Section 17, Article XII of the 1987 Constitution

Temporary state take- over of business affected with public interest

Take-over of the operation of any privately owned public utility or business
affected with public interest
1973 Constitution (Sec 7, Art. XIV)
In times of national emergency when the
public interest so requires, the State may
temporarily take over or direct the
operation of any privately owned public
utility or business affected with public
interest.

1987 Constitution (Sec 17, Art. XII)

In times of national emergency, when
the public interest so requires, the State
may, during the emergency and under
reasonable terms prescribed by it,
temporarily take over or direct the
operation of any privately owned public
utility or business affected with public
interest.

The provision was first introduced during the 1971 Constitutional Convention. The
phrase under reasonable terms prescribed by it was added upon the instance of
Commissioner Jamir. it reffered to the State, through an appropriate agency
Letter of Instruction No. 2 of President Marcos (September 22, 1972)
Instructing the Secretary of National Defense to take over the the
management, control and operation of the Manila Electric Company, the
National Waterworks and Sewerage Authority, the Philippine National
Railways, the Philippine Airlines, Air Manila (and) Filipinas Orient Airwaysfor
the successful prosecution by the Government of its efforts to contain, solve
and end present national emergency.
LETTER OF INSTRUCTIONS NO. 2

The
Department
Quezon

of

National

Secretary
Defense
City

In view of the present national emergency which has been brought about by the
activities of those who are actively engaged in a criminal conspiracy to seize
political and state power in the Philippines and to take over the Government by
force and violence the extent of which has now assumed the proportion of an actual
war against our people and their legitimate Government, and pursuant to
Proclamation No. 1081, dated September 21, 1972, and in my capacity as
commander-in-chief of all the armed forces of the Philippines and in order to
prevent any disruption of vital public services during the duration of the present

national emergency, you are hereby ordered forthwith to take over or cause the
take over of the management, control and operation of the Manila Electric
Company, the Philippine Long Distance Telephone Company, the National
Waterworks and Sewerage Authority, the Philippine National Railways, the
Philippine Airlines, Air Manila, Filipinas Orient Airways, and such other public utilities
which, in your sound judgment, you consider essential for the successful
prosecution by the Government of its effort to contain, solve and end the present
national
emergency.
You are to continue handling and directing the management, control and operation
of the aforesaid public utilities for the duration of the present national emergency or
until otherwise ordered by me or by my designated representative.
Done in the City of Manila this 22nd day of September, in the year of Our Lord,
nineteen hundred and seventy-two.
chan robles virtual law library
National Emergency
Pursuant to the 1973 Constitution, the power to decide could be exercised by the
executive arm of the government.
Under the 1986 Constitutional Convention, national emergency was explained as
encompassing threat from external aggression, calamities, or natural disasters, but
not strikes. The duration of the emergency is the duration of the takeover.
Duration
Section 23(2), Article VI
Congress to delegate, by law,
emergency powers to the President,
which power cease upon the next
adjournment of Congress unless sooner
withdrawn by the same

Section 17, Article XII

No time limit on the duration of the
emergency take over
Duration would be discretionary with the
President

Case: David v. Ermita (2006)

The Court said that the power of the President to take over the operation of public
utilities is activated only if Congress grants emergency powers under Article VI,
Section 23.
The President acquires emergency powers when given to her by Congress in a state
of emergency declared by Congress.
A Look on David v. Ermita, in connection with Art 12, Section 17:

