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Bacolod City, PhilippinesSaturday, August 6, 2011
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SC to study fiscal impacts
of ruling on PLDT capital

Supreme Court Chief Justice Renato Corona yesterday said that the SC will study the economic repercussions of its decision ordering an investigation to determine if the Philippine Long Distance Telephone Co. violated the constitutional cap on foreign ownership.

"Frankly, no one mentioned about its economic implications. Our decision was purely legal," said Corona at the sidelines of the European Chamber of Commerce of the Philippines membership meeting at the New World Hotel, in Makati City.

Corona said that the economic repercussions is the reason why they set an oral argument to hear the motions for reconsideration filed by the respondents.

Businessman Manuel Pangilinan and several others asked the SC to reverse its decision changing the calculation to determine foreign ownership in public utilities because it sends wrong signal to foreign investors that they are not welcome in the Philippines.

In his petition, Pangilinan said "if the Court does not reconsider, that unwarranted redefinition will have very serious adverse repercussions for the partially nationalized industries affected, the Philippine capital market, the Philippine economy in general and the country as a whole."

In a ruling dated June 29, 2011, the SC directed the Securities and Exchange Commission to conduct an investigation on the allegations that the PLDT violated the constitutional cap on foreign ownership.

Aside from Pangilinan, PLDT president Napolen Nazareno and the Philippine Stock Exchange filed their separate motions seeking a reversal of the SC's ruling and sought that a temporary restraining order and/or writ of preliminary injunction be issued to stop the SEC from conducting its investigation.

The SC ruled that "capital" refers to shares of stock entitled to vote in the election of directors and thus refers only to common shares and not to the total outstanding capital stock.

It said that such definition should be used in determining the extent of allowable foreign ownership in respondent PLDT and if there is a violation of Section 11 Article 12 of the 1987 Philippine Constitution.

The respondents argued that the ruling that foreigners may own up to only 40 percent of a public utility's voting stock (instead of up to 40 percent of its entire capital stock) "is not justified: by the text of the Constitution; the clear intent of the 1986 Constitutional Commission that drafted it; nor by the economic conditions confronting the country."

The separate motions said that the SC ruling was based on a “misreading” of Section 11, Article XII of the 1987 Constitution when it ruled that the term "capital" in that section referred only to "voting stock."

This justifies the reduction of the allowable investments for foreigners in partially nationalized activities from 40 percent of total "capital" to only 40 percent of "voting shares" because Section 11 explicitly says "capital" not "voting shares”, the respondents said. The motions said that the 1986 Constitutional Commission was comprised of intelligent men and women fluent in English and keen to make their intentions clear. They would not have used the general term "capital" if they wanted to refer only to "voting shares".

Pangilinan said that the reason why the framers of the Constitution rejected the use of the term "voting capital" or "controlling interest" instead of "capital" because they are aware of the "dire economic condition and pressing need for investments and wanted to find ways to attract and keep, rather than drive away foreign capital. This meant they did not want to adopt additional restrictions such as limiting allowable foreign ownership of voting stock to only 40 percent rather than 40 percent of total capital in partially nationalized industries, Pangilinan said.*PNA


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