2019

2019
DOING BUSINESS
IN THE PHILIPPINES
Doing Business in the
Philippines
2019
The material in this publication has been prepared by Quisumbing Torres to provide general information
only. It is not offered as advice on any particular matter, whether it be legal, procedural, commercial or
otherwise, and should not be taken as such. For this reason, the information contained in this publication
should not form the basis of any decision as to a particular course of action; neither should it be relied upon
as legal advice nor regarded as a substitute for detailed advice in individual cases. The authors expressly
disclaim all liability to any person in respect of consequences of anything done or omitted to be done wholly
or partly in reliance upon the whole or any part of the contents of this publication.
This publication is copyrighted. No part of this publication may be reproduced or transmitted by any process
or means without the prior permission of Quisumbing Torres.
The law is stated as of 15 August 2019.

Doing Business in the Philippines
Table of Contents
About Quisumbing Torres ........................................................................................ iv
Introduction .................................................................................................................1
I. Foreign investments in the Philippines ........................................................ 2
1. Doing business in the Philippines ........................................................................ 2
2. Foreign equity restrictions .................................................................................... 3
II. Private company investments ....................................................................... 9
1. Corporate vehicles .................................................................................................. 9
2. Other regulatory approvals and registrations ................................................ 11
3. Corporate structure: Governance, corporate officers, stockholders ....... 12
III. Public company investments ....................................................................... 14
1. Registration of securities ..................................................................................... 14
2. Corporate structure: Governance, officers, stockholders ........................... 14
3. Disclosure requirements....................................................................................... 15
IV. Incentives under special registrations ......................................................... 17
1. OIC / 2017 IPP .......................................................................................................... 17
2. PEZA registration ................................................................................................... 21
3. Tax and other incentives...................................................................................... 22
V. Foreign exchange controls ........................................................................... 24
1. Foreign direct investments ................................................................................ 24
2. Outward investments .......................................................................................... 24
3. Foreign loans (including shareholder advances) .......................................... 24
4. Other types of transactions ................................................................................ 25
VI. Taxation .......................................................................................................... 26
1. Corporate income tax .......................................................................................... 26
2. Individual income tax........................................................................................... 26
3. Value added tax ..................................................................................................... 26
4. Local and real property taxes ............................................................................ 26
5. Treaties..................................................................................................................... 26
VII. Border control and customs regulations .................................................... 28
1. Overview ................................................................................................................. 28
2. Customs and trade agreements ........................................................................ 28
3. Border control ........................................................................................................ 29
VIII. Employment ................................................................................................... 30
1. Labor standards ..................................................................................................... 30
2. Labor relations ........................................................................................................ 31
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3. Welfare legislation ................................................................................................. 31
4. Rights of employer ................................................................................................ 32
5. Contract of employment ..................................................................................... 32
6. Type of employment............................................................................................. 32
7. Termination of employment ............................................................................... 33
IX. Immigration ................................................................................................... 36
1. Entry to the Philippines....................................................................................... 36
2. Work/employment requirements ..................................................................... 36
3. Special resident visas ........................................................................................... 38
4. Others ....................................................................................................................... 39
X. Intellectual property .....................................................................................40
1. Overview ................................................................................................................. 40
2. Types of IP rights .................................................................................................. 40
3. Protection of IP rights ......................................................................................... 43
4. Technology transfer arrangements ................................................................. 44
XI. Competition law ............................................................................................ 46
1. Philippine Competition Commission................................................................ 46
2. Prohibited agreements and conduct ............................................................... 46
3. Merger control ....................................................................................................... 49
XII. Privacy laws.....................................................................................................51
1. Overview .................................................................................................................. 51
2. Privacy of communications ................................................................................. 51
3. Data privacy............................................................................................................. 51
XIII. Ownership and lease of land ........................................................................ 55
1. Ownership of private land................................................................................... 55
2. Lease of private land ............................................................................................. 55
XIV. Environmental regulations ........................................................................... 56
1. Project requirements............................................................................................ 56
2. Specific areas of regulation ................................................................................ 56
XV. Industry-specific regulations ....................................................................... 58
1. Consumer Goods & Retail ................................................................................... 58
2. Energy, Mining & Infrastructure ....................................................................... 59
3. Financial Institutions ............................................................................................ 67
4. Healthcare ............................................................................................................... 69
5. Industrials, Manufacturing & Transportation ................................................ 71
6. Technology, Media & Telecommunications ................................................... 79
XVI. Dispute resolution ......................................................................................... 93
1. Legal and judicial system .................................................................................... 93
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2. The courts ................................................................................................................ 93

3. Litigation ................................................................................................................. 95
4. Arbitration .............................................................................................................. 103
5. Other modes of alternative dispute resolution.......................................... 108
XVII. Insolvency in the Philippines ...................................................................... 112
1. Overview and introduction to the jurisdiction / applicable legislation 112
2. Proceedings for solvent debtors (individuals or corporations) ............... 113
3. Liquidation proceedings (individuals or corporations) .............................. 119
4. Cross-border insolvency proceedings ............................................................ 122
5. Consequences on shareholders of insolvent corporations ....................... 122
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About Quisumbing Torres
We are Quisumbing Torres.
Established in 1963, Quisumbing Torres has been advising many of the most dynamic and successful business
organizations in the Philippines and overseas for more than 50 years.
We are a full-service firm with a team of more than 50 Philippine lawyers advising clients in the Banking &
Finance, Corporate & Commercial, Dispute Resolution, Employment, Immigration, Intellectual Property, and
Tax practice areas.
Our lawyers specialize not only from the standpoint of the above practice areas but also from the
perspective of industries, including:
• Consumer Goods & Retail
• Energy, Mining & Infrastructure
• Financial Institutions
• Healthcare
• Industrials, Manufacturing & Transportation
• Technology, Media & Telecommunications
Quisumbing Torres is a member firm of Baker & McKenzie International, a Swiss Verein with independent
member law firms around the world.
iv Quisumbing Torres
Introduction
The Philippine economy remains stable and conducive to foreign direct investment. Recent policy and
structural reforms, as well as improved revenue collection, continue to strengthen the country's economic
fundamentals.
In February 2019, the Revised Corporation Code was signed into law. This update is aimed at improving the
ease of doing business in the country by introducing significant changes to the legal framework for the
registration and operation of private corporations in the Philippines.
To keep economic growth sustainable, meanwhile, the government has implemented successive rate hikes 1
and accelerated spending on infrastructure — a linchpin of its economic program. Increased infrastructure
spending sourced from public and private funds — at PHP 9 trillion until 2022 2 — is expected to spur a
multiplier effect as the government's "Build, Build, Build" program clears up bottlenecks in the market and
places the Philippines on a faster growth track.
While the government moves with this ambitious infrastructure plan, the country’s economic managers are
poised to overhaul the tax system. After reducing personal income tax, which is among the highest in Asia,
the government plans to bring down corporate taxes, also among the highest in the region, and rationalize
tax incentives. 3
Meanwhile, the government’s overall fiscal position remains healthy as the nation's sovereign debt, mainly
denominated in peso, declined to 41.9% of GDP in 2018 from 42.1% in 2017. 4 Credit rating agencies are looking
at further upgrading the Philippines' investment grade debt rating if certain milestones are met, including
the passage of reforms and the implementation of key projects. Just recently, the country earned back-to-
back rating upgrades from S&P 5 in April and from Fitch 6 in May 2019.
According to the Philippine Central Bank's latest survey, the business confidence index rose to 40.5% in the
second quarter, from 35.2% in the previous three months. 7 The confidence is based on expectations that the
peso will appreciate, an expansionary monetary policy will remain in place, and interest rates will remain
generally low.
1
PhilStar.com, "Fitch affirms Philippines' investment grade", 31 May 2019 (accessed 12 July 2019).
2
PhilStar.com, "YEARENDER: Build Build Build takes off in 2018", 31 December 2018 (accessed 12 July 2019).
3
4
World Bank, "Philippines Economic Update: Safeguarding Stability, Investing in the Filipino", April 2019
( accessed 12 July 2019).
5
Business World, "S&P upgrades Philippine debt rating", 1 May 2019 (accessed 12 July 2019).
6
7
World Bank, "Philippines Economic Update: Safeguarding Stability, Investing in the Filipino", April 2019
( accessed 12 July 2019).
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I. Foreign investments in the Philippines
1. Doing business in the Philippines
The law that governs the participation of foreign entities in economic and commercial activities in the
Philippines is Republic Act No. 7042 (RA 7042), as amended, otherwise known as the Foreign Investments Act
of 1991 (FIA). Under the FIA, a foreign corporation that is doing business in the Philippines must obtain a
license for this purpose from the Philippine Securities and Exchange Commission (SEC). The license is
obtained by registering a Philippine branch office or representative office of the foreign corporation with
the SEC. In the alternative, the foreign corporation may incorporate a Philippine corporation and engage in
business in the Philippines through the Philippine corporation.
Under the FIA and the Revised Corporation Code, a foreign corporation found to be doing business in the
Philippines without a license or without setting up the appropriate local entity may be subject to the
following:
• It cannot sue or maintain suits to enforce its rights in Philippine courts but can be sued on any valid
cause of action.
• It may be subject to a fine of not less than PHP 10,000 but not more than PHP 1 million at the
discretion of the court. In the case of foreign corporations, the penalties are imposed on the
directors and officers responsible for the violation, although we have rarely seen these fines
imposed.
1.1. Acts that constitute "doing business"

The FIA includes the following activities among those that would constitute "doing business" in the
Philippines:
• Soliciting orders, service contracts
• Opening offices, whether "liaison" offices or branches
• Appointing representatives or distributors domiciled in the Philippines or who in any calendar year
stay in the Philippines for a period or periods totaling 180 days or more
• Participating in the management, supervision or control of any domestic business, firm, entity or
corporation in the Philippines
• Any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose
and object of the business organization
1.2. Exceptions to "doing business"

The implementing rules and regulations of the FIA (FIA IRR) also provide for exceptions from the scope of
the definition of "doing business." Under the FIA IRR, "doing business" shall not be deemed to include the
following:
• Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do

business, and/or the exercise of rights as such investor
• Having a nominee director or officer to represent its interest in such corporation
2 Quisumbing Torres
• Appointing a representative or distributor domiciled in the Philippines who transacts business in the
representative's or distributor's own name and account
• The publication of a general advertisement through any print or broadcast media
• Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed
by another entity in the Philippines
• Consignment by a foreign entity with a local company of equipment to be used in the processing of
products for export
• Collecting information in the Philippines
• Performing services auxiliary to an existing isolated contract of sale that are not on a continuing
basis, such as installing in the Philippines machinery it has manufactured or exported to the
Philippines, servicing the same, training domestic workers to operate it, and similar incidental
services
2. Foreign equity restrictions

2.1. General rule
The FIA provides the policy of the state to attract, promote and welcome productive investments from
foreign individuals, partnerships, corporations and governments, including their political subdivisions, in
activities that significantly contribute to national industrialization and socioeconomic development, to the
extent that foreign investment is allowed in such activity by the Constitution and relevant laws.
To encourage foreign investments, Philippine laws expressly recognize various rights of foreign investors in
the Philippines, including the right to repatriation of investments, remittance of earnings, and freedom from
expropriation (except for public use or in the interest of national welfare or defense, and upon payment of
just compensation).
Foreigners may hold interests in corporations, partnerships and other entities in the Philippines, provided
that such corporations, partnerships and other entities are not engaged in an activity that is reserved by law
only to Philippine citizens or to entities that are wholly owned by Philippine citizens. The maximum amount
of foreign equity that is allowed in a company depends on the type of activity that the company is engaged
in.
2.2. Extent of foreign equity in general enterprises

The FIA provides for the formulation of a Foreign Investment Negative List (Negative List), which is a list of
economic activities where foreign equity is either prohibited or limited to a certain percentage. The Negative
List has two component lists: List A and List B. List A contains areas of investment where foreign ownership
is limited by mandate of the Philippine Constitution or by specific laws. List B contains areas of investment
where foreign ownership is limited for reasons of security, defense, risk to health and morals, or protection
of local small and medium-sized enterprises. A new Negative List is prospective in application and will not
affect foreign investment that already exists on the date of its publication. Except with respect to activities
where restrictions on foreign equity are imposed under the Philippine Constitution or statutes, the president
of the Philippines may amend the Negative List. Such amendments may not be made more often than once
every two years.
A non-Philippine national (please see the definition of "Philippine national" below) may invest in a domestic
enterprise or an export enterprise (as these terms are defined below) in the Philippines up to the extent of
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100% of the capital of the domestic enterprise or the export enterprise, provided that the following
conditions are complied with:
(a) It is investing in a domestic market enterprise or an export enterprise that is engaged in an activity
that is not on the Negative List.
A domestic market enterprise is an enterprise that produces goods for sale or renders services to the
domestic market entirely, or if exporting a portion of its output, fails to consistently export at least
60% thereof. An export enterprise is a manufacturing, processing or service (including tourism)
enterprise that exports 60% or more of its output, or a trader that purchases products domestically
and exports 60% or more of such purchases.
(b) The country or state of the non-Philippine national must also allow Filipino citizens and corporations
to do business therein.
(c) If the non-Philippine national is investing in a domestic market enterprise, the domestic enterprise
must have a paid-in capital of the peso equivalent of at least USD 200,000. The capitalization
requirements of a domestic market enterprise may be reduced to the peso equivalent of USD
100,000: (i) if its activity involves advanced technology as determined and certified by the
Department of Science and Technology (DOST); or (ii) if it employs at least 50 direct employees as
certified by the appropriate regional office of the Department of Labor and Employment (DOLE).
The FIA defines "Philippine national" as: a citizen of the Philippines; or a domestic partnership or association
wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines, of
which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines; or a corporation organized abroad and registered as doing business in the Philippines, of which
100% of the capital stock outstanding and entitled to vote is wholly owned by Filipinos; or a trustee of funds
for pension or other employee retirement or separation benefits where the trustee is a Philippine national
and at least 60% of the fund will accrue to the benefit of Philippine nationals. Where a stockholder-
corporation and its non-Filipino stockholders own stocks in an enterprise registered with the SEC, at least
60% of the capital stock outstanding and entitled to vote of the stockholder-corporation and the SEC-
registered enterprise must be owned and held by citizens of the Philippines, and at least 60% of the
members of the board of directors of both corporations must be citizens of the Philippines for the SEC-
registered enterprise to be considered a Philippine national.
2.3. Extent of foreign equity for particular activities

The Eleventh Negative List, which was promulgated by the Office of the President of the Republic of the
Philippines on 29 October 2018 through Executive Order No. 65, Series of 2018, and which took effect 15 days
after its publication in a newspaper of general circulation, is the current list that provides for the activities
that are subject to foreign equity restrictions, as follows:
No foreign equity
• Mass media, except recording and internet business 8
• The practice of the following professions, including: (a) radiologic and x-ray technology; (b)
criminology; (c) law; and (d) marine deck officers and marine engine officers, subject to the Annex
on Professions attached to the Negative List and forming an integral part of the Negative List,
8
Under the Negative List, "internet business" shall have the meaning ascribed to it under Department of Justice Opinion
No. 48, Series of 1998, where "internet business" shall refer to internet access providers that merely serve as carriers for
transmitting messages, rather than being the creator of messages/information.
4 Quisumbing Torres
where: (i) foreigners are allowed to practice in the Philippines subject to reciprocity; and (ii) where
corporate practice is allowed. 9 Furthermore, under the Negative List, foreigners may teach at higher
education levels, provided the subject being taught is not a professional subject (i.e., including in a
government board or bar examination)
• Retail trade enterprises with a paid-up capital of less than USD 2.5 million
• Cooperatives
• Organization and operation of private detective, watchmen or security guard agencies
• Small-scale mining
• Utilization of marine resources in archipelagic waters, territorial sea and exclusive economic zones,
as well as small-scale utilization of natural resources in rivers, lakes, bays and lagoons
• Ownership, operation and management of cockpits
• Manufacture, repair, stockpiling and/or distribution of biological, chemical, and radiological weapons
and anti-personnel mines
• Manufacture of firecrackers and other pyrotechnic devices
Up to 25% foreign equity
• Private recruitment, whether for local or overseas employment
• Contracts for the construction of defense-related structures
• Advertising
9
The Annex on Professions attached to the Negative List states that foreigners are allowed to practice their professions
in the Philippines provided their country allows Filipinos to be admitted to the practice of these professions: aeronautical
engineering; agricultural and biosystems engineering; chemical engineering; civil engineering; electrical engineering;
electronics engineering; electronics technician; geodetic engineering; mechanical engineering; metallurgical engineering;
mining engineering; naval architecture; sanitary engineering; medicine; medical technology; dentistry; midwifery; nursing;
nutrition and dietetics; optometry; pharmacy; physical and occupational therapy; veterinary medicine; accountancy;
architecture; chemistry; customs brokerage; environmental planning; geology; landscape architecture; librarianship;
master plumbing; social work; teaching at elementary and secondary levels; agriculture; fisheries; forestry; guidance and
counselling; real estate service (real estate consultant, real estate appraiser, real estate assessor, real estate broker and
real estate salesperson); respiratory therapy; psychology; interior design, and other professions as may be provided by
law or by treaty where the Philippines is a party.
The Annex on Professions also states that corporate practice is allowed in the following professions, subject to the
requirements and conditions under the pertinent professional regulatory law: aeronautical engineering; agricultural and
biosystems engineering; architecture; chemistry; electronics engineering; environmental planning; forestry; guidance and
counselling; interior design; landscape architecture; naval architecture; psychology; real estate service (real estate
consultant, real estate appraiser, real estate assessor, real estate broker and real estate salesperson); sanitary engineering;
and social work.
As of this writing, however, the Professional Regulation Commission (PRC), which is the Philippine government agency
mandated by law with the regulation of a total of 43 professions, has yet to formalize its official position with respect to
the aforementioned modification in the Negative List. Under very limited circumstances, the PRC allows foreigners to
practice certain professions in the Philippines, subject to securing a Special Temporary Permit also from the PRC. Such
permits are normally valid for a limited period of six months to one year.
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• Subject to applicable regulatory frameworks, contracts for the construction and repair of locally
funded public works except: (a) infrastructure/development projects covered by Republic Act No.
7718; and (b) projects that are foreign-funded or -assisted and required to undergo international
competitive bidding
• Exploration, development and utilization of natural resources
• Ownership of private lands
• Operation of public utilities, except power generation and supply of electricity to the contestable
market, and other similar businesses or services not covered by the definition of public utilities 10
• Educational institutions other than those established by religious groups and mission boards, for
foreign diplomatic personnel and their dependents and other foreign temporary residents, or for
short-term high-level skills development that do not form part of the formal education system as
defined in Section 20 of Batas Pambansa No. 232 (1982)
• Contracts for the supply of materials, goods and commodities to government-owned or -controlled
corporations, companies or agencies, or municipal corporations
• Culture, production, milling, processing, trading (except retailing) of rice and corn and acquiring, by
barter, purchase or otherwise, rice and corn and the byproducts thereof
• Private radio communications network
• Ownership of condominium units
• Operation of deep-sea commercial fishing vessels
• Domestic market enterprises (i.e., entities that do not export 60% or more of their output) with a
paid-in equity capital of less than the equivalent of USD 200,000
• Domestic market enterprises that involve advanced technology or employ at least 50 direct
employees with paid-in equity capital of less than the equivalent of USD 100,000
• Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine
National Police (PNP) clearance, as follows: (a) firearms (handguns to shotguns), parts of firearms
and ammunition therefor, instruments or implements used or intended to be used in the
manufacture of firearms; (b) gunpowder; (c) dynamite; (d) blasting supplies; (e) ingredients used in
making explosives; and (f) telescopic sights, sniper scope and other similar devices
• Manufacture, repair, storage and/or distribution of products requiring Department of National

Defense (DND) clearance, as follows: (a) guns and ammunition for warfare; (b) military ordnance and
parts thereof (e.g., torpedoes, depth charges, bombs, grenades, missiles); (c) gunnery, bombing and
fire control systems and components; (d) guided missiles / missile systems and components; (e)
tactical aircraft (fixed and rotary-winged), parts and components thereof; (f) space vehicles and
component systems; (g) combat vessels (air, land and naval) and auxiliaries; (h) weapons repair and
maintenance equipment; (i) military communications equipment; (j) night vision equipment; (k)
10
Under the Negative List, "public utility," citing JG Summit Holdings vs. Court of Appeals et al., means "a business of
service engaged regularly supplying the public with some commodity or service of consequence, such as electricity, gas,
water, transportation, telephone or telegraph service.
6 Quisumbing Torres
stimulated coherent radiation devices, components and accessories; (l) armament training devices;
and (m) others as may be determined by the Secretary of the DND.
• Manufacture and distribution of dangerous drugs
• Sauna and steam bathhouses, massage clinics and other similar activities, except wellness centers,
that are regulated by law because of risks posed to public health and morals
• All forms of gambling, except those covered by investment agreements with the Philippine
Amusement and Gaming Corporation (PAGCOR)
Persons who will engage in construction activities in the Philippines are also required to obtain a license from
the Philippine Contractors Accreditation Board (PCAB). Under the rules of the PCAB, certain licenses are
reserved for and issued only to Filipino sole proprietorships, partnerships or corporations with at least 60%
Filipino equity participation, and duly organized and existing under and by virtue of the laws of the
Philippines.
2.4. Developments relating to activities that are governed by nationality restrictions

