The Constitutional Provisions
that have Implications to
Management and Business
Lecture 1
June 15, 2011
The Preamble
Purposes of the State:
1. to build a just and humane society;
2. to promote the common good;
3. to conserve and develop our patrimony;
4. to secure to ourselves and our posterity the
blessings of independence and democracy
under the rule of law….
Preamble…
The Preamble is not a source of rights or of obligations.
However, it sets down the origin and purposes of the
Constitution.
It is useful as an aid in ascertaining the meaning of
ambiguous provisions in the body of the Constitution.
The phrase “common good” projects the idea of a social order
that enables every citizen to attain his or her fullest
development economically, politically, culturally and
spiritually.
Ours is a government of laws and not of men.
Section 1, Article II
The Philippines is a democratic and
republican state;
Sovereignty resides in the people and all
government authority emanates from them.
Section 7, Article II
The State shall pursue an independent foreign
policy.
In its relations with other states the paramount
consideration shall be national sovereignty,
territorial integrity, and the right to
self-determination.
Section 9, Article II
The State shall promote a just and dynamic
social order:
That will ensure the prosperity and independence
of the nation;
That will free the people from poverty through
policies that provide adequate social services,
promote full employment, a rising standard of
living, and an improved quality of life for all.
Section 9…
Social justice is the equalization of economic,
political and social opportunities with special
emphasis on the duty of the State to tilt the
balance of social forces by favoring the
disadvantaged in life.
Justice for the “common tao”
Those who have less in life should have more
in law.
Section 9…
The provision has been chiefly instrumental in
the socialization of the state’s attitude to
property rights thus gradually eradicating the
vestiges of “laissez faire” in Philippine
society.
Related to Section 10, Article II
Sections 10,11 and 14, Article II
Section 10. The State shall promote social justice in
all phases of national development.
Section 11. The State values the dignity of every
human person and guarantees full respect for human
rights.
Section 14. The State recognizes the role of women
in nation-building and shall ensure the fundamental
equality before the law of women and men.
The general idea is for the law to ignore sex where sex is
not a relevant factor in determining rights and duties.
Sections 15 and, Article II
Section 15.The State shall protect and
promote the right to health of the people and
instill health consciousness among them.
Section 16. The State shall protect and
advance the right of the people to a balanced
and healthful ecology in accord with the
rhythm and harmony of nature.
Sections 15….
Concept of intergenerational responsibility
Where there is a desire to harness natural
resources to amass profit and to meet the
country’s immediate financial requirements, the
more essential need to ensure future generations
of Filipinos their survival in a viable environment
demands effective and circumspect action from
the government to check further denudation of
whatever remains of the forest land.
Sections 18 and 19, Article II
Section 18. The State affirms labor as a
primary social economic force. It shall protect
the right of workers and promote their
welfare.
Section 19. The State shall develop a
self-reliant and independent economy
effectively controlled by Filipinos.
Sections 20 and 22, Article II
Section 20.The State recognizes the
indispensable role of the private sector,
encourages private enterprise, and provides
incentives to needed investments.
Section 22. The State recognizes and
promotes the rights of indigenous cultural
communities within the framework of national
unity and development.
Sections 1,9,10 and 20, Article III
Section 1. No person shall be deprived of life, liberty
and property without due process of law, nor shall
any person be denied the equal protection of laws.
Section 9. Private property shall not be taken for
public use without just compensation.
Section 10. No law impairing the obligation of
contracts shall be passed.
Section 20. No person shall be imprisoned for debt
or non-payment of poll tax.
Section 28, Article VI
The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of
taxation.
Charitable institutions, churches and parsonages or
convents appurtenant thereto, mosques, non-profit
cemeteries and all lands, buildings and
improvements, actually, directly and exclusively
used for religious, charitable or educational purposes
shall be exempt from taxation.
Section 1, Article XII
The goals of the national economy are:
A more equitable distribution of opportunities,
income and wealth;
A sustained increase in the amount of goods and
services produced by the nation for the benefit of
the people; and,
An expanding productivity as the key to raising
the quality of life for all, especially the
underprivileged.
Section 1….
Directions of development:
Industrialization and full employment based on
sound agricultural development and agrarian
reform;
Industries shall make full and efficient use of
human resource and natural resources which are
competitive in both domestic and foreign
markets;
The State shall protect enterprises against unfair
foreign competition and trade practices.
Section 1…
All sectors of the economy and all regions of
the country shall be given optimum
opportunity to develop.
Private enterprises, including corporations,
cooperatives and similar collective
organizations shall be encouraged to broaden
the base of their ownership.
Section 6, Article XII
The use of property bears a social function, and all
economic agents shall contribute to the common
good;
Individuals and private groups, including
corporations, cooperatives and similar collective
organizations, shall have the right to own, establish
and operate economic enterprises, subject to the duty
of the State to promote distributive justice and to
intervene when the common good so demands.
