense of the general public. But at some point that has to stop and the tangled misdeeds of the past have to be pulled apart and put back again properly.
By all means preserve the sanctity of contracts when contracts are honest, holy, sacred or saintly. But if their very terms indicate that they have been procured through wrong means and could well imply foul play then it is time to investigate.
And since we have a history of lopsided contracts which discriminate against consumers and the nation at large, we should seriously consider enacting legislation which would invalidate unfair contracts with government.
Some countries have done this for consumer contracts but the way our government has been signing away concessions it looks like our government needs legislative protection against lopsided contracts even more than consumers. And consumers would benefit from the protection the legislation gives to government.
That’s clearly different from not honouring contracts which are honourable – and the difference is crucial. Before we cry sanctity of contracts let’s first be sure the contracts are not tainted and obtained by unfair and foul means, in other words they are indeed holy, sacred and saintly.
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P Gunasegaram is publisher and founding editor of business news portal KiniBiz. He likes this illuminating quote from John D Rockefeller about doing business: “The ability to deal with people is as purchasable a commodity as sugar or coffee and I will pay more for that ability than for any other under the sun.”
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