Society firstBy Peter Wallace
Philippine Daily Inquirer
I’ve always believed that law was the servant of society. It was created to ensure that what was best for society happened. Many lawyers, though, seem to feel the law is the end in itself, that whatever the law says must be strictly obeyed—to the letter, to the smallest detail.
Well, there’s some justification for that in that if you didn’t, decisions could be judgmental and, consequently, dependent on the judgment of one person: the judge. But there are occasions where the pure letter of the law is not in the best interests of society.
That’s where the Supreme Court can step in. A judge must go by the letter of the law; the high court need not, and should not. I’d go further: It should consider what’s best for society—and as long as it can be reasonably justified in its interpretation, decide law in favor of society.
Well, recently it didn’t. It ruled that in determining ownership of public utilities, capital “refers only to shares of stock entitled to vote in the election of directors, and, in the present case, only to common shares and not to the total outstanding capital stock comprising both common and nonvoting preferred shares.” The court decision stemmed from a petition filed by a certain Wilson Gamboa in 2007, claiming that PLDT had exceeded the 40-percent foreign ownership limit.
If you want to stop what little foreign investment comes into this country, this Supreme Court ruling, if strictly implemented, will be a great way to do it. You don’t change the rules of the game in midstream. And you certainly don’t do it retroactively. If the high court genuinely thought it was in society’s best interest to redefine ownership, then it should have done so only as it applies to future investment.
Today, almost everyone agrees that the fears of foreign dominance are no longer relevant. Filipinos can compete equally, and win. So we all want the Constitution changed. And I sincerely hope the President will, too, as soon as the 2013 elections are over.
This ruling prompted the Securities and Exchange Commission (SEC) to review its own rules. The SEC claims, and we agree, that the separation of powers—executive, legislative, judiciary—as set by the Constitution applies here. That the PLDT decision applies only to that case. That “the constitutional separation of powers should be respected for good governance.”
I like what the business community quoted in its paper, that the law should be interpreted “not by the letter that killeth but by the spirit that giveth life” and “always in the contest of pulsating social realities and specific environmental facts.” What is in the best public interest is what the SEC must now decide: how the SEC can abide by the high court’s specific ruling, whilst creating the least harm to the market.
The Filipino business community, virtually en masse, has called for a liberal interpretation of the law, and the ruling. Needless to say, the Joint Foreign Chambers will also be overwhelmingly supportive of a liberal interpretation. If Filipino businessmen see it as good, as no threat but beneficial to the growth of business and the economy, then surely it should be the way to go.
But the SEC’s initial draft of how it will interpret it just won’t do. It will create chaos; foreign investment will flee as foreigners sell out rather than have the businesses they have successfully maintained for years watered down. The estimate is that some P380 billion of foreign shares will be affected. This will drive down stock market prices at a time when the Philippine stock market is one of the fastest growing, most dynamic in the region. The confidence burgeoning in the Philippines will evaporate.
What the SEC suggested was that the Filipino-foreign ownership percentage rule of 60-40 should be for each class of share, not of the total outstanding shares of stock as is the case now. But this gets away from what the Constitution intends. The Constitution wants CONTROL, not the money put in, to define what is Filipino. It wants Filipinos to be in control of these businesses. It doesn’t care how much money foreigners pour in as long as Filipinos decide how it will be used.
This, then, is how the members of the business community are approaching it. They want ownership to be defined as it was in the past, to retain the existing definition. If the SEC feels it cannot, then at the very least its ruling should be based on Filipino control (60 percent) of the board, because that after all is what it should be all about. So basing ownership on the shares of stock entitled to vote in the election of directors will meet that Filipino control requirement. That makes eminent sense; it keeps control in Filipino hands whilst allowing present ownership ratios to remain and new ones to come into a stable, predictable environment.
Let’s hope the SEC agrees. I think it will, and the Supreme Court concurs that it fits within its redefinition—if it is approached on the subject. If it doesn’t, society will suffer. Foreign investors will pull out (or be forced to do so if local capital is not available, or not be interested, as can well be the case).
New foreign investments won’t come. New industries won’t be created. Jobs won’t happen, will even be lost. The impact on the economy will be disastrous. And as the business groups’ position paper states: “The impression [will be] that the Philippines is an inhospitable environment for investors. This will hamper the efforts to reduce poverty and improve the quality of life of our people.”
Let’s hope the SEC and the Supreme Court agree it must be society first.
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