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Republic SUPREME Manila EN BANC G.R. No.

143855

of

the

Philippines COURT

September 21, 2010

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG, ROBERT ACE S. BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and FRANKLIN BAUTISTA, Petitioners, vs. HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade and Industry), HON. FELIPE MEDALLA (Secretary of National Economic and Development Authority), GOV. RAFAEL BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA BAUTISTA (Chairman, Securities and Exchange Commission), Respondents. DECISION ABAD, J.: This case calls upon the Court to exercise its power of judicial review and determine the constitutionality of the Retail Trade Liberalization Act of 2000, which has been assailed as in breach of the constitutional mandate for the development of a self-reliant and independent national economy effectively controlled by Filipinos. The Facts and the Case On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely prohibited foreign nationals from engaging in the retail trade business. R.A. 8762 now allows them to do so under four categories: Category A Less US$2,500,000.00 than Exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.

Category B

US$2,500,000.00 up but For the first two years of R.A. 8762s less than US$7,500,000.00 effectivity, foreign ownership is allowed up to 60%. After the two-year period, 100% foreign equity shall be allowed. US$7,500,000.00 or more May be wholly owned by foreigners. Foreign investments for establishing a store in Categories B and C shall not be less than the equivalent in Philippine Pesos of US$830,000.00.

Category C

Category D

US$250,000.00 per store of May be wholly owned by foreigners. foreign enterprises specializing in high-end or luxury products

R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in the Philippines, to engage in the retail trade business with the same rights as Filipino citizens. On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S. Espina, Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers, Enrique Garcia, Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor, Ma. Elena Palma-Gil, Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the House of Representatives, filed the present petition, assailing the constitutionality of R.A. 8762 on the following grounds: First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which enjoins the State to place the national economy under the control of Filipinos to achieve equal distribution of opportunities, promote industrialization and full employment, and protect Filipino enterprise against unfair competition and trade policies. Second, the implementation of R.A. 8762 would lead to alien control of the retail trade, which taken together with alien dominance of other areas of business, would result in the loss of effective Filipino control of the economy. Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari store vendors, destroy self-employment, and bring about more unemployment. Fourth, the World Bank-International Monetary Fund had improperly imposed the passage of R.A. 8762 on the government as a condition for the release of certain loans. Fifth, there is a clear and present danger that the law would promote monopolies or combinations in restraint of trade. Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas, National Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng Pilipinas Gov. Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista countered that: First, petitioners have no legal standing to file the petition. They cannot invoke the fact that they are taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor can they invoke the fact that they are members of Congress since they made no claim that the law infringes on their right as legislators.

Second, the petition does not involve any justiciable controversy. Petitioners of course claim that, as members of Congress, they represent the small retail vendors in their respective districts but the petition does not allege that the subject law violates the rights of those vendors. Third, petitioners have failed to overcome the presumption of constitutionality of R.A. 8762. Indeed, they could not specify how the new law violates the constitutional provisions they cite. Sections 9, 19, and 20 of Article II of the Constitution are not self-executing provisions that are judicially demandable. Fourth, the Constitution mandates the regulation but not the prohibition of foreign investments. It directs Congress to reserve to Filipino citizens certain areas of investments upon the recommendation of the NEDA and when the national interest so dictates. But the Constitution leaves to the discretion of the Congress whether or not to make such reservation. It does not prohibit Congress from enacting laws allowing the entry of foreigners into certain industries not reserved by the Constitution to Filipino citizens. The Issues Presented Simplified, the case presents two issues: 1. Whether or not petitioner lawmakers have the legal standing to challenge the constitutionality of R.A. 8762; and 2. Whether or not R.A. 8762 is unconstitutional. The Courts Ruling One. The long settled rule is that he who challenges the validity of a law must have a standing to do so.1 Legal standing or locus standi refers to the right of a party to come to a court of justice and make such a challenge. More particularly, standing refers to his personal and substantial interest in that he has suffered or will suffer direct injury as a result of the passage of that law.2 To put it another way, he must show that he has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the law he complains of. 3 Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act prejudices petitioners or inflicts damages on them, either as taxpayers 4 or as legislators.5 Still the Court will resolve the question they raise since the rule on standing can be relaxed for nontraditional plaintiffs like ordinary citizens, taxpayers, and legislators when as in this case the public interest so requires or the matter is of transcendental importance, of overarching significance to society, or of paramount public interest.6 Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the State to develop a self-reliant and independent national economy effectively controlled by Filipinos. They invoke the provisions of the Declaration of Principles and State Policies under Article II of the 1987 Constitution, which read as follows:

Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all. xxxx Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. Section 20. The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of the 1987 Constitution, which reads: Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities. xxxx Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive. Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity. But, as the Court explained in Taada v. Angara,7 the provisions of Article II of the 1987 Constitution, the declarations of principles and state policies, are not self-executing. Legislative failure to pursue such policies cannot give rise to a cause of action in the courts. The Court further explained in Taada that Article XII of the 1987 Constitution lays down the ideals of economic nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and patrimony and in the use of Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt measures that help make them competitive; and (3) by requiring the State to develop a self-reliant and independent national economy effectively controlled by Filipinos.8
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In other words, while Section 19, Article II of the 1987 Constitution requires the development of a self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, it does not impose a policy of Filipino monopoly of the economic environment. The objective is simply to prohibit foreign powers or interests from maneuvering our economic policies and ensure that Filipinos are given preference in all areas of development. Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity; and speaks of industries which are competitive in both domestic and foreign markets as well as of the protection of Filipino enterprises against unfair foreign competition and trade practices. Thus, while the Constitution mandates a bias in favor of Filipino goods, services, labor and enterprises, it also recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair.9 In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and services. While it does not encourage their unlimited entry into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair. 10 The key, as in all economies in the world, is to strike a balance between protecting local businesses and allowing the entry of foreign investments and services.
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More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when the national interest requires. Thus, Congress can determine what policy to pass and when to pass it depending on the economic exigencies. It can enact laws allowing the entry of foreigners into certain industries not reserved by the Constitution to Filipino citizens. In this case, Congress has decided to open certain areas of the retail trade business to foreign investments instead of reserving them exclusively to Filipino citizens. The NEDA has not opposed such policy. The control and regulation of trade in the interest of the public welfare is of course an exercise of the police power of the State. A persons right to property, whether he is a Filipino citizen or foreign national, cannot be taken from him without due process of law. In 1954, Congress enacted the Retail Trade Nationalization Act or R.A. 1180 that restricts the retail business to Filipino citizens. In denying the petition assailing the validity of such Act for violation of the foreigners right to substantive due process of law, the Supreme Court held that the law constituted a valid exercise of police power. 11 The State had an interest in preventing alien control of the retail trade and R.A. 1180 was reasonably related to that purpose. That law is not arbitrary. Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the foreigners right to property or to engage in an ordinarily lawful business, it cannot be said that the law amounts to a denial of the Filipinos right to property and to due process of law. Filipinos continue to have the right to engage in the kinds of retail business to which the law in question has permitted the entry of foreign investors.

Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save when it blatantly violates the Constitution. But as the Court has said, there is no showing that the law has contravened any constitutional mandate. The Court is not convinced that the implementation of R.A. 8762 would eventually lead to alien control of the retail trade business. Petitioners have not mustered any concrete and strong argument to support its thesis. The law itself has provided strict safeguards on foreign participation in that business. Thus First, aliens can only engage in retail trade business subject to the categories aboveenumerated; Second, only nationals from, or juridical entities formed or incorporated in countries which allow the entry of Filipino retailers shall be allowed to engage in retail trade business; and Third, qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities. In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can prejudice the local small and medium enterprises since its implementation about a decade ago. WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs. SO ORDERED. ROBERTO Associate Justice G.R. No. 100883 December 2, 1991 CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner, vs. THE EXECUTIVE SECRETARY, THE NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY, THE BOARD OF INVESTMENTS, THE SECURITIES AND EXCHANGE COMMISSION, and THE BUREAU OF TRADE REGULATION AND CONSUMER PROTECTION, respondents. Senator VICENTE T. PATERNO and PHILIPPINE ASSOCIATION OF BATTERY MANUFACTURERS, intervenors. Abraham C. La Vina for petitioner. Padilla, Jimenez, Kintanar and Asuncion Law Firm for PABMA. Demaree J.B. Raval and Jhosep Y. Lopez for Sen. V. Paterno A. ABAD

CRUZ, J.:p

The petitioner challenges RA 7042 on the ground that it defeats the constitutional policy of developing a self-reliant and independent national economy effectively controlled by Filipinos and the protection of Filipino enterprises against unfair foreign competition and trade practices. He claims that the law abdicates all regulation of foreign enterprises in this country and gives them unfair advantages over local investments which are practically elbowed out in their own land with the complicity of their own government. Specifically, he argues that under Section 5 of the said law a foreign investor may do business in the Philippines or invest in a domestic enterprise up to 100% of its capital without need of prior approval. All that it has to do is register with the Securities and Exchange Commission or the Bureau of Trade Regulation and Consumer Protection in the case of a single proprietorship. The said section makes certain that "the SEC or BTRCP, as the case may be, shall not impose any limitations on the extent of foreign ownership in an enterprise additional to those provided in this Act." Furthermore, Section 7 provides that "non-Philippine nationals may own up to one hundred percent (100%) of domestic market enterprises unless foreign ownership therein is prohibited or limited by existing law or the Foreign Investment Negative List under Section 8 hereof." The provision for a Foreign Investment Negative List in Section 8 does not satisfy the constitutional mandate for the government to regulate and exercise authority over foreign investments. The system of negative list abandons the positive aspect of regulation and exercise of authority over foreign investments. In effect, it assumes that so long as foreign investments are not in areas covered by the list, such investments are not detrimental to but are good for the national economy. The petitioner attacks List A as not a true negative list in the strict sense of the term. It would merely enumerate areas of activities already reserved to Philippine nationals by mandate of the Constitution and specific laws. List B would contain areas of activities and enterprises already regulated according to law and includes small and medium-sized domestic market enterprises or export enterprises which utilize raw materials from depleting natural resources with paid-in equity capital of less than the equivalent of US$500,000.00. In other words, "small to medium" are reserved to Philippine nationals; in effect Filipinos are not encouraged to go big. List C would merely contain areas of investment m which "existing enterprises already serve adequately the needs of the economy and the consumers and do not need further foreign investments." The category of "existing enterprises" should be qualified by the term "Filipino." Otherwise, List C would protect existing foreign enterprises as well. The petitioner also attacks Section 9 because if a Philippine national believes that an area of investment should be included in list C, the burden is on him to show that the criteria enumerated in said section are met. It is alleged that Articles 2, 32, & 35 of the Omnibus Investments Code of 1982 are done away with by RA 7042. It is also argued that by repealing Articles 49, 50, 54 and 56 of the 1987 Omnibus Investments Code, RA No. 7042 further abandons the regulation of foreign investments by doing away with important requirements for doing business in the Philippines.

Finally, the petitioner claims that the transitory provisions of RA 7042, which allow practically unlimited entry of foreign investments for three years, subject only to a supposed Transitory Foreign Investment Negative List, not only completely deregulates foreign investments but would place Filipino enterprises at a fatal disadvantage in their own country. In his Comment, the Solicitor General counters that the phrase "without need of prior approval" applies to equity restrictions alone. This is well explained by the fact that prior to the effectivity of RA 7042, Article 46 of the Omnibus Investments Code of 1987 (EO No. 226), provided that a non-Philippine national could, without need of prior authority from the Board of Investments (BOI), invest in: (1) any enterprise registered under Book I (Investments with Incentives); and (2) enterprises not registered under Book I, to the extent that the total investment of the non-Philippine national did not exceed 40% of the outstanding capital. On the other hand, under Article 47 thereof, if an investment by a nonPhilippine nationals in an enterprise not registered under Book I was such that the total participation by non-Philippine nationals in the outstanding capital thereof exceeded 40%, prior authority from the BOI was required. With the effectivity of RA 7042, a certain layer of bureaucracy has been removed, specifically, the case-to-case authorization by BOI. Furthermore, with the introduction of the Negative List under Sections 8 & 15, the areas of investments not open to foreign investors are already determined and outlined; hence, registration with the SEC or BTRCP, as the case may be, is now the initial step to be taken by foreign investors. This registration constitutes regulation and exercise of authority over foreign investments. Under SEC and BTRCP rules and regulations, foreign investors must first comply with certain requirements before they can be issued a license to do business in the Philippines. The SEC has PD 902-A, as amended, and BP 68 for its governing laws. Pertinent provisions of these laws are contained in the SEC Licensing Procedure of Foreign Corporations. For BTRCP, the applicable laws are EO No. 133 in conjunction with EO No. 913. Section 7 of RA 7042 allows non-Philippine nationals to own up to 100% of domestic market enterprises only in areas of investments outside the prohibitions and limitations imposed by law to protect Filipino ownership and interest. Furthermore, the Foreign Investment Negative List under Section 8 reserves to Filipinos sensitive areas of investments. List C prohibits foreign investors from engaging in areas of activities where existing enterprises already serve adequately the needs of the economy and the consumer. The Act opens the door to foreign investments only after securing to Filipinos their rights and interests over the national economy. The provisions of the Constitution and other specific laws (which would be used as a basis for List A) regulate or limit the extent of foreign ownership in enterprises engaged in areas of activity reserved for Filipinos. To insist otherwise would be tantamount to saying that those laws are useless and should therefore be erased from the statute books.

The fact that List B contains areas already regulated pursuant to law already makes it clear that it is regulatory. It channels efforts at promoting foreign investments to bigger enterprises where there is an acute lack of Filipino capital. However, this should not be construed as a scheme to discourage Filipino enterprises from going into big enterprises. On the contrary, the scheme is for foreign investments to supplement Filipino capital in big enterprises. Activities which do not adequately meet-the needs of the consumers should not be included in list C so as to allow healthy competition. Otherwise, consumers would be at the mercy of unscrupulous producers. Foreign corporations already doing business in the Philippines under a valid license prior to the enactment of RA 7042 necessarily come within the protection of the law. The Solicitor General adds that Section 9 provides for the criteria to be used by NEDA in determining the areas of investment for inclusion in List C. The petition for inclusion therein requires "a public hearing at which affected parties will have the opportunity to show whether the petitioner industry adequately serves the economy and the consumers." But this does not mean that the Act is shifting the burden of proof to Filipino enterprises while deregulating foreign investments at the same time. On the contrary, this provision is designed to protect the consumers as not all existing enterprises satisfy the criteria inclusion in List C. The requisite proof and public hearing under Section 9 are, therefore, necessary to prevent detriment to the economy and the consumers. Regarding the alleged elimination of certain rules in the Code, the Solicitor General stresses that Section 16 of the provides that only "Articles forty-four (44) to fifty-six (56) Book II of EO No. 226 are repealed." The approval by the BOI and the other regulatory requirements set forth in the aforementioned articles were purposely removed because the determination of the areas of investment open to foreign investors is made easy by the Foreign Investment Negative List formulated and recommended by NEDA following the process and criteria provided in Sections 8 & 9 of the Act. Concluding, he argues that the Transitory Foreign Investment Negative List is not imaginary. In fact, it practically includes the same areas of investment reserved to Filipino under Section 5. Moreover, during the transitory period, "SEC shall disallow registration of the applying non-Philippine national if the existing joint venture enterprises, particularly the Filipino partners therein, can reasonably prove they are capable to make the investment needed for the domestic market activities to be undertaken by the competing applicant." Allowed to intervene, Senator Vicente T. Paterno,** raises substantially the same points stressed by the Solicitor General in defense of the Act and amplifies the argument that the Act does not deregulate foreign investments to the disadvantage of the Filipino entrepreneur. He discusses at length the different regulatory requirements for doing business in the Philippines and explains the over-all strategy embodied in the Act to develop a self-reliant economy, as well as the provisions designed to promote full employment for Filipinos. He also suggests that the constitutional challenge should be rejected outright for noncompliance with the requisites of a judicial inquiry into a constitutional question, to wit: (1) there must be an actual case or controversy; (2) the constitutional question must be raised by a proper party; (3) the constitutional question must

