CONGRESSMAN ENRIQUE T. GARCIA (SECOND DISTRICT OF BATAAN), PETITIONER, VS. THE EXECUTIVE SECRETARY, THE NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY, THE BOARD OF INVESTMENTS, TH…

The petitioner challenges RA 7042 on the ground that it defeats
the constitutional policy of developing a self-reliant and independent national
economy effectively controlled by Filipinos and the protection of Filipino
enterprises against unfair foreign competition and trade practices.  He claims that the law abdicates all
regulation of foreign enterprises in this country and gives them unfair
advantages over local investments which are practically elbowed out in their
own land with the complicity of their own government.

Specifically, he argues that under Section 5 of the said law a
foreign investor may do business in the Philippines or invest in a domestic
enterprise up to 100% of its capital without need of prior approval.  All that it has to do is register with the
Securities and Exchange Commission or the Bureau of Trade Regulation and
Consumer Protection in the case of a single proprietorship.  The said section makes certain that “the
SEC or BTRCP, as the case may be, shall not impose any limitations on the
extent of foreign ownership in an enterprise additional to those provided in
this Act.”

Furthermore, Section 7 provides
that “non-Philippine nationals may own up to one hundred percent (100%) of
domestic market enterprises unless foreign ownership therein is prohibited or
limited by existing law or the
Foreign Investment Negative List under Section 8 hereof.” The provision
for a Foreign Investment Negative List in Section 8 does not satisfy the constitutional mandate
for the government to regulate and exercise authority over foreign investments.  The system of negative list abandons the
positive aspect of regulation and exercise of authority over foreign
investments.  In effect, it assumes that
so long as foreign investments
are not in areas covered by the list, such investments are not detrimental to
but are good for the national economy.

The petitioner attacks List A as not a true negative list in the
strict sense of the term.  It would
merely enumerate areas of activities already reserved to Philippine nationals
by mandate of the Constitution and specific laws.  List B would contain areas of activities and
enterprises already regulated according to law and includes small and
medium-sized domestic market enterprises or export enterprises which utilize
raw materials from depleting natural resources with paid-in equity capital of
less than the equivalent of US$500,000.00. 
In other words, “small to medium” are reserved to Philippine
nationals; in effect Filipinos are not encouraged to go big.  List C would merely
contain areas of investment in which “existing enterprises already serve
adequately the needs of the economy and the consumers and do not need further
foreign investments.” The category of “existing enterprises”
should be qualified by the term “Filipino.” Otherwise, List C would
protect existing foreign enterprises as well.

The petitioner also attacks Section 9 because if a Philippine national believes that an
area of investment should be included in List C, the burden is on him to show
that the criteria enumerated in said section are met.

It is alleged that Articles 2, 32, & 35 of the Omnibus
Investments Code of 1982 are done away with by RA 7042.  It is also argued that by repealing Articles
49, 50, 54 and 56 of the 1987 Omnibus Investments Code, RA No. 7042 further
abandons the regulation of foreign investments by doing away with important
requirements for doing business in the Philippines.

Finally, the petitioner claims that the transitory provisions of
RA 7042, which allow practically unlimited entry of foreign investments for
three years, subject only to a supposed Transitory Foreign Investment Negative
List, not only completely deregulates foreign investments but would place
Filipino enterprises at a fatal disadvantage in their own country.

In his Comment, the Solicitor General counters that the phrase
“without need of prior approval” applies to equity restrictions
alone.  This is well explained by the
fact that prior to the effectivity of RA 7042,
Article 46 of the Omnibus Investments Code of 1987 (EO No. 226), provided that
a non-Philippine national could, without need of prior authority from the Board
of Investments (BOI), invest in:  (1) any
enterprise registered under Book I (Investments with Incentives); and (2)
enterprises not registered under Book I, to the extent that the total investment
of the non-Philippine national did not exceed 40% of the outstanding
capital.  On the other hand, under
Article 47 thereof, if an investment by a non-Philippine national in an enterprise not registered under Book I
was such that the total participation
by non-Philippine nationals in the outstanding capital thereof exceeded 40%,
prior authority from the BOI was required.

With the effectivity of RA 7042, a
certain layer of bureaucracy has been removed, specifically, the case-to-case
authorization by BOI.  Furthermore, with
the introduction of the Negative List under Sections 8 & 15, the areas of
investments not open to foreign investors are already determined and outlined;
hence, registration with the SEC or BTRCP, as the case may be, is now the initial
step to be taken by foreign investors.