In the landmark case of Gamboa v. Finance Secretary 11 (Gamboa Case), the Supreme Court ruled on the
compliance by a public utility with applicable Filipino ownership requirements. Under the Constitution, a
public utility is required to be at least 60% Filipino-owned. In defining "capital," the Supreme Court ruled that
"the Constitution refers only to shares of stock that can vote in the election of directors" and that "capital
refers to the voting stock or controlling interest of a corporation." In addition, the Supreme Court ruled that
mere legal title is insufficient to meet the 60% Filipino-owned capital requirement. Full beneficial ownership
and voting rights by Filipinos over 60% of the outstanding capital stock must also be present.
Because the Constitution uses similar language in defining the foreign equity restrictions that apply to an
operator of a public utility as it does for other activities that are subject to nationality restrictions under the
Constitution, the aforementioned ruling in the Gamboa Case may be interpreted as applicable to
corporations that are engaged in other activities and that are also subject to nationality restrictions under
the Constitution.
To implement the ruling and principles laid down in the Gamboa Case, the SEC issued Memorandum Circular
No. 8, which provides for the guidelines on compliance with the Filipino-foreign ownership requirements by
corporations engaged in nationalized and partly nationalized activities (SEC Guidelines).
Under the SEC Guidelines, all covered corporations are required to observe the constitutional or statutory
ownership requirement. For purposes of determining compliance therewith, the required percentage of
Filipino ownership shall be applied to the following:
(a) The total number of outstanding shares of stock entitled to vote in the election of directors
(b) The total number of outstanding shares of stock, whether or not entitled to vote in the election of
directors
The SEC Guidelines apply to all corporations engaged in activities specifically reserved, wholly or partly, to
Philippine nationals by existing laws. The SEC Guidelines direct all corporate secretaries to monitor and
observe compliance with the provisions on ownership requirements provided in existing laws.
11
GR No. 176579, 9 October 2012.
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In the case of Roy v. Herbosa, 12 the Supreme Court, in confirming the rulings in the Gamboa Case and the
validity of SEC Guidelines, clarified that there is no requirement to apply the prescribed minimum percentage
of Filipino equity on each class of shares of a corporation engaged in a nationalized industry. Nonetheless, in
the same case, the Supreme Court considered that such classification of shares should not be a means to
give control to foreign nationals of the Philippine portion of the capital of the corporation.
2.5. Anti-Dummy Law

The Philippines has an Anti-Dummy Law (ADL), which applies to corporations engaged in partially
nationalized activities that are subject to Filipino ownership requirement to the extent of at least 60% of the
capital of the corporation.
Under the ADL, a person who has, in his or her name or under his or her control, a right, franchise, privilege,
property or business, the exercise or enjoyment of which is expressly reserved by law to Philippine citizens
or to corporations or associations where at least 60% of the capital is owned by such citizens, is prohibited
from: (a) permitting or allowing the use, exploitation or enjoyment of such right, franchise, privilege,
property or business by a person, corporation or association not possessing the qualifications prescribed by
law; or (b) in any manner permitting or allowing any person not so qualified to intervene in the
management, operation, administration or control of such right, franchise, privilege, property or business,
whether as an officer, employee or laborer, with or without remuneration (except technical personnel whose
employment may be specifically authorized by the Secretary of Justice). However, foreign nationals may
serve as members of the board or governing body of corporations engaged in partially nationalized
activities, in a number proportionate to their actual and allowable equity in the company.
A violation of the ADL is punishable by imprisonment of not less than five but not more than 15 years and by
a fine of not less than the value of the right, franchise or privilege, but in no case less than PHP 5,000. A
corporation found to have committed a violation of the ADL shall, upon proper court proceedings, be
dissolved. A person who knowingly aids, assists or abets in the planning, consummation or perpetration of
any of the foregoing acts is also subject to the same penalties.
12
G.R. No. 207246, 22 November 2016.
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II. Private company investments

1. Corporate vehicles
There are three general forms of business organizations in the Philippines: sole proprietorship, partnership
and corporation (domestic or foreign).
1.1. Sole proprietorship

A sole proprietorship is a business owned and operated by a single natural person. The liability of the sole
proprietor is unlimited, and the personality of the business enterprise is not distinct and separate from that
of the owner.
1.2. Partnership
A partnership is created by virtue of a contract whereby two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the profits among
themselves. The partnership has a juridical personality separate and distinct from that of each of the
partners. However, generally, all partners are liable pro rata, with all their property and after all the
partnership assets have been exhausted, for the contracts that may be entered into in the name and for the
account of the partnership.
1.3. Domestic/foreign corporation

Subject to nationality requirements that may apply to particular areas of investment in the Philippines, as
discussed earlier, Philippine law allows foreign investors to incorporate a corporation organized under
Philippine law. It also allows foreign corporations to transact business in the Philippines as a branch or a
representative office.
A domestic corporation may be incorporated as a joint venture with a local partner, or a wholly owned
subsidiary of the foreign corporation.
Under Philippine law, a branch and a representative office of a foreign corporation are not separate legal
entities from, but are mere extensions of, their head offices.
For reasons relating to the exercise of management powers and the extent of liability, among others, the
corporation is generally the most preferred vehicle for investments in the Philippines among the various
forms of business organizations. Foreign investors who wish to engage in a business that is not subject to
nationality restrictions generally choose between establishing either a Philippine subsidiary or a Philippine
branch office.
Domestic corporation vs. branch
Assuming that the proposed activity is not subject to any foreign equity limitation, a foreign investor may
incorporate a domestic corporation, or register a branch of a foreign corporation in the Philippines. These
two types of corporate vehicles have their relative advantages and disadvantages relating to, among others,
the extent of liability of the parent company / head office, taxation, and the administrative costs of
maintaining the same.
If the proposed activity is subject to foreign equity limitations, a foreign investor will have to set up a
domestic corporation with a Philippine national as a joint venture partner.
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As discussed earlier, generally, corporations that are more than 40% foreign-owned, as well as branches of
foreign corporations that are considered domestic market enterprises, must have a paid-in capital of at least
USD 200,000. The paid-in capital requirement is reduced to USD 100,000 for domestic market enterprises
whose activities involve advanced technology or which employ at least 50 direct employees.
Entities that qualify as export enterprises are not subject to any minimum paid-in capital requirement.
Representative office
A foreign corporation may register a representative office in the Philippines for the purpose of dealing
directly with the clients of its head office who are in the Philippines, and to undertake information
dissemination and promotion of the company's products, including the conduct of quality control. A
representative office may not derive income in the Philippines and is fully subsidized by its head office.
A representative office must have an initial inward remittance of USD 30,000 to fund its operations.
Regional or area headquarters
A multinational company engaged in international trade may establish a regional or area headquarters in the
Philippines to act as an administrative branch of the multinational company and to serve principally as a
supervision, communications and coordination center for its subsidiaries, branches or affiliates in the Asia
Pacific region and other foreign markets.
The regional or area headquarters may not earn or derive income in the Philippines. It may not participate, in
any manner, in managing any subsidiary or branch office it may have in the Philippines; neither may it solicit
or market goods or services, whether on behalf of its parent company or its branches, affiliates, subsidiaries
or any other company.
Its expenses must be financed by the head office or parent company from external sources in an acceptable
foreign currency. To fund its operations in the Philippines, its head office or parent company must initially
remit into the Philippines at least USD 50,000 and thereafter, USD 50,000 annually.
Regional operating headquarters
A multinational company may establish a regional operating headquarters (ROHQ) in the Philippines to
service its own affiliates, subsidiaries or branches in the Philippines or in the Asia Pacific region and other
foreign markets.
An ROHQ is allowed to derive income in the Philippines by performing any of the following qualifying
services:
(a) General administration and planning
(b) Business planning and coordination
(c) Sourcing/procurement of raw materials and components
(d) Corporate finance advisory services
(e) Marketing control and sales promotion
(f) Training and personnel management
(g) Logistics services
(h) Research and development services and product development
10 Quisumbing Torres
(i) Technical support and maintenance
(j) Data processing and communication
(k) Business development
An ROHQ is prohibited from offering qualifying services to entities other than its affiliates, branches or
subsidiaries, as declared in its registration with the SEC; nor shall it be allowed to solicit or market goods and
services directly and indirectly, whether on behalf of its mother company, branches, affiliates, subsidiaries or
any other company.
An ROHQ must initially remit into the Philippines at least USD 200,000.
Regional warehouses
A multinational company organized and existing under any laws other than those of the Philippines and that
is engaged in international trade and supplies spare parts, components, semi-finished products and raw
materials to its distributors or markets in the Asia Pacific area and other foreign areas, and which has
established or will simultaneously establish a regional or area headquarters and/or ROHQ in the Philippines,
may also establish a regional warehouse or warehouses in special economic zones (Ecozones) in the
Philippines after securing a license from the Philippine Economic Zone Authority (PEZA). With respect to
regional warehouses located or to be located in Ecozones with special charters, such license shall be secured
from the concerned Ecozone authorities (please refer to our discussion below on Ecozones). For existing
regional warehouses, said license shall be secured from the Board of Investments (BOI), unless they choose
to relocate inside Ecozones. The activities of the regional warehouse shall be limited to the following:
(a) Serving as a supply depot for the storage, deposit and safekeeping of its spare parts, components,
semi-finished products and raw materials, including packing, covering, putting up, marking, labeling,
and cutting or altering to customer's specification, mounting, and/or packaging into kits or
marketable lots thereof; and filling up transactions and sales made by its head offices or parent
companies
(b) Serving as a storage or warehouse of goods purchased locally by the home office of the
multinational for export abroad
In addition to the foregoing, the regional warehouse may not directly engage in trade, directly solicit
business, promote any sale, or enter into any contract for the sale or disposition of goods in the Philippines.
2. Other regulatory approvals and registrations

Upon incorporation of a domestic corporation or registration of a foreign corporation with the SEC, certain
basic registration and licensing requirements with different government agencies must be complied with.
These post-registration requirements include obtaining a local business permit from the local government
unit in which the corporation locates its offices, and certain registrations relating to tax, as well as those to
be secured and applied from employee-welfare agencies.
In addition to the basic post-registration requirements, certain businesses in highly regulated industries may
be subject to special licensing or registration requirements with the government agency having jurisdiction
over such industry.
Quisumbing Torres 11
3. Corporate structure: Governance, corporate officers, stockholders
On 20 February 2019, President Rodrigo Duterte signed into law Republic Act (RA) No. 11232 or the Revised
Corporation Code of the Philippines (Revised Corporation Code). The Revised Corporation Code expressly
repeals Batas Pambansa Blg. 68 or the Corporation Code of the Philippines.
The Revised Corporation Code, which took effect on 23 February 2019, governs the organization and
corporate powers and authorities of a domestic corporation.
Pursuant to the Revised Corporation Code, two or more persons but not more than 15 may organize
themselves and form a corporation. Each incorporator must own or be a subscriber to at least one share of
the capital stock of the proposed stock corporation. The incorporators may be composed of any
combination of: (i) natural individual persons; (ii) SEC-registered partnership; (iii) SEC-registered domestic
corporations; and/or (iii) foreign corporations.
Under the Revised Corporation Code, the powers of a stock corporation are generally exercised by the board
of directors. Stock corporations must have not more than 15 directors who are duly elected by the
stockholders. 13 Every director must hold at least one share of the capital of the corporation.
The Revised Corporation Code provides that a stock corporation must have a president (who must be a
director), a treasurer (who must be a resident) and a company secretary (who must be a Philippine citizen
and resident). If the corporation is vested with public interest, the corporation must also have a compliance
officer. Other officers may be elected, according to the by-laws of the corporation. No person may be
president and secretary, or president and treasurer, at the same time.
While the powers of a corporation are vested in the board of directors, the approval of the following
corporate acts requires stockholder approval:
• Amendment of the articles of incorporation
• Adoption and amendment of by-laws
• Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporate property
• Incurring, creating or increasing bonded indebtedness
13
Under Section 22 of the Revised Corporation Code, the board of the following corporations vested with public interest
shall have independent directors constituting at least 20% of such board:
• Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as "The Securities Regulation Code,"
namely those whose securities are registered with the SEC, corporations listed with an exchange or with assets of at
least PHP 50 million and having 200 or more holders of shares, each holding at least 100 shares of a class of its
equity shares
• Banks and quasi-banks; nonstock savings and loan associations; pawnshops; corporations engaged in money service
business; preneed, trust and insurance companies; and other financial intermediaries
• Other corporations engaged in businesses vested with public interest similar to the above, as may be determined by
the SEC, after taking into account relevant factors that are germane to the objective and purpose of requiring the
election of an independent director, such as the extent of minority ownership, type of financial products or
securities issued or offered to investors, public interest involved in the nature of business operations, and other
analogous factors
An independent director is a person who, apart from shareholdings and fees received from the corporation, is
independent of management and free from any business or relationship that could, or could reasonably be perceived to,
materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
• Increase or decrease of capital stock
• Merger or consolidation of the corporation with another corporation or other corporations
• Investment of corporate funds in another corporation or business
• Entering into a management contract
• Dissolution of the corporation
Foreign corporations doing business in the Philippines are required to designate a resident agent for the
purpose of service of writs and other processes. A resident agent may be an individual or a Philippine
corporation.
The Revised Corporation Code also permits a natural person, trust or estate to form a One Person
Corporation (OPC), with the single stockholder as the sole director and president. Banks and quasi-banks;
preneed, trust, insurance, public and public-listed companies; and non-chartered government-owned and -
controlled corporations may not incorporate as an OPC. A natural person who is licensed to exercise a
profession may not organize as an OPC for the purpose of exercising such profession, except as otherwise
provided under special laws.
III. Public company investments
Investments in public companies are subject to the same foreign equity restrictions as those applicable to
private companies. In terms of corporate governance, they are subject to additional or stricter rules that are
essentially intended to protect public investors.
1. Registration of securities
Under the Securities Regulation Code (SRC), no securities shall be sold or offered for sale or distribution
within the Philippines unless such securities are registered with the SEC. By way of exception, registration of
securities with the SEC is not required under any of the following circumstances, notwithstanding that the
subject securities are sold or offered for sale or distribution within the Philippines:
• If the securities are of a class of securities that is exempt as listed in Section 9.1 of the SRC,
including, among others: (i) any security issued or guaranteed by the government of the Philippines,
or by any political subdivision or agency thereof, or by any person controlled by or supervised by,
and acting as an instrumentality of the government; (ii) any security issued or guaranteed by the
government of any country with which the Philippines maintains diplomatic relations, or by any
state, province or political subdivision thereof on the basis of reciprocity, provided that the SEC may
require compliance with the form and content for disclosures the SEC may prescribe; (iii) any
security or its derivatives the sale or transfer of which, by law, is under the supervision and
regulation of the Office of the Insurance Commission, the Housing and Land Use Rule Regulatory
Board or the Bureau of Internal Revenue (BIR); and (iv) any security issued by a bank except its own
shares of stock
• If the securities are to be offered or sold in a transaction that is exempt as listed in Section 10.1 of
the SRC, including, among others: (i) the distribution by a corporation actively engaged in the
business authorized by its articles of incorporation, of securities to its stockholders or other security
holders as a stock dividend or other distribution out of surplus; (ii) the sale of capital stock of a
corporation to its own stockholders exclusively, where no commission or other remuneration is paid
or given directly or indirectly in connection with the sale of such capital stock; (iii) the sale of
securities by an issuer to fewer than 20 persons in the Philippines during any 12-month period
(private placement); and (iv) the sale of securities to any number of qualified buyers (as this term is
defined in SRC rules)
• If the securities are to be offered or sold in a transaction that is not an exempt transaction under
Section 10.1 but which the SEC, pursuant to its power under Section 10.2 of the SRC, exempts from
the registration requirement on the ground that the SEC finds that requiring registration is not
necessary in the public interest or for the protection of the investors, such as by reason of the small
amount involved or by the limited character of the offering
If the company intends to list the securities on the Philippine Stock Exchange (PSE), it must comply with the
listing requirements under PSE rules.
2. Corporate structure: Governance, officers, stockholders

In addition to the corporate governance requirements that apply generally to all corporations doing business
in the Philippines, public listed companies are subject to additional requirements under the Code of
Corporate Governance for Publicly Listed Companies.
Below are some of the key features of the corporate governance framework for public companies:
• The board of directors is primarily responsible for governance of the company. It should be
composed of a majority of non-executive directors who possess the necessary qualifications to
effectively participate and help secure objective, independent judgment on corporate affairs and to
substantiate proper checks and balances. It should have at least two independent directors, or such
number as to constitute at least one-third of the members of the board of directors, whichever is
higher.
• A public company should have the following committees:
o Audit Committee
o Corporate Governance Committee
o Board Risk Oversight Committee
o Related Party Transaction Committee
• The board of directors should establish corporate disclosure policies and procedures so shareholders
and other stakeholders can have a comprehensive, accurate, reliable and timely report that gives a
fair and complete picture of a company's financial condition, results and business operations.
• The board must appoint a compliance officer who shall be responsible for monitoring, reviewing,
evaluating and ensuring that the company, its officers and directors comply with the relevant laws,
rules and regulations, as well as with all governance issuances of regulatory agencies and the Code
of Corporate Governance for Publicly Listed Companies.
• The company should establish standards for the appropriate selection of an external auditor, and
exercise effective oversight of the same to strengthen the external auditor's independence and
enhance audit quality.
• The board of directors should ensure that an appropriate internal control system is in place,
including a mechanism for monitoring and managing potential conflicts of interest involving
management, board members and shareholders.
• The board of directors should ensure that basic shareholder rights are disclosed in the Manual on
Corporate Governance and on the company's website. It should encourage active shareholder
participation.
• The board of directors should identify the company's various stakeholders and promote cooperation
between them and the company in creating wealth, growth and sustainability.
3. Disclosure requirements
The SEC imposes disclosure requirements on public companies, as follows:
• Structured/regular continuing disclosure requirements, including submission of: (i) periodic and other
reports; and (ii) beneficial ownership report
• Unstructured/current continuing disclosure requirements (relating to every material fact or event

that occurs that would reasonably be expected to affect investors' decision in relation to the shares)
Structured disclosures are the periodic reportorial requirements of the SEC and the PSE. The purpose of the
structured reports is to assure the public availability of continuing adequate information on publicly listed
companies. These structured reports are generally intended to keep the information and documents filed
with the SEC for the registration or listing of the securities reasonably current.
Unstructured disclosures are the reports on corporate developments to the investing public as they occur.
The purpose of the unstructured disclosures is to update the investing public with any material fact or event
that occurs that would reasonably be expected to affect investors' decisions in relation to trading of the
company's shares.
In the event a news report involving an alleged material event appears in the media, and such report would
create public speculation if not officially denied or clarified by the issuer and the issuer has not yet made any
previous disclosure in relation to said material event, the SEC may require the issuer to file the appropriate
disclosures within the period prescribed in order to clarify the news report.
Public companies are also mandated to include all company disclosures on their company websites. The SRC
imposes fines and penalties for public companies that fail to comply with disclosure requirements.
IV. Incentives under special registrations

Qualified enterprises may register with the BOI under the Omnibus Investments Code (OIC) or with PEZA to
avail of certain incentives. Investment opportunities in the Philippines have also been created by the
Philippine government's conversion plan covering Clark Air Base, Subic Naval Base, Camp John Hay in Baguio
City, and other former US military reservations as well as their extensions into Ecozones.
1. OIC / 2017 IPP