be raised at the earliest opportunity; and (4) the resolution of the constitutional question must be necessary to the decision of the case. 1 The court has carefully gone over the petition and wryly observes that it could have been pruned and limited to the strictly legal principles involved in the interest of a speedier disposition of the case. A considerable portion of the petition, and this is also true of the reply (if not more so), sounds too much like speechifying that is better addressed to a political audience than to a court of justice. Much valuable time would have been saved in the presentation of a leaner, strictly legal tract. Coming first to the procedural objections to the petition, we agree that there is at this point no actual case or controversy, particularly because of the absence of the implementing rules that are supposed to carry the Act into effect. A controversy must be one that is appropriate or "ripe" for determination, not conjectural or anticipatory. We hold, however, that the petitioner, as a citizen and taxpayer, and particularly as a member of the House of Representatives, comes under the definition that a proper party is one who has sustained or is in danger of sustaining an injury as a result of the act complained of. 2 We will also hold that the
constitutional question has not been raised tardily but in fact, as just remarked, prematurely.

On the merits, we find that the constitutional challenge must be rejected for failure to show that there is an indubitable ground for it, not to say even a necessity to resolve it. The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers which enjoins upon each department a becoming respect for the acts of the other departments. The theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted. In the case at bar, the law is challenged on broad constitutional principles and the proposition that the Filipino investor is unduly discriminated against in his own land. Due process is invoked. The provisions on nationalism are cited. Economic dependency is deplored. In the light, however, of the explanation given by the Solicitor General and of the Intervenor in their respective Comments, we hold that the cause of unconstitutionality has not been proved by the petitioner. On the contrary, we are satisfied that the Act does not violate any of the constitutional provisions the petitioner has mentioned. What we see here is a debate on the wisdom or the efficacy of the Act, but this is a matter on which we are not competent to rule. As Cooley observed: "Debatable questions are for the legislature to decide. The courts do not sit to resolve the merits of conflicting issues." 3 In Angara v. Electoral Commission, 4 Justice Laurel made it clear that "the judiciary does not pass upon questions of wisdom,
justice or expediency of legislation." And fittingly so for in the exercise of judicial power, we are allowed only "to settle actual controversies involving rights which are legally demandable and enforceable," 5 and may not annul an act of the political departments simply because we feel it is unwise or impractical. It is true that, under the expanded concept of the political question, we may now also "determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government." 6 We find, however, that irregularity does not exist in the case at bar.

The petitioner is commended for his high civic spirit and his zeal in the protection of the Filipino investors against unfair foreign competition. His painstaking study and analysis of the Foreign Investments Act of 1991 reveals not only his nationalistic fervor but also an

impressive grasp of this complex subject. But his views are expressed in the wrong forum. The Court is not a political arena. His objections to the law are better heard by his colleagues in the Congress of the Philippines, who have the power to rewrite it, if they so please, in the fashion he suggests. WHEREFORE, the petition is DISMISSED, without any pronouncement as to costs. It is so ordered. Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Medialdea, Regalado, Davide, Jr. and Romero, JJ., concur. Padilla, J., took no part. Fernan, C.J., is on leave. Bidin, Grio-Aquino,

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