Hogan Lovell OffshoreBook 2023 230809 OnlinePDF - Flipbook - Page 226
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Obtaining an RE Contract and, thereafter, developing and implementing an RE
project constitutes "doing business"16 in
the Philippines. A foreignowned entity will
need to obtain a license from the Philippine Securities and Exchange Commission17
as a branch18 or set up a local entity or
subsidiary. In case of an establishment of
a branch office or a domestic corporation
that will have more than 40% foreign ownership, there is a minimum capitalization
requirement of US$200,000,19 unless any
of the exceptions apply. 20
(a) Risk Relating to the DOJ Opinion
The DOJ Opinion, which purports to
interpret the provisions of the Philippine Constitution, is not necessarily
binding upon the courts. The final
arbiter regarding the interpretation
of Constitutional provisions is the
Philippine Supreme Court. 21 Actions of
an administrative agency may be set
aside by the courts if there is an error
of law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly
Republic of the Philippines
conflicting with either the letter or
the spirit of a legislative enactment. 22
Thus, unless this issue has been ruled
upon by the Supreme Court, there is a
risk that a case may be brought before
the courts questioning the interpretation of the DOJ regarding the scope
of "natural resources" and "all forces
of potential energy" as contemplated
under the Philippine Constitution and
the Supreme Court may decide that
the DOJ Opinion is erroneous and that
the 60% minimum Filipino ownership
requirement applies even to RE wind
projects. In turn, this may result in the
amendment of the RE Act IRR reinstating the nationality restriction on RE
wind projects.
Assuming an adverse Supreme Court
decision, the RE company would be
prospectively prohibited from engaging in the nationalized activity of
exploring, developing, and utilizing
wind energy if it is still more than 60%
owned by foreigners. This would have
16 Under Republic Act No. 7042, as amended, otherwise known as the Foreign Investments Act (the "FIA"), 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 totalling 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 functions
normally incident to, and in progressive prosecution of, 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.
17 Revised Corporation Code, Section 140.
18 Under Section 3(uu) of the RE Act IRR, RE Developers refer to "individual/s or juridical entity created, registered and/or authorized to operate in the
Philippines in accordance with existing Philippine laws and engaged in the exploration, development, and utilization of RE resources and actual operation of
RE systems/facilities… (Underscoring supplied.)" We believe that this provision is broad enough to cover a branch.
19 A, Section 8(b).
20 Under Section 8(b) of the FIA, a minimum paid-in capital of US$100,000 shall be allowed for micro and small domestic market enterprises that have
more than 40% foreign ownership, provided that (1) they involve advanced technology as determined by the Department of Science and Technology, or (2)
they are endorsed as start-up or start-up enablers by the lead host agencies pursuant to Republic Act No. 11337, otherwise known as the Innovative Startup Act; or (3) a majority of their direct employees are Filipinos, but in no case shall the number of Filipino employees be less than 15.
21 Gios-Samar, Inc. v. Department of Transportation and Communications, G.R. No. 217158, March 12, 2019.
22 Peralta v. Civil Service Commission, G.R. No. 95832, August 10, 1992.