The OIC, through tax incentives and other benefits, encourages investments in preferred areas of economic
activity in the Investment Priorities Plan (IPP).
To qualify for registration and obtain incentives under the OIC, the following qualifications must be met:
(a) The applicant, if a natural person, must be a citizen of the Philippines; in the case of a partnership or
any other association organized under Philippine laws, must have at least 60% of its capital being
owned and controlled by citizens of the Philippines; in the case of a corporation or a cooperative
organized under Philippine laws, must have at least 60% of its capital stock outstanding and
entitled to vote being owned and held by Philippine nationals and at least 60% of its board of
directors consisting of citizens of the Philippines. If the applicant does not possess the required
degree of ownership by Philippine nationals, the following circumstances must be satisfactorily
established:
(i) It proposes to engage in pioneer projects (please refer to the definition below), which,
considering the nature and extent of capital requirements, processes, technical skills and
relative business risks involved, are, in the opinion of the BOI, of such a nature that the
available measured capacity thereof cannot be readily and adequately filled by Philippine
nationals; or where the applicant is exporting at least 70% of its total production.
(ii) It obligates itself to attain the status of a Philippine national within 30 years from the date
of registration or within such longer period as the BOI may require, taking into account the
export potential of the project. A registered enterprise that exports 100% of its total
production need not comply with this requirement.
(iii) The pioneer area it will engage in is one that is not within the activities reserved by the
Constitution or other laws of the Philippines to Philippine citizens or corporations owned
and controlled by Philippine citizens.
(b) The applicant is proposing to engage in a preferred project listed or authorized in the current IPP
within a reasonable time to be fixed by the BOI, or if not so listed, at least 50% of its total
production is for export or it is an existing producer that will export part of production under such
conditions and/or limited incentives as the BOI may determine; or the enterprise is engaged or
proposing to engage in the sale abroad of export products bought by it from one or more export
producers; or the enterprise is engaged or proposing to engage in rendering technical, professional
or other services, or in exporting television and motion pictures, and musical recordings made or
produced in the Philippines, either directly or through a registered trader.
(c) The applicant is capable of operating on a sound and efficient basis of contributing to the national
development of the preferred area in particular and of the national economy in general.
An enterprise may apply for registration either as a pioneer or non-pioneer enterprise. A "pioneer enterprise"
is a registered enterprise: (i) engaged in the manufacture, processing or production, and not merely in the
assembly or packaging of goods, products, commodities or raw materials that have not been or are not
being produced in the Philippines on a commercial scale; (ii) using a design, formula, scheme, method,
process, or system of production or transformation of any element, substance or raw materials into another
raw material or finished goods that are new and untried in the Philippines; (iii) engaged in the pursuit of
agricultural, forestry and mining activities and/or services, including the industrial aspects of food processing
whenever appropriate, predetermined by the BOI, in consultation with the appropriate department, to be
feasible and highly essential to the attainment of the national goal, in relation to a declared specific national
food and agricultural program for self-sufficiency and other social benefits of the project; or (iv) producing
non-conventional fuels or manufacturing equipment that utilizes non-conventional sources of energy or
using or converting to coal or other non-conventional sources of energy in its production, manufacturing or
processing operations. The final product in any of the foregoing instances must involve substantial use and
processing of domestic raw materials, whenever available, taking into account the risks and magnitude of
investment.
The 2017 IPP, which took effect on 18 March 2017 and is the current IPP, reflects the current administration's
orientation to boost growth in more micro, small and medium enterprises, as well as in innovation, health
and environment-driven activities, while shifting investments to the countryside.
The 2017 IPP provides for the following preferred areas of investments that may be entitled to incentives:
1.1. Preferred activities

(a) All qualified manufacturing activities, including agro-processing
(b) Agriculture, fishery and forestry
(c) Strategic services (including integrated circuit design; creative industries / knowledge-based
services; maintenance, repair and overhaul (MRO) of aircraft; charging/refueling stations for
alternative energy vehicles; industrial waste treatment; telecommunications; state-of-the-art
engineering, procurement and construction (EPC))
(d) Healthcare services, including drug rehabilitation centers
(e) Mass housing
(f) Infrastructure and logistics, including local government unit public-private partnerships (LGU-PPPs)
(g) Innovation drivers (research and development activities; conduct of clinical trials (including drug
trials); establishment of centers of excellence; business incubation hubs; fabrication laboratories;
commercialization of new and emerging technologies and products of the DOST or government-
funded research and development)
(h) Inclusive business models (covers business activities of medium and large enterprises in the
agribusiness and tourism sectors that provide business opportunities to micro, small and medium
enterprise as part of their value chains)
(i) Environment or climate-change-related projects
(j) Energy
1.2. Export activities

(a) Production and manufacture of export products
(b) Service exports
(c) Activities in support of exporters
1.3. Special Laws

(a) Industrial Tree Plantation (PD 705)
(b) Mining (RA 7942) (limited to capital equipment incentive)
(c) Publication or Printing of Books/Textbooks (RA 8047)
(d) Refining, Storage, Marketing and Distribution of Petroleum Products (RA 8479)
(e) Rehabilitation, Self-Development and Self-Reliance of Persons with Disability (RA 7277)
(f) Renewable Energy (RA 9513)
(g) Tourism (RA 9593)
1.4. Autonomous Region of Muslim Mindanao (ARMM) list

(a) Export activities
(i) Export trade and service exporters
(ii) Support activities for exporters
(b) Agriculture, agribusiness/aquaculture and fishery
(c) Basic industries
(d) Infrastructure and services
(e) Industrial service facilities
(f) Engineering industries
(g) Logistics
(h) Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA)-related

investment enterprises
(i) Tourism
(j) Health and education services and facilities
(k) Halal industry
(l) Banking, non-bank financial institutions and facilities
(m) Energy
1.5. Incentives
An enterprise registered with the BOI enjoys the following tax and non-tax special incentives:
1.5.1. Tax incentives
(a) Income tax holiday (ITH), consisting of income tax exemption for six years from the start of
commercial operations for pioneer firms, and four years for non-pioneer firms (may be extended in
certain instances and upon approval by the BOI, but may not be extended for more than eight
years)
(b) For expanding firms, exemption from income taxes proportionate to their expansion for a period of
three years from the start of commercial operations of the expansion
(c) Duty free importation of capital equipment, spare parts and accessories, subject to conditions
(d) For registered enterprises with bonded manufacturing warehouses, exemption from taxes and
duties on the importation of supplies and spare parts for imported equipment and consigned
equipment
(e) For the first five years from registration, an additional deduction from taxable income of 50% of the
wages of additional skilled and unskilled workers in the direct labor force (granted only if the
registered enterprise meets a prescribed capital-to-labor ratio and shall not be availed of
simultaneously with the ITH)
(f) Exemptions from taxes and duties on the importation of breeding stocks and genetic materials
within 10 years from the date of registration or commercial operation
(g) Tax credit for taxes and duties on raw materials, supplies and semi-manufactured products used for
the manufacture of export products and forming part thereof
(h) Exemption from wharfage duties and any export tax, duty, impost and fees on exports by a
registered enterprise of its non-traditional export products
(i) Exemption from local taxes for six years from the date of registration for pioneer enterprises, and
four years for non-pioneer enterprises
1.5.2. Non-tax incentives
(a) Simplified customs procedures for the importation of equipment, spare parts, raw materials and
supplies, and the export of processed products
(b) No restriction on the use of consigned equipment (re-export bond required)
(c) Employment of foreign nationals in supervisory, technical or advisory positions for five years from
registration, extendible for limited periods (the president, general manager and treasurer (or their
equivalent) of foreign-owned registered firms are not subject to the foregoing limitations)
(d) Privilege to operate bonded manufacturing/trading warehouses, subject to customs rules and
regulations
1.5.3. Additional incentives
The following additional incentives are available to projects (excluding mining, forestry, and processing of
minerals and forest products) located in less-developed areas:
(a) Double deduction from taxable income of 50% of the wages corresponding to the increment in the
number of direct labor
(b) Deduction of the cost of necessary and major infrastructure works constructed
2. PEZA registration
To disperse industry and generate employment in non-urban areas, the government has established several
Ecozones.
Enterprises may establish their businesses within an Ecozone and register with the PEZA as any of the
following enterprises:
• Export manufacturing enterprise
• Information technology (IT) service export enterprise
• Tourism enterprise
• Medical tourism enterprise
• Agro-industrial export manufacturing enterprise
• Agro-industrial biofuel manufacturing enterprise
• Logistics and warehousing services enterprise
• Economic zone development and operation, such as:
o Manufacturing economic zone
o IT park
o Tourism economic zone
o Medical tourism economic zone
o Agro-industrial economic zone
o Retirement economic zone
• Facilities providers, such as:
o Facilities for manufacturing enterprises
o Facilities for IT enterprises
o Retirement facilities
• Establishment, operation, and maintenance of light and power systems, and water supply and
distribution systems inside Ecozones
An Ecozone manufacturing enterprise is an entity engaged in the assembly, manufacturing or processing
activities resulting in the exportation of at least 70% of its production. "Manufacturing or processing" is the
process by which raw materials or semi-finished materials are converted into a new product through a
change in their physical, mechanical or electromagnetic characteristics and/or chemical properties.
"Assembly" is the process by which semi-finished parts or materials are put together or combined to form a
distinct product without substantially changing their physical or mechanical characteristics or
electromagnetic and/or chemical properties.
An IT service export enterprise is a company operating or offering IT services of which 70% of total revenues
are derived from clients abroad. "IT Service Activities" are activities that involve the use of any IT software
and/or system for value addition. Among the IT Service Activities eligible for incentives are IT-enabled
services, such as business process outsourcing, call centers, data encoding, transcribing and processing;
software development and application, including programming and adaptation of system software and
middleware; and content development for multimedia or internet purposes.
3. Tax and other incentives

3.1. Enterprises registered with the Subic Bay Metropolitan Authority (SBMA)
The Subic Special Economic Zone (SSEZ) and Subic Free Port Zone (SFZ) were established by the Philippine
government with the aim of developing the area into a self-sustaining industrial, commercial, financial and
investment center in the Philippines. In addition, the SFZ was established to be operated and managed as a
separate customs territory ensuring the free flow or movement of raw materials, capital, equipment and
consumer items within, into and exported out of the SFZ.
The territory of the SSEZ includes the city of Olongapo and the municipality of Subic in Zambales province,
the former US Naval Base at Subic Bay, as well as its extensions located in the municipalities of Hermosa and
Morong in Bataan province. The SFZ is an area within the SSEZ that is fenced in and designated as a Freeport
Zone.
A business enterprise may register as an Ecozone Enterprise in the SSEZ or a Freeport Enterprise in the SFZ
with the SBMA.
An SSEZ Enterprise is a business entity located within the SSEZ that is duly registered with the SBMA to
operate any lawful economic activity within the SSEZ. An SFZ Enterprise is a business entity located within
the SFZ that is duly registered with the SBMA.
Registration as an SSEZ/SFZ Enterprise is open to any business enterprise in any area of economic activity,
subject only to limitations under the Philippine Constitution.
As provided under the Rules and Regulations to Implement Republic Act No. 9400, an SSEZ Enterprise shall
be entitled to the 5% special tax on gross income earned, in lieu of national and local taxes, while an SFZ
Enterprise shall be entitled to: (i) tax- and duty-free importation within the SFZ; and (ii) 5% special tax on
gross income earned, in lieu of national and local taxes.
3.2. Enterprises located in the Clark Special Economic Zone

The Clark Special Economic Zone (CSEZ) covers certain areas of Angeles City, the municipalities of Mabalacat
and Porac in Pampanga province, and the municipalities of Capas and Bamban in Tarlac province.
In 2007, RA 9400 converted a portion of the CSEZ into a freeport zone called the Clark Freeport Zone. The
Clark Freeport Zone is operated and managed as a separate customs territory, with the following incentives
available to registered business enterprises located therein: (i) tax rate of 5% on gross income earned, in lieu
of national and local taxes; and (ii) tax- and duty-free importation of raw materials and capital equipment.
The government agency that registers enterprises and grants and administers incentives to those enterprises
is the Bases Conversion and Development Authority (BCDA), with the Clark Development Corporation (CDC)
as its implementing arm.
Under the Rules and Regulations to Implement RA 9400, PEZA Ecozones may be created within the CSEZ.
PEZA-registered enterprises located in PEZA Ecozones within the CSEZ are entitled to the same tax and duty
incentives available to PEZA-registered enterprises located in other PEZA Ecozones. The government agency
that registers enterprises and grants and administers incentives to those enterprises located in PEZA
Ecozones within the CSEZ is the PEZA. The agency in charge of the development, operation, management
and maintenance of the infrastructure, facilities and utilities in those PEZA Ecozones is the BCDA, with the
CDC as its implementing arm.
V. Foreign exchange controls
1. Foreign direct investments
Under the regulations issued by the Bangko Sentral ng Pilipinas (BSP, the Philippines' central bank),
registration of foreign direct investments in the Philippines with the BSP is required if the investee firm
intends to purchase foreign exchange from the Philippine banking system to fund the repatriation of capital
and the remittance of profits, dividends and earnings that may accrue on such investments. The Philippine
banking system consists of authorized agent banks and/or their subsidiaries or affiliates authorized to
engage in foreign exchange operations.
In general, registration of foreign direct investments in the Philippines is evidenced by a Bangko Sentral
Registration Document (BSRD). Registration is made by way of an application for such purpose filed with
the BSP, accompanied by certain supporting documents, depending on the form of the investments sought
to be registered (i.e., whether cash investments, investments in kind or investments of capitalized
oil/gas/geothermal exploration expenditures).
Foreign direct investments may be in cash or in kind. To be eligible for registration with the BSP, foreign
exchange funding for cash investments must be inwardly remitted to the Philippines (but need not be
converted to Philippine peso). Assets eligible for registration as investment in kind include: (a) machinery and
equipment; and (b) raw materials, supplies, spare parts and other items, including intangible assets,
necessary for the operations of the investee firm.
As a rule, applications for the registration of foreign direct investments must be filed with the BSP within
one year from the date of inward remittance of foreign exchange funding the investment (if the foreign
direct investment is in cash) or the date of actual transfer of assets to the Philippines (if the foreign direct
investment is in kind). If the foreign direct investment involves the transfer of BSP-registered investment to
another foreign investor and payment is made offshore in foreign exchange, the application for registration
must be filed with the BSP within one year from the date of signing of the deed of sale/assignment covering
the transfer.
2. Outward investments
BSP regulations allow residents to invest in: (a) debt and equity securities issued offshore by non-residents;
(b) offshore foreign currency-denominated mutual funds and UITFs; (c) foreign currency-denominated
intercompany loans to offshore parent companies/subsidiaries of residents with an original tenor of at least
one year; (d) investments in real property abroad; and (e) foreign-currency-denominated investment
instruments issued onshore by non-residents without BSP approval, if such investments are funded by: (i)
the resident's foreign currency deposit account; and/or (ii) foreign exchange of up to USD 60 million
purchased from the Philippine banking system, per investor per year.
Qualified investors, such as insurance and pre-need companies, collective/pooled funds, public or private
pension, or retirement or provident funds, may apply with the BSP for a higher annual investment limit.
3. Foreign loans (including shareholder advances)

Prior BSP approval and/or registration with the BSP of foreign loans is generally required to enable the
borrower to purchase foreign exchange from the Philippine banking system to service payment of the
principal and interest on foreign loans.
Subject to certain exceptions, private sector foreign loans that are not publicly guaranteed need not be
submitted for BSP's prior approval but must be registered with the BSP if the borrower will need to purchase
foreign exchange from the Philippine banking system to repay the loan. Registration of the foreign loan is
generally required to be undertaken promptly after drawdown, disbursement or utilization of such loan, and
the borrower is likewise expected to provide the BSP with key information relating to the terms and
conditions of the foreign loan.
As with registration of foreign direct investments in the Philippines, procuring prior BSP approval and/or
registration, as applicable, of foreign loans is not mandatory. These approval and/or registration
requirements apply only if the borrower intends to (or the lenders expect the borrower to) procure or
purchase foreign exchange necessary to service payments on the foreign loan from the Philippine banking
system.
4. Other types of transactions

4.1. Trade transactions
Under BSP regulations, provided that the subject of the importation is not a prohibited commodity and
subject to compliance with the relevant guidelines of the BSP, residents are generally allowed to purchase
foreign exchange from the Philippine banking system without prior BSP approval to fund payments for
imports under certain arrangements. These arrangements include letters of credit, documents against
payment, documents against acceptance, direct remittance, advance payment and open account (including
intercompany netting arrangement among non-bank related parties).
For export trade transactions, payments for exports made under certain arrangements, such as letters of
credit, documents against payment or cash against documents, documents against acceptance and open
account arrangements, are generally allowed without prior BSP approval, provided that the subject of the
exportation is not a prohibited commodity.
4.2. Non-trade transactions

Residents are generally allowed to purchase foreign exchange from the Philippine banking system without
prior BSP approval if the foreign exchange will be used to fund payments to non-resident beneficiaries for
non-trade transactions enumerated in the relevant regulations of the BSP, subject to submission to the
selling bank of an application to purchase foreign exchange and other documentary requirements.
VI. Taxation
1. Corporate income tax 14
A domestic corporation is taxed on its net income (gross income less allowable deductions) from all sources
at the rate of 30%. A resident foreign corporation, such as a branch, is taxed only on its net income from
Philippine sources at the same rate as a domestic corporation.
A non-resident foreign corporation is subject to final withholding tax on its gross income (without the
benefit of deductions) from Philippine sources at the rate of 30%.
A foreign corporation is considered a resident when it is engaged in trade or business in the Philippines and
is licensed by the Philippine SEC to engage in trade or business in the Philippines.
2. Individual income tax

A resident citizen is taxed on income from all sources at progressive rates ranging from 0 to 35% of net
taxable income.
A non-resident alien engaged in trade or business in the Philippines is generally subject to tax on net income
from Philippine sources at the same progressive tax rates imposed on resident aliens and citizens. A non-
resident alien is deemed engaged in trade or business if he or she stays in the Philippines for an aggregate
period of more than 180 days during any calendar year.
A non-resident alien not engaged in trade or business in the Philippines is taxed on gross income from
Philippine sources at the rate of 25%, withheld at source.
3. Value added tax

Value added tax (VAT) is a tax on consumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines, and on the importation of goods into the Philippines.
A person becomes subject to the 12% VAT when his or her gross sales or receipts for the past 12 months
exceed PHP 3 million.
A VAT taxpayer is allowed input VAT credits against his or her output VAT liability, subject to certain
limitations.
4. Local and real property taxes

Local government units, such as provinces, cities, municipalities and barangays, may also levy taxes and
impose local license fees pursuant to the Local Government Code. Furthermore, real property tax applied
solely to the lands, buildings and other improvements thereon is levied on the assessed value of the real
property.
5. Treaties
Currently, the Philippines has entered into tax treaties with 43 countries, namely: Australia, Austria, Bahrain,
Bangladesh, Belgium, Brazil, Canada, the People's Republic of China, the Czech Republic, Denmark, Finland,
France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, South Korea, Kuwait, Malaysia, Mexico, the
14
In 2019, the government expects to pass a new tax reform bill which will lower the corporate income tax rate.
Netherlands, New Zealand, Nigeria, Norway, Pakistan, Poland, Qatar, Romania, Russia, Singapore, Spain, Sri
Lanka, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, the United Kingdom, USA and Vietnam.
VII. Border control and customs regulations
1. Overview
In addition to the 12% VAT and any applicable excise tax, importations are generally subject to customs
duties. The applicable customs duty rate depends on the tariff classification of the goods or products
imported. In this regard, the Philippines follows the Harmonized System. The Harmonized System is a
multipurpose international product nomenclature developed by the World Customs Organization that allows
participating countries to classify traded goods on a common basis for customs purposes. The Harmonized
System consists of a series of six-digit codes, organized in a hierarchy of sections, chapters, headings and
subheadings, that covers various product.
The Customs Modernization Act also provides for the imposition of anti-dumping duty, countervailing duty,
marking duty, safeguard duty and discriminating duty under special circumstances.
Further, the Philippines has control, regulation, and licensing requirements for the import and export of
prohibited and regulated items. The Department of Trade and Industry (DTI) provides a list of such
prohibited and regulated items for import / export (http://dti.gov.ph). These requirements are implemented
by different government agencies. If the goods to be imported are regulated, the importer / exporter is
required to secure a permit from the regulating government agency.
The rules of the Bureau of Customs (BOC) on border control measures also prevent the entry into the
Philippines of infringing merchandise and ensure expedited procedures for the handling and disposition of
goods suspected to be imported in violation of the Intellectual Property Code of the Philippines (IP Code).
The Strategic Trade and Management Act likewise provides a mechanism for trade control in the
importation, exportation, re-exportation, reassignment, transit and transshipment of strategic goods, and
the provision of related services.
Strategic goods are goods enumerated in the National Strategic Goods List, which has yet to be issued by
the National Security Council - Strategic Trade Management Committee. These are products that, for security
reasons or due to international agreements, are considered to be of such military importance that their
export is either prohibited altogether or subject to specific conditions. Such goods are generally suitable to
be used for military purposes or for the production of weapons of mass destruction.
Related services refer to brokering, financing and transporting in relation to the movement of strategic
goods between two foreign countries, as well as to providing technical assistance.
If a person intends to import, export or transship strategic goods covered by the National Strategic Goods
List, an authorization from the Strategic Trade Management Office must be secured.
2. Customs and trade agreements

The Philippines is a member of the Association of Southeast Asian Nations (ASEAN) and is a signatory to the
ASEAN Trade in Goods Agreement (previously referred to as the ASEAN Free Trade Area Common Effective
Preferential Tariff Scheme), along with the other ASEAN member states. The ASEAN aims to eliminate all
import duties among member states.
In addition, as part of the ASEAN, the Philippines has existing FTAs with China (ASEAN-China), South Korea
(ASEAN-Korea), Japan (ASEAN-Japan Comprehensive Economic Partnership), Australia and New Zealand
(ASEAN-Australia and New Zealand), and India (ASEAN-India).
The Philippines signed a free trade agreement with the European Free Trade Association (EFTA) member
states, Iceland, Liechtenstein, Norway and Switzerland, on 28 April 2016. The parties are currently
undertaking their respective domestic processes for the ratification and entry into force of the agreement.
3. Border control
The BOC, in the implementation of laws and regulations prohibiting the importation of goods that infringe
upon IP rights, approved on 3 September 2002, Customs Administrative Order No. 6-2002 or the Rules and
Regulations Implementing the Intellectual Property Code of the Philippines in relation to Sections 51-60 of
the TRIPS Agreement, amending for the purpose Customs Administrative Order (CAO) No. 7-93 on Customs
Border Control. The guidelines seek to enhance existing procedures to prevent the entry into the country of
infringing merchandises and to ensure expedited procedures for the handling and disposition of goods
suspected to be imported in violation of the IP Code.
IP holders may register their products covered by patents, trademarks, copyrights and other similarly
protected IP rights with the Intellectual Property Rights Registry maintained by the BOC. The application for
registration serves as the consent of the IP owner for the BOC to conduct a physical inspection of imports
suspected to be infringing. The registration will be the basis of the BOC to monitor on its own initiative
suspected imports to determine whether they are liable to seizure and forfeiture.
The BOC may also, on its own initiative, conduct random checks of goods suspected to infringe IP rights.
VIII. Employment
1. Labor standards
The Labor Code of the Philippines (Labor Code) lays down the minimum terms, conditions and benefits of
employment that employers must provide or comply with and to which the employees are entitled as a
matter of right.
1.1. Work hours

