DFNN wins arbitration on wireless lotto betting dispute with PCSO

GAMING technology solutions provider DFNN Inc. has won an arbitration case against the state-controlled Philippine Charity Sweepstakes Office (PCSO) over a disputed wireless lotto betting contract that was scrapped during the Arroyo administration.

In a statement to the Philippine Stock Exchange on Monday, DFNN noted that in its arbitral ruling dated May 21, the Ad Hoc Arbitration Panel declared that the PCSO had erred when it rescinded DFNN’s equipment lease agreement covering systems design development and upgrade for lotto betting via personal communication devices such as text, GPRS, BlueTooth, 3G, WiFi Protocols and other wireless devices.

The members of the arbitration panel are lawyers Victor Alimirong (chair), Fulgencio Factoran Jr. and Jose Tomas Syquia.

In ruling that PCSO had improperly terminated its deal with DFNN, the arbitration panel noted that the grounds for cancellation of the contract were “misplaced and/or unfounded.” Moreover, the arbitration panel acknowledged that DFNN’s undertaking under the agreement was satisfied when “DFNN delivered, as it did, a system that was integretable with PCSO’s existing lotto betting system.”

Accordingly, the arbitration panel ordered the PCSO to pay DFNN P27 million as liquidated damages on account of the improper termination of the agreement.

“We are gratified with the positive outcome of the arbitration. We would like to thank the arbitration panel for validating our stance on the baseless and unjust termination of our license by the previous administrators of the PCSO,“ DFNN president Ramon Garcia Jr. stated.

“We are, however, still committed to examining and evaluating all further legal remedies to ensure that the maximum restitution is effected in order to protect the interests of our shareholders. We would also like to state our willingness to work with the present PCSO management, led by its new chairman, Ayong (Erineo) Maliksi. We strongly believe in the mission of the PCSO to raise funds for charity, and would like to reiterate our commitment to partner with the PCSO in the critical task of nation building and ensuring that no single Filipino gets left behind,” Garcia added.

The disputed equipment lease agreement was executed by the parties in 2003, providing for the exclusive lease from DFNN all the hardware, software, and knowhow to design and develop a system that would allow the processing of bets from personal communication device users nationwide. But in 2005, prior to the commercial operation of the system, DFNN was informed of the PCSO’s decision to terminate the deal, after which the PCSO began negotiating with third parties to carry out the project.

In 2010, DFNN obtained an injunction from the Regional Trial Court (RTC) of Quezon City that prevented the PCSO from awarding any contract to any entity for wireless betting while the dispute was undergoing arbitration proceedings. The PCSO assailed this RTC ruling at the Court of Appeals which, however, dismissed its motion.

In its complaint against the PCSO, DFNN had argued that:
◦ The unilateral cancellation of the agreement was without cause;
◦ The issuance of the PCSO resolution approving the revised text betting project as well as PCSO’s act of negotiating with third parties regarding the implementation of the said project, compounded the violation of the rights of DFNN; and,
◦ DFNN will suffer grave and irreparable injury.