Adverse FedEx ruling seen to erode PH competitiveness

Philippine business competitiveness against its regional peers may be eroded if potential foreign investors are scared off by the legal setback handed recently by the Court of Appeals against international freight forwarder Federal Express.

In an interview with the Inquirer Monday, American Chamber of Commerce of the Philippines senior adviser John Forbes said that FedEx—one of the world’s biggest cargo moving firms —did business all over the world and any court ruling banning its local operations would serve to only hurt Philippine interests.

“The Philippines needs to be aware that its competitiveness is affected in a negative way when you don’t have as much competition as possible in [the industry facilitating] international trade,” he said, explaining that competition among both local and foreign freight firms was essential to keep transport costs in check.

FedEx was the subject of a recent adverse decision by the Court of Appeals, which ruled that the US-based firm should be barred from operating in the Philippines by virtue of it being a foreign-owned utility firm—something prohibited by the 1987 Constitution.

However, FedEx holds a five-year permit to operate in the country granted by the Civil Aeronautics Board (CAB) in May 2011. The CAB permit was backed by a Department of Justice opinion issued in 2004 stating that “international air freight forwarders are not covered by the nationality requirement under the 1987 Constitution, hence, may be issued a certificate of public convenience subject to the CAB’s pertinent rules and regulations set forth under Republic Act No. 776 and other existing laws.”

In its decision first issued on Jan. 23, 2013, the CA said it was “not bound by the resolution of the justice secretary.” Siding with locally owned complainants Merit Freight International Inc. and Ace Logistics Inc., the court denied FedEx’s appeal in another decision dated June 6.

FedEx is appealing the decision before the appellate court.

“What FedEx is engaged in is international freight activity,” Amcham’s Forbes said. “It moves freight into and out of the country. That is a pretty standard practice around the world. It would be quite rare for that to be interrupted in the way the Court of Appeals is suggesting.”

Commenting on the court’s decision, Forbes conceded that there had been a number of legal decisions involving foreign firms that have worried foreign investors.

This has prompted the Joint Foreign Chambers of the Philippines—of which Amcham is a  member—to express its concern vis-à-vis the perceived lack of a level playing field whenever foreign firms engage in legal disputes with local parties.

“The courts are very important. Courts need to be objective, informed and deliberate in a fairly expeditious way in these decisions. In the case of the Philippines, there is a history of rather surprising decisions coming from the courts at all levels over the years,” he noted.

“FedEx was given a license to operate by the government,” Forbes stressed. “That license should be respected by all branches of the government.”