(a) Normal hours of work – The normal hours of work should not exceed eight hours in a work day.
Employees are entitled to at least 60 minutes unpaid time off from work for their regular meals.
(b) Overtime pay – Any work done in excess of eight hours in a work day must be paid overtime pay
based on the applicable basic rate, unless there is compressed work week arrangement. The Labor
Code enumerates the specific instances when an employee may be required to render overtime
work and the corresponding overtime pay rate. These overtime pay rates may vary depending on
whether the overtime work is rendered on a regular work day, holiday or rest day, or during a night
shift.
(c) Night shift differential – An employee must be paid a night shift differential equivalent to a certain
rate of his or her regular wage for work done between 10 pm and 6 am.
(d) Premium pay for rest day or holiday work – For work done on rest days and holidays, the Labor
Code requires the employer to pay a certain amount as additional compensation based on the
regular wage of the employee.
The rules on work hours are not applicable to managerial employees, among others.
1.2. Wages
Under the minimum wage law in the Philippines, there is a different minimum wage rate in each region of
the country; the minimum wage rates are prescribed by the Regional Tripartite Wages and Productivity
Boards.
Wages are generally paid in cash at least twice a month (usually on the 15th and the last day of every
month).
1.3. Other Compulsory Benefits
• Holiday pay • Maternity leave
• Service incentive leave • Paternity leave
• Thirteenth month pay • Parental leave
• Retirement benefits • Leave due to domestic violence
• Rest day • Leave following surgery caused by gynecological

disorders
• Lactation break
1.4. Rule on non-diminution of employment benefits

If an employee benefit has been granted by reason of employer practice or policy, the benefit becomes part
of the terms and conditions of employment and cannot be unilaterally withdrawn or discontinued by the
employer, despite the absence of a legal or contractual requirement to grant the said benefit.
The following criteria may be used to ascertain the existence of a binding and enforceable employer practice
or policy under Philippine law:
(a) The act of the employer has been done for a long period or is consistently repeated.
(b) The act is done deliberately, knowingly and consistently.
(c) The act is not a product of erroneous interpretation or construction of a doubtful or difficult
question of law.
2. Labor relations
As a general rule, employees have the right to form and join unions and to engage in concerted activities for
their collective protection. Certain classes of employees, however, such as managerial and confidential
employees, may not form or become members of labor unions. A labor union has to be registered with the
DOLE for it to enjoy all the rights granted by law to labor unions. It may register as an independent labor
union or as a charter of a federation or national union.
Employees, through their union representatives, may negotiate with their employers and enter into
collective bargaining agreements (CBAs) concerning the terms and conditions of their employment.
Employees, under specified circumstances, have the right to conduct a strike in accordance with law.
Correspondingly, the employer, under specified circumstances, has the right to lock out employees.
Aside from labor unions, employees may form and join workers' associations and other mutual aid and
benefit associations for legitimate purposes other than collective bargaining.
3. Welfare legislation
The employer and its employees are required to be members of the Social Security System (SSS), Employees'
Compensation (EC) program, Philippine Health Insurance Corporation (PhilHealth) and Home Development
Mutual Fund (HDMF). The SSS administers both the social security and EC programs for employees in the
private sector.
The employer should register with the SSS, PhilHealth and HDMF and report its employees for coverage with
the said agencies. Furthermore, the employer and its employees should contribute to these agencies, with
the contributions based on the monthly compensation of the employees. Each agency has its own definition
of monthly compensation. The employer is responsible for withholding and remitting the contributions of its
employees, and remitting its (i.e., the employer's) counterpart contributions, within the period that each
agency has set. The employer's contributions may not be deducted from the employees' salary. Failure to
remit the contributions to the SSS, PhilHealth and HDMF could give rise not only to monetary liability for the
employer but also to criminal sanctions against the employer and its officers. If a juridical person is guilty of
the offense, its managing director, partner, president, general manager and/or the responsible person are
liable for the penalties.
The monetary liability would involve interest on the contributions that have not been remitted, computed
from the date the contributions fall due until they are remitted to the relevant agencies. On the other hand,
the criminal sanctions would involve a fine or imprisonment or both.
4. Rights of employer
Every employer has the right to regulate all aspects of employment according to its own discretion and
judgment. This includes the hiring of employees; work assignments; instructing working methods; the time,
place and manner of work; work supervision; transfer of employees; lay-off of workers; and discipline,
dismissal and recall of employees. The only limitations to the exercise of this management prerogative are
those imposed by labor laws and the requirements of good faith.
With respect to the transfer of employees, the employer has the prerogative to move them around in order
to ascertain where they will function with maximum benefit to the company. While an employee enjoys the
right to security of tenure, this does not mean that he or she has such a vested right in his or her position as
to deprive the company of its prerogative to change the employee's assignment or transfer him or her
where he or she will be most useful to the company. However, the transfer must not be unreasonable,
inconvenient or prejudicial to the employee; it should not involve a demotion in rank or a diminution of his
or her salaries, benefits and other privileges.
The right to dismiss employees is discussed in further detail below.
5. Contract of employment
Although not generally required, it is best to put in writing the employment contract between the employer
and the employee. This will protect the employer in the event of a future disagreement as to the terms and
conditions of employment.
It is also advisable for the employer to have an employee handbook containing the rules and regulations that
will govern the relationship with the employees.
6. Type of employment
The Labor Code and jurisprudence classify employment status into regular, project, seasonal, casual,
probationary and fixed-term.
The employment status of an employee is not determined by the specific designation given to it in the
employment contract but by the nature of the work being performed by the employee.
An employment is presumed to be regular or permanent in nature, unless the legal requirements for the
other types of employment are strictly observed. For instance, a probationary employee must be provided
with written standards for regular employment no later than the start of his or her employment. Otherwise,
he or she shall be deemed a regular employee from the start of his or her employment.
The classification of an employee is important because under Philippine law, the causes for terminating an
employer-employee relationship will depend upon the classification of the employee.
6.1. Regular and probationary employment

If an individual is engaged to perform activities that are usually necessary or desirable in the usual business
or trade of the employer, he or she should be employed as a regular employee (i.e., an employee with
indefinite term of employment), unless the employment relationship can qualify as an alternative
employment arrangement.
In this connection, before an employee becomes a regular employee, his or her employer can require him or
her to undergo probationary employment. The maximum length of the probationary period is six months,
counted from the date the new employee started working. The employer normally may not extend the
probationary period. Once the new employee is allowed to work after the lapse of the probationary period,
his or her employment will be deemed regular employment by operation of law. Also, at or before the
beginning of the probationary period, the employer must notify the employee of the standards that he or
she must satisfy. Otherwise, the employment will also be deemed regular employment from the time the
employee started working.
6.2. Project and seasonal employment

There is project employment when the period of employment has been fixed for a specific undertaking, the
completion of which has been determined at the time of the engagement of the employee. A project
employee may acquire the status of a regular employee when he or she is continuously rehired after the
cessation of a project and the tasks he or she performs are vital, necessary and indispensable to the usual
business or trade of his or her employer.
In contrast, there is seasonal employment when the work is to be performed only at a certain time of the
year and the employment is for the duration of that time of the year.
6.3. Casual employment

There is casual employment when an employee is engaged to perform work that is merely incidental to the
business of the employer, and such work is for a definite period made known to the employee at the time of
his or her engagement. If the casual employee renders at least one year of service, whether such service is
continuous or not, he or she shall be considered a regular employee with respect to the activity for which he
or she is employed, and his or her employment shall continue while such activity exists.
6.4. Fixed-period employment

There is fixed-period employment when the commencement and termination dates of the employment
relationship have been set before the employment relationship begins. Fixed-period employment is highly
restricted and is subject to the following criteria: (i) the fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force, duress or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his or her consent; or (ii) it satisfactorily
appears that the employer and the employee dealt with each other on more or less equal terms, with no
dominance exercised by the former over the latter. As much as possible, fixed-period employment should
involve highly educated people or highly technical positions.
7. Termination of employment
Corollary to the employer's right to hire, terminate and discipline employees is the employee's right to
security of tenure.
In general, an employer may terminate an employment only if there is a legal (i.e., just or authorized) cause
for termination and it has followed the procedures required for the cause of termination. At-will
employment, where the employer may dismiss an employee at any time, without cause and by mere notice
or salary in lieu of notice, is not allowed under Philippine labor law.
On the other hand, an employee may terminate his or her employment for any reason by serving a written
notice to his or her employer at least one month in advance. In the event that the employee does not give
any notice, the employer may hold the employee liable for damages. Under certain instances, the employee
may terminate his or her employment without need of any notice.
7.1. Causes for dismissal

An employer may terminate an employment for any of the just and authorized causes defined in the Labor
Code. The just causes for termination of employment are as follows:
• Serious misconduct or willful disobedience by the employee of the lawful orders of his or her
employer or representative in connection with his or her work
• Gross and habitual neglect by the employee of his or her duties
• Fraud or willful breach by the employee of the trust reposed in him or her by his or her employer or
duly authorized representative
• Commission of a crime or offense by the employee against the person of his or her employer or any
immediate member of his or her family or his or her duly authorized representative
• Other causes analogous to the foregoing
On the other hand, the authorized causes for termination of employment are as follows:
• Installation of labor-saving devices
• Redundancy
• Retrenchment to prevent losses
• Closing or cessation of operation of the establishment or undertaking
• Disease, where the continued employment of the afflicted employee is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees
Termination of employment by the employer without a legal cause will entitle the illegally dismissed
employee to reinstatement without loss of seniority rights and other privileges, to payment of full back
wages and of other benefits or their monetary equivalent computed from the time compensation was
withheld until actual reinstatement, and to payment of damages.
7.2. Procedures for dismissal

In dismissing an employee from work due to a just cause, the Labor Code requires the employer to serve a
written notice to the employee informing him or her of the charges against him or her. After serving the
notice, the employer must afford the employee an opportunity to be heard where the employee can answer
the charges with the assistance of counsel, if he or she so desires. If the employer decides to dismiss the
employee, it must serve another written notice to the employee to inform him or her of its decision to
dismiss him or her.
In the case of termination of employment due to an authorized cause, the employer must serve a written
notice to each affected employee and to the DOLE at least one month before the intended effective date of
the termination. For employment termination by reason of disease, there must also be a certification by a
competent public health authority that the disease cannot be cured within a period of six months even with
proper medical treatment. In all cases of authorized cause employment termination, the employee is entitled
to receive separation pay. The separation pay is equivalent to half a month's salary for every year of service
or one month's salary for every year of service, depending on the authorized cause of employment
termination.
If an employee is dismissed without his employer observing the appropriate procedures, he or she is entitled
to nominal damages the amount of which is subject to the discretion of the court, even if there is a just or
authorized cause for employment termination. For this purpose, the court will take into consideration the
relevant circumstances of each case, particularly the gravity of the due process violation. The nominal
damage serves as a penalty upon the employer for its failure to comply with the requirements of procedural
due process for employment termination.
IX. Immigration
1. Entry to the Philippines
A foreign national who is not a "restricted" national 15 may enter the Philippines without obtaining an entry
(9[a]) business visa from the Philippine Embassy from the country of origin. However, the said unrestricted
foreign national must, upon entry: (a) have a passport valid for not less than six months; and (b) hold a valid
return ticket. Upon arrival in the Philippines, the foreign national will be granted a 9(a) visa, valid for 30, 21,
14, or 7 days, depending on his or her nationality.
If the foreigner is a "restricted" national, he or she must, in addition to the passport and return ticket
requirements, obtain from the Philippine embassy or consulate in his country of origin or residence a 9(a)
visa before entering the country.
2. Work/employment requirements
All foreign nationals who intend to work in the Philippines are required to obtain proper work visas and/or
permits, through a local petitioner or sponsor. The local petitioner or sponsor may be a domestic corporation
(incorporated in the Philippines) or a foreign corporation registered and licensed to do business in the
Philippines. The work visa and/or permit applications are usually filed upon the arrival of the foreign national
in the Philippines.
Entities engaged in nationalized or partly nationalized industries (industries where foreign ownership/control
is limited) can only employ foreign nationals as technical personnel and subject to issuance by the
Department of Justice (DOJ) of an Authority to Employ. The issuance of an Authority to Employ is required
before a foreign national can work for a partly nationalized entity.
2.1. Short-term assignments (3-6 months)

A foreign national who: (a) intends to work in the Philippines for a short period not exceeding six months;
and (b) will occupy a temporary position, is required by the Bureau of Immigration (BI) to obtain a special
work permit (SWP). The SWP is a special permit issued for an initial period of three months and may be
extended only once for another three months. The SWP must be filed by a local petitioner or sponsor on
behalf of the foreign national, upon the latter's arrival in the Philippines.
2.2. Long-term expatriates, and/or local transfer

2.2.1. Alien employment permit (AEP)
A foreign national who intends to work in the Philippines beyond six months is required to obtain an AEP
and a work visa from the relevant government agencies.
The issuance of an AEP is subject to the non-availability of a person in the Philippines who is competent, able
and willing to perform the services for which the foreign national is desired. In general, the AEP application
must first be filed with the DOLE on behalf of the foreign national.
15
A DFA advisory enumerates the countries whose nationals are not required to obtain an entry or 9(a) visa from the
Philippine embassy/consulate abroad before entering the country. These nationals are called "unrestricted" nationals.
Nationals of countries not appearing in the DFA advisory are called "restricted" nationals and are required to obtain a 9(a)
visa from the relevant Philippine embassy/consulate prior to entering the Philippines. For further information, please visit
the DFA's website at www.dfa.gov.ph.
It takes around two to three weeks from submission of the complete documentary requirements to process
the AEP application. The validity period of the AEP usually coincides with the duration of the foreign
national's assignment in the Philippines.
There are certain instances when a foreign national is exempt/excluded from securing an AEP, such as when
the foreign national is: (a) a member of the governing board with voting rights and who does not intervene
in the management of the corporation or its day to day operations; (b) a president or treasurer who is also a
stockholder of the company; (c) an intra-corporate transferee who is a manager, executive or specialist who
is an employee of the foreign service supplier for at least one year prior to deployment to a
branch/subsidiary/affiliate or representative office in the Philippines; and (d) a consultant who does not have
an employer in the Philippines.
The AEP application, once accepted for filing by the DOLE, does not allow a foreign national to work
immediately. A provisional work permit will have to be applied for and issued before the foreign national can
commence work with the Philippine employer during the pendency of the work visa and AEP applications.
2.2.2. Work visas
The most common types of work visas that may be obtained are the following:
(a) Pre-arranged employment or 9(g) Visa - This visa is available to a foreign national who is proceeding
to the Philippines to engage in a lawful occupation or gainful employment in a Philippine entity. The
9(g) visa may be extended to the foreign national's spouse and unmarried children under 21 years of
age.
The 9(g) visa is granted for a period coterminous with the AEP, which is in turn granted for a period
discretionary to the DOLE, usually based on the duration of the assignment of the foreigner.
However, the officers of the BI have the discretion to shorten the validity period of the approved
pre-arranged employment visa to one year.
It takes approximately two to three months from submission of the complete documentary
requirements to process a 9(g) visa application.
(b) Treaty Trader's/Investor or 9(d) Visa - A foreigner is entitled to a treaty trader or investor visa only if
he or she is a national of the US, Germany or Japan — countries with which the Philippines has
concluded a reciprocal agreement for the admission of treaty traders or investors. The local
petitioning company must be majority-owned by US, German or Japanese interests. The nationality
of the foreigner and the majority of the shareholders of the employer company must be the same.
When granted, the visa may be extended to the foreigner's spouse and unmarried children below 21
years of age.
The treaty trader's/investor's visa is granted for a period coterminous with the AEP, which is in turn
granted for a period discretionary to the DOLE, usually based on the duration of the assignment of
the foreigner. However, the officers of the BI have the discretion to shorten the validity period of
the approved 9(d) visa to one year.
It takes approximately two to three months from submission of the complete documentary
requirements to process a 9(d) visa application.
(c) Special non-immigrant (47[a][2]) Visa - This visa is granted under Section 47(a)(2) of the Philippine
Immigration Act, which allows the president to issue such visas when public interest warrants,
subject to conditions the president may prescribe.
The president, acting through the appropriate government agencies, has exercised this authority to
allow foreign nationals to be employed in supervisory, technical or advisory positions in Export
Processing Zone Enterprises, BOI-registered enterprises, and special government projects (e.g., MRT,
Skyway).
The 47(a)(2) visa may be extended to the foreign national's spouse and unmarried children under 21
years of age.
The 47(a)(2) visa is generally valid for an initial period of one year and is renewable from year to
year.
It takes approximately five to six weeks from submission of the complete documentary
requirements to process a 47(a)(2) visa application.
Special types of work visas are the following:
(a) OBU or PD1034 Visa - This visa is granted under Section 7 of Presidential Decree No. 1034, which
allows foreign personnel to be assigned by any foreign bank to work in its OBU in the Philippines.
Such foreign personnel, their spouses and unmarried children under 21 years of age shall be granted
multiple entry special visa, valid for a period of one year.
(b) Regional or Area Headquarters, Regional Operating Headquarters, and Regional Warehouse or
RA8756 Visa - This visa is granted under Section 5, Article 60 of Republic Act No. 8756, which allows
foreign personnel of regional or area headquarters and ROHQ of multinational companies, their
respective spouses and unmarried children under 21 years of age, if accompanying them or if
following to join them after their admission into the Philippines as non-immigrants, to be issued
multiple-entry special visas, which shall be valid for a period of three years. Please note, however,
that the validity period of the visa may be shorter, depending on the contract of the foreign
personnel.
(c) Subic Free Port Zone Work Visa - A foreign national who possesses executive or highly technical
skills, which no Filipino citizen within the SFZ possesses, as certified by the DOLE, may apply for this
visa with the SBMA.
(d) Clark Special Economic Zone Work Visa - Foreign nationals who possess executive or highly technical
skills, which no Filipino citizen within the CSEZ possesses, may apply for this type of work visa with
the Clark Development Authority.
3. Special resident visas

A foreigner may apply for special resident visas. These visas allow a foreigner to work in the Philippines,
subject to other requirements or limitations imposed by law.
The following are the different types of special resident visas:
(a) Special Resident Retiree's Visa (SRRV) - The SRRV program is available to foreigners and former
Filipinos at least 35 years of age, who deposit the minimum amount required by law with a bank
accredited by the Philippine Retirement Authority (PRA).
An SRRV holder may stay in the Philippines indefinitely or visit the country at any time.
The holder may also invest in any of the areas specifically designated by the PRA.
(b) Special Investor's Resident Visa (SIRV) - The SIRV is a program offered by the Philippine government
to alien investors wanting to obtain a special resident status with multiple entries for as long as the
required investment subsists.
The applicant's spouse and unmarried children under 21 years of age who are accompanying the
applicant, may be included in the visa application.
(c) SIRV for Investors in Tourist-Related Projects and Tourist Establishments - A foreigner who invests
an amount of at least USD 50,000 in a qualified tourist-related project or tourism establishment, as
determined by a governmental committee, shall be entitled to an SIRV.
(d) Subic Free Port Zone Residency Visas for Retirees - This visa requires the applicant to be over 60
years old, of good moral character, with no previous conviction of a crime involving moral turpitude,
no longer employed or not self-employed, and receiving a pension or passive income exceeding USD
50,000 per year.
(e) Quota Visa - This is issued on "quota basis" (i.e., not more than 50 in a calendar year) to foreign
nationals of countries that have reciprocity agreements with the Philippines.
4. Others
There are other types of visas that are available to foreign nationals depending on the following factors: (i)
nature of the business, registration and corporate structure of the Philippine company; (ii) nature of the
work that the foreign nationals will perform while in the Philippines; (iii) nationality of the majority
stockholder of the corporation; (iv) nationality (original and/or acquired), as well as nationality of the
spouses, if any, of the foreign nationals; and (iv) other related information.
X. Intellectual property
1. Overview
A wide range of industries are dealing with and affected by various intellectual property (IP) issues and
concerns.
Local laws and regulations — particularly Republic Act No. 8293 or the IP Code, which took effect on 1
January 1998, as well as its implementing rules and regulations and other issuances of the Intellectual
Property Office (IPO) — generally provide basis for the protection and enforcement of IP rights. The IP Code
and the relevant regulations also incorporate and reinforce the Philippines' commitments under various
international treaties and agreements, such as the Paris Convention for the Protection of Industrial Property,
the Berne Convention for the Protection of Literary and Artistic Works, the Protocol Relating to the Madrid
Agreement Concerning the International Registration of Marks (Madrid Protocol), and the General
Agreement on Tariffs and Trade (GATT) Uruguay Round, particularly the Agreement on the Trade Related
Aspects of Intellectual Property Rights (TRIPS Agreement).
2. Types of IP rights
Under the IP Code, the term "IP rights" consists of the following:
2.1. Copyright and related rights