This registration constitutes regulation and exercise of
authority over foreign investments. 
Under SEC and BTRCP rules and regulations, foreign investors must first
comply with certain requirements before they can be issued a license to do
business in the Philippines.  The SEC has
PD 902-A, as amended, and BP 68 for its governing laws.  Pertinent provisions of these laws are
contained in the SEC Licensing Procedure of Foreign Corporations.  For BTRCP, the applicable laws are EO No. 133
in conjunction with EO No. 913.

Section 7 of RA 7042 allows non-Philippine nationals to own up to
100% of domestic market enterprises only in areas of investments outside the
prohibitions and limitations imposed by law to protect Filipino ownership and
interest.  Furthermore, the Foreign
Investment Negative List under Section 8 reserves to Filipinos sensitive areas
of investments.   List C prohibits
foreign investors from engaging in areas of activities where existing
enterprises already serve adequately the needs of the economy and the consumer.

The Act opens the door to foreign investments only after securing
to Filipinos their rights and interests over the national economy.

The provisions of the Constitution and other specific laws (which
would be used as a basis for
List A) regulate or limit the extent of foreign ownership in enterprises
engaged in areas of activity reserved for Filipinos.  To insist otherwise would be tantamount to
saying that those laws are useless and should therefore be erased from the
statute books.

The fact   that List B
contains areas already regulated pursuant to law already makes it clear that it
is regulatory.  It channels efforts at
promoting foreign investments to bigger enterprises where there is an acute lack
of Filipino capital.  However, this
should not be construed as a scheme to discourage Filipino enterprises from
going into big enterprises.  On the
contrary, the scheme is for foreign investments to supplement Filipino capital
in big enterprises.

Activities which do not adequately meet the needs of the
consumers should not be included in List C so as to allow healthy
competition.  Otherwise, consumers would
be at the mercy of unscrupulous producers. 
Foreign corporations already doing business in the Philippines under a
valid license prior to the enactment of RA 7042 necessarily come within the
protection of the law.

The Solicitor General adds that Section 9 provides for the
criteria to be used by NEDA in determining the areas of investment for inclusion in List C.  The petition for inclusion therein requires
“a public hearing at which affected parties will have the opportunity to
show whether the petitioner industry adequately serves the economy and the
consumers.” But this does not mean that the Act is shifting the burden of
proof to Filipino enterprises while deregulating foreign investments at the
same time.  On the contrary, this
provision is designed to protect the consumers as not all existing enterprises
satisfy the criteria for inclusion in List C. 
The requisite proof and public hearing under Section 9 are, therefore,
necessary to prevent detriment to the economy and the consumers.

Regarding the alleged elimination of certain rules in the Code,
the Solicitor General stresses that Section 16 of the Act provides that only
“Articles forty-four (44) to fifty-six (56) of Book II of EO No. 226 are
repealed.” The approval by the BOI and the other regulatory requirements
set forth in the aforementioned articles were purposely removed because the
determination of the areas of investment open to foreign investors is made easy
by the Foreign Investment Negative List formulated and recommended by NEDA
following the process and criteria provided in Sections 8 & 9 of the Act.

Concluding, he argues that the Transitory Foreign Investment
Negative List is not imaginary.  In fact,
it practically includes the same areas of investment reserved to Filipinos
under Section 5.  Moreover, during the
transitory period, “SEC shall disallow
registration of the applying non-Philippine national if the existing joint
venture enterprises, particularly the Filipino partners therein, can reasonably
prove they are capable to make the investment needed for the domestic market
activities to be undertaken by the competing applicant.”

Allowed to intervene,* Senator
Vicente T. Paterno, raises substantially the same
points stressed by the Solicitor General in defense of the Act and amplifies
the argument that the Act does not deregulate foreign investments to the
disadvantage of the Filipino entrepreneur. 
He discusses at length the different regulatory requirements for doing
business in the Philippines and explains the over-all strategy embodied in the
Act to develop a self-reliant economy, as
well as the provisions designed to promote full employment for
Filipinos.  He also suggests that the
constitutional challenge should be rejected outright for non-compliance with
the requisites of a judicial inquiry into a constitutional question, to wit:  (1) there must be an actual case of controversy; (2) the constitutional
question must be raised by a proper party; (3) the constitutional question must
be raised at the earliest
opportunity; and (4) the resolution of the constitutional question must be
necessary to the decision of the case.^[1]

The Court has carefully gone over the petition and wryly observes
that it could have been pruned and limited to the strictly legal principles
involved in the interest of a speedier disposition of the case.  A considerable portion of the petition, and
this is also true of the reply (if not more so), sounds too much like
speechifying that is better addressed to a political audience than to a court
of justice.  Much valuable time would
have been saved in the presentation of a leaner, strictly legal tract.

Coming first to the procedural objections to the petition, we
agree that there is at this point no actual case or controversy, particularly
because of the absence of the implementing rules that are supposed to carry the
Act into effect.  A controversy must be
one that is appropriate or “ripe” for determination, not conjectural
or anticipatory.  We hold, however, that
the petitioner, as a citizen and taxpayer, and particularly as a member of the
House of Representatives, comes under the definition that a proper party is one
who has sustained or is in danger of sustaining an injury as a result of the
act complained of.^[2]
We will also hold that the constitutional question has not been raised tardily
but in fact, as just remarked, prematurely.

On the merits, we find that the constitutional challenge must be
rejected for failure to show that there is an indubitable ground for it, not to
say even a necessity to resolve it.  The
policy of the courts is to avoid ruling on constitutional questions and to
presume that the acts of the political departments are valid in the absence of
a clear and unmistakable showing to the contrary.  To doubt is to sustain.  This presumption is based on the doctrine of
separation of powers which enjoins upon each department a becoming respect for
the acts of the other departments.  The
theory is that as the joint act of Congress and the President of the
Philippines, a law has been carefully studied and determined to be in
accordance with the fundamental law before it was finally enacted.

In the case at bar, the law is challenged on broad constitutional
principles and the proposition that the Filipino investor is unduly
discriminated against in his own land. 
Due process is invoked.  The
provisions on nationalism are cited. 
Economic dependency is deplored. 
In the light, however, of the explanation given by the Solicitor General
and of the Intervenor in their respective Comments,
we hold that the cause of unconstitutionality has not been proved by the
petitioner.  On the contrary, we are
satisfied that the Act does not violate any of the constitutional provisions
the petitioner has mentioned.

What we see here is a debate on the wisdom or the efficacy of the
Act, but this is a matter on which we are not competent to rule.  As Cooley observed:  “Debatable questions are for the
legislature to decide.  The courts do not
sit to resolve the merits of conflicting issues.”^[3]
In Angara v. Electoral Commission,^[4]
Justice Laurel made it clear that “the judiciary does not pass upon
questions of wisdom, justice or expediency of legislation.” And fittingly
so for in the exercise of judicial power, we are allowed only “to settle
actual controversies involving rights which are legally demandable and
enforceable,”^[5]
and may not annul an act of the political departments simply because we feel it
is unwise or impractical.  It is true
that, under the expanded concept of the political question, we may now also
“determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.”^[6]
We find, however, that that irregularity does not exist in the case at bar.

The petitioner is commended for his high civic spirit and his zeal
in the protection of the Filipino investors against unfair foreign
competition.  His painstaking study and
analysis of the Foreign Investments Act of 1991 reveals not only his
nationalistic fervor but also an impressive grasp of this complex subject.  But his views are expressed in the wrong
forum.  The Court is not a political
arena.  His objections to the law are
better heard by his colleagues in the Congress of the Philippines, who have the
power to rewrite it, if they so
please, in the fashion he suggests.

WHEREFORE, the petition is DISMISSED, without any
pronouncement as to costs.  It is so
ordered.

Narvasa, Melencio-Herrera,
Gutierrez, Jr., Paras, Feliciano, Bidin,
Griño-Aquino, Medialdea, Regalado, Davide, Jr., and Romero, JJ., concur.

Padilla, J., no part.

Fernan, C.J., on leave.

* The Philippine Association of
Battery Manufacturers was also allowed to intervene but merely supported the
allegations and arguments of the petitioner.

^[1]
Dumlao v. Commission on Elections, 95 SCRA
392.

^[2]
Ex Parte Levitt,
303 U.S. 63.

^[3]
Constitutional Limitations, 8th ed., 379-80.

^[4]
63 Phil. 139.

^[5]
Constitution, Art. VIII, Sec. 1.

^[6]
Ibid.