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Ownership of Public Utilities

Ownership of public utilities is subject to regulation by the State. Concerned government


agencies may impose certain requirements to persons or entities who wish to operate as public utilities.
This may include capitalization requirement and other similar impositions.

Domestic and Foreign Ownership (Public Utility)

In Domestic Ownership, a corporation organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and at least sixty (60%) of the fund will
accrue to the benefit of the Philippine nationals.

In Foreign ownership, a list of areas of economic activity is limited to a maximum of forty


ownership is limited to a maximum of forty percent (40%) of the equity capital of the enterprise
engaged therein.

Ownership of public utilities is even subject to limitations under Section 11 of Article XII of the
Constitution. The Constitutional provision states that “no franchise, certificate or any other form of
authorization for the operation of a public utility shall be granted except to citizens of the Philippines or
to corporations or associations organized under the laws of the Philippines at least 60 per centum (60%)
of whose capital is owned by such citizen, nor shall such franchise, certificate or authorization be
exclusive n character for s longer period than fifty years. The interpretation of the term "capital" in
Section 11, Article XII of the Constitution has far-reaching implications to the national economy. In fact,
a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their
own country. What is at stake here is whether Filipinos or foreigners will have effective control of the
national economy.1

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission,
reminds us that the Filipinization provision in the 1987 Constitution is one of the products of the spirit of
nationalism which gripped the 1935 Constitutional Convention. 2 The 1987 Constitution "provides for
the Filipinization of public utilities by requiring that any form of authorization for the operation of public
utilities should be granted only to ‘citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens.’
The provision is [an express] recognition of the sensitive and vital position of public utilities both in the
national economy and for national security." The evident purpose of the citizenship requirement is to
prevent aliens from assuming control of public utilities, which may be inimical to the national interest.3
This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an

1
Gamboa vs Finance Secretary Teves, G.R NO. 176579 (June 28, 2011)
2
Bernas, The Constitution of the Republic of the Philippines, p. 452, citing Smith, Bell and Co. v. Natividad, 40 Phil.
136, 148 (1919); Luzon Stevedoring Corporation v. Anti-Dummy Board, 46 SCRA 474, 490 (1972)
3
De Leon, Hector, Philippine Constitutional Law (Principles and Cases), Volume 2, 1999 Ed.
overriding economic goal of the 1987 Constitution: to "conserve and develop our patrimony" and ensure
"a self-reliant and independent national economy effectively controlled by Filipinos.

Any citizen or juridical entity desiring to operate a public utility must therefore meet the
minimum nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a
corporation to be granted authority to operate a public utility, at least 60 percent of its "capital" must
be owned by Filipino citizens.

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