House passes bill allowing 100% foreign ownership of public utilities

MANILA, Philippines – The bill that would allow foreigners to fully own public utilities like transportation, communication, and power firms in the Philippines successfully hurdled the House of Representatives.

On Tuesday, March 10, 136 lawmakers voted yes to House Bill (HB) No. 78, which would give a distinction between how a public service and a public utility is defined under Commonwealth Act No. 146 or the Public Service Act, in effect allowing foreigners to fully own public utilities in the Philippines.

A total of 43 legislators – including several allies of President Rodrigo Duterte – voted against the bill, while one abstained from the vote.

Under HB No. 78, public services are those which are "non-rivalrous or imbued with public interest," such as:

HB No. 78 then limits the definition of public utility to any person or entity that operates, manages, or controls for public use the distribution of electricity, transmission of electricity, water pipeline distribution, and sewerage pipeline.

But HB No. 78 not only makes a distinction between public services and public utilities, it also leaves out the 60-40 constitutional rule on foreign ownership.

The Senate version of the bill remains pending at the committee level. It has to be approved by senators on 2nd and 3rd readings before Duterte can sign it into law.

'Unconstitutional' legislation

Opposition lawmakers have long argued the measure is unconstitutional.

This is because Section 11, Article XII of the 1987 Constitution currently reserves the ownership, operation, control, and management of public utilities to Filipino citizens or to corporations or associations, and at least 60% of its capital stock should by owned by Filipinos.

Gabriela Representative Arlene Brosas said the bill would now allow foreigners to own "critical" public services like telecommunications and transportation.

She also said the passage of HB No. 78 "more or less fulfills the goal of economic charter change without tinkering with the 1987 Constitution."

"Foreign ownership of our mobile communication services, mass transits, and oil extraction will not improve the quality of services. Rather, it will leave us all vulnerable to external shocks and risks at the expense of course of ordinary consumers, in the form of higher fares and fees," she added.

But House committee on economic affairs chairperson Sharon Garin, who sponsored HB No. 78 in the plenary, said it does not violate the Constitution.  

She cited jurisprudence from the Supreme Court (SC) in the JG Summit Holdings vs Court of Appeals case, where the justices upheld the removal of shipyards from the definition of public utility.

Garin also said that in the National Power Corporation vs Bataan provincial government case, the SC also ruled that "power generation is no longer considered a public utility operation."

"The Supreme Court has upheld the removal of sectors previously considered public utilities.... It should be further emphasized that [the bill] is entitled to the presumption of constitutionality which every treaty, executive agreement, and statute enjoys," the AAMBIS-OWA representative said in a statement.  

"The burden of proof is on the  petitioner to clearly demonstrate that the assailed statute is unconstitutional," she added. 

Garin previously said HB No. 78 would help improve the "deplorable state" of the Philippines' public services by giving more leeway for foreign direct investments. – Rappler.com 

Mara Cepeda

Mara Cepeda writes about politics and women’s rights for Rappler. She covers the Senate and the Office of the Vice President. Got tips? Send her an email at mara.cepeda@rappler.com or shoot her a tweet @maracepeda.

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