ILL - Negative Listing Paper

8/12/2019 ILL - Negative Listing Paper

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CARBONELL, Zhanika Marie O. International Labor Law

11-136 Atty. Joy Casis

Negative Listing in the Foreign Investments Act: Valid or Void?

I. The Foreign Investments Act and The Foreign Investments Negative List

The Foreign Investments Act of 1991 or Republic Act No. 7042 was enacted

to promote foreign investments and to prescribe the procedures for registering

enterprises who wish to do business in the Philippines. In its Declaration of Policy, it

is said that it is the policy of the State to attract, promote and welcome productive

investments from foreign individuals, partnerships, corporations, and governments,

including their political subdivisions, in activities which significantly contribute to

national industrialization and socioeconomic development to the extent that foreign

investment is allowed in such activity by the Constitution and relevant laws. 1The

law seeks to use foreign investment as a tool for economic growth in our country.

However, the amount of foreign investment is also limited to only those activities,

which are sanctioned by the Constitution, and other laws related to such.

It is also mentioned in the Declaration of Policy that generally, there are no

restrictions to the extent of foreign investment. They can choose to invest, as much

as one hundred percent equity if they wish to, however, this is subject to rule that

these areas invested in should not be included in the negative list. The Foreign

Investments Negative List is a list of areas of economic activity whose foreign

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

the enterprise engaged therein.2

1An Act To Promote Foreign Investments, Prescribe The Procedures For Registering

Enterprises Doing Business In The Philippines, And For Other Purposes [Foreign

Investments Act of 1991], Republic Act No. 7042, 2 (1991).2Id. 3(g)


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Section 8 of the Foreign Investments Act contains the list of investment

areas, which are reserved to Philippine nationals, otherwise known as the Foreign

Investment Negative List. It has three components: Lists A, B and C. List A

enumerates the areas of activities reserved to Filipinos by mandate of the

Constitution and specific laws. Negative List B contains areas where foreign

ownership is limited by reason of security, defense, risk to health and morals and

protection of small-and-medium scale enterprises. List C shall contain the areas of

investment in which existing enterprises already serve adequately the needs of the

economy and the consumer and do not require further foreign investments, as

determined by NEDA applying the criteria provided in Section 9 of the FIA,

approved by the President and promulgated in a Presidential Proclamation.3

Investment, according to the Implementing Rules and Regulations of RA

7042, means any equity investment made by a non-Philippine national. It further

defined such saying that for purposes of Section 8 of the FIA, which pertains to the

Negative List, Existing Foreign Investments shall mean any equity investments

made by a non-Philippine national duly registered with the SEC or the Bureau of

Trade Regulation and Consumer Protection (BTRCP) in the form of foreign exchange

and/or other assets transferred to the Philippines.4 In its basic guidelines, it was

further clarified that the act covers restrictions pertaining to foreign equity

participation only.

With regard to the formulation of the Negative List, it is the NEDA or the

National Economic Development Authority who shall be responsible for such. The

process includes that the NEDA shall first submit the proposed FINLs to the

President for approval and promulgation. Each Regular FINL shall apply only to newforeign investments and shall not affect existing foreign investments at the time of

3Id. 84The National Economic and Development Authority, Rules and Regulations

Implementing the Foreign Investments Act of 1991, Republic Act. No. 7042, I(1)

(1991).


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The State shall encourage appropriate technology and regulate its

transfer for the national benefit. The practice of all professions in the

Philippines shall be limited to Filipino citizens, save in cases

prescribed by law.

On the other hand, Section 1 of Republic Act No. 5181, which is an act

prescribing permanent residence and reciprocity as qualifications for any

examination or registration for the practice of any profession in the Philippines,

provides that aliens who wish to practice their respective professions in our country

can only do so if their country permits Filipinos to practice their professions within

their territories.9However, these professions should not be limited by law to

citizens of the Philippines.

In justifying the addition of four more professions in FINL A, In a statement,

Executive Secretary Paquito Ochoa Jr. said that the addition of real estate,

psychology and respiratory therapy is based on foreign ownership and foreign

practice limitations imposed under the following newly legislated laws:

Real Estate Service Act of the Philippines (RA 9646),

Philippine Respiratory Act (RA 10024),

Philippine Psychology Act (RA 10029), and

Lending Company Regulation Act of 2007 (RA 9474).

