Foreign investors in PLDT may sue PHL govt on investment rules – MVP lawyer

Foreign investors may sue the Philippine government before an international tribunal for espousing inconsistent investment rules, a lawyer of Manuel V. Pangilinan, CEO and managing director of the First Pacific Group, told the Supreme Court on Tuesday.   During oral arguments on the foreign ownership of the publicly-listed telecom giant Philippine Long Distance Telephone Co. at the Supreme Court, lawyer E. M. Lombos said the constitutional provision capping at 40 percent the equity of foreign investors in public utilities was never violated in the case of PLDT.   Pangilinan, who heads PLDT–a unit of Hong Kong-based First Pacific Co. Ltd.–was one of the respondents in the petition filed by now deceased human rights lawyer Wilson Gamboa.   Gamboa asked the Supreme Court to annul the sale of government-acquired 111,415 PLDT shares under the name of Philippine Telecommunications Investment Corporation (PTIC) to First Pacific for P25.2 billion.   The sale violated Section 11, Article 12 of the Constitution which limits foreign ownership of domestic public utilities to 40 percent, the human rights lawyer claimed, accusing the respondents of committing grave abuse of discretion by allowing the sale to push through.   Pangilinan, in turn, asked the SC to reverse its June 28, 2011 decision which gave weight to Gamboa’s complaint by redefining the term “capital” under Section 11, Article 12 of the Constitution. Inconsistent, bad for investments   That was inconsistent on the part of government, and a violation of the fair and equitable treatment of foreign investors who invested their money in a Philippine company in good faith, Lombos told the court.   This may have a bad impact on equity investments in the Philippines by foreign businesses, according to Pangilinan’s lawyer.   PLDT, Lombos also said, stands to lose its public utility franchise as the value of shares held by its Filipino and foreign investors are expected to hit bottom low if the court will maintain its ruling.   “I have little or no doubt that the arbitral tribunal will not allow the Philippine government to go away with something by pointing fingers at each other and saying, ‘Well that’s what we said, but that is not what that guy in the other branch said,’” Lombos said in response to a query by Associate Justice Maria Lourdes Sereno.   Lombos noted that international arbitrary tribunals look at a government as a single, unified entity despite the independence of the executive from the judicial and legislative branches.   “Thus, in case two branches of the same government took different positions, as far as investors are concerned, the fact that there may be disagreements does not prevent a potential liability from arising when there is an effective position taken by the government insofar as its investment rules are concerned,” he said.   In the case of PLDT, Lombos noted the executive branch invited foreigners to join the bidding for the PLDT shares at a time when the foreign investors already owned more than 40 percent of the voting stocks in the company.   If PLDT loses its franchise, Globe and other carries that depend on interconnection relationships will be affected, the lawyer said.   “If that public utility franchise is lost, the losers will be PLDT’s Filipino and foreign shareholders because of the hit on the value of their shares will sustain,” he said.   Sereno reminded the lawyer that the court was mandated to interpret the Constitution and the laws, regardless of the adverse consequences.   “Assuming that there is inconsistency, are we going to diminish our review powers or the exercise of judicial review simply because there is this inconsistency? Or is it not in fact the rule to set to rest all questions even if in fact there will be adverse consequences because that is the primary role of the court, to settle all questions regarding interpretations of the Constitution or the law?” she said.   However, Lombos insisted the court has no jurisdiction to hear the matter and issue the ruling  considering that not all the affected parties are impleaded.   Constitutionalist Fr. Joaquin Bernas SJ, who attended the oral arguments as amicus curiae or “friend of the court,” said the issues in the case are not constitutional in nature but “statutory” because the definition of the term “capital” is not stated in the Constitution.   In closing the oral arguments, Acting Chief Justice Antonio Carpio directed all parties to submit their respective memorandum within 30 days, after which the case is deemed submitted for resolution.   In its June 28, 2011 decision, the Court held that the term “capital” in Section 11, Article XII of the 1987 Constitution refers only to common stocks or voting shares used in electing company directors and not the total outstanding, capital stock composed of common and preferred or non-voting shares.   The SC directed the Securities and Exchange Commission to look “only to common shares, and not to the total outstanding, capital stock” in the case of PLDT.   It also ordered the SEC “to apply this definition of the term ‘capital’ in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company and if there is violation of Section 11, Article XII of the Constitution, to impose appropriate sanctions under the law.” —VS, GMA News PLDT foreign investors may sue PHL govt on investment rules – MVP lawyer   Foreign investors may sue the Philippine government before an international tribunal for espousing inconsistent investment rules, a lawyer of Manuel V. Pangilinan, CEO and managing director of the First Pacific Group, told the Supreme Court on Tuesday.   During oral arguments on the foreign ownership of the publicly-listed telecom giant Philippine Long Distance Telephone Co. at the Supreme Court, lawyer E. M. Lombos said the constitutional provision capping at 40 percent the equity of foreign investors in public utilities was never violated in the case of PLDT.   Pangilinan, who heads PLDT–a unit of Hong Kong-based First Pacific Co. Ltd.–was one of the respondents in the petition filed by now deceased human rights lawyer Wilson Gamboa.   Gamboa asked the Supreme Court to annul the sale of government-acquired 111,415 PLDT shares under the name of Philippine Telecommunications Investment Corporation (PTIC) to First Pacific for P25.2 billion.   The sale violated Section 11, Article 12 of the Constitution which limits foreign ownership of domestic public utilities to 40 percent, the human rights lawyer claimed, accusing the respondents of committing grave abuse of discretion by allowing the sale to push through.   Pangilinan, in turn, asked the SC to reverse its June 28, 2011 decision which gave weight to Gamboa’s complaint by redefining the term “capital” under Section 11, Article 12 of the Constitution.   That was inconsistent on the part of government, and a violation of the fair and equitable treatment of foreign investors who invested their money in a Philippine company in good faith, Lombos told the court.   This may have a bad impact on equity investments in the Philippines by foreign businesses, according to Pangilinan’s lawyer.   PLDT, Lombos also said, stands to lose its public utility franchise as the value of shares held by its Filipino and foreign investors are expected to hit bottom low if the court will maintain its ruling.   “I have little or no doubt that the arbitral tribunal will not allow the Philippine government to go away with something by pointing fingers at each other and saying, ‘Well that’s what we said, but that is not what that guy in the other branch said,’” Lombos said in response to a query by Associate Justice Maria Lourdes Sereno. Govt as single, unified entity   Lombos noted that international arbitrary tribunals look at a government as a single, unified entity despite the independence of the executive from the judicial and legislative branches.   “Thus, in case two branches of the same government took different positions, as far as investors are concerned, the fact that there may be disagreements does not prevent a potential liability from arising when there is an effective position taken by the government insofar as its investment rules are concerned,” he said.   In the case of PLDT, Lombos noted the executive branch invited foreigners to join the bidding for the PLDT shares at a time when the foreign investors already owned more than 40 percent of the voting stocks in the company.   If PLDT loses its franchise, Globe and other carries that depend on interconnection relationships will be affected, the lawyer said.   “If that public utility franchise is lost, the losers will be PLDT’s Filipino and foreign shareholders because of the hit on the value of their shares will sustain,” he said.   Sereno reminded the lawyer that the court was mandated to interpret the Constitution and the laws, regardless of the adverse consequences.   “Assuming that there is inconsistency, are we going to diminish our review powers or the exercise of judicial review simply because there is this inconsistency? Or is it not in fact the rule to set to rest all questions even if in fact there will be adverse consequences because that is the primary role of the court, to settle all questions regarding interpretations of the Constitution or the law?” she said.   However, Lombos insisted the court has no jurisdiction to hear the matter and issue the ruling  considering that not all the affected parties are impleaded.   Constitutionalist Fr. Joaquin Bernas SJ, who attended the oral arguments as amicus curiae or “friend of the court,” said the issues in the case are not constitutional in nature but “statutory” because the definition of the term “capital” is not stated in the Constitution. Capital as common stocks   In closing the oral arguments, Acting Chief Justice Antonio Carpio directed all parties to submit their respective memorandum within 30 days, after which the case is deemed submitted for resolution.   In its June 28, 2011 decision, the Court held that the term “capital” in Section 11, Article XII of the 1987 Constitution refers only to common stocks or voting shares used in electing company directors and not the total outstanding, capital stock composed of common and preferred or non-voting shares.   The SC directed the Securities and Exchange Commission to look “only to common shares, and not to the total outstanding, capital stock” in the case of PLDT.   It also ordered the SEC “to apply this definition of the term ‘capital’ in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company and if there is violation of Section 11, Article XII of the Constitution, to impose appropriate sanctions under the law.” —VS/DVM, GMA News