Sections 7 and 8, Article XII
Section 7. Save in cases of hereditary
succession, no private lands shall be
transferred or conveyed except to individuals,
corporations or associations qualified to
acquire or hold lands of the public domain.
Section 8. A natural-born citizen of the
Philippines who has lost his Philippine
citizenship may be a transferee of private
lands, subject to limitations provided by law.
Section 10, Article XII
Upon recommendation of NEDA and when the national
interest dictates, the State shall reserve to citizens of the
Philippines or to corporations or associations at least 60% of
whose capital is owned by such citizens or such higher
percentage as Congress may prescribe, certain areas of
investment.
The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is
wholly owned by Filipinos.
In the grant of rights, privileges and concessions covering the
national economy and patrimony, the State shall give
preference to qualified Filipinos.
Section 10, Article XII in relation to
Case 1, Manila Prince Hotel vs. GSIS, 267 SCRA 408, 1997
Facts:
GSIS pursuant to the privatization program of the Philippine Government
under Proclamation 50 dated December 08, 1986 decided to sell through
public bidding 30% to 51% of the issued and outstanding shares of the
Manila Hotel;
The winning bidder is to provide management expertise and or
international marketing/ reservation system and financial support to
strengthen the profitability and performance of the Manila Hotel;
In the close of the bidding held on September 18, 1995, only two bidders
participated:
Manila Prince Hotel Corporation, a Filipino Corporation offered to buy
51% of the MHC or 15, 300 shares at P41.58 per share.
Case 1…
Renong Berhad, a Malaysian firm with ITT-
Sheraton as its hotel operator bid for the same
number of shares at P44.00 per share or P2.42
more than the bid of the MPHC.
Pending the declaration of RB as the winning
bidder/ strategic partner, MPHC matched the
bid price of the former.
The GSIS refused to accept the matched bid.
Case 1…
Issues:
Is Section 10, Article XII a self-executing provision
of the Constitution?
A constitutional provision is self-executing if the
nature and extent of the right conferred and the
liability imposed are fixed by the constitution itself,
so that they can be determined on the examination
and construction of its terms and there is no
language indicating that the subject is referred to the
legislature for action.
Case 1…
When the Constitution mandates that in the
grant of rights, privileges and concessions
covering the national economy and patrimony,
the State shall give preference to qualified
Filipinos, it means just that-qualified Filipinos
must be preferred.
Case 1…
Is the Manila Hotel part of the “national patrimony”?
National patrimony refers not only to the natural
resources of the Philippines but also to the cultural
heritage of the Filipinos.
The Manila Hotel has become a landmark-a living
testimonial of Philippine heritage.
It has served as a venue of various significant events
that have shaped Philippine History.
It was the site of festivities during the inauguration
of the Philippine Commonwealth.
Case 1…
It serves as the Official Guest House of the
Philippine Government.
How should the bidding rules be interpreted?
Adhering to the doctrine of constitutional
supremacy, the Filipino First Policy constitutional
provision is as it should be impliedly written in the
bidding rules issued by the GSIS.
The mere tending of the highest bid is not an
assurance that the highest bidder will be declared the
winning bidder.
Case 1…
It should be stressed that while the Malaysian
firm offered the higher bid, is not yet the
winning bidder.
The bidding rules expressly provide that the
highest bidder shall be declared the winning
bidder after it has negotiated and executed the
necessary contracts and secured the requisite
approvals.
Case 1…
Privatization of business asset for purposes of
enhancing its business viability and
preventing further losses regardless of the
character of the asset, should not take
precedence over non-material values.
Protection of foreign investments, while
laudable, is merely a policy. It cannot override
the demands of nationalism.
Case 2 (191 SCRA 288, 1990)
Garcia vs. Board of Investments
Facts:
• Under PD No. 1803 dated January 16, 1981, 576 hectares of
the public domain located in Limao, Limay, Bataan were
reserved for the Petrochemical Industrial Zone under the
administrative, management and ownership of the Philippine
National Oil Company (PNOC).
• Taiwanese investors formed the Bataan Petrochemical
Corporation (BPC) and applied with the BOI for registration.
• Its application specified Bataan as the plant site.
• Naptha cracker was specified as feedstock or fuel.
Case 2…
BPC, thereafter, applied for the amendment of its
certificate of registration on the following counts,
among others:
Changing the feedstock from naptha only to naptha and/or
liquefied petroleum gas;
Transferring the job site from Bataan to Batangas;
The BOI approved the amendments on the ground that the
final choice on the project site is a prerogative of the
investor;
Congressman Enrique T. Garcia of the 2nd district of
Bataan elevated the decision of the BOI to the Supreme
Court for review.
Case 2…
Issues:
Could the BOI approve the amendments to
the Certificate of Registration of the BPC?
Does the investor have the prerogative to
choose the project site after the issuance of its
Certificate of Registration?
Case 2…
Court’s contentions:
Bataan was the original choice as the plant site of
the BOI to which the BPC agreed;
The BRC which is a government-owned and
controlled Filipino corporation strategically
located in Bataan to provide the required naptha
as feedstock of BPC;
Naptha is exempt from the ad valorem tax.