A distinction must be drawn between the Presidents authority to declare "a state
of national emergency" and to exercise emergency powers. To the first, as
elucidated by the Court, Section 18, Article VII grants the President such power,
hence, no legitimate constitutional objection can be raised. But to the second,
manifold constitutional issues arise.
Section 23, Article VI of the Constitution reads:
SEC. 23. (1) The Congress, by a vote of two-thirds of both Houses in joint session
assembled, voting separately, shall have the sole power to declare the existence of
a state of war.
(2) In times of war or other national emergency, the Congress may, by law,
authorize the President, for a limited period and subject to such restrictions as it
may prescribe, to exercise powers necessary and proper to carry out a declared
national policy. Unless sooner withdrawn by resolution of the Congress, such powers
shall cease upon the next adjournment thereof.
It may be pointed out that the second paragraph of the above provision refers not
only to war but also to "other national emergency." If the intention of the Framers of
our Constitution was to withhold from the President the authority to declare a "state
of national emergency" pursuant to Section 18, Article VII (calling-out power) and
grant it to Congress (like the declaration of the existence of a state of war), then the
Framers could have provided so. Clearly, they did not intend that Congress should
first authorize the President before he can declare a "state of national emergency."
The logical conclusion then is that President Arroyo could validly declare the
existence of a state of national emergency even in the absence of a Congressional
enactment.
But the exercise of emergency powers, such as the taking over of privately owned
public utility or business affected with public interest, is a different matter. This
requires a delegation from Congress.
Courts have often said that constitutional provisions in pari materia are to be
construed together. Otherwise stated, different clauses, sections, and provisions of
a constitution which relate to the same subject matter will be construed together
and considered in the light of each other. 123 Considering that Section 17 of Article
XII and Section 23 of Article VI, previously quoted, relate to national emergencies,
they must be read together to determine the limitation of the exercise of
emergency powers.
Generally, Congress is the repository of emergency powers. This is evident in the
tenor of Section 23 (2), Article VI authorizing it to delegate such powers to the
President. Certainly, a body cannot delegate a power not reposed upon it. However,
knowing that during grave emergencies, it may not be possible or practicable for

Congress to meet and exercise its powers, the Framers of our Constitution deemed
it wise to allow Congress to grant emergency powers to the President, subject to
certain conditions, thus:
(1) There must be a war or other emergency.
(2) The delegation must be for a limited period only.
(3) The delegation must be subject to such restrictions as the Congress may
prescribe.
(4) The emergency powers must be exercised to carry out a national policy
declared by Congress.124
Section 17, Article XII must be understood as an aspect of the emergency powers
clause. The taking over of private business affected with public interest is just
another facet of the emergency powers generally reposed upon Congress. Thus,
when Section 17 states that the "the State may, during the emergency and under
reasonable terms prescribed by it, temporarily take over or direct the operation of
any privately owned public utility or business affected with public interest," it refers
to Congress, not the President. Now, whether or not the President may exercise
such power is dependent on whether Congress may delegate it to him pursuant to a
law prescribing the reasonable terms thereof. Youngstown Sheet & Tube Co. et al. v.
Sawyer,125 held:
It is clear that if the President had authority to issue the order he did, it must be
found in some provision of the Constitution. And it is not claimed that express
constitutional language grants this power to the President. The contention is that
presidential power should be implied from the aggregate of his powers under the
Constitution. Particular reliance is placed on provisions in Article II which say that
"The executive Power shall be vested in a President . . . .;" that "he shall take Care
that the Laws be faithfully executed;" and that he "shall be Commander-in-Chief of
the Army and Navy of the United States.
Summation:
The Court finds and so holds that PP 1017 is constitutional insofar as it constitutes a
call by the President for the AFP to prevent or suppress lawless violence. The
proclamation is sustained by Section 18, Article VII of the Constitution and the
relevant jurisprudence discussed earlier. However, PP 1017s extraneous provisions
giving the President express or implied power (1) to issue decrees; (2) to direct the
AFP to enforce obedience to all laws even those not related to lawless violence as
well as decrees promulgated by the President; and (3) to impose standards on
media or any form of prior restraint on the press, are ultra vires and
unconstitutional. The Court also rules that under Section 17, Article XII of the

Constitution, the President, in the absence of a legislation, cannot take over

privately-owned public utility and private business affected with public interest.
ther than this declaration of invalidity, this Court cannot impose any civil, criminal
or administrative sanctions on the individual police officers concerned. They have
not been individually identified and given their day in court. The civil complaints or
causes of action and/or relevant criminal Informations have not been presented
before this Court. Elementary due process bars this Court from making any specific
pronouncement of civil, criminal or administrative liabilities.
It is well to remember that military power is a means to an end and substantive civil
rights are ends in themselves. How to give the military the power it needs to protect
the Republic without unnecessarily trampling individual rights is one of the eternal
balancing tasks of a democratic state. During emergency, governmental action may
vary in breadth and intensity from normal times, yet they should not be arbitrary as
to unduly restrain our peoples liberty.
Perhaps, the vital lesson that we must learn from the theorists who studied the
various competing political philosophies is that, it is possible to grant government
the authority to cope with crises without surrendering the two vital principles of
constitutionalism: the maintenance of legal limits to arbitrary power, and political
responsibility of the government to the governed.
WHEREFORE, the Petitions are partly granted. The Court rules that PP 1017 is
CONSTITUTIONAL insofar as it constitutes a call by President Gloria MacapagalArroyo on the AFP to prevent or suppress lawless violence. However, the provisions
of PP 1017 commanding the AFP to enforce laws not related to lawless violence, as
well as decrees promulgated by the President, are declared UNCONSTITUTIONAL. In
addition, the provision in PP 1017 declaring national emergency under Section 17,
Article VII of the Constitution is CONSTITUTIONAL, but such declaration does not
authorize the President to take over privately-owned public utility or business
affected with public interest without prior legislation.
G.O. No. 5 is CONSTITUTIONAL since it provides a standard by which the AFP and
the PNP should implement PP 1017, i.e. whatever is "necessary and appropriate
actions and measures to suppress and prevent acts of lawless violence."
Considering that "acts of terrorism" have not yet been defined and made punishable
by the Legislature, such portion of G.O. No. 5 is declared UNCONSTITUTIONAL.
The warrantless arrest of Randolf S. David and Ronald Llamas; the dispersal and
warrantless arrest of the KMU and NAFLU-KMU members during their rallies, in the
absence of proof that these petitioners were committing acts constituting lawless
violence, invasion or rebellion and violating BP 880; the imposition of standards on
media or any form of prior restraint on the press, as well as the warrantless search

of the Tribune offices and whimsical seizure of its articles for publication and other
materials, are declared UNCONSTITUTIONAL.
Business affected with public interest
According to American Constitutional jurisprudence, the phrase has significant
history and it had a special significance especially in the heyday of laissez faire. This
area of business was not allowed to escape the regulatory power of the state.
governmental regulatory power restricted by laissez faire
Case: Munn v. Illinois (1877)
Property does become clothed with a public interest when used in a manner to
make it of public consequence, and affect the community at large. When, therefore,
one devotes his property to a use in which the public has an interest, he, in effect,
grants to the public an interest in that use, and must submit to be controlled by the
public for the common good, to the extent of the interest he has thus created.
Dissent: court holds that property loses something of its private character when
employed in such a way as to be generally useful
Prior to the case, businesses affected with public interest were those granted with
special privileges by the government. Decisions subsequent to Munn were not
receptive to the broad view enunciated in the said case, and continued to give the
phrase a restrictive sense.
Case: Nebbia v. New York (1934)
The high court finally rejected the restricted meaning of business affected with a
public interest and returned to the broad view of Munn. Under the said case, the
phrase affected with public interest can, in the nature of things, mean no more
than that an industry, for adequate reason, is subject to control for the public good
During the 1986 Constitutional Commission, the phrase means business that has a
lot of repercussion on the public, whether it be public utility or other businesses
which may partake of the characteristics of public utility but which is not yet
considered public utility or any business which concerns a mass-based consumer
group and especially among the low income groups.
AN APPLICATION OF ART. 12, SECTION 17:
House Bill/Resolution NO. RBH0002
FULL TITLE : RESOLUTION OF BOTH HOUSES GRANTING THE STATE AUTHORITY TO
TAKE OVER OR DIRECT THE OPERATION OF ANY PRIVATELY-OWNED PUBLIC UTILITY
OR BUSINESS AFFECTED WITH PUBLIC INTEREST PURSUANT TO ARTICLE XII

(NATIONAL ECONOMY AND PATRIMONY), SECTION 17 OF THE 1987 PHILIPPINE

CONSTITUTION IN VIEW OF THE LOOMING POWER CRISIS IN 2015
PRINCIPAL AUTHOR : RODRIGUEZ, RUFUS B.
DATE FILED : 2014-10-01CO-AUTHORS(Upon Filing) :
1. Rodriguez (M.)
DATE APPROVED BY THE SENATE : 0000-00-00
DATE TRANSMITTED TO THE HOUSE: 0000-00-00
DATE RECEIVED BY THE HOUSE: 0000-00-00
DATE CERTIFIED AS URGENT SENATE BILL: 0000-00-00
ACTIONS TAKEN BY THE COMMITTEE ON RULES
REFERRAL TO THE COMMITTEE ON CONSTITUTIONAL AMENDMENTS ON 201410-20
DATE BILL WITHDRAWN: 0000-00-00

CONSTITUTIONAL AMENDMENTS
JURISDICTION : All matters directly and principally relating to amendments or
revisions of the Constitution.
CHAIRPERSON :
Hon. Garcia-Albano, Mylene J.Garcia-Albano, Mylene J.
District Representative Davao City, 2nd District; Term: 2
MEMBERSHIP : 35 Members
COMMITTEE OFFICE :
3/F Ramon V. Mitra Building, House of Representatives, Quezon City
Telephone no. 9315001 local 7155, Telefax no. 9313647
Committee Secretary - Ms. Aline Ruth V. Villaluz

Section 18, Article XII of the 1987 Constitution

The State may, in the interest of national welfare or defense,

establish and operate vital industries and, upon payment of just
compensation, transfer to public ownership utilities and other private
enterprises to be operated by the Government.

This provision talks about NATIONALIZATION or STATE OWNERSHIP of

industries and pubic utilities.
This is a broad concept of inherent power of Eminent Domain.
It is a textual acceptance of the equation of the concept of public use
with broader concept of public welfare or national welfare.

Under this provision, the state may do two things:

1. Establish and operate vital industries.
2. Transfer to public ownership, utilities
and other private enterprises,
upon payment of just compensation, to be operated by the government.
What is just compensation?
Just compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator. The measure is not the takers gain, but the
owners loss. The word "just" is used to intensify the meaning of the word
"compensation" and to convey thereby the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full, and ample.
Such "just"-ness of the compensation can only be attained by using reliable and
actual data as bases in fixing the value of the condemned property (Republic v.
Libnao, G.R. No. 166553, July 30, 2009).
Who determines just compensation?
The determination of just compensation is an inherently judicial function. It
stressed that any valuation for just compensation laid down in statutes merely
serve as guides or factors and may not substitute the courts own judgment as
to what amount should be awarded and how to arrive at such amount.
[T]he determination of just compensation is a judicial function; hence, courts
cannot be unduly restricted in their determination thereof. To do so would
deprive the courts of their judicial prerogatives and reduce them to the
bureaucratic function of inputting data and arriving at the valuation.
What are the factors considered in determining just compensation?
In determining just compensation, the cost of acquisition of the land, the current
value of like properties, its nature, actual use and income, the sworn valuation
by the owner, the tax declarations, and the assessment made by government
assessors shall be considered.