According to Ochoa, except for RA 9474, which allows foreign ownership of

up to 49% in lending companies, the 3 others limit the practice of non-Filipinos in

9 An Act Prescribing Permanent Residence And Reciprocity As Qualifications For

Any Examination Or Registration For The Practice Of Any Profession In The

Philippines, Republic Act No. 5181, 1, (1967).


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the areas of real estate and health care such as respiratory therapy and psychology,

unless there is a reciprocity arrangement prescribed by a law.10

III. Questions as to the Validity of including Professions in the FINL

The problem herein is that the FINL generally bans the practice of

professions of foreigners in the Philippines. This is provided by the Constitution

with the qualification that some professions may be allowed provided that these are

prescribed by law. This necessitates a look at our special laws and an examination

as to which of them explicitly reserves the practice of their professions to Filipino

citizens. RA 5181 states that aliens who which to practice their professions in the

Philippines must show first that there is a reciprocity practice in their country. This

means that only those professions, which are allowed to be practiced by Filipinos

abroad, can be practiced by the residents of those countries, which allow such in our

country.

In sum, as long as the profession is not reserved to Filipinos by our

Constitution or by our special laws, any foreigner may practice in the Philippines,

provided that the country of which he is a national allows our citizens to practice

the same profession there. Thus, in my opinion, the list and the recent additions are

not necessarily void for they are explicitly limited to Filipino citizens by express

mandate of special laws. For example, the Real Estate Service Act of the Philippines

provides that Philippine citizenship is a necessary requirement before an individual

can take their licensure examination and practice the service of real estate in the

Philippines. This shows that this profession is reserved for Filipinos only. This

special law takes the real estate profession out of those, which can be practiced byforeigners in the Philippines even if their country has a reciprocity clause.

10 Rappler, More industries now off limits to foreigners, available at

http://www.rappler.com/business/15337-longer-negative-list-will-not-discourage-

investors-palace (last accessed on March 8, 2014).
http://www.rappler.com/business/15337-longer-negative-list-will-not-discourage-investors-palacehttp://www.rappler.com/business/15337-longer-negative-list-will-not-discourage-investors-palacehttp://www.rappler.com/business/15337-longer-negative-list-will-not-discourage-investors-palacehttp://www.rappler.com/business/15337-longer-negative-list-will-not-discourage-investors-palace


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To put it more simply, it does not mean that, even if a certain profession is

allowed by the laws of a foreign country to be practiced by a Filipino, automatically

their residents may practice the same profession in the Philippines. For as long as

this profession is exclusively reserved by law or by the Constitution to Filipinos,

foreigners here cannot practice it. The reciprocity clause only comes into the picture

when there is no law expressly prohibiting foreigners to practice a certain

profession in the Philippines.

The argument that globalization is a reality which we must succumb to does

not necessarily make the FINL void. It is a matter of policy and does not make the

Foreign Investments Act, more particularly its provisions on Foreign Investments

Negative Listing, unconstitutional. Neither is the argument that we, as part of the

ASEAN Community, should make the negative listing less negative because our

neighboring countries are more open to having foreigners practice their professions

in their country. Our economic, political and social atmosphere differs from theirs

and we should not make it a habit to pattern our laws and legislation to others in

order to make our legal system seem more sophisticated.

Besides, if some individuals want to make more foreigners practice their

profession here, what we need are the amendments of the various special laws

pertaining to their respective professions and not the holding of the FIA as

unconstitutional. These special laws should be amended one by one allowing the

practice of foreigners with regard to their appropriate professions.

As to the argument that the Foreign Investments Act pertain only to

investments in the form of equity and not to professions, taking into account thetenor of the whole law, it can be seen that this pertains not only to professions but

also to foreign corporations who would employ foreigners to practice such

professions. If this were limited only to foreign corporations then the special laws

prohibiting foreigners to practice certain professions in the Philippines can easily be


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avoided by working as individuals and not as employs of foreign corporations. This

is clearly not the intention of the law. Thus, it is of my belief that the FINL is valid.

Documents

ILL - Negative Listing Paper