PLDT run by Filipinos, Supreme Court told
BAGUIO CITY—Philippine Long Distance Telephone Co. (PLDT) insisted to the Supreme Court that it is controlled by Filipinos and not foreigners, as it sought to reverse the high court’s 2011 ruling ordering the telecommunications giant to return control of the company to its Filipino stockholders.
The high tribunal held oral arguments on the case during its summer sessions here on Tuesday.
Lawyer Victor Lazatin, counsel for PLDT president Napoleon Nazareno, said the high court had “relied on untested facts and data” when it issued the ruling that he said may have implications on how foreign investors are to be treated in the country.
Lazatin said the decision “ignored the reality on the ground [of] a self-reliant and independent PLDT effectively controlled by Filipinos.” He said only two foreigners sit on the PLDT board of directors.
In June 28, 2011 decision, the high court ruled that PLDT had violated the constitutional provision on foreign ownership in a transaction involving the government’s sequestered shares of stock in PLDT.
PLDT stockholder Wilson Gamboa went to the high court in 2007 asking it to nullify the government’s sale of its PLDT shares to Metro Pacific Assets Holdings (MPAH), an affiliate of the Hong Kong-based First Pacific Co. Ltd. (First Pacific).
Gamboa ruling
Gamboa, who died in October 2011, argued that the sale gave PLDT’s foreign investors more than half of the company’s controlling shares in violation of the Constitution which restricts foreign ownership of assets in the Philippines to 40 percent, leaving the dominant 60 percent to Filipino control.
In its 2011 ruling, the high court noted that foreign investors owned shares of stock in PLDT that gave them the right to vote on company decisions, whereas more Filipinos owned shares that do not give them the same voting rights.
This was because of Presidential Decree 217 issued by the late dictator Ferdinand Marcos which required all PLDT phone applicants to subscribe to non-voting preferred shares to pay for the investment cost of installing a telephone line.
To correct the discrepancy, the high court defined the term “capital” to refer to shares of stock that are entitled to vote in the election of company directors.
In the PLDT’s case, it was defined to refer only to common shares and not to the total outstanding capital stock or common and nonvoting preferred shares of the company combined.
SEC probe
This meant that 64 percent of PLDT was owned by foreigners (holding common shares) in violation of constitutional limits to foreign ownership. (But if preferred shares are included in determining the company’s ownership structure, 87 percent of PLDT is owned by Filipinos and 13 percent by foreigners.)
In its ruling, the high court directed the SEC to investigate the PLDT’s ownership structure to find out whether it was in violation of the foreign capital limit based on the tribunal’s definition of capital, and if in violation, to impose the appropriate sanctions under the law.
Lazatin told Tuesday’s hearing the decision ignored the fact that if “capital” would be defined as all forms of shares, PLDT had not violated the Constitution because it meant that 86.3 percent of its shares of stock are Filipino-owned and only 13.7 percent are foreign-controlled.
“If not reconsidered, the Gamboa decision will affect ’vested rights’ of PLDT and its foreign shareholders. It changes the rules in the middle of the game. It sets back [by] two steps our quest for economic development and prosperity for our people,” Lazatin said.
He said the Gamboa ruling would “push our country out of the radar screen of foreign investors,” and “expose the government to investment suits” owing to bilateral treaties and contracts it may end up breaking.
Lazatin took the brunt of the justices’ questioning. Associate Justices Antonio Carpio and Presbitero Velasco Jr. asked the lawyer to explore all historical definitions of the term “capital,” including how it is defined by past and present Philippine laws, in order to show to the court how it may have misjudged the situation of the telecommunications giant.
Aside from Lazatin, the other lawyers who participated in the hearing were counsel for Manuel Pangilinan, the PLDT chairman, and those representing the SEC and the Office of the Solicitor General.
Lawyer Pablito Sanidad, who supported Gamboa’s suit, also turned up with his legal team. Sanidad and his brother, lawyer Arno Sanidad, were petitioners-in-intervention which the court had allowed to participate in Gamboa’s suit.