Case: Republic vs PLDT (26 SCRA 620)

Facts:
Public petitioner commenced a suit against private respondent praying for the right
of the Bureau of Telecommunications to demand interconnection between the
Government Telephone system and that of PLDT, so that the Government Telephone
system could make use of the lines and facilities of the PLDT. Private respondent
contends that it cannot be compelled to enter into a contract where no agreement
is had between them.
Issue:
WON interconnection between PLDT and the Government Telephone system can be
a valid object of expropriation.
Ruling:
Yes. In the exercise of the sovereign power of eminent domain, the Republic may
require the telephone company to permit interconnection as the needs of the
government service may require, subject to the payment of just compensation.
Case: City of Baguio vs. The National Waterworks and Sewerage Authority (106 PHIL
144); August 31, 1959
Facts:
Plaintiff is a municipal corporation organized under its Charter, while
defendant is a public corporation created by R.A. No. 1383. The said Act directs that
all waterworks system belonging to cities, municipalities and municipal districts in
the Philippines to be transferred to NAWASA. It takes the effect of transferring real
ownership over the said waterworks system and not merely a transfer of
administration. Plaintiff contends that R.A. No. 1383 does not include within its
purview the Baguio Waterworks System being a private property. Assuming that it
does, the said Act is unconstitutional because it has the effect of depriving plaintiff
of the ownership, control and operation of said waterworks system without just
compensation and due process of law; and that it is oppressive, unreasonable and
unjust.

Issue:
Whether R.A. No. 1383 does comply with the requirements of section 6,
Article XIII, in relation to section 1 (2), Article III, of the 1935 Constitution.
Held:
No, R.A. No. 1383 failed to comply with the Constitution.

The Baguio Waterworks System, being owned by the municipal corporation in

a propriety character, cannot be taken away without observing the safeguards set
by the Constitution for the protection of private property. Accordingly, the right of
the state as to the private property of municipal corporations is a right of regulation
to be exercised in harmony with the general policy of the state and is not a right of
appropriation. The municipality cannot be deprived of such property against its will,
except by the exercise of eminent domain with payment of full compensation.
It is clear that the State may, in the interest of National welfare, transfer to
public ownership any private enterprise upon payment of just compensation. At the
same time, one has to bear in mind that no person can be deprived of his property
except for public use and upon payment of just compensation. There is an attempt
by the Act to observe the requirements set by the Constitution when it provided for
the exchange of NAWASA assets for the value of the waterworks system. However,
such mode of payment is not what the law presupposes it to be. Insofar as
expropriation is of concern, there will be a violation of the Constitution if no
effective payment of just compensation, before taking it over, will be made.
References:
http://www.lawphil.net/judjuris/juri2006/may2006/gr_171396_2006.html
http://www.gov.ph/2006/04/20/senate-v-ermita-g-r-no-169777-april-20-2006/
http://www.congress.gov.ph/committees/search.php?id=0507&pg=bills
Bernas, The 1987 Constitution of the Republic of the Philippines.
http://www.chanrobles.com/letterofinstructions/letterofinstructionsno2.html#.VkQ3P
Ruqqkq
http://sc.judiciary.gov.ph/jurisprudence/2006/may2006/G.R.%20No.%20171396.htm
https://www.law.cornell.edu/supremecourt/text/94/113
https://www.law.cornell.edu/supremecourt/text/291/502
http://www.lawphil.net/judjuris/juri1969/jan1969/gr_l-18841_1969.html
http://philippinelaw.info/jurisprudence/106-phil-144.html

Arellano University School of Law

Taft Avenue Corner Menlo, 33, Pasay, 1300 Metro Manila

REPORT ON SECTION 17 AND SECTION 18,

ARTICLE XII OF THE 1987 CONSTITUTION

Submitted to:
Atty. Lydia A. Bundac

Reporters:
Atian, Ia Dulce
Marzan, Jeffrey
Montances, Jane Mabel
Ong, Pauli
Natural Resources and Environmental Law
Set B, Saturday 1:00-4:00 P.M.