Literary, scholarly, scientific and artistic works, whether published or unpublished, may be copyrighted.
Copyright protection extends to computer programs, multimedia works and databases that are original by
reason of the selection, coordination or arrangement of their contents.
In general, copyrights endure for the lifetime of the creator and for 50 years after his or her death.
The IPO processes applications for copyrighted works and issues the corresponding certificates of
registration. Copyrighted works are deposited with the National Library (and the Supreme Court Library for
copyrighted works in the field of law).
2.2. Trademarks and service marks

Trademarks, service marks and trade names owned by persons, corporations, partnerships or associations
domiciled in the Philippines or in any foreign country may be registered with the IPO. Kindly note, however,
that trade names are protected even prior to or without registration.
Rights to a mark are acquired by registration. Priority is given to whoever applies first for registration. There
is a single procedure for both foreign and local applicants for the registration of marks.
Trademark registration is valid for 10 years. The registration may be renewed for a period of 10 years, and for
subsequent 10-year periods.
In order to maintain the registration, Declarations of Actual Use (DAUs) and evidence of use must be filed
within the following timeframes:
• Three years from the filing date of the trademark application
• One year from the fifth anniversary of the registration
• One year from the date of renewal of the registration
In the event that the applicant or registrant has valid reasons that prevent it from using the mark
commercially, a Declaration of Non-Use may be filed in lieu of a DAU, with proof of reasons that must be
beyond the control of the applicant or registrant. Justifiable reasons include a requirement imposed by
another government agency; an existing restraining or injunctive order issued by a court of competent
jurisdiction, the IPO or another quasi-judicial body; or if the mark is the subject of an opposition or
cancellation case.
2.3. Geographic indications

The IP Code does not specifically define a geographic indication (GI), and the IPO has not yet promulgated
any rules regarding the same. The Rules and Regulations on Trademarks, Service Marks, Tradenames and
Marked or Stamped Containers referred to GI as an indication which identify a good as originating in the
territory of a country which is a member of, or a region or locality in that territory, where a given quality,
reputation or other characteristic of the good is essentially attributable to its geographical origin.
The definition of the World Intellectual Property Organization (WIPO) may also be used to define a GI, which
is a sign used on products that have a specific geographical origin and possess qualities or a reputation that
are due to that origin. In order to function as a GI, a sign must identify a product as originating in a given
place. In addition, the qualities, characteristics or reputation of the product should be essentially due to the
place of origin. Since the qualities depend on the geographical place of production, there is a clear link
between the product and its original place of production.
2.4. Industrial designs

An industrial design is any composition of lines or colors or any three-dimensional form, whether or not
associated with lines or colors, provided that such composition or form gives a special appearance to and can
serve as pattern for an industrial product or handicraft. To be registrable, an industrial design must be a new
or original creation relating to the ornamental features of shape, configuration, form, or a combination
thereof, of an article of manufacture, whether or not associated with lines, patterns or colors, which imparts
an aesthetic and pleasing appearance to the article. Furthermore, a design that is embodied in any
composition of lines, patterns or colors must be inseparable from the article and cannot exist alone merely as
a scheme of surface ornamentation.
The IP Code provides that industrial designs that are either dictated essentially by technical or functional
considerations to obtain a technical result, or those that are contrary to public order, health and morals, are
not registrable.
The term of registration of an industrial design is five years from the effective date of filing. Such term may
be renewed for not more than two consecutive periods of five years.
2.5. Patents
The IP Code defines a "patentable invention" as any technical solution of a problem in any field of human
activity that has the following qualities:
• New
• Involves an inventive step
• Industrially applicable
An invention is not considered new if it forms part of a prior art.
An invention involves an inventive step if, having regard to the prior art, it is not obvious to a person skilled
in the art at the time of either the filing or priority date of the application claiming the invention. In the case
of drugs and medicines, there is no inventive step if the invention results from the mere discovery of a new
form or new property of a known substance that does not result in the enhancement of the known efficacy
of that substance, or the mere discovery of any new property or new use for a known substance, or the
mere use of a known process, unless such known process results in a new product that employs at least one
new reactant.
An invention that can be produced and used in any industry is industrially applicable.
A patent registration for an invention is valid for 20 years from the date of filing of the application, subject
to the payment of an annual fee starting from the expiration of four years from the date of publication of
the application.
2.6. Utility models

Under the IP Code, the provisions governing patents generally apply, mutatis mutandis, to the registration of
utility models. Regulations define a utility model as "any technical solution of a problem in any field of
human activity which is new and industrially applicable." To be registrable, therefore, a utility model must be
new and industrially applicable only. The inventive step is not a requirement.
The term of registration of a utility model is seven years, counting from the effective date of filing of the
application, and automatically expires at the end of the period. There is no opportunity for renewal of a
utility model registration.
At any time before the grant or refusal of a patent, an applicant for a patent may, upon payment of a
prescribed fee, convert such into an application for registration of a utility model, and vice versa.
Such converted application shall be accorded the effective filing date of the initial application. An application
may only be converted once. Furthermore, parallel applications, or those involving the same subject filed as
both a patent and utility model, are not allowed by the IP Code.
2.7. Layout-designs (topographies) of integrated circuits

Layout-design is synonymous with "topography" and means the three-dimensional disposition, however
expressed, of the elements, at least one of which is an active element, and of some or all of the
interconnections of an integrated circuit, or such a three-dimensional disposition prepared for an integrated
circuit intended for manufacture.
Republic Act No. 9150, entitled An Act Providing for the Protection of Layout-Designs (Topographies) of
Integrated Circuits amends certain sections of the IP Code. Its provisions aim to conform to the
internationally acceptable standards for the protection of layout designs of integrated circuits. Notable
provisions of the law include the requisites for registrability of the layout designs, the first-to-file rule and
remedies for infringement. In order to be registrable, a layout design of integrated circuits must be original,
that is, the result of the creator's own intellectual effort and is not commonplace among creators of layout
designs and manufacturers of integrated circuits at the time of its creation. A layout design consisting of a
combination of elements and interconnections that are commonplace shall be registered only if the
combination, taken as a whole, is original.
The term of registration of a layout design is 10 years from the date of first commercial exploitation or from
the date of filing the application for registration, if not previously exploited commercially. Such term may
not be renewed.
Inventions, utility models and industrial designs (including topographies of integrated circuits) may be
patented. A patent is granted to the inventor who filed his or her patent application earlier than others, thus
simplifying the determination of who is entitled to own the patent.
A registration for a utility model is valid for seven years from the date of filing of the application and
automatically expires at the end of the period. The term of registration of an industrial design is five years
from the date of filing and may be renewed for two consecutive periods of five years each.
2.8. Protection of undisclosed information

There is no specific law in the Philippines governing trade secrets, although the IP Code recognizes the
protection of undisclosed information as an independent IP right. Moreover, Philippine jurisprudence has
recognized the owner's proprietary rights over a trade secret, which is defined as a plan or process, tool,
mechanism or compound known only to its owner and those of his employees to whom it is necessary to
confide it. The definition also extends to a secret formula or process not patented, but known only to certain
individuals using it in compounding some article of trade having a commercial value. A trade secret may
consist of any formula, pattern, device, or compilation of information that: (1) is used in one's business; and
(2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the
information. Generally, a trade secret is a process or device intended for continuous use in the operation of
the business, for example, a machine or formula, but can be a price list or catalogue or specialized customer
list. It is indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of
a trade secret or similar innovation has rights therein which may be treated as property, and ordinarily an
injunction will be granted to prevent the disclosure of the trade secret by one who obtained the information
"in confidence" or through a "confidential relationship." 16
Trade secrets and other confidential commercial information may be protected by contract. Some laws in the
Philippines also provide for protection of confidential information, such as the Revised Penal Code, which
prohibits the unauthorized revelation of secrets or confidential information by either private individuals or
public officers, and the Food and Drug Act, which prohibits the unwarranted use or revelation of confidential
or undisclosed information, including confidential data consisting of the active ingredient(s), formulation,
dosages, clinical data, etc., from the registration files of an innovative drug submitted for purposes of
obtaining marketing approval from the Food and Drug Administration (FDA).
Furthermore, the TRIPS Agreement, to which the Philippines is a signatory, requires member states to protect
against disclosure and unfair commercial use of undisclosed data submitted by the originator/innovator in
the process of securing approval for the marketing of pharmaceutical or of agricultural chemical products
that utilize new chemical entities. However, it is still unclear whether Article 39 of the TRIPS Agreement is
self-executory or if there should be a legislative enactment to give it effect in the Philippines. At present,
Article 39 of the TRIPS Agreement does not have a counterpart provision under any Philippine law or statute.
3. Protection of IP rights
The first step is to ensure that IP rights are duly protected, recognized and/or registered with the relevant
government agencies, such as the IPO.
Once IP protection is obtained, local laws would generally provide a sufficient basis for administrative, civil,
and criminal actions against IP rights violations. Administrative actions are filed with the IPO and other
government agencies, while civil and criminal actions are lodged with the commercial courts.
16
Air Philippines Corporation v. Pennswell, Inc., G.R. No. 172835, 13 December 2007.
However, there are a number of practical difficulties that make effective enforcement elusive. For one, there
is the inordinate length of time it takes to prosecute a criminal case or pursue a civil case for infringement or
unfair competition. A second major practical problem is the lack of resources available to frontline
government authorities whose role is to enforce IP laws. The government's declared policy is to discourage
IP counterfeiting and to prosecute infringers. However, the proliferation of counterfeit products in the
Philippines has remained largely unabated, despite earnest efforts to address the issue.
Efforts to enforce IP rights continue to be plagued by other problems, such as delays in obtaining search
warrants; varying levels of standard of evidence required by trial court judges hearing search warrant
applications; the under-funded investigative, prosecutorial and judicial system; and the lack of heightened
awareness of the public on IP rights. Even after successful seizures, endless delays mar the post-raid
enforcement system. The abolition of the specialized IP Courts several years ago is considered a setback in
the country's anti-counterfeiting campaign, as the judges that had been assigned to Special IP Courts and
had received specialized training on IP issues are now also assigned to handle other types of commercial
cases.
Notwithstanding many difficulties, experience has shown that immediate, decisive and aggressive action on
the part of the IP owner upon detection of any violation of IP rights can lead to an expedited resolution of
the problem. What is required is a detailed knowledge of the workings of the enforcement systems
available, a rapport with local enforcement authorities, and a flexible and creative approach to enforcement
actions.
The Supreme Court Special Rules for IP cases, which took effect in November 2011, shortened the litigation
period and included the appointment of eight courts in Metro Manila that can issue search warrants that can
be validly enforced anywhere in the Philippines.
In addition, Republic Act No. 10372, which became effective on 22 March 2013, amended portions of the IP
Code and provided additional enforcement powers to the IPO, which gives IP owners another option in
pursuing the infringement of its IP rights. The issuance by the IPO on the rules for IPO visits fully
complements RA 10372.
In 2016, the IPO issued a memorandum amending the Revised Rules and Regulations on Inter Partes
Proceedings (IPC Rules), which expands the authority of the IPO Hearing/Adjudication Officers. Under the
amended IPC Rules, IPO Hearing/Adjudication Officers may now issue and sign decisions and final orders and
perform other functions, such as issue orders relating to the IPO's enforcement and visitorial powers.
4. Technology transfer arrangements

A technology transfer arrangement (TTA) refers to a contract or an agreement involving the transfer of
systematic knowledge for the manufacture of a product, the application of a process, or the rendering of a
service, including management contracts. A TTA also refers to an agreement to transfer, assign or license all
forms of IP rights, including the licensing of computer software, except computer software developed for
the mass market.
Parties are free to negotiate the amount or the rate of royalties to be paid under the TTA. Under the IP Code,
however, the IPO has quasi-judicial jurisdiction to settle disputes regarding technology transfer payments,
including the fixing of the appropriate amount or rate of royalty.
TTAs should not contain certain prohibited clauses that are deemed to be adverse to competition and trade,
and should contain certain mandatory provisions. Non-conformity to the requirement on prohibited clauses 17
17
Section 87, IP Code.
and mandatory provisions 18 will automatically render the TTA unenforceable. However, there are exceptional
cases 19 where exemptions from the prohibited and/or mandatory clauses may be allowed by the IPO on a
case-by-case basis, upon showing that substantial benefits will accrue to the Philippine economy as a result
of the implementation of the TTA.
A TTA that conforms with the IP Code provisions need not be registered with the IPO. However, there are
practical benefits to registering a compliant TTA, particularly for license agreements. These are as follows:
• The registration will serve as the best evidence that the agreement is compliant with the IP Code
requirements and is enforceable in this respect. Philippine courts generally lend great weight to
findings of administrative agencies like the Documentation, Information and Technology Transfer
Bureau (DITTB) of the IPO. In the event of litigation over the agreement, the DITTB ruling may be
used as evidence of the enforceability of the agreement.
• If the agreement involves the licensing of a trademark, the registration of the agreement may serve
as evidence of the use of the trademark and against the cancellation thereof for non-use. Under the
IP Code, a trademark license agreement that is not recorded with the IPO will have no effect against
third parties. Thus, non-recordation of a trademark license may render the registration of the
mark(s) covered by the license vulnerable to cancellation actions by third parties due to non-use.
The IP Code specifically provides that a trademark registration may be cancelled any time if the
registered owner of the mark, without legitimate reason, fails to use the mark in the Philippines or
fails to cause it to be used in the Philippines under license during an uninterrupted period of three
years or longer.
The regulations also provide that as part of the evaluation procedure of TTAs, the DITTB shall take into
account acceptable worldwide industry standards and practices for licensing technology in the relevant
sectors.
18
19
XI. Competition law
The Philippine Competition Act (PCA) took effect on 8 August 2015. It represents the country's long-awaited
comprehensive legal framework on antitrust. Passed as part of a concerted effort to prepare the country for
ASEAN integration, the PCA brings the Philippines closer to the level of antitrust regulation in other
countries. It may also create new risks for companies doing business in, or affecting, the Philippines. As such,
these businesses are encouraged to evaluate their business structures and agreements for possible
infringements under the PCA.
1. Philippine Competition Commission

The PCA provided for the creation and organization of the Philippine Competition Commission (PCC), an
independent quasi-judicial body that is tasked to implement a national competition policy and enforce the
provisions of the PCA. The PCC is vested with original and primary jurisdiction over the enforcement and
implementation of the PCA, and its implementing rules and regulations (PCA-IRR). The express powers and
functions of the PCC under the PCA include the following:
• Conduct inquiries and investigations, hear and decide cases on violations of the PCA and other
competition laws, and impose administrative sanctions
• Review mergers and acquisitions from an antitrust perspective
• Impose and apply remedies to redress anti-competitive conduct, such as injunctions, divestment
orders and disgorgement of profits
• Issue subpoena ad testificandum and subpoena duces tecum
• Upon order of the court, undertake inspection of business premises, offices and vehicles in relation
to its investigations
2. Prohibited agreements and conduct

2.1. Anti-competitive agreements
The PCA prohibits the following anti-competitive agreements:
(a) As illegal per se, agreements among competitors: (i) restricting competition on price, its components
or other terms of trade; and (ii) various forms of bid rigging
(b) Agreements among competitors that have the object or effect of substantially preventing,
restricting or limiting competition in the relevant market in respect of: (i) setting, limiting or
controlling production, markets, technical development or investment; and (ii) dividing or sharing
the market, whether by volume of sales or purchases, territory, type of goods or services, buyers or
sellers, or any other means
(c) Agreements other than (1) and (2) above that have the object or effect of substantially preventing,
restricting or lessening competition in the relevant market in the Philippines, provided that those
agreements, which contribute to improving the production or distribution of goods and services or
to promoting technical or economic progress while allowing consumers a fair share of the resulting
benefits, may not necessarily be prohibited under the PCA.
An entity engaging in anti-competitive agreements under (1) and (2) may be subject to criminal penalties of
imprisonment from two to seven years, and a fine of PHP 50 million to PHP 250 million. 20 The penalty of
imprisonment shall be imposed upon the responsible officers and directors of the entity.
When the entities involved are juridical persons, the penalty of imprisonment shall be imposed on officers,
directors or employees holding managerial positions who are knowingly and willfully responsible for such
violation.
In addition, all types of anti-competitive agreements may be imposed administrative fines of up to PHP 100
million for the first offense and up to PHP 250 million 21 for the second offense, depending on the gravity and
the duration of the violation.
The PCA provides that the schedule of administrative fines (PHP 100 million to PHP 250 million) as provided
above shall be increased by the PCC every five years to maintain their real value from the time it was set.
2.2. Abuse of dominance

The PCA also prohibits an entity from abusing its dominant position by engaging in conduct that would
substantially prevent, restrict or lessen competition.
Under the PCA, such conduct would include the following actions of a dominant entity:
(a) Selling goods or services below cost with the object of driving competition out of the relevant
market
The PCC will consider whether the entity or entities did not have such object, and the price was
established in good faith to meet or compete with the lower price of a competitor in the same
market selling the same or comparable product or service of like quality.
(b) Imposing barriers to entry or committing acts that prevent competitors from growing within the
market in an anti-competitive manner, except those that develop in the market as a result of or
arising from a superior product or process, business acumen, or legal rights or laws
(c) Tying, or making a transaction subject to acceptance by the other parties of other obligations which,
by their nature or according to commercial usage, have no connection with the transaction
(d) Setting prices or other terms or conditions that discriminate unreasonably between customers or
sellers of the same goods or services, where the effect may be to lessen competition substantially
However, the following are considered permissible price differentials:
(i) Socialized pricing for the less fortunate sector of the economy
(ii) Price differential that reasonably or approximately reflects differences in the cost of
manufacture, sale or delivery resulting from differing methods, technical conditions or
quantities in which the goods or services are sold or delivered to the buyers or sellers
(iii) Price differential or terms of sale offered in response to the competitive price of payments,
services or changes in the facilities furnished by a competitor
20
PHP 50 million to PHP 250 million is approximately USD 1 million to USD 5 million, assuming an exchange rate of USD 1
= PHP 50.
21
PHP 100 million to PHP 250 million is approximately USD 2 million to USD 5 million, assuming an exchange rate of USD 1
= PHP 50.
(iv) Price changes in response to changing market conditions, marketability of goods or services
or volume
(e) Imposing restrictions on the lease or sale or trade of goods or services, such as where, to whom, or
in what forms goods or services may be sold or traded; fixing prices; giving preferential discounts or
rebate upon such price; or imposing conditions not to deal with competing entities, where the
object or effect of the restrictions is to prevent, restrict or lessen competition substantially
Nonetheless, the following are not prohibited under the PCA:
(i) Permissible franchising, licensing, exclusive merchandising or exclusive distributorship

agreements, such as those that give each party the right to unilaterally terminate the
agreement
(ii) Agreements protecting IP rights, confidential information or trade secrets
(f) Making supply of particular goods or services dependent upon the purchase of other goods or
services from the supplier, which have no direct connection with the main goods or services to be
supplied
(g) Imposing unfairly low purchase prices for the goods or services of, among others, marginalized
agricultural producers; fisher folk; micro-, small- and medium-scale enterprises; and other
marginalized service providers and producers
(h) Imposing unfair purchase or selling price on their competitors, customers, suppliers or consumers,
provided that prices that develop in the market as a result of or due to a superior product or
process, business acumen or legal rights or laws shall not be considered unfair prices
(i) Limiting production, markets or technical development to the prejudice of consumers
However, limitations that develop in the market as a result of or due to a superior product or
process, business acumen or legal rights or laws are not considered violative of the PCA.
While the PCA prohibits the above actions that constitute abuse of dominance, it does not prohibit a person
from having a dominant position in a relevant market or from acquiring, maintaining and increasing market
share through legitimate means that do not substantially prevent, restrict or lessen competition. Further, any
conduct that contributes to improving production or distribution of goods or services within the relevant
market, or promoting technical and economic progress while allowing consumers a fair share of the resulting
benefit may not necessarily be considered an abuse of dominant position.
Under the PCA, there is a rebuttable presumption of dominance when an entity has a market share of at
least 50% of the relevant market. An entity may also be considered dominant despite a lower market share,
according to the following factors under the PCA:
(a) The share of the entity in the relevant market and whether it is able to fix prices unilaterally or to
restrict supply in the relevant market
(b) The existence of barriers to entry and the elements that could foreseeably alter both said barriers
and the supply from competitors
(c) The existence and power of its competitors
(d) The possibility of access by its competitors or other entities to its sources of inputs
(e) The power of its customers to switch to other goods or services
(f) Its recent conducts
(g) Other criteria established by the regulations issued pursuant to the PCA
An entity engaging in abuse of dominance may be imposed administrative fines of up to PHP 100 million for
the first offense and up to PHP 250 million 22 for the second offense, depending on the gravity and the
duration of the violation.
2.3. Enforcement rules of procedure

