DOJ Opinion No. 088, s. 1999

DOJ OPINION NO. 088 , s. 1999 October 11, 1999 The Chairman Board of Investments Industry and Investments Building 385 Sen. Gil J. Puyat Avenue Makati City Sir : This has reference to the request for clarification on certain issues relating to the legal implications of the full implementation of the Agreement on Trade-Related Investment Measures (TRIM) under the auspices of the World Trade Organization (WTO) vis-a-vis the continued enforcement and implementation of certain measures, like E.O. No. 259 (An Act to Rationalize the Soap and Detergent Surfactant Industry and Thereby Promote and Expand the Utilization of Chemicals Derived from Coconut Oil and for Other Purposes), which the Philippine Government has identified and notified the WTO as one measure that conflicts with the provisions of the Agreement on TRIM. LibLex Specifically, the following questions are raised: 1. In the event E.O. No. 259 is not repealed or amended to conform with the Agreement on TRIM on or before December 31, 1999 and the said TRIM Agreement becomes effective starting January 1, 2000, what would be the legal implications in this situation where the law still exists on the one hand while the country has to comply with its commitments under the TRIM Agreement on the other hand? 2. Would it be safe to say that upon the effectivity of the TRIM Agreement the provisions of E.O. No. 259, particularly Sections 2 and 3 thereof are ipso facto rendered ineffective or unenforceable? The request, it appears, stemmed from the apparent conflict between the provisions of the TRIM Agreement relating to the commitment of member countries to adopt the national treatment principle under Article III(4) and to eliminate quantitative restrictions under Article XI(1) of the 1994 General Agreement on Tariff and Trade (GATT), on the one hand, and, on the other hand, the provisions of Sections 2 and 3 of E.O. No. 259 which require local sourcing of raw materials in the manufacture of detergent products in the country and which requirement is likewise applied to imported detergent products. The provisions of the 1994 GATT and E.O. No. 259 adverted to respectively read: prcd 1994 GATT "ARTICLE III. . . . 4. The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use . . . . xxx xxx xxx "ARTICLE XI. 1. No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party." E . O . No . 259, s . 1987 "SECTION 2. The soap and detergent surfactant industry shall be subject to a rationalization program requiring increasing local content in the usage of its raw materials which do not endanger the environment to a minimum of 20% the first year, 40% the second year, up to a minimum of 60% for the third year and thereafter. "SECTION 3. Importation of raw materials and finished products of the industries covered by the rationalization program may be restricted subject to the guidelines set by the BOI." It is stated that under Article 5(2) of the TRIM, developing countries, like the Philippines, have five (5) years from date of entry into force of the WTO Agreement (January 1, 1995), or until December 31, 1999, to comply with the commitment of eliminating all trade-related investment measures (TRIMs) which are identified to WTO as posing some conflict with the provisions of the TRIM Agreement. cdll However, since E.O. No. 259 partakes of the nature of a law as it was issued when then President Corazon Aquino was exercising both legislative and executive powers, a legislative fiat will be necessary to repeal E.O. No. 259 or amend the same by removing the objectionable provisions therein. This being the case and in view of the process involved in law-making and the limited time left until December 31, 1999, it is feared that the Philippines may not be able to eliminate the TRIM contained in E.O. No 259. Hence, the request. We shall resolve the issues jointly. cdll A treaty has been defined as a compact made between two or more independent nations with a view to the public welfare (Adolfo vs. CFI of Zambales, 34 SCRA 166, 169, citing Taada & Fernando, Constitution of the Philippines, 4th ed., Vol. II). Broadly, it is a formal agreement, usually but not necessarily in writing, which is entered into by states or entities possessing the treaty-making capacity for the purpose of regulating their mutual relations under the law of nations (Cruz, International Law, 1971 ed., p. 126). Placed in the same category as an Act of Congress (Salonga & Yap, Public International Law, 4th ed., p. 320), a treaty has the effect of automatically invalidating or superseding a local law inconsistent with it provided the treaty is last in date and its provisions are self-executing (74 Am. Jur. 2d 838, citing cases), i.e., it operates of itself without the aid of any legislative action/provision (Salonga & Yap, id., 321). Thus, when the treaty stipulations are not self-executing, but require legislation to carry them into effect, such cannot have the effect of suspending or superseding the operation of a statute (Cameron Septic Tank Co. vs. Knoxville, 57 L. ed. 407; see also DOJ Ops. No. 158, s. 1998; No. 65, s. 1996). llcd Applied to the instant case, the provision of Article 5(2) of the TRIM Agreement which requires developing countries, like the Philippines, to comply with the commitment of eliminating "all TRIMs which are notified," indubitably reveals that the Agreement on TRIM is not self-executing. As such, it cannot have the effect of automatically amending and/or superseding the provisions of E.O. No. 259 which is a law, having been issued in the exercise of then President Corazon Aquino's legislative power pursuant to Section 6, Article XVII of the 1987 Constitution (Transitory Provisions). This notwithstanding, in the event E.O. No. 259 is not repealed/amended to conform with the Agreement on TRIM on or before December 31, 1999, the Philippines, as signatory thereto, is still required to perform, in good faith, its treaty obligation based on the fundamental rule governing the application and enforcement of treaties, that treaties must be observed in good faith "pacta sunt servanda". This means that all attempts must be made to reconcile or harmonize the provisions of E.O. No. 259 with our treaty commitment under the Agreement on TRIM, and if truly irreconcilable, for the Executive, through the agency concerned, to continue working for the amendment or repeal of inconsistent provisions of E.O. No. 259. prcd Please be guided accordingly. Very truly yours, (SGD.) JUSTICE SERAFIN R. CUEVAS Secretary