DOJ Opinion No. 177, s. 1983

DOJ OPINION NO. 177 , s. 1983 November 24, 1983 MEMORANDUM For : The Prime Minister The Executive Committee Executive House Manila From : The Minister of Justice This has reference to the proposed guidelines on fishing joint ventures or charter agreement and the application for the charter of fishing vessels by Ambassador Hotel, Inc. A. The proposes guidelines submitted by the Minister of Natural Resources (MNR) governing fishing joint ventures or charter agreements state that specific consideration shall be given to the following areas or points: (1) total maximum allowable catch; (2) fishing grounds; (3) species; (4) gear; (5) scale of operation; (6) change of status of vessels covered by joint venture agreements; (7) replacement of vessels; and (8) hiring of foreign crew members. It lays down the general guiding policy for foreign participation in the form of joint ventures in the exploitation of the country's fishery resources. We assume that the proposed guidelines will be issued by the Fishery Industry Development Council, which is the inter-agency body created in P.D. No 704, headed by the Minister of Natural Resources, to implement the policy of the state regarding the development of the fishery industry and the protection and conservation of the fisher industry and the protection and conservation of the fishery resources of the country and to "formulate and establish comprehensive policy guidelines for the management, protection, conservation and utilization of the fishery/aquatic resources of the country and for the creation of a healthy investment climate for the development of the fishery industry." (Section 2, 12 and 13, P.D. No. 704) No legal issue is raised in the proposed guidelines. They conform to the provisions of P.D. No. 704 and are within the authority of the Fishery Industry Development Council to promulgate. Significantly, final approval of the joint venture agreement and its operations" are subject to compliance with relevant fishery laws, rules and regulations." LexLib It is noted that the Fisheries Code contains very specific legal requirements with respect to fisheries joint venture agreements and charter contracts, e.g., registration of the fishing vessel and licensing of the operator/owner of the vessel (Section 20, P.D. No. 704); licensing of the crew members (Section 17 and 21, id .); instruction and training of the local crew members by the foreign crew members in the operation of the fishing vessel and replacement of foreign crew members by local crew member after two years (Sec. 21, id .) ; equity participation of foreign investors in case of a joint venture agreement which must not exceed 40% of the capital investment; and in case of a charter contract, payment to the alien owner must be in kind in case of export items of fish and / or fishery /aquatic products. (Secs. 20 and 21, id. ) The final approval and implementation of the joint venture or charter agreement shall be subject to all the limitations and restriction under Philippine fishery laws (Sec. 21, id. ). For clarity and emphasis, these statutory requirements may be reiterated in the proposed guidelines. B. On the propose integrated long-line tuna fishing and exporting project of Ambassador Hotel, Inc. The project proposal of Ambassador Hotel, Inc. will involve the following aspects; 1) development of an integrated tuna boat building; 2) transfer of long-line tuna fishing technology from Taiwan to the Philippines through a planned on-the-job training of local fishermen; and 3) development of exporting business in the Philippines. It is purportedly the main objective of the Ambassador Hotel, Inc. to do the fishing itself in Philippines waters and for this purpose, proposes to hire and employ Taiwanese tuna fishing and boat building technicians in order to improve its facilities and develop its technology; local fishermen will be trained by the Taiwanese experts in the modern techniques in tuna fishing . Its proposed local boat building project will also be supervise by Taiwanese technicians. Initially, Ambassador Hotel, Inc. Proposes to operate with 50 vessels to be chartered from Taiwan. This number is the minimum for a viable fleet-size requirement. By the tenth year of its operation, the corporation expects to increase its fleet to 300 locally built vessels with expected foreign exchange earning up to $100 million. The MNR memorandum states that the project proposal is within the framework of the aforementioned guidelines and recommends approval of the requested charter of 50 units of 35 GT Tuna long-line fishing vessels from Taiwan. The project proposal was referred to this Ministry as regards the "constitutionality of the joint venture and/or charter agreement arrangement, considering that it is and exploitation of the country's natural resources." The equity structure of Ambassador Hotel, Inc. and the details of the charter contract for the foreign vessels, are note disclosed in the within papers. Accordingly, we limit our comments to the legal implication of the project proposal. LexLib Pursuant to the Constitution, "[T]he disposition, exploration, development, exploitation, or utilization of any of the natural resources of the Philippines shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens ." (Art. XIV, Sec 9, 1973 Constitution) Additional, Section 21 of P.D. No. 704 ("The Fisheries Decree of 1975") Provides that "[N]o commercial fishing boat license shall be issued except to citizens of the Philippines or to associations or corporations duly registered in the Philippines, at least sixty per cent (60%) of the capital stock of which is owned by Filipino citizens ." Corollary thereto, Section 21 of the same Decree provides that citizens of the Philippines and qualified corporations engaged in commercial fishing "may, subject to the approval of the Secretary (Minister) [of Natural Resources] enter into charter contracts , lease or lease purchase agreements of fishing boats, or contracts for financial, technical or other forms of assistance with any foreign person, corporation or entity for the production, storage, marketing and processing of fish and fishery/aquatic products; Provided, That the foreign crew members of the foreign fishing boat . . . shall not exceed seventy five per cent (75%) of the complement of the boat ." It is observe that this provision, which allows the owner of the fishing license to hire or employ aliens as crew members of a foreign fishing boat chartered or lease by it, would constitute an exception to Section 2-A of the Anti-Dummy Law (Com. Act No. 108, as amended) insofar as it penalized the employment of aliens by persons or entities engaged in nationalized activities, except alien directors elected to represent foreign equity holdings in the corporation, or technical personnel whose employment is specifically approved by the Minister of Justice. Unless authorized by law and/or the proper government authority, employment of foreigners is proscribed. Section 21 also provides that "[C] harter contracts , lease of lease-purchase agreements and contract for financial, technical or other forms of assistance with any foreign person, corporation or entity, shall be subject to the guidelines promulgated by the Council [Fishery Industry Development Council] and the approval of the Secretary (Minister) [of Natural Resources]". Assuming that the Ambassador Hotel, Inc. is a qualified natural-resources corporation which may legally engage in commercial fishing in the Philippines, the charter of foreign fishing vessels and hiring of foreign crew member would be subject to the limitations and requirements provided in the fishing laws, rules and regulations. LexLib November 24, 1983. Respectfully submitted: (SGD.) RICARDO C. PUNO Minister of Justice