Following its issuance of the Interim Rules on Preliminary Inquiry and Full Administrative Investigation in
August 2017, the PCC has issued its more comprehensive Rules of Procedure (PCC Rules of Procedure). The
PCC Rules of Procedure took effect on 30 September 2017. The PCC Rules of Procedure apply to
investigations, hearings and proceedings of the PCC, except matters involving mergers and acquisitions.
Under the PCC Rules of Procedure, administrative proceedings for alleged violations of the PCA or other
existing competition laws consist of two stages: investigation and adjudication. An investigation is initiated
by a verified complaint, a referral by another regulatory agency, or a motu proprio directive from the PCC. Its
enforcement office conducts the investigation, which consists of: (i) a preliminary inquiry; and (ii) a full
administrative investigation.
3. Merger control
The PCA prohibits mergers and acquisitions that would substantially prevent, restrict or lessen competition in
the relevant market. A merger is broadly defined as the joining of two or more entities into an existing
entity or to form a new entity, and includes joint ventures. An acquisition is broadly defined as the purchase
of securities or assets, through contract or other means, for the purpose of obtaining control by one entity
of the whole or part of another, two or more entities over another, or one or more entities over one or more
entities.
On 23 November 2017, the PCC published its Rules on Merger Procedure (Merger Rules), which took effect
on 8 December 2017. On 5 March 2018, the PCC issued Memorandum Circular no. 18-01 (MC 18-01), which
increases the thresholds for mandatory notification of M&A transactions.
Parties to an M&A, including joint ventures, must notify the PCC within 30 days from the date of signing of
the definitive agreement if: (a) the gross revenues in the Philippines or the assets in the Philippines of the
ultimate parent of either the acquiring or acquired entity and its controlled entities exceed PHP 5.6 billion;
and (b) the value of the transaction in the Philippines exceeds PHP 2.2 billion. 23 Transaction value is
determined depending on the type of M&A transaction.
For an acquisition of assets, mandatory notification is required if: (a) the value of the assets being acquired in
the Philippines or the value of the acquiring entity's assets in the Philippines, depending on where the assets
to be acquired are located; and (b) the gross revenues generated by those assets in or into the Philippines
exceed PHP 2.2 billion.
For acquisition of shares in a corporation or of an interest in a non-corporate entity, mandatory notification

is required if: (a) the value of the assets of the target or its gross revenues in, into or from the Philippines
exceed PHP 2.2 billion; and (b) the acquisition will give the acquirer and its affiliates more than 35% of the
22
PHP 100 million to PHP 250 million is approximately USD 2 million to USD 5 million, assuming an exchange rate of USD
1 = PHP 50.
23
These thresholds apply to M&A transactions with definitive agreements executed on or after March 1 2019.
target's outstanding voting shares or profits, or more than 50% of such voting shares or profits if the
acquirer already has more than 35% interest in the target prior to the transaction.
In the case of a joint venture, the acquirer is subject to mandatory notification if the total value of assets to
be combined and contributed to the joint venture in the Philippines, or the gross revenues in the Philippines
from such assets, exceed PHP 2.2 billion.
The PCC's review covers various stages and periods, beginning with a preliminary review within 15 days to
determine whether the form is sufficient. Following such determination, under the standard review, the PCC
will proceed to review the transaction within an initial period of 30 calendar days (Phase I review), at which
time it may inform the parties of the need for a more comprehensive and detailed analysis of the transaction
(Phase II review). A Phase II review may take an additional 60 days. The total period for Phase I review and
Phase II review must not exceed 90 days.
Alternatively, if the M&A transaction qualifies for an expedited review (Expedited Review), the PCC shall
complete its Phase I review within 15 working days instead of 30 calendar days under the standard review.
Please note that during an Expedited Review, the PCC may also determine that an M&A transaction does not
qualify for an Expedited Review and require the parties to file under the regular review process.
Within the review period, the PCC may absolutely prohibit the agreement, subject the agreement to certain
changes, or require parties to enter into agreements specified by the PCC, based on its assessment of
whether the transaction will substantially prevent, restrict or lessen competition in the relevant market in
the Philippines.
A merger or acquisition agreement consummated in violation of the notification requirement shall be

considered void, and subject the parties to an administrative fine of 1% to 5% of the value of the transaction.
On the other hand, parties to a merger & acquisition, and their ultimate parent entities, that fail to notify the
PCC within the period for notification but have yet to consummate the M&A transaction may be fined in the
amount of 1/2 of 1% of 1% of the value of the transaction, but not exceeding PHP 2 million.
Other violations not specifically penalized by the PCA may carry a fine ranging from PHP 50,000 to
PHP 2 million.
XII. Privacy laws

1. Overview
Government policies in the Philippines and decisions of the Supreme Court tilt heavily toward the protection
of an individual's privacy rights. However, the Philippines also recognizes that the free flow of information is
vital to promote innovation and growth. Thus, the recent trend in cases of conflict is to balance the interests
of the business sector and that of an individual's right to privacy.
The Philippines also enacted a data privacy act, which became effective on 8 September 2012 and was
modeled after the European Union Data Protection Directive, the General Data Protection Regulation, and
the Asia-Pacific Economic Cooperation Privacy Framework.
2. Privacy of communications
Privacy of communications is a recognized right in the Philippines and is in fact found in Article III, Section 3
of the Philippine Constitution, as follows:
"Section 3. (1) The privacy of communications and correspondence shall be inviolable except
upon lawful order of the court or when public safety or order requires otherwise, as
prescribed by law. (2) Any evidence obtained in violation of this or the preceding section
shall be inadmissible for any purpose in any proceeding."
Other provisions on privacy of communications can be found in the Civil Code of the Philippines (Civil Code),
and Republic Act No. 4200 (RA No. 4200) or the Anti-Wire Tapping Act, which, in summary, makes it
unlawful for any person to record any private communication without the consent of all the parties
involved. Private communication has been interpreted by the Supreme Court to mean one that is made
between a person and another as opposed to a speaker and the public, and to cover communications of all
types, such as telephone conversations and electronic messages.
Rights to privacy of communications, however, may be waived so long as the waiver is not contrary to law,
public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by
law.
3. Data privacy
Republic Act No. 10173 or the Data Privacy Act of 2012 (DPA) applies to the processing of all types of personal
information and to any natural and/or juridical person involved in personal information processing, including
those personal information controllers and processors who, although not found or established in the
Philippines: (1) use equipment that are located in the Philippines or maintain an office, branch or agency in
the Philippines; and (2) process personal information pertaining to a Philippine citizen or resident and
maintain commercial links to the Philippines.
"Personal Information" is defined as any information from which the identity of an individual is apparent or
can be reasonably and directly ascertained, or that, when put together with other information, would
directly and certainly identify an individual.
"Sensitive personal information," on the other hand, is defined as personal information: (1) about an
individual's race, ethnic origin, marital status, age, color, and religious, philosophical or political affiliations; (2)
about an individual's health, education, genetic or sexual life of a person, or to any proceeding for any
offense committed or alleged to have been committed by such person, the disposal of such proceedings, or
the sentence of any court in such proceedings; (3) issued by government agencies peculiar to an individual,
which includes but is not limited to social security numbers, previous or current health records, licenses or its
denials, suspension or revocation, and tax returns; and (4) specifically established by an executive order or an
act of Philippine Congress to be kept classified.
In general, the DPA prohibits the processing of personal information without the express and recorded
consent of the data subject. The law also enumerates the rights of data subjects (i.e., notice, access, control,
data portability, and the right to be indemnified by personal information controllers for damages arising
from the unlawful processing of personal information) and the obligations of personal information
controllers and processors to ensure the privacy, security and integrity of personal information, including but
not limited to a breach notification requirement). More particularly, the DPA requires personal information
controllers to employ reasonable and appropriate organizational, physical and technical measures to protect
the security of personal information. At a minimum, these measures should include: (1) anti-computer
hacking safeguards; (2) a security policy; (3) a process for preventing and mitigating security breaches; (4)
contractual or other reasonable data protection arrangements with third-party contractors; and (5) the
appointment of an information security officer who will ensure the entity's compliance with the DPA.
In addition, the DPA has created the National Privacy Commission (NPC), which is tasked with administering
and implementing the provisions of the law, as well as with monitoring and ensuring compliance with
international standards for data protection.
Under the DPA, personal information may only be processed if: (a) the data subject has given his or her
consent; (b) the processing of personal information is necessary and is related to the fulfillment of a contract
with the data subject or in order to take steps at the request of the data subject prior to entering into a
contract; (c) the processing is necessary for compliance with a legal obligation to which the personal
information controller is subject; (d) the processing is necessary to protect vitally important interests of the
data subject; (e) the processing is necessary in order to respond to a national emergency, to comply with the
requirements of public order and safety, or to fulfill functions of public authority; or (f) the processing is
necessary for the purposes of the legitimate interests of the personal information controller or by a third
party or parties to whom the data is disclosed.
On the other hand, processing of sensitive personal information is only allowed if: (a) the employee has
given his or her consent; (b) the processing is provided for by existing law, in case the employee's consent is
not required by such law; (c) it is necessary to protect the life and health of the employee or another person,
and the employee is not legally or physically able to express his consent prior to the processing; (d) it is
necessary to achieve the lawful and non-commercial objectives of public organizations and associations,
provided that the same is limited only to their members and prior consent was obtained; (e) it is carried out
by a medical practitioner or a medical treatment institution and necessary for purposes of medical
treatment; (f) it is necessary for the protection of lawful rights and interests of natural or legal persons in
court proceedings, or for the establishment, exercise or defense of legal claims, or when provided to
government or public authority.
The DPA sets forth a detailed schedule of penalties, which include both imprisonment and fines, for
violations of such Act, such as unauthorized processing, accessing due to negligence, improper disposal,
processing for unauthorized purposes, unauthorized access or intentional breach, concealment of security
breaches, malicious disclosure, and unauthorized disclosure of personal information and sensitive personal
information.
On 25 August 2016, the NPC issued the implementing rules and regulations (Rules) of the DPA. The Rules
took effect on 9 September 2016.
In addition to the more general requirements of the DPA on the processing of personal information, the
Rules impose several registration and compliance obligations on covered controllers and processors. The
most important of these obligations are:
• Registration of Personal Data Processing Systems. A personal information controller (PIC) or a

personal information processor (PIP) is required to appoint a Data Protection Officer (DPO) under
the DPA and the Rules.
Additionally, a PIC or PIP is required to register its data processing systems with the NPC, within two
months from the start of operations, if it is processing personal data and operating under any of the
following conditions:
o The PIC or PIP employs at least 250 employees.
o The processing includes sensitive personal information of at least 1,000 individuals.
o The PIC or PIP belongs to the list of business sectors which the NPC has identified to be
covered by the registration requirement. The NPC's current list includes government
agencies, banks and financial institutions, telecommunications networks, BPOs, the
academe, hospitals, insurance companies and brokers, direct marketers and networkers,
providers of reward cards and loyalty programs, pharmaceutical companies engaged in
research, PIPs of the foregoing PICs, and operators of data processing systems involving
automated decision-making.
Under NPC Circular 17-01, the NPC requires the renewal of registrations within two months prior to,
but not later than the 8th day of March every year. Otherwise, registrations where no applications
for renewal have been filed are deemed revoked, unless good cause is shown for the delay.
In 2019, NPC announced that it had suspended the requirement to renew registrations for one year,
as long as the personal information controller or processor had completed at least phase one of their
registration in 2018. The suspension means that all organizations that are currently registered at
least for phase one do not need to renew their registration until 8 March 2020.
• Reportorial Requirements. PICs are required to notify the NPC and affected data subjects of a data
breach within 72 hours from the discovery thereof. In addition, covered entities shall also report to
the NPC with a summary of documented security incidents and data breaches on an annual basis
(the Annual Security Incident Report for 2017 fell due on 30 June 2018), and notify the NPC when
automated processing becomes the sole basis for making decisions about a data subject.
In March 2019, the NPC announced the indefinite postponement of the deadline for filing of the
annual security incident report for 2018 to give way for the NPC to revise its key processes to
enhance reportorial efficiency and improve user experience for PICs and PIPs, among others.
• Nature of Consent of Data Subjects. The Rules clarify that in cases not exempt from the consent
requirement, the data subject's consent to the personal information processing should be time-
bound in relation to the purpose of the processing. Data sharing, even between entities belonging
to the same corporate organization, should also have the prior consent of the affected data
subjects.
• Minimum Security Requirements; Contents of Data Transfer Agreements between Controllers and
Processors. The Rules enumerate the specific minimum organizational, physical and technical
requirements that controllers and processors are required to implement while processing personal
information. These security standards are subject to periodic evaluation and updating by the NPC
via subsequent issuances. The Rules also contain the minimum requirements as to the compliance
provisions to be included in any data processing agreement between personal information
controllers and processors.
Subsequent to the issuance of the Rules, the NPC also released several circulars and advisories that state the
requirements and guidelines on the following matters: (a) the public sector's compliance with the DPA; (b)
personal data breach management and notification; (c) the NPC's rules on practice and procedure, including
rules for requesting NPC's advisory opinions and the conduct of mediation before the NPC; (d) appointment
of DPOs and compliance officers for privacy; (e) registration of data processing systems with the NPC,
including a list of the business sectors covered by the mandatory registration requirement; (f) conduct of
privacy impact assessments; (g) security incident and personal data breach reportorial requirements; (h)
annual security incident report templates; and (i) guidelines on the NPC's conduct of compliance checks
which include a privacy sweep, documents submission, and/or on-site visit.
XIII. Ownership and lease of land

1. Ownership of private land
Under the Philippine Constitution, only Filipino citizens and corporations or partnerships, at least 60% of
which are owned by Filipino citizens, may acquire and own private land in the Philippines. The following are
the exceptions:
(a) Foreign nationals and entities who have acquired land before the effectivity of the 1935 Constitution
(b) Former natural-born Filipino, subject to limitations prescribed by law
The ownership of real property, other than land, such as buildings, is not subject to foreign equity
restrictions. Furthermore, foreign nationals may, subject to the provisions of the Philippine Condominium
Act, purchase condominium units in certain condominium projects.
2. Lease of private land

Foreign investors may lease private lands, which will be used exclusively for investments for a period of up
to 50 years, renewable once for a period of 25 years. The lease must be registered with the Philippine BOI
under the Investors' Lease Act. The long-term lease will be subject to the following conditions, among
others: (a) the leased area shall be used solely for the purpose of the investment upon the mutual agreement
of the parties; (b) the leased premises shall comprise such area as may reasonably be required for the
purpose of the investment, subject, however, to the Comprehensive Agrarian Reform Law and the Local
Government Code; and (c) the lease agreement must incorporate certain mandatory conditions.
Foreigners investing at least USD 5 million in tourism projects, 70% of which must be invested in the project
within three years from the signing of the lease contract, may lease private lands for the project for the
same period.
With respect to land that the foreign investor will not use exclusively for the purpose of the investment, or
land for tourism projects with investments of less than USD 5 million, the lease contract may be for a
maximum period of 25 years, renewable for another 25 years.
XIV. Environmental regulations
The Philippines adheres to a policy of protecting and advancing the right of its people to a balanced and
healthful ecology.
Philippine environmental law consists of a series of legislative enactments, executive decrees and
administrative regulations, each addressing a specific area of concern relating to the environment.
Therefore, the environmental law applicable to a particular business concern depends largely on the
activities of that business concern.
The Department of Environment and Natural Resources (DENR) is the lead agency in environmental
protection and administration.
The DENR is assisted in the formulation and implementation of environmental policies by the Environmental
Management Bureau (EMB), local government units, and other governmental agencies and departments.
1. Project requirements
Presidential Decree No. 1586 (PD 1586) established the Philippine Environmental Impact Statement (EIS)
System. Environmental impact assessment (EIA) is part of project planning and is conducted to identify and
evaluate important environmental consequences, including social factors that may occur if a project will be
undertaken. Measures to eliminate or minimize these impacts are incorporated into project design and
operations.
PD 1586 requires proponents of environmentally critical projects (ECPs) and projects within environmentally
critical areas (ECAs) to obtain an environmental compliance certificate (ECC) prior to the commencement of
the project.
The ECC is a document certifying that based on the representations of the proponent, the proposed project
or undertaking will not cause significant negative environmental impact. The ECC also certifies that the
proponent has complied with all the requirements of the EIS System and has committed to implementing its
approved Environmental Management Plan. The ECC contains specific measures and conditions that the
project proponent has to undertake.
An ECA is an area delineated as environmentally sensitive, such that significant environmental impacts are
expected if certain types of proposed projects or programs are located, developed or implemented in it. An
ECP is a project or program that has high potential for significant negative environmental impact.
The EMB of the DENR, together with the EIA Review Committee, is the government agency that implements
the EIS System.
2. Specific areas of regulation

Presidential Decree No. 984 (PD 984), otherwise known as the National Pollution Control Decree of 1976, is
the general legislation on pollution prevention and control that is being enforced by the government.
Republic Act No. 9003 (RA 9003), or the Ecological Solid Waste Management Act of 2000, calls for the
institutionalization of a national program that will manage the control, transfer, transport, processing and
disposal of solid waste in the country.
Republic Act No. 6969 (RA 6969), or the Toxic Substances and Hazardous and Nuclear Wastes Control Act,
provides the legal framework for the country's program to control and manage the importation,
manufacture, processing, distribution, use, transport, treatment and disposal of toxic substances as well as
that of hazardous and nuclear wastes.
Republic Act No. 8749 (RA 8749), or the Philippine Clean Air Act of 1999, provides the framework for
preventing, managing, controlling and reversing air pollution nationwide.
Republic Act No. 9275 (RA 9275), or the Philippine Clean Water Act of 2004, requires the DENR to implement
a comprehensive water quality management program to guarantee effective water utilization and
conservation. RA 9275 applies to water quality management in all water bodies. However, it primarily applies
to the abatement and control of pollution from land-based sources.
Republic Act No. 10587 (RA 10587), or the Environmental Planning Act of 2013, provides the legal framework
for the regulation of the profession and practice of environmental planning.
Republic Act No. 8048 (RA 8048), or the Coconut Preservation Act of 1995, provides the framework for the
regulation of the cutting of coconut trees in the Philippines.
Republic Act No. 9367 (RA9367), or the Biofuels Act of 2006, provides the legal framework for the regulation
of biofuels, taking into account the need for environmental protection.
Republic Act No. 10915 (RA 10915), or the Philippine Agricultural and Biosystems Engineering Act of 2016,
provide the regulatory framework for the practice of the agricultural and biosystems engineering profession.
Republic Act No. 11038 (RA 11038), or the Expanded National Integrated Protected Areas System (NIPAS) Act
of 2018), provides the amendments to Republic Act No. 7586 (RA 7586), or the NIPAS Act of 1992, which
established the system of integrated protected areas for the protection of the environment.
XV. Industry-specific regulations
1. Consumer Goods & Retail
1.1. Consumer Goods
Republic Act No. 7394 (otherwise known as the Consumer Act of the Philippines) (Consumer Act) seeks to
protect the interests of consumers and establish standards of conduct for business and industry.
The Consumer Act and its implementing rules and regulations provide for protection against deceptive,
unfair and unconscionable sales acts and practices, including rules on consumer product and service
warranties, labeling and fair packaging, price tags, liability for defective products and services, and
regulation of advertising and sales promotion activities.
The Consumer Act defines "consumer products and services" as "goods, services and credits, debts or
obligations which are primarily for personal, family, household or agricultural purposes, which shall include
but not be limited to food, drugs, cosmetics, and devices."
The Consumer Act mandates that its provisions shall be enforced by the following government agencies:
• the Department of Health (DOH) with respect to foods, drugs, cosmetics, devices, and substances;
• the Department of Agriculture with respect to products related to agriculture; and
• the DTI with respect to other consumer products not falling within the jurisdiction of the DOH and
the Department of Agriculture.
Pursuant to the foregoing mandate, the DOH, and the FDA (which is an agency attached to the DOH), have
issued regulations to:
• establish standards and quality measures for foods, drugs, devices and cosmetics;
• adopt measures to ensure pure and safe supply of foods and cosmetics, and safe, efficacious and
good quality of drugs and devices in the Philippines;
• adopt measures to ensure the rational use of drugs and devices, such as, but not limited to, banning,
recalling or withdrawing from the market drugs and devices which are unregistered, unsafe,
inefficacious or of doubtful therapeutic value, and the use of generic names in the labeling of drugs.
The DTI has also issued rules and regulations that govern:
• deceptive, unfair and unconscionable sales acts and practices;
• consumer product and service warranties;
• minimum labeling and packaging requirements;
• manner of placing labels and information that must appear on the display panels;
• requirements for price tags and price lists;
• liability for defective products and services;
• false, deceptive and misleading advertisements; and
• requirements for the conduct of sales promotion campaigns.
1.2. Retail Trade

