Atty. Silverio S. Tayao

June 6, 1995 Atty. Silverio S. Tayao Reyes Santayana Tayao Molo & Alegre 3rd Floor, Zaragosa Building Gamboa St.,Legaspi Village Makati, Metro Manila S i r : This refers to your letter of May 22, 1995 requesting this Commission to exempt your client, Reading & Bates Drilling Limited (RBDL), a foreign corporation, from licensing requirements under the Corporation Code and the Foreign Investments Act of 1991 for the offshore drilling activity it will undertake under its solitary contract with Philodrill Corporation. As stated, RBDL is a corporation duly organized and existing under the laws of the State of Oklahoma, U.S.A.,with headquarters in Houston, Texas. In consonance with the exploration and development program of the Philippine Government, its services have been contracted by Philodrill Corporation, a corporation duly organized and existing under Philippine Laws, to undertake offshore drilling work in Northwestern Palawan. Under the terms of the Drilling Contract dated April 26, 1995 with Philodrill, RBDL will drill, test and complete or plug and abandon, as the case may be, one (1) exploration or gas well at Blk. A, SC #6, Octon #3 Wellsite, Northwest Palawan Island, Philippines/Mabini Base, utilizing its semi-submersible mobil offshore drilling unit "Jim Cumingham." The work will be of short duration and is estimated to last only for thirty-five (35) days .The parties intent to commence operations on May 21, 1995 and terminate on June 25, 1995 or earlier. Upon completion of the drilling project with Philodrill, RBDL shall pull out its drilling rig and all its ancillary equipment and complement from Philippine waters because it does not intend to maintain or continue its drilling activity in the country .Its drilling contract with Philodrill is an isolated transaction and its drilling operation thereunder is limited and transitory in character and consequently, RBDL shall have no permanent establishment in the Philippines. You emphasized that RBDL has never done business in the Philippines and there will be no direct hiring of local or Filipino labor. Hence, your request for exemption. The weight of authority maintains that where the corporation enters into a single agreement ,or engages in isolated business act or transaction within a particular state, with no intention to repeat the same or make such state a basis for the conduct of any part of its corporate business, such corporation cannot be said to be doing business or transacting business within the state ,within the meaning of the usual statutory provisions regulating the transaction of business by foreign corporation. (17 Fletcher, Cyclopedia Corporations, Sec. 8469). cdlex Under Philippine jurisdiction, the term " doing business " is thus defined under Sec. 3(d) of RA No. 7042, otherwise known as the Foreign Investments Act of 1991, as follows: "The phrase " doing business " shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty (180) days or more ;participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements ,and contemplate to that extent the performance of acts or works, or the exercise of some of the commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account." (Emphasis supplied) From the foregoing authorities, it would appear that the above-contemplated activity does not fall within the coverage of the term "doing business" which requires licensing under the Corporation Code and Foreign Investments Act. Therefore, your request that RBDL be exempted from obtaining a license to do business in the Philippines is hereby granted. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner