POLITICAL LAW AND PUBLIC INTERNATIONAL LAW
VII. NATIONAL ECONOMY AND PATRIMONY
B. Public Trust Doctrine
1. R.A. No. 11659 or the New Public Service Act
1. Overview of R.A. No. 11659 (New Public Service Act)
Republic Act No. 11659, also known as the New Public Service Act (NPSA), was signed into law on March 21, 2022. It seeks to amend the 85-year-old Commonwealth Act No. 146 (Public Service Act) by redefining the scope of "public services" and opening up certain sectors to greater foreign investment, while maintaining limitations on strategic sectors. This is part of the Philippine government’s broader effort to modernize the economy, improve infrastructure, and attract foreign capital by updating antiquated laws.
2. Relation to the National Economy and Patrimony
R.A. No. 11659 is central to the constitutional mandate under Article XII of the 1987 Philippine Constitution, which focuses on the National Economy and Patrimony. Under the Constitution, certain sectors and industries are reserved for Filipino nationals, in line with promoting Filipino control over national resources and safeguarding the nation’s economic sovereignty.
Historically, the term "public utility" has been broadly defined, and foreign ownership of these enterprises was strictly limited. The Constitution limits foreign ownership in public utilities to 40%, with the remaining 60% reserved for Filipinos. However, the new law narrows the definition of "public utility," and only enterprises that fall under this more limited definition remain subject to the 40% foreign equity restriction.
3. Key Features of R.A. No. 11659
A. Redefinition of Public Utilities
R.A. No. 11659 distinguishes between "public utilities" and "public services," limiting the scope of what qualifies as a "public utility." This is important because only public utilities are subject to the 40% foreign equity limitation mandated by the Constitution.
The law provides a more specific definition of "public utilities" and enumerates the following as falling within this category:
- Distribution of electricity;
- Transmission of electricity;
- Water pipeline distribution systems;
- Sewerage pipeline systems;
- Seaports; and
- Public utility vehicles.
Under the new law, public services that do not fall within this list are no longer considered public utilities and are therefore exempt from the 40% foreign ownership restriction.
B. Foreign Ownership Liberalization
R.A. No. 11659 allows 100% foreign ownership in public services that are not categorized as public utilities. This includes sectors such as telecommunications, transportation, tollways, and airports. By doing so, the government aims to attract more foreign investment, which could enhance competition, improve service delivery, and generate employment.
This shift represents a significant departure from previous restrictions and a key part of economic liberalization. However, it retains safeguards for certain critical infrastructure sectors, which are considered strategic to national security and welfare.
C. National Security Review of Foreign Investments
While R.A. No. 11659 opens many sectors to foreign ownership, it also introduces a mechanism for protecting national security. The law mandates the establishment of a National Security Council-led review process for foreign investments in critical infrastructure, such as telecommunications, airports, and shipping industries. This ensures that foreign participation in sensitive industries does not undermine national security interests.
The law requires the President, upon the recommendation of relevant regulatory agencies, to prohibit or suspend any proposed merger, acquisition, or investment in public services or public utilities that could pose a threat to national security.
D. Reciprocity Clause
R.A. No. 11659 includes a reciprocity clause that allows the Philippines to impose restrictions on foreign investors from countries that do not grant reciprocal treatment to Filipino nationals. If a foreign investor comes from a country that does not allow Filipinos to engage in similar businesses, the same restrictions may be imposed in the Philippines.
E. Stronger Consumer Protections
The law also strengthens consumer protection mechanisms by ensuring that public services provide quality, accessible, and affordable services. The law empowers regulatory agencies to issue and enforce rules on service quality, continuity, and consumer rights.
4. The Public Trust Doctrine and its Implications in R.A. No. 11659
A. Definition of Public Trust Doctrine
The Public Trust Doctrine is a legal principle that holds that certain resources are preserved for public use, and that the government must protect and maintain these resources for the public’s benefit. In the context of national economy and patrimony, the doctrine emphasizes that certain assets, such as natural resources and public utilities, should remain under the control of the state or be subject to stringent oversight to ensure that they serve the common good.
B. Application of the Public Trust Doctrine in Public Utilities
The Public Trust Doctrine applies to R.A. No. 11659 insofar as it pertains to "public utilities" and critical infrastructure. Since these sectors serve essential public needs, they are subject to stricter regulatory oversight and limitations on foreign ownership. The law ensures that vital public utilities remain under significant Filipino control and government regulation, preserving the public interest and preventing any undue influence from foreign entities.
C. Ensuring Public Interest in Strategic Sectors
The redefinition of "public utilities" under R.A. No. 11659 aligns with the Public Trust Doctrine because it protects essential services that are critical to daily life and national security, such as electricity distribution and water supply. These sectors, by their nature, serve the public trust and thus require heightened safeguards to ensure their accessibility, affordability, and reliability for the Filipino people.
5. Key Legal and Constitutional Considerations
The enactment of R.A. No. 11659 must be understood within the framework of the 1987 Philippine Constitution. Article XII of the Constitution stipulates that certain areas of the economy, especially those involving national patrimony and public utilities, must be predominantly owned and controlled by Filipinos.
By narrowing the scope of "public utilities" to specific industries, R.A. No. 11659 adheres to the constitutional mandate of promoting Filipino ownership in these sectors while providing flexibility for foreign investments in other public services. The law also incorporates constitutional provisions on national security and reciprocity, ensuring that the country's economic and security interests are not compromised.
6. Criticisms and Concerns
A. National Security Concerns
Critics argue that allowing 100% foreign ownership in certain public services could pose national security risks, particularly in sectors like telecommunications and transportation, which have critical implications for public safety and security. The national security review mechanism in the law seeks to address these concerns but may not fully allay fears of foreign influence over sensitive industries.
B. Potential Impact on Local Industries
There are concerns that the liberalization of foreign ownership might undermine local businesses, which could struggle to compete with well-capitalized foreign companies. This could lead to the displacement of smaller local players and potential job losses if local firms are unable to compete effectively.
7. Conclusion
R.A. No. 11659, the New Public Service Act, represents a major shift in the Philippine government's approach to foreign investment in key sectors. By redefining "public utilities" and liberalizing foreign ownership in other public services, the law aims to boost economic growth and attract more foreign capital. However, it balances these objectives with constitutional mandates and the Public Trust Doctrine, ensuring that critical industries remain subject to Filipino control and that the national interest is safeguarded.
The law marks a crucial development in modernizing the Philippines' economic legal framework, but its long-term impact will depend on the effective implementation of safeguards, particularly in relation to national security and local industry protection.