Republic Act No. 8762 (otherwise known as the Retail Trade Liberalization Act) (RTLA) regulates the
investment in and establishment of retail trade enterprises in the Philippines.
"Retail Trade" is defined under the RTLA as "any act, occupation or calling of habitually selling direct to the
general public merchandise, commodities or goods for consumption."
Under the RTLA, foreign-owned partnerships, associations and corporations formed and organized under
Philippine law may, upon registration with the SEC engage in or invest in the retail trade business.
The RTLA prescribes minimum paid-up capital requirements for a retail trade enterprise in accordance with
the following categories:
CATEGORY PAID-UP CAPITAL FOREIGN EQUITY RESTRICTION
A Less than USD 2.5 million Reserved for Filipino citizens or corporations wholly
owned by Filipino citizens
B USD 2.5 million and above May be wholly owned by foreign nationals
C No longer applicable
D USD 250,000 per store Enterprises specializing in high-end or luxury products
In addition, the RTLA requires foreign retailers to satisfy certain prequalification requirements before it can
invest in or establish retail trade enterprises in the Philippines. The prequalification requirements include a
minimum net worth, track record in retailing, and the requirement that the home country of the foreign
retailer allow Filipinos to engage in retail trade therein.
The BOI confirms compliance with the prequalification requirements and issues a Certificate of Compliance
with the Prequalification Requirements (Prequalification Certificate). The Prequalification Certificate is a
requirement of the SEC for the incorporation of the retail trade enterprise.
In addition to the foregoing, the RTLA prescribes an investment per store requirement of not less than the
equivalent in Philippine pesos of USD 830,000, for enterprises in Category B and a paid-up capital per store
requirement for enterprises in Category D.
Moreover, retail trade enterprises under Category B in which foreign ownership exceeds 80% of equity shall
offer a minimum of 30% of their equity to the public through any stock exchange in the Philippines within
eight years from their start of operations.
2. Energy, Mining & Infrastructure

2.1. Energy
2.1.1. Regulatory framework
Republic Act No. 9136, also known as the Electric Power Industry Reform Act of 2001 (EPIRA), primarily
governs the electric power industry and its participants, together with other special laws. The main
objectives of the EPIRA include ensuring and accelerating the total electrification of the country, and the
quality, reliability, security and affordability of the supply of electric power. For this purpose, the EPIRA has
mandated the Department of Energy (DOE) to supervise the restructuring of the electric energy industry.
The EPIRA also created the Energy Regulatory Commission (ERC), an independent quasi-judicial regulatory
body. Its functions include promoting competition, encouraging market development, ensuring customer
choice, and penalizing the abuse of market power in the restructured electricity industry. The Wholesale
Electricity Spot Market was also created to serve as the mechanism for identifying and setting the price of
actual variations from the quantities transacted under contracts between sellers and purchasers of
electricity.
Republic Act No. 9513, also known as the Renewable Energy Act of 2008 (RE Act) on the other hand, provides
the policy framework for the accelerated development and advancement of Renewable Energy (RE)
Resources, and the development of a strategic program to increase the utilization of RE Resources in the
Philippines. Under the RE Act, the DOE was designated as the lead agency to implement the provisions
thereof. The National Renewable Energy Board (NREB) and Renewable Energy Management Bureau were
also created to perform the functions necessary to attain the objectives of the RE Act.
2.1.2. Organization of the Philippine electric power industry; foreign equity restrictions
The EPIRA restructured and divided the Philippine electric power industry into four sectors, responsible for
the generation, transmission, distribution and supply of electricity respectively.
2.1.2.1. Generation
"Generation of electricity" refers to the production of electricity by a generation company or a cogeneration

facility. Generally, the generation of electricity is not subject to foreign equity limitations. A company
engaged in the generation of electricity may therefore be 100% foreign-owned.
It must also be noted however, that regulations issued by the DOE pursuant to the RE Act impose a Filipino
nationality requirement of at least 60%, on the generation of electricity from RE Resources (i.e., biomass,
solar, wind, hydro, geothermal and ocean energy sources). Accordingly, RE Developers 24 are generally subject
to a foreign equity limitation of a maximum of 40%. By way of exception, large-scale geothermal projects
undertaken by way of a foreign technical or financial assistance agreement (FTAA) with the Philippine
government are allowed to be 100% foreign-owned. In view of the foregoing, an RE Developer is generally
required to be at least 60% Filipino-owned, unless such RE Developer engages in large-scale exploration,
development and utilization of geothermal resources by way of an FTAA with the Philippine government.
2.1.2.2. Transmission
"Transmission of electricity" refers to the conveyance of electricity through the high voltage backbone
system or the Philippine Grid. Under the EPIRA, the transmission of electricity shall be a regulated common
electricity carrier business, which is considered a public utility requiring a franchise from the Philippine
Congress. In this connection, the 1987 Philippine Constitution imposes a 60% Filipino ownership requirement
on public utility operators. Accordingly, corporations and associations engaged in the transmission of
electricity may have up to a maximum of 40% foreign equity and are required to obtain a franchise from the
Philippine Congress.
In 2009, the transmission sector was privatized through a grant of a 25-year concession to the National Grid
Corporation of the Philippines (NGCP) to operate the Philippine Grid. A congressional franchise was granted
to NGCP for this purpose. Prior to the privatization, it was the National Transmission Corporation (TRANSCO)
24
"RE Developers" refers to individual/s or juridical entity created, registered and/or authorized to operate in the
Philippines in accordance with existing Philippine laws and engaged in the exploration, development and utilization of RE
resources and actual operation of RE systems/facilities.
that assumed the electrical transmission function of the National Power Corporation, including the authority
and responsibility for the planning, construction and centralized operation and maintenance of the Philippine
Grid.
2.1.2.3. Distribution
"Distribution of electricity" refers to the conveyance of electric power by a distribution utility through its
distribution system. Under the EPIRA, the distribution of electricity to end-users shall be a regulated
common carrier business requiring a franchise. The EPIRA provides that the power to grant franchises to
persons engaged in the distribution of electricity shall be vested exclusively in the Philippine Congress. Thus,
similar to transmission of electricity, corporations or associations that will engage in the business of
distribution of electricity must at least be 60% Filipino-owned and must also obtain a franchise from the
Philippine Congress.
2.1.2.4. Supply
"Supply of electricity" means the sale of electricity by authorized persons or entities. No foreign equity
restrictions are imposed on corporations engaged in the business of supply of electricity to the contestable
market, subject to meeting certain requirements such as capitalization.
2.1.3. Recent updates
On 25 April 2018, the DOE issued Department Circular No. DC2018-04-0013 also known as the "Implementing
Rules and Regulations of Executive Order No. 30, creating the Energy Investment Coordinating Council in
order to Streamline the Regulatory Procedures affecting energy projects" (EO 30 IRR), which aims to
rationalize and streamline the permitting and licensing process of Energy Projects to ensure their timely
implementation.
Under EO 30 IRR, Energy Projects of National Significance (EPNS), are Energy Projects that possess the
following attributes: (i) have a significant capital investment of PHP 3.5 billion; (ii) have a significant
contribution to the country's economic development; (iii) have a significant consequential economic impact;
(iv) have the potential to contribute to the inflow of foreign investment capital; (v) have the potential to
contribute to sustainability with minimal adverse effects to the environment; (vi) involve newly developed
or pioneering energy systems and/or technologies; and (vii) have a significant infrastructure requirement.
EPNS have the right to an expedited processing time of 30 working days from submission of complete
documentary requirements, in obtaining the necessary permits required from the relevant Philippine
government agencies. A failure of the Philippine government agency to make a decision within 30 working
days would result in the automatic issuance of the relevant permit, within five (5) working days from the
lapse of the 30-working day period.
2.2. Mining
2.2.1. Non-Coverage of Small-Scale Mining Projects
DENR Memorandum Circular (MC) No. 2018-05 clarifies that the moratorium on acceptance, processing,
and/or approval of new mining projects does not include small-scale mining projects in duly declared
People's Small Scale Mining Areas or Minahang Bayan pursuant to Republic Act No. 7076, otherwise known as
"The People's Small Scale Mining Act of 1991", and DENR Administrative Order No. 2015-03, its revised
Implementing Rules and Regulations.
2.2.2. Guidelines For Additional Environmental Measures For Operating Surface Metallic Mines
DENR Administrative Order No. 2018-19 provides new environmental policies that seek to ensure sustainable
environmental conditions at every stage of the mining operation and minimize the disturbed area of a
mining project at any given time.
2.2.3. Guidelines in the Conduct of Apprehension, Seizure, Confiscation, and Disposition of

Illegally Sourced Minerals / Mineral Products and By-Products, Tools, Conveyances, and
Equipment Used
Mines and Geosciences Bureau (MGB) MC No. 2018-01 aims to provide a uniform procedure in the conduct of
apprehension, seizure, confiscation, and disposition of illegally sourced minerals/mineral products and by-
products including tools, conveyances, and equipment used in illegal mining operations consistent with the
provisions of Republic Act No. 7942, Department Administrative Order No. 2010-21 and other pertinent laws,
rules, and regulations.
2.2.4. Guidelines for Compliance Monitoring and Rating / Scorecard of Mining Permits / Contracts
MGB MC No. 2018-02 seeks to provide the following: (i) an efficient and effective Standard Monitoring
System, by using checklists that shall ascertain the compliance of Contractors/Permittees/Permit Holders
with the terms and conditions of the laws, rules, and regulations; and (ii) a performance rating system by
using scorecards to determine the compliance level of Contractors/Permittees/Permit Holders
2.3. Infrastructure
2.3.1. Contractor's License Law
Under the Contractor's License Law (RA 4566) and its implementing rules and regulations, a person or entity
that intends to engage in any of the activities that pertain to a contractor must first obtain a license from
the PCAB (PCAB License). Under RA 4566, a "contractor is deemed synonymous with the term 'builder' and,
hence, any person who undertakes or offers to undertake or purports to have the capacity to undertake or
submits a bid to, or does himself or by or through others, construct, alter, repair, add to, subtract from,
improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure,
project, development or improvement, or to do any part thereof, including the erection of scaffolding or
other structures or works in connection therewith."
There are two main types of PCAB Licenses: (a) Regular License and (b) Special License.
2.3.1.1. Regular License
A Regular License is issued to a domestic construction firm, and will authorize the licensee to engage in
construction contracting within the field and scope of the license's classification(s), for as long as the validity
of the license is maintained through annual renewal. A Regular License may be issued only to Filipino sole
proprietorships, or partnerships and corporations with at least 60% Filipino equity participation and duly
organized and existing under Philippine laws.
A "sub-type" of the Regular License is a Regular License with Annotation, which can be issued to a
corporation organized under Philippine law, irrespective of equity ownership, with a capitalization of at least
PHP 1 billion. The holder of a Regular License with Annotation may undertake only vertical projects with a
minimum contract value of PHP 5 billion, and horizontal projects with a minimum contract value of PHP 3
billion.
2.3.1.2. Special License
A Special License is issued to a joint venture, a consortium, a foreign constructor or a project owner, and will
authorize the licensee to engage only in the construction of a single, specific project. If the licensee is a
foreign firm, the issuance of the license will be further subject to any conditions that may have been
imposed by the relevant Philippine government authority for permitting the licensee to engage in
construction contracting in the Philippines. A Special License must be renewed annually for as long as the
project is in progress, but the number of renewals shall be restricted only to as many times as may be
necessary for the completion of the project.
A Special License may be issued to: (i) a foreign contractor (Special License - Foreign); (ii) a joint venture
composed of at least two contractors (Special License - JV); or (iii) a consortium composed of a contractor
and a non-contractor (Special License - Consortium).
A Special License - Foreign may be issued to a foreign contractor only under any of the following instances:
• The project involved is foreign financed or internationally funded, and that international bidding is
required, or the participation of foreign contractors is allowed under the terms and conditions of the
bilateral agreement entered into by and between the Philippine government and the foreign /
international financing institution.
• The project involved will be implemented in accordance with the Philippine Build-Operate-Transfer
(BOT) Law and other projects of a similar nature.
A Special License - JV may be issued to a joint venture formed by multiple construction contractors
undertaking a single project, provided that each of the joint venture partners possesses its own PCAB
License.
A Special License - Consortium may be issued to a consortium if the project is undertaken by way of a
cooperative agreement (usually in the form of a consortium agreement) between a contractor and a non-
contractor. To obtain a Special License - Consortium, at least one of the members of the consortium must
have its own PCAB License.
Each of the types of PCAB Licenses may be issued for specific classifications, namely: (a) General Engineering,
(b) General Building, (c) Specialty, and (d) SP-Trade. A single license may be issued for multiple classifications.
Further, every constructor shall be graded and assigned a category as an adjunct to its license. General
Engineering and General Building contractors may be categorized based on the following scale: AAAA
(Quadruple A), AAA, AA, A, B, C, and D. Specialty constructors shall be categorized in a scale of seven, namely;
AAA, AA, A, B, C, D and Trade. The category will depend on the amount of stockholders' equity and credit
points (computed based on a PCAB formula) of the licensee.
2.3.2. Build-Operate-Transfer (BOT) Law
The Build-Operate-Transfer Law (RA 6957, as amended) and its implementing rules and regulations (BOT IRR)
apply to all private sector infrastructure or development projects undertaken by GOP infrastructure agencies,
including government-owned and controlled corporations and local government units (collectively, GOP
Entities), in accordance with the contractual arrangements or schemes authorized under the BOT Law.
The BOT Law authorizes GOP Entities to enter into contract with a pre-qualified project proponent for the
financing, construction, operation, and maintenance of a financially viable infrastructure or development
facility through any of the contractual arrangements and schemes authorized under the BOT Law as follows:
2.3.2.1. Build-Operate-and-Transfer
Under a BOT scheme, the project proponent undertakes the construction, including financing, of an
infrastructure facility, and the operation and maintenance thereof.
The project proponent operates the facility over a fixed term, during which it is allowed to charge facility
users appropriate tolls, fees, rentals, and charges not exceeding those proposed in its bid or as negotiated
and incorporated in the relevant contract, in order to enable the project proponent to recover its investment,
and operating and maintenance expenses in the project. The project proponent transfers the facility to the
GOP Entity concerned at the end of the fixed term, which shall not exceed 50 years.
2.3.2.2. Build-and-Transfer Scheme (BT)
In the BT scheme, the project proponent undertakes construction, including the financing of a given
infrastructure or development facility, and, after its completion, turns it over to the GOP Entity concerned,
which shall then pay the project proponent on an agreed schedule its total investments expended on the
project, plus a reasonable rate of return thereon. This arrangement may be employed in the construction of
any infrastructure or development project, including critical facilities which, for security or strategic reasons,
must be operated directly by the GOP.
2.3.2.3. Build-Own-Operate (BOO)
Under a BOO scheme, the project proponent is authorized to finance, construct, own, operate and maintain
an infrastructure or development facility, from which the project proponent is allowed to recover its total
investment, operating and maintenance costs, plus a reasonable return thereon by collecting tolls, fees,
rentals or other charges from facility users. Under a BOO arrangement, the proponent, which owns the
assets of the facility, may assign its operation and maintenance to a facility operator. All BOO projects
require the favorable recommendation of the ICC and approval of the President of the Philippines.
2.3.2.4. Build-Lease-Transfer (BLT)
In the BLT scheme, the project proponent is authorized to finance and construct an infrastructure or
development facility, and, upon its completion, turns it over to the GOP Entity concerned on a lease
arrangement for a fixed period, after which ownership of the facility is automatically transferred to the GOP
Entity concerned.
2.3.2.5. Build-Transfer-and-Operate (BTO)
Under the BTO scheme, the relevant GOP Entity contracts out the building of an infrastructure facility to a
private entity, such that the contractor builds the facility on a turn-key basis, assuming cost overrun, delay,
and specified performance risks. Once the facility is commissioned satisfactorily, title is transferred to the
relevant GOP Entity. The private entity, however, operates the facility on behalf of the GOP Entity under an
agreement.
2.3.2.6. Contract-Add-and-Operate (CAO)
In the CAO scheme, the project proponent adds to an existing infrastructure facility which it is renting from
the government. It operates the expanded project over an agreed franchise period. There may or may not be
a transfer arrangement over the facility.
2.3.2.7. Develop-Operate-and-Transfer (DOT)
Under the DOT scheme, favorable conditions external to a new infrastructure project that is to be built by a
project proponent are integrated into the arrangement by giving the project proponent the right to develop
adjoining property and, thus, enjoy some of the benefits the investment creates such as higher property or
rent values.
2.3.2.8. Rehabilitate-Operate-and-Transfer (ROT)
Under the ROT scheme, an existing facility is turned over to the private sector to refurbish, operate, and
maintain for a specified franchise period, at the expiry of which the legal title to the facility is turned over to
the relevant GOP Entity. The term is also used to describe the purchase of an existing facility from abroad,
importing, refurbishing, erecting and consuming it within the host country.
2.3.2.9. Rehabilitate-Own-and-Operate (ROO)
Under the ROO scheme, an existing facility is turned over to the private sector to refurbish and operate with
no time limitation imposed on ownership. As long as the operator is not in violation of its franchise, it may
be allowed to continue operating the facility in perpetuity.
For projects to be implemented through a contractual arrangement requiring a public utility franchise for its
operation, the prospective project proponent must be Filipino citizens or, if corporations, must be duly
registered with the SEC and owned up to at least 60% by Filipinos, or, if a consortium of local, foreign, or
local and foreign firms, Filipinos must have at least 60% interest in said consortium.
Under certain circumstances, the President of the Philippines may approve variations of any of the foregoing
arrangements.
2.3.3. Eligible Projects
The BOT IRR enumerates the types of projects that may be proposed and implemented under the BOT Law
and its IRR (Eligible Projects), and provides that these projects will now be wholly or partly financed,
constructed, and operated by the private sector. 25 It may include the construction, rehabilitation,
improvement, betterment, expansion, modernization, operation, financing, and maintenance of the projects.
2.3.4. Solicited Projects and Unsolicited Proposals
The BOT Law requires GOP Entities to (i) prepare their respective infrastructure or development programs,
and (ii) identify specific priority projects that may be financed, constructed, operated and maintained by the
private sector through the contractual arrangements or schemes authorized under the BOT Law and its IRR
(List of Priority Projects). GOP Entities are also required to provide wide publicity for their respective Lists
of Priority Projects, in order to keep interested parties informed.
Solicited projects are those projects that are included by GOP Entities in their respective Lists of Priority
Projects (Solicited Projects).
On the other hand, project proposals that are (i) submitted by the private sector not in response to a formal
solicitation or request issued by a GOP Entity, and (ii) not among the GOP Entity's List of Priority Projects,
are classified as unsolicited proposals (Unsolicited Proposals). The BOT IRR provides for special requirements
and mechanics for the approval, submission, evaluation, and acceptance of Unsolicited Proposals. 26
A project that is included in the List of Priority Projects is not eligible for acceptance as an Unsolicited
Proposal, unless it involves a new concept or technology. In addition, any component of an approved project
is not eligible for any Unsolicited Proposal.
25
Section 2.2, BOT IRR.
26
See Rule 10, BOT IRR.
2.3.5. Approval of projects
National projects are subject to approval by different bodies. If the project cost is up to PHP 300 million
(approximately USD 5,716,037, converted at a rate of exchange of USD 1 : PHP 52), it shall be submitted to the
Investment Coordinating Committee (ICC) of the National Economic Development Authority (NEDA) for
approval. On the other hand, if the project cost is more than PHP 300 million, it shall be submitted to the
NEDA Board for approval, upon the recommendation of the ICC.
As regards local projects, confirmation by the concerned local legislative body is required.
2.3.6. Allowable modes of implementation
The BOT Law and its IRR provide that projects may be implemented either through public bidding or through
direct negotiation.
2.3.6.1. Public bidding
As a rule, projects undertaken pursuant to the BOT Law must be awarded through public bidding. Once a
project is approved in accordance with the provisions of the BOT Law and the BOT IRR, the relevant GOP
Entity must cause the publication of a notice inviting prospective project proponents to participate in a
competitive public bidding.
Any individual, partnership, corporation or firm, whether local or foreign, including consortia of local, foreign
or local and foreign firms (subject to limits specified in the BOT IRR), may participate or apply for pre-
qualification. To pre-qualify, a prospective project proponent must comply with the requirements specified
in the BOT IRR. If the prospective project proponent is a consortium, each of the members of the consortium
would have to (i) be disclosed during the pre-qualification stage, and (ii) undergo pre-qualification. The BOT
IRR provides for specific guidelines, rules, procedures, and mechanisms for the conduct of the competitive
bidding process.
2.3.6.2. Direct negotiation
Under certain circumstances, a contract for a project may be implemented through direct negotiation. The
BOT IRR provides that direct negotiation shall be resorted to when there is only one complying bidder after
the public bidding is conducted.
2.3.6.3. "Swiss Challenge"
When a GOP Entity receives an Unsolicited Proposal, it can award the project to the winning bidder only
after it implements a process known as the "Swiss Challenge," a system where a third party can bid on a
project during a designated period and the original proponent can counter match any superior offer. The
guidelines for evaluation of the proposal and qualification of the Unsolicited Proponent are provided in the
BOT IRR.
2.3.7. State guarantees
The BOT Law and its IRR provide for certain guarantee structures as may be applicable in favor of the public
proponents: (1) direct government guarantees; (2) government undertakings; and (3) investment incentives.
Direct government guarantees refer to agreements whereby the GOP or any GOP Entity assumes
responsibility for the repayment of debt directly incurred by the project proponent in implementing the
project in case of loan default.
Government undertakings refer to forms of contribution or support extended to the proponent by the GOP
or any GOP Entity which includes, among others, cost sharing, credit enhancements, direct government
subsidy, direct government equity, performance undertakings, legal assistance, and security assistance.
Investment incentives refer to contributions or support extended to the proponent by the GOP or any GOP
Entity as provided under special laws such as, but not limited to, the Renewal Energy Act, the Tourism Act,
the Mini-Hydro-electric Power Incentives Act, Omnibus Investment Code, or the Local Government Code.
3. Financial Institutions
3.1. Banking
Under Philippine laws, banks are entities that engage in the lending of funds obtained in the form of
deposits. An entity intending to engage in banking in the Philippines must obtain an authority or secondary
license to operate (such as a commercial banking license) from the BSP.
Banks are classified into the following under Philippine law:
(a) Universal banks
(b) Commercial banks
(c) Thrift banks, composed of: (i) savings and mortgage banks; (ii) stock savings and loan associations;
and (iii) private development banks
(d) Rural banks
(e) Cooperative banks
(f) Islamic banks
(g) Other classifications of banks as determined by the BSP
Philippine law provides that foreign individuals and non-bank corporations may own or control up to 40%
(individual or aggregate) of the voting stock of a universal bank, commercial bank, thrift bank or rural bank.
By way of exception, foreign banks may own up to 100% of the voting stock of a universal bank, commercial
bank, thrift bank or rural bank, with prior approval from the BSP. In determining whether or not approval will
be issued, the BSP will consider whether reciprocity rights are enjoyed by or granted to Philippine banks in
the country of the foreign bank.
Following the recent liberalization of regulations relating the entry of foreign banks into the Philippines, the
BSP may authorize foreign banks to operate in the Philippine banking system through any of the following
modes of entry: (a) owning up to 100% of the voting stock of an existing domestic bank; (b) investing up to
100% of the voting stock of a new banking subsidiary incorporated under Philippine law; or (c) establishing
branches with full banking authority.
A foreign bank branch must comply with the same minimum capital and prudential capital ratios applicable
to domestic banks of the same category. Subsidiaries and branches of foreign banks will be allowed to
perform the same functions and enjoy the same privileges of, and be subject to the same limitations
imposed upon, a Philippine bank of the same category.
3.2. Credit card issuers and acquirers
Under the Credit Card Industry Regulation Law (Credit Card Law), a credit card issuer is a bank or a
corporation that offers the use of its credit card. On the other hand, a credit card acquirer refers to an
institution that accepts and facilitates the processing of credit card transactions initially accepted by the
merchant.
The Credit Card Law vests the authority to supervise all credit card issuers and acquirers on the BSP.
However, the Credit Card Law does not provide any BSP licensing requirement for credit card issuers and
acquirers. The Credit Card Law took effect on 16 August 2016, and its implementing rules and regulations
have not been issued to date. The implementing rules and regulations may impose BSP licensing
requirements on credit card issuers and acquirers.
3.3. Digital payment services

