DOJ Opinion No. 009, s. 1995

DOJ OPINION NO. 009 , s. 1995 January 31, 1995 Hon. Gary B. Teves House of Representatives Quezon City Sir : This has reference to your request for opinion as to whether or not there are constitutional constraints in suspending, for a limited period, the nationality requirements of multilateral financial institutions (MIFs), such as the Asian Development Bank (ADB), the International Finance Corporation (IFC), the World Bank (WB), the United Nations Development Programme (UNDP), etc., in case they invest in particular economic activities e.g. mining and public utilities, where the permissible maximum foreign equity under the Constitution is forty percent (40%). prcd It appears that the query is being raised in connection with your proposal to introduce an amendment to Article 7(13) of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, for the purpose stated above. You state that the MFIs should be categorized differently, at least on a temporary basis, from foreign individuals considering that they do not possess any single national identity; and that it is your belief that if the proposed amendment is approved, it will help accelerate the development of the natural resources and physical infrastructure of the country, and thus, enable our country to catch up with our ASEAN neighbors. Section 7(13) of E.O. No. 226 reads: "Art. 7. Powers and Duties of the Board . The Board shall be responsible for the regulation and promotion of investments in the Philippines. It shall meet as often as may be necessary generally once a week on such days as it may fix. Notice of regular and special meetings shall be given all members of the Board. The presence of four (4) governors shall constitute a quorum and the affirmative vote of four (4) governors in a meeting validly held shall be necessary to exercise its powers and perform it duties, which shall be as follows: xxx xxx xxx (13) In appropriate cases, and subject to the conditions which the Board deems necessary, suspend the nationality requirement provided for in this Code or any other nationalization statute in cases of ASEAN projects or investments by ASEAN nationals on preferred projects, and with the approval of the President, extend said suspension to other international complementation arrangements for the manufacture of a particular product on a regional basis to take advantage of economies of scale; xxx xxx xxx" while the proposed amendment thereto as embodied in the consolidated version of House Bill No. 262 and Senate Bill No. 397 reads: "Section 1. Article 7(13) of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987 is hereby amended to read 'as follows': (13) In appropriate cases, and subject to the conditions which the Board deems necessary, suspend the nationality requirement provided for in this Code or any other nationalization statute in cases of ASEAN projects or investments by ASEAN nationals in preferred projects, and with the approval of the President, extend said suspension to other national complementation arrangements for the manufacture of a particular product on a regional basis to take advantage of economies of scale: Or, in the case of business activities wherein the constitution or applicable statutes require that a minimum percentage of the ownership be held by Filipino citizens or corporations sixty percent of the capital stock of which is owned by Filipino citizens, the investments made by Multilateral Financing Institutions such as the International Finance Corporation of the World Bank, the Asian Development Bank and the European Development Bank, in the concept of shared risk rather than outright loans, shall be deemed investments made by qualified investors if the said investments are maintained by the Multilateral Financing Institutions only for a reasonable period of time as defined by rules and regulations to be promulgated by the President of the Republic of the Philippines, and divestment thereof shall be done in favor of Filipino citizens or corporations sixty percent of the capital stock of which is owned by Filipino citizens. xxx xxx xxx" The present provision of Article 13(7) of the Omnibus Investments Code, supra , authorizes the BOI to suspend the nationality requirements provided for in the said Code or in other nationalization statutes for ASEAN projects or investments of ASEAN nationals on preferred projects. The proposed amendment would authorize the BOI to also suspend the nationality requirements provided for in the Constitution for particular businesses or activities in cases of investments made and maintained by MFIs in such businesses or activities for a reasonable length of time. The pertinent provisions of the 1987 Constitution are found in Sections 2 and 11, Article XII thereof, which provide: "Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens . Such agreements may be for a period not exceeding twenty-five years renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant . . . (Emphasis supplied.) "Sec. 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. The 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." (Emphasis supplied). There is nothing in the aforequoted constitutional provisions which authorizes the waiver or suspension of the nationality requirement prescribed therein. Hence, the proposed bill, if enacted into a law, would constitute a violation of the Constitution insofar as it authorizes such suspension of the nationality requirements in favor of the MFIs. It is axiomatic that as the Constitution is the fundamental law to which all laws are subservient, the proposed bill, in order to be validly enacted as law, must be in harmony with, and not in violation of, the Constitution. Your query is answered accordingly. Very truly yours, (SGD.) DEMETRIO G. DEMETRIA Acting Secretary