Case 2…
Under Section 10, Article XII, it is the duty of the
State to regulate and exercise authority over foreign
investments within its national jurisdiction and in
accordance with its national goals and priorities;
Article 2 of the Omnibus Investments Code of 1987
provides, “ the sound development of the national
economy in consonance with the principles and
objectives of economic nationalism is the set goal of
government”.
Case 2…
A petrochemical industry is not an ordinary
investment opportunity. It should not be treated like
a garment embroidery firm, a shoe-making venture
or even an assembler of cars or manufacturer of
computer chips.
The petrochemical industry is essential to the
national interest.
Hence, the BOI committed grave abuse of discretion
amounting to lack or excess of jurisdiction.
Filipinization vs nationalization
There is Filipinization when ownership is
limited to Filipino citizens or Filipino
corporations.
There is nationalization when ownership is
reserved to the State.
Section 12 and 13, Article XII
Section 12.The State shall promote the preferential
use of Filipino labor, domestic materials and locally
produced goods and adopts measures that help make
them competitive.
Section 13. The State shall pursue a trade policy that
serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality
and reciprocity.
Section 14. Article XII
The State shall encourage appropriate
technology and regulate its transfer for the
national benefit;
The practice of all professions in the
Philippines shall be limited to Filipino
citizens, save in cases prescribed by law.
Section 16, Article XII
The Congress shall not, except by general law,
provide for the formation, organization, or
regulation of private corporations.
Government-owned or controlled corporations
may be created or established by special
charters in the interest of the common good
and subject to the test of economic viability.
Section 17, Article XII
In times of national emergency, when the
public interest so requires, the State may,
during emergency and under reasonable terms
prescribed by it, temporarily take over or
direct the operation of any privately-owned
public utility or business affected with public
interest.
Section 18, Article XII
The State, may in the interest of national
welfare or defense establish and operate vital
industries and upon, payment of just
compensation, transfer to public ownership
utilities and other private enterprises to be
operated by the government.
Section 19, Article XII
The State shall regulate or prohibit
monopolies when the public interest so
requires. No combination in restraint of trade
or unfair competition shall be allowed.
Section 3, Article XIII
The state shall afford full protection to labor, local or
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for
all.
It shall guarantee the rights of all workers to
self-organization, collective bargaining and negotiations and
peaceful concerted activities, including the right to strike in
accordance with law.
They shall be entitled to security of tenure, humane
conditions of work, and a living wage.
They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be
provided by law.
Section 3…
The State shall promote the principle of
shared responsibility between workers and
employers and the preferential use of
voluntary modes in settling disputes including
conciliation, and shall enforce their mutual
compliance therewith to foster industrial
peace.
Section 3…
The State shall regulate the relations between
workers and employers, recognizing the right
of labor to its just share in the fruits of
production and the right of enterprises to
reasonable returns on investments, and to
expansion and growth.
Section 14, Article XIII
The State shall protect working women by
providing safe and healthful working
conditions, taking into account their maternal
functions, and such facilities and
opportunities that will enhance their welfare
and enable them to realize their full potential
in the service of the nation.
Examples of laws that promote
Filipinization…
Anti-Dummy Act
( CA 108, as amended by PD 715)
The law penalizes Filipinos who permit aliens to use
them as nominees or dummies to enjoy privileges
reserved for Filipinos or Filipinos corporations;
Criminal sanctions are imposed on the president,
manager, members of the board or persons in charge
of the violating entity and causing and forfeiting its
privileges, rights and franchises.
Anti-Dummy…
Section 2-A of the Law prohibits aliens from
intervening in the management, operation,
administration and control of nationalized businesses
or enterprises whether as officers, employee or
laborers, with or without compensation.
Aliens may take part in the technical aspects,
provided no Filipino can do such technical work and
with express authority from the President of the
Philippines.
Anti-Dummy…
In PD 715, the aliens became qualified as
members of the Board of Directors or the
governing bodies of the corporations or
associations engaged in partially nationalized
activities in proportion to their allowable
participation or share in the capital of such
entities.
Flag Law ( CA 138 and RA 912)
CA 138 provides that in the bidding
requirements of the National Government or
any of its political subdivisions or by
government-owned or controlled
corporations, if difference in bid price
between native products and those foreign
bidders is only 15%, then preference shall still
be given to Filipinos or to corporations 75%
controlled by Filipinos.
Flag…
The Flag Law may be invoked only against a
bidder who is not a domestic entity who offers
imported articles, materials or supplies or
those made or produced in the Philippines
from imported materials.
It has no application where both bidders are
domestic entities or all the materials, goods or
supplies offered is bids are produced, made
and manufactured in the Philippines.
Questions for Discussions…
Does the Philippines have a friendly
economic environment for foreigners to invest
in?
It is fair that government can take over the
operations, management and ownership of
entities if public interests so demands?
Is Filipinization/ nationalization a boon or a
bane?
