Gamboa heir allowed to intervene in foreign ownership case vs PLDT, SEC
MANILA—The Supreme Court has allowed the heir of the late human rights lawyer Wilson Gamboa to intervene in a legal petition challenging the framework issued by the Securities and Exchange Commission on foreign ownership restrictions in key industries such as utilities.
Wilson Gamboa Jr., now a Bacolod City councilor, filed in July a petition in intervention to compel the SEC to issue new guidelines regarding the determination of compliance with the constitutional restriction on foreign ownership. As a consequence of the death of his father and namesake who had obtained a favorable decision from the Supreme Court in Gamboa vs. Teves, et al.— the case that questioned foreign ownership in Philippine Long Distance Telephone Co. — the younger Gamboa had earlier substituted himself in the case.
In an en banc resolution dated Sept. 9, the Supreme Court granted the “motion for leave to file petition-in-intervention” filed by Gamboa Jr. along with Daniel Cartanega, John Warren Gabinete, Antonio Pesina Jr., Modesto Martin Mamon and Gerardo Erebaren.
The original petitioner was lawyer Jose Roy III while the respondents were the SEC, its chair Teresita Herbosa, and PLDT.
The high court required the respondents to comment within 10 days on the petition-in-intervention dated July 16.
As intervenor, Gamboa’s group asked the Supreme Court to direct the SEC to conduct a re-investigation of PLDT and determine whether it has violated the Constitution in light of high court’s ruling in the Gamboa case. An earlier court resolution ruled that the term “capital” in the 1987 Constitution referred only to shares of stock entitled to vote in the election of directors. This meant that non-voting preferred shares issued by companies covered by the foreign ownership restriction must be excluded in computing the level of foreign ownership. This case caused a stir among private corporations, many of which generally followed the 60-40 percent ownership structure on the basis only of common shares.
Last May 20, for purposes of compliance with the Supreme Court ruling on the Gamboa case, the SEC issued a framework stating that the required percentage of Filipino ownership (60 percent) should be applied to both the total number of outstanding shares entitled to vote in the election of directors and the total number of shares whether entitled to vote or not.
This blueprint was then questioned by the original petitioner, Roy. In July, Gamboa’s group filed the petition for intervention, asking the Supreme Court to direct the SEC to impose proper penalties against PLDT if it had violated the Constitution; declare that the PLDT Beneficial Trust Fund was not a Philippine national, and that any corporation in which it owns more than 60 percent of the outstanding capital stock should also be declared as a foreign corporation; and, direct the SEC to conduct an investigation of all corporations in which PLDT Beneficial Trust Fund made an investment to determine whether those corporations and their subsidiaries violated the constitutional mandate enshrined in Section 11, Article XII and Section 11 Article XVI of the Constitution.
Petitioners said they were entitled to join in this case based on the doctrine enunciated by the high court in the Gamboa case. They said that as citizens of the Philippines and taxpayers, they “cannot idly stand while the SEC wastes government funds in implementing the erroneous guideline,’’ noting that the interpretation by the SEC of the term ‘capital’ was considered equally important since, even if erroneous, this SEC interpretation – left to stand – would be the basis used by all entities for testing compliance with the 60-40 foreign ownership rule.
Since a specific class of shares may have rights and privileges or restrictions different from the rest of the shares in a corporation, the petitioners argued that the 60-40 ownership requirement in favor of Filipino citizens in the Constitution must apply not only to shares with voting rights but also to shares without voting rights.
The petitioners alleged that the SEC’s guidelines “practically encourage circumvention of the 60-40 ownership rule by impliedly allowing the creation of several classes of voting shares with different degree of beneficial ownership over the same, but at the same time, not imposing a 40 percent limit on foreign ownership of the higher yielding stocks.”
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