The BSP recently issued the regulatory framework for entities engaged in digital payment services, including
remittance and transfer companies and virtual currency exchanges.
3.3.1. Remittance and transfer companies
The BSP regulates remittance and transfer companies (such as remittance agents, remittance platform
providers and e-money issuers) or entities that provide money or value transfer service. Remittance and
transfer companies are required to register with the BSP.
Foreign citizens are allowed to own up to 100% of the shares in a remittance and transfer company. Based
on BSP regulations, remittance and transfer companies must meet benchmark capital requirements ranging
from PHP 10 million to PHP 100 million, depending on the category.
3.3.2. Virtual currency exchanges
BSP regulations define virtual currency as any type of digital unit that is used as a medium of exchange or a
form of digitally stored value created by agreement within the community of virtual currency users. Virtual
currencies are broadly construed to include digital units of exchange that have a centralized repository or
administrator, are decentralized and have no centralized repository or administrator, or may be created or
obtained by computing or manufacturing effort.
The BSP regulates virtual currency exchanges or entities that offer services or engage in activities that
provide facility for the conversion or exchange of fiat currency to virtual currency or vice versa. A virtual
currency exchange must obtain from the BSP a certificate of registration to operate as a remittance and
transfer company.
The BSP does not impose nationality requirements on a virtual exchange.
3.4. Financing companies

Under Philippine law, financing companies are corporations (except banks, investment houses, savings and
loan associations, insurance companies, cooperatives and other financial institutions organized or operating
under other special laws) that are primarily organized for the purpose of extending credit facilities to
consumers and to industrial, commercial or agricultural enterprises, by direct lending or by discounting or
factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel
mortgages or other evidences of indebtedness, or by financial leasing of movable as well as immovable
property. An entity intending to engage as a financing company must obtain an authority or secondary
license to operate as a financing company from the SEC. If the entity intends to perform quasi-banking
functions (that is, engaging in the lending of funds obtained in the form of deposit-substitutes), such entity
must secure a quasi-banking license from the BSP.
Under the Financing Company Act, as amended, a financing company must have a paid-up capital ranging
from at least PHP 2.5 million to PHP 10 million, depending on where the financing company will set up its
office in the Philippines. Subject to certain conditions, foreign persons may own up to 100% of the shares in
a financing company.
3.5. Lending companies

On the other hand, "lending companies" refer to corporations engaged in granting loans from its own capital
funds or from funds sourced from not more than 19 persons. The term "lending companies" exclude banking
institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance
companies, cooperatives and other credit institutions already regulated by other laws.
A company intending to perform activities as a lending company must obtain from the SEC an authority or
secondary license to operate as a lending company.
Under the Lending Company Act, as amended, a lending company must have a minimum paid-up capital of
PHP 1 million. Subject to certain conditions, foreign persons are allowed to own up to 100% of the shares in a
lending company.
However, no foreign national may be allowed to own shares in a lending company unless the country of
which such person is a national accords reciprocal rights to Philippine citizens.
3.6. Securitization Act

The Securitization Act provides the legal and regulatory framework for asset securitization and grants tax
exemptions and other incentives in favor of securitization transactions in the Philippines. It is designed to
create a favorable capital market environment for asset-backed securities (ABS) and to facilitate the
development of a secondary market for residential mortgage-backed securities.
In the securitization process, loans, receivables or similar financial assets with an expected cash payment
stream (Assets) are sold on a without-recourse basis by a seller to a special purpose entity (SPE). The SPE
issues to investors ABS that depend, for their payment, on the cash flow from the Assets. The issuance of the
ABS must be in accordance with the plan for securitization approved by the SEC.
4. Healthcare
4.1. Health products
Republic Act No. 3720, as amended, or the Food and Drug Administration Act and its implementing rules and
regulation (collectively, FDA Act), regulates the manufacture, importation, export, distribution, sale,
advertising, promotion and other marketing activities for health products. The FDA Act defines health
products as including food, drugs, medical devices, cosmetics and health supplements (considered as food
products), among others.
Entities that deal with health products are generally required to obtain an LTO from the Philippine FDA. The
FDA is divided into centers, with each center being responsible for the regulation of a specific major category
of health products, as follows:
• Center for Food Regulation and Research (CFRR)
• Center for Drug Regulation and Research (CDRR)
• Center for Device Regulation, Radiation Health and Research (CDRRHR)
• Center for Cosmetics Regulation and Research (CCRR)
Applications for an LTO are processed and reviewed by the relevant center. A person intending to engage in
activities relating to various categories of health products must obtain an LTO from each relevant center of
the FDA. By way of example, a corporation intending to import and distribute drugs and cosmetics must
obtain a separate LTO from the CDRR and the CCRR.
The LTO will cover and state the specific activities that the holder may perform in relation to the health
product covered.
Certain health products, such as drugs, certain medical devices and health supplements, must be registered
with the FDA prior to its importation, exportation, sale, manufacture, distribution, advertisement, promotion
and other marketing activities. On the other hand, certain health products, such as cosmetics, require
notification to the FDA before they can be subject to any of the foregoing activities in the Philippines. The
DOH and the FDA have recently issued guidelines governing authorizations of medical devices pursuant to
the ASEAN Medical Device Directive. Under such guidelines, the FDA will classify medical devices based on its
risk classification rating. The rating determines whether the devices will require notification to or registration
with the FDA.
Only persons with a valid LTO can obtain registrations and notifications covering specific health products
from the FDA.
Labels of health products must comply with the labelling requirements under FDA regulations.
4.2. Clinical trials

Clinical trials in the Philippines are regulated by the FDA and the DOH.
Clinical trials may be undertaken by sponsors or Contract Research Organizations (CRO). A sponsor refers to
an individual, company, institution, organization, or an entity that takes responsibility for the initiation,
management, and/or financing of a clinical trial. On the other hand, a CRO refers to a person or an
organization (commercial, academic or other) contracted by a sponsor to perform one or more of the
sponsor's trial-related duties and functions.
Current FDA regulations require a sponsor and the CRO to obtain an LTO from the FDA. Furthermore, clinical
trials must be conducted according to an approved clinical trial protocol from the FDA.
DOH Administrative Order No. 2014-0034 (AO-34) requires sponsors and CROs that engage in clinical trials to
obtain an LTO for such purpose from the FDA. Prior to AO-34, sponsors of clinical trials and CROs were not
required to obtain an LTO.
Pursuant to AO-34, the FDA has issued FDA Circular No. 003-15 entitled, "Guidelines on the Implementation of
New Rules and Regulations on the Licensing of Sponsors and CROs following AO-34" (CRO Guidelines).
Under the CRO Guidelines, entities engaged in the following trial-related duties and functions delegated by a
sponsor are required to secure an LTO as a CRO: (i) oversight (e.g., ensuring quality assurance and/or quality
control systems are in place to ensure clinical trials are conducted, data is gathered, and subsequently
reported); and (ii) management of clinical trails (e.g., development of protocols and/or trial design, selection
of investigator and/or sites, screening and/or recruitment of subjects, and data handling).
Entities involved in the procurement/importation, storage, and/or distribution of investigational product(s)

are not required to secure an LTO as a CRO, unless they are involved in the other activities mentioned above.
These entities must follow other existing licensing requirements for such specific activities.
Moreover, under FDA Circular No. 2012-007, all clinical trials must be approved by the FDA. Such approval
shall be based on the approval/recommendation of an accredited ethics review board and committee
(ERBC). ERBCs are ethics review committees established in institutions that engage in biomedical and
behavioral research charged with safeguarding the dignity, safety and well-being of all actual or potential
human participants. The FDA accredits ERBCs based on the recommendation of the Philippine National
Health Research System (PNHRS).
The ERBC reviews the clinical trial protocol from applicants and provides its recommendation to the FDA. The
FDA shall make the final decision in the approval of the clinical trial. The clinical trial may proceed only after
the FDA has issued its approval.
5. Industrials, Manufacturing & Transportation

5.1. Automotive
The Comprehensive Automotive Resurgence Strategy (CARS) program embodied in Executive Order (EO) No.
182 provides financial incentives of up to PHP 27 billion for three (3) participating car makers to enroll three
(3) different car models for local assembly, which translates to PHP 9 billion in incentives per model, on the
condition that production outputs for each model reach 200,000 units over a six-year period. This amounts
to a total of 600,000 locally produced units over six years.
Under the EO, an Inter-Agency Committee was formed to evaluate the applications for endorsement to the
BOI. Participating car makers of the CARS program will have to comply with performance-based terms and
conditions, including the minimum output of 200,000 units over the six-year program period and local
production of body shell and large plastic parts.
5.1.1. Available fiscal support
There are two kinds of fiscal support: the fixed investment support (FIS) and the production volume
incentive (PVI). To be eligible for FIS, there must be new investments in the manufacture of parts and/or the
establishment of a shared testing facility. On the other hand, eligibility in the PVI requires at least the
manufacture of 50% of the assembly weight of the body shell and the manufacture of major components of
the large plastic parts assemblies, exceeding 100,000 units in production volume.
The total fiscal support for the CARS Program shall not exceed PHP 27 billion, with each enrolled model not
exceeding PHP 9 billion, with 40% allocated for FIS, and 60% for PVI. The incentives will be granted to
participants through a tax payment certificate, which can be used to defray the tax and duty obligations due
to the national government, including excise tax, income tax, import duties and VAT.
5.2. Aviation, aerospace and defense

Civil aviation in the Philippines is primarily governed by Republic Act No. 776 (as amended), otherwise known
as "The Civil Aeronautics Act of the Philippines" (RA 776) and Republic Act No. 9497, otherwise known as the
"Civil Aviation Act of 2008" (RA 9497). These laws created the two main regulatory bodies in Philippine civil
aviation — the Civil Aeronautics Board (CAB) (created under RA 776) and the Civil Aviation Authority of the
Philippines (CAAP) (created under RA 9497).
5.2.1. Civil Aeronautics Board
The CAB is the government agency responsible for regulating the economic aspect of air transportation. It
has general jurisdiction and control over: (a) air carriers, (b) general sales agents (defined as a "person not a
bona fide employee of an air carrier who, pursuant to an authority from an airline, by itself or through an
agent, sells or offers for sale any air transportation, or negotiates for, or holds himself out by solicitation,
advertisement or otherwise as one who sells, provides, furnishes, contracts or arranges for, such air
transportation"), (c) cargo sales agents, and (d) air freight forwarders.
The CAB issues Certificates of Public Convenience and Necessity (CPCN), Foreign Air Carrier's Permits (FACP),
and other permits / authority to engage in air commerce and/or transportation, either as sales agents,
operator or air freight forwarder.
A person or entity cannot engage in air commerce and/or transportation in the Philippines without a permit /
authority issued in its favor by the CAB.
5.2.2. Civil Aviation Authority of the Philippines
The CAAP is the government agency responsible for the safety and technical aspect of civil aviation in the
Philippines. It issues: (a) airmen's certificates, (b) aircrafts' certificates of air worthiness, (c) air carrier
operating certificates, (d) certificates for aircrafts, aircraft engines, propellers and appliances, (e) certificates
for air navigation facilities and aerodromes, and (f) certificates for instructors and civil aviation schools.
It is the sole authority for registering aircrafts and liens, mortgages or other interests in aircrafts and aircrafts
engines in the Philippines.
5.2.3. Nationality restrictions
Air commerce and/or transportation
Air commerce "means and includes air transportation for pay or hire, the navigation of aircraft in furtherance
of a business, or the navigation or aircraft from one place to another for operation in the conduct of
business".
Air transportation is defined as "service or carriage of persons, property or mail, in whole or in part, by
aircraft."
Domestic air commerce and / or transportation (engaging in air commerce and/or transportation within the
Philippine territory) is restricted to Filipino citizens and/or entities (i.e., corporations or associations organized
under Philippine law at least 60% of whose capital is owned by Filipino citizens).
Foreign air carriers are allowed to engage in international (between the Philippines and any place outside it,
or wholly outside the Philippines) air commerce and/or transportation subject to existing treaties and air
agreements between the Philippines and the foreign air carrier's home country.
Aircraft Registration
Unless otherwise provided by the Philippine Constitution and/or existing treaties, an aircraft will not be
eligible for registration unless it is owned or leased by a Filipino citizen and/or entities (i.e., corporations or
associations organized under Philippine law at least 60% of whose capital is owned by Filipino citizens).
5.3. Chemicals and Plastics

5.3.1. The Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990
RA 6969, otherwise known as "The Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990",
together with its implementing rules and regulations, regulate the importation, manufacture, processing,
handling, storage, transportation, sale, distribution, use, and disposal of all unregulated chemical substances
and mixtures in the Philippines. RA 6969 is administered primarily by the DENR.
The DENR maintains an inventory of all chemical substances that are stored, imported, exported, used,
processed, manufactured, or transported in the Philippines, known as the Philippine Inventory of Chemical
Substances.
The DENR also maintains a Priority Chemicals List, which is a listing of all existing and new chemicals that the
DENR has determined as posing an unreasonable risk or hazard to public health and the environment, either
through their use, storage, manufacture, importation, processing, or transportation. If the DENR determines
that the use, storage, transport, processing, manufacture, importation, or exportation of any new substance
or a priority chemical poses an unreasonable risk or hazard to public health or the environment, the DENR
may issue a Chemical Control Order (CCO). The CCO may prohibit, limit, or place controls or conditions on the
use, manufacture, import, export, transport, process, storage, possession or sale of the chemical substance.
5.3.2. Other special regulations relating to chemicals
Depending on the nature or use of certain chemicals, they may also be subject to regulation under other
special laws and regulations. By way of example, certain chemicals used for agricultural purposes may be
regulated under Presidential Decree No. 1144, otherwise known as the "Fertilizer and Pesticide Authority Act".
Republic Act No. 9165, as amended, otherwise known as the "Comprehensive Dangerous Drugs Act of 2002",
regulates controlled precursors and essential chemicals, as well as dangerous drugs, among other things.
5.3.3. Regulation of plastics
Plastics are regulated under a number of special laws and regulatory issuances. Among the more notable
regulations are:
• Republic Act No. 9003, otherwise known as "The Ecological Solid Waste Management Act", which
regulates the proper disposal of solid wastes, including plastics;
• Republic Act No. 9514, otherwise known as the "Revised Fire Code", which imposes certain fire safety
measures for the manufacture, storage, handling, and/or use of hazardous materials involving
plastics, among others;
• Republic Act No. 8749, otherwise known as the "Clean Air Act", which prohibits the burning of
plastics and other materials in any quantities that would cause the emission of toxic and poisonous
fumes;
• Republic Act No. 6541, otherwise known as the "National Building Code", which regulates the use of
plastic products in buildings and similar structures; and
• various local ordinances passed by the legislative bodies of provinces and cities, which regulate the
use of plastic bags in their respective territorial jurisdictions.
Currently, there are also initiatives in the Philippine Congress to pass laws that would ban the use and
importation of microplastics in consumer products, as well as of single-use plastics.
5.4. Construction and building products
5.4.1. Articles 1713 to 1731 of the Civil Code
Article 1713 of the Civil Code defines a construction contract as a contract for "a piece of work". Article 1713
further states that "[b]y the contract for a piece of work, the contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation". The contractor in a contract for
a piece of work may either employ only his labor or skill, or also furnish the material. Unless the parties
provide in their construction contract for a specific and contrary stipulation, the provisions of the Civil Code
on contracts for a piece of work may apply by default to a construction contract.
5.4.2. Executive Order No. 1008
Executive Order No. 1008 established the Construction Industry Arbitration Commission (CIAC). The CIAC has
original and exclusive jurisdiction over construction disputes, which shall "include those between or among
parties to, or who are otherwise bound by, an arbitration agreement, directly or by reference whether such
parties are project owner, contractor, subcontractor, fabricator, project manager, design professional,
consultant, quantity surveyor, bondsman or issuer of an insurance policy in a construction project."
The CIAC is a hybrid of voluntary and compulsory arbitration. The Philippine Supreme Court has held that "as
long as the parties agree to submit their dispute to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose
another forum, the parties will not be precluded from electing to submit their dispute before the CIAC
because this right has been vested by law."
5.5. Food and agri-business

5.5.1. The Omnibus Investments Code of 1987
Executive Order No. 226, otherwise known as the OIC of 1987, together with the relevant IPP, sets out
investment priority areas of the state, and the investment incentives that may be availed of through
registration with the BOI. The IPP is administered primarily by the BOI, who on 28 February 2017, approved
the latest 2017 IPP.
The 2017 IPP contains the following preferred investment areas in connection with the Food and Agri-
business:
All Qualified Manufacturing Activities including Agro-Processing
This covers the manufacture of industrial goods and processing of agricultural and fishery products,
including Halal and Kosher food, into (a) semi-finished/intermediate goods for use as inputs in the
production of other goods, or (b) finished products or consumer goods for final consumption.
Except for modernization projects, only projects located outside Metro Manila may qualify for registration.
Agriculture, Fishery and Forestry
This covers commercial production of agricultural, fishery and forestry products.
This also covers production of seeds and seedlings, and establishment of nurseries and hatcheries, and
support services and infrastructures, such as facilities for drying, cold chain storage, blast freezing, bulk
handling and storage; harvesting, plowing, and spraying/dusting; packing houses, trading centers, ice plants
in Less Developed Areas; AAA slaughterhouses; and AAA dressing plants.
Except for modernization projects, only projects located outside Metro Manila may qualify for registration.
Modernization projects include those for agricultural support services and infrastructure only.
The 2017 IPP also includes incentives for export activities and agri-business activities in the (ARMM).
5.6. Special regulations relating to health and safety

Republic Act 10611 or the Food Safety Act of 2013 (RA 10611), was promulgated to establish a high level of
food safety, protection of human life and health in the production and consumption of food. The primary
agency tasked with enforcement of the food safety requirements of RA 10611 is the FDA, under the DOH. In
addition, the Department of Agriculture shall be responsible for the development and enforcement of food
safety standards and regulations for foods in the primary production and post harvest stages of the food
supply chain. Further, Republic Act 8976 or the Philippine Food Fortification Act of 2000 (RA 8976),
establishes a Food Fortification Program that shall cover all imported or locally processed foods or food
products for sale and distribution in the Philippines. RA 8976 implements a Mandatory Food Fortification
program that will address the fortification of staple foods, based on standards issued by the DOH for staple
foods including rice, wheat flour, refined sugar and other staple foods.
Philippine regulations such as Republic Act 8485 or the Animal Welfare Act of 1998, and its implementing
rules and regulations, address the treatment and welfare of all animals, including those used as objects of
trade. Further regulations of the Department of Agriculture establish the National Animal Waste Resource
Management Program and regulate poultry dressing. In addition, the Bureau of Animal Industry, through its
relevant regulations, implements research and development programs for livestock and poultry, especially
concerning genetics and breeding systems, animal nutrition, feeds and feeding systems, animal health and
disease control and containment, and other policies and procedures governing the flow, handling, and
transport of livestock / poultry and livestock / poultry products.
5.6.1. Other food and agri-business regulations
