OFW call center; judicial self-restraint

Whenever I write about our overseas Filipino workers, as I did last Sunday, I am flooded with e-mail lamenting the government’s inattention to our OFWs’ woes. Many readers are moved by their sad plight and invariably offer creative ideas and out-of-the-box remedies.

The best creative solution I received comes from Alberto Lina who said that his company (Air 21) would put up a call center that OFWs anywhere in the world can dial for help, free of charge, 24/7. Air 21 already operates a call center. All it needs is the cooperation of the Department of Labor and Employment.

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Foreign shares in utilities. To explain a major controversy besetting the economy, let me first cite the Constitution. It states that (1) only Filipino citizens or “corporations… at least 60 per centum of whose capital is owned by such citizens” may operate a public utility such as a phone company; (2) “the participation of foreign investors in the (board of directors) of any public utility… shall be limited to their proportionate share in its capital,” and (3) “all the executive and managing officers of such corporations” must be Filipinos.

In turn, the capital stock of a corporation may be divided into (a) “voting” and (b) “non-voting” or “preferred” shares. Only voting shares can be used to elect members of the board of directors. Non-voting or preferred shares cannot; but they may legally be used in voting on very important issues, like in disposing of all or substantially all of the corporate assets; in incurring or increasing bonded indebtedness; or in merging the corporation with another; or in dissolving the corporation; etc.

A majority of 10 Supreme Court members led by Justice Antonio T. Carpio held in Gamboa v. Teves (June 28, 2011) that the word “capital” in the cited charter provision should refer only to voting shares, “not to the total outstanding capital stock.” Hence, foreign investments in public utilities, like PLDT, should be limited to only 40 percent of the voting shares. The Court said that this interpretation will ensure that Filipinos will “effectively control” public utilities because “it is the board of directors that controls or manages a corporation.”

To assure such control, it directed the chairperson of the Securities and Exchange Commission (SEC) “to apply this definition of the term ‘capital’ in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of… the Constitution, to impose the appropriate sanctions under the law.”

A minority of three dissenters, led by Justice Presbitero J. Velasco Jr., (two seats were vacant) opined that jurisdictional, procedural and due process issues hobble the majority’s decision. On the merits, the dissenters argued that “capital” should include not only the voting but also the preferred shares because this was the interpretation given by the framers of the current and previous Constitutions since 1935.

Further, under item 2 above, the Constitution already assures Filipino control of public utilities because, in electing directors, foreigners can use only 40 percent of the common shares they hold, even if they own more than that percentage. Hence, “they will never be in a position to elect majority of the members of the board of directors… Filipinos will always control the board… although they (may) own less than 50 percent of the (voting) shares.” Also under item 3, only Filipinos may be “executive and managing officers” of public utilities, thus doubly ensuring Filipino control.

Liberty and prosperity. I believe that in construing the economic provisions of the Constitution, courts should – absent grave abuse of discretion – defer to the government, especially the Executive Department. Here, judicial restraint – nay, self-restraint – is the better course. Au contraire, in litigations involving civil liberties, the scales of justice should weigh heavily against the government and in favor of the people, particularly the poor and marginalized. I have always espoused this philosophy of “liberty and prosperity.”

With due respect, I submit that the judiciary does not have the mandate, not to say the expertise, to decide on matters relating to the economy and prosperity, and must – as much as possible – defer to the officials elected by the people to look after these issues. After all, if these elective officials fail to deliver on their mandate, they can be held accountable during periodic elections. This is how democracy thrives.

During the last several decades, our elected leaders – despite their partisan differences –have always relied on foreign investments to propel our economy and alleviate poverty. Even the majority’s decision concedes that over the last 75 years, the Charter has been uniformly construed to refer to all shares, not to voting shares only.

Most objectionable is the threat of sanction that the Court ordered the SEC chair to impose retroactively. How can we punish investors who relied in good faith on government’s blandishments over the last 75 years? That is most cruel and unfair.

However, if the decision cannot be reversed, I respectfully submit that, instead of being sanctioned, investors should be given a reasonable period of time, a few years, to comply with the new ruling. Finally, I believe Congress should consider passing a new law, which will govern an orderly and fair divestment process that will not unduly derail the country’s economic progress.

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