Filipinization of Public Utilities

 Filipinization of Public Utilities 

The Preamble of the 1987 Constitution, as the prologue of the supreme law of the land, embodies the ideals that the Constitution intends to achieve. The Preamble reads: 

"We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and humane society, and establish a Government that shall embody our ideals and aspirations, promote the common good, conserve and develop our patrimony, and secure to ourselves and our posterity, the blessings of independence and democracy under the rule of law and a regime of truth, justice, freedom, love, equality, and peace, do ordain and promulgate this Constitution[.]" 

Consistent with these ideals, Section 19, Article II of the 1987 Constitution declares as State policy the development of a national economy "effectively controlled" by Filipinos: 

"Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.," 

Fortifying the State policy of a Filipino-controlled economy, the Constitution decrees: 

"Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos" 

"In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos." 

"The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities." 

Under Section 10, Article XII of the 1987 Constitution, Congress may "reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments." 

Thus, in numerous laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least sixty percent of the "capital" of which is owned by Filipino citizens. 

Some of these laws are: 

(1) Regulation of Award of Government Contracts or R.A. No. 5183; 

(2) Philippine Inventors Incentives Act or R.A. No. 3850; 

(3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; 

(4) Philippine Overseas Shipping Development Act or R.A. No. 7471; 

(5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; 

(6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and 

(7) Ship Mortgage Decree or P.D. No. 1521. 

With respect to public utilities, the 1987 Constitution specifically ordains: 

"Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines[.]" 

This provision, which mandates the Filipinization of public utilities, requires that any form of authorization for the operation of public utilities shall be granted only to "citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens." 

"The provision is [an express] recognition of the sensitive and vital position of public utilities both in the national economy and for national security." 

The 1987 Constitution reserves the ownership and operation of public utilities exclusively to 

(1) Filipino citizens, or 

(2) corporations or associations at least 60 percent of whose "capital" is owned by Filipino citizens. 

Hence, in the case of individuals, only Filipino citizens can validly own and operate a public utility. In the case of corporations or associations, at least 60 percent of their "capital" must be owned by Filipino citizens. 

In other words, under Section 11, Article XII of the 1987 Constitution, to own and operate a public utility a corporation’s capital must at least be 60 percent owned by Philippine nationals. 

Filipinos have only to remind themselves of how this country was exploited under the Parity Amendment, which gave Americans the same rights as Filipinos in the exploitation of natural resources, and in the ownership and control of public utilities, in the Philippines. To do this the 1935 Constitution, which contained the same 60 percent Filipino ownership and control requirement as the present 1987 Constitution, had to be amended to give Americans parity rights with Filipinos. 

There was bitter opposition to the Parity Amendment and many Filipinos eagerly awaited its expiration. 

In late 1968, PLDT was one of the American-controlled public utilities that became Filipino-controlled when the controlling American stockholders divested in anticipation of the expiration of the Parity Amendment on 3 July 1974. No economic suicide happened when control of public utilities and mining corporations passed to Filipinos’ hands upon expiration of the Parity Amendment. 

The [M]ovants’ interpretation of the term "capital", would bring us back to the same evils spawned by the Parity Amendment, effectively giving foreigners parity rights with Filipinos, but this time even without any amendment to the present Constitution. Worse, movants’ interpretation opens up our national economy to effective control not only by Americans but also by all foreigners, be they Indonesians, Malaysians or Chinese, even in the absence of reciprocal treaty arrangements. At least the Parity Amendment, as implemented by the Laurel-Langley Agreement, gave the capital-starved Filipinos theoretical parity – the same rights as Americans to exploit natural resources, and to own and control public utilities, in the United States of America. Here, movants’ interpretation would effectively mean a unilateral opening up of our national economy to all foreigners, without any reciprocal arrangements. That would mean that Indonesians, Malaysians and Chinese nationals could effectively control our mining companies and public utilities while Filipinos, even if they have the capital, could not control similar corporations in these countries. 

G.R. No. 176579               October 9, 2012 

HEIRS OF WILSON P. GAMBOA,* Petitioners, vs

FINANCE SECRETARYMARGARITO B. TEVES et al.

CARPIO, J.

Read the full decision here:

https://lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html

Brief background of Parity Amendment:

🔗 https://lawphil.net/judjuris/juri1972/aug1972/gr_l_30299_1972.html 

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