SC hears PLDT arguments for reversal of foreign ownership ruling

By MARK MERUEÑAS, GMA News

Published April 17, 2012 3:16pm

BAGUIO CITY - The Supreme Court on Tuesday started hearing arguments of the Philippine Long Distance Telephone Company (PLDT) in the latter's bid to reverse a July 2011 ruling on a case alleging the telecommunications firm exceeded the limits on foreign ownership.

All 15 magistrates listened first to the arguments of lawyers from the PLDT.

In its June 2011 ruling, the high court defined the term "capital" in the constitutional provision limiting foreign ownership of domestic public utilities to 40 percent.

The court said the Securities and Exchange Commission (SEC) should use only common voting shares in assessing the capital stock of the firm to determine the level of foreign ownership in PLDT. This would mean that 64 percent of PLDT is owned by foreigners, in violation of the 40-percent limit set by the Foreign Investments Act of 1991.

A month after the SC ruling, in July 2011, PLDT filed a motion asking the high court to reconsider the decision.

After Chief Justice Renato Corona expressed fears that the ruling would trigger "possible economic repercussions," the Supreme Court decided to set an oral argument for and against it.

PLDT chairman Manuel Pangilinan had been quoted as saying that the SC ruling would discourage foreigners from investing in the Philippines, which in turn will adversely affect the country's economy.

Apart from Pangilinan, other respondents who sought the reversal of the SC ruling were Smart Communications head Napoleon Nazareno, the Securities and Exchange Commission (SEC), Philippine Stock Exchange (PSE), Department of Finance (DOF), and the Presidential Commission on Good Government.

The case was originally filed by human rights lawyer Wilson Garcia. He, however, died in October last year due to a liver ailment, and has since been replaced as complainant in the case by his eldest son Lauro.

The younger Gamboa has already waived his participation in the oral arguments.

PLDT counsel Atty. Victor Lazatin, representing PLDT chairman Manuel V. Pangilinan said the July 2011 SC ruling "ignored the reality on the ground, that is a self-reliant and independent PLDT effectively controlled by Filipinos."

The justices pointed out that PLDT "is not a party to the case" since individual persons were named respondents in the complaint.

Lazatin insisted on his firm's concern about the SC ruling saying: "It is unfair to different parties particularly for PLDT and other foreign parties which are not heard on the matter."

He appealed to the magistrates to reverse the court’s ruling on the case, saying: "If not reconsidered, the Gamboa decision will certainly affect 'vested rights' of PLDT and its foreign shareholders."

"It changes the rules in the middle of the game. It sets back two steps: our quest for economic development and prosperity for our people," Lazatin added.

Lazatin also claimed that PLDT's overall capital is 86.3 percent Filipino-owned and 13.7 foreign-owned.

PLDT, in a special stockholders' meeting on March 22, approved changes to its articles of incorporation “for the purpose of seeking approval of the amendments to the Seventh Article of the Articles of Incorporation, consisting of the sub-classification of the company’s preferred capital stock into 150,000,000 shares of voting preferred stock, each with a par value of P1, and 807,500,000 shares of non-voting serial preferred stock, each with a value of P10.” Other perspectives Apart from Pangilinan, other respondents who sought the reversal of the SC ruling were Smart Communications head Napoleon Nazareno, the Securities and Exchange Commission (SEC), Philippine Stock Exchange (PSE), Department of Finance (DOF), and the Presidential Commission on Good Government. SEC chairperson Teresita Herbosa has said that her agency is crafting possible amendments to the Corporation Code and among the proposals seeks clarity on SEC powers to determine nationality compliance. “We also want to be clearer about the nationality requirements...to reinforce our authority to determine if the company is complying with the nationality requirements,” Herbosa said. PSE president Hans B. Sicat would rather that the Philippines' definition of "capital" be aligned with global finance terminology should the Supreme Court change its June 28 ruling on foreign ownership limits in the PLDT case. “We’re hoping that there will be a lot more logic that goes into the discussion... It is quite dangerous for the Court, with the stroke of a pen, to define the word ‘capital’," PSE president Hans B. Sicat has said.

Before the oral arguments ended Tuesday, the high court also summoned constitutionalists Joaquin Bernas and Bernardo Villegas to the next day of oral arguments on June 26 so they could give insights on particular provisions in the Foreign Investments Act of 1991. — RSJ/ELR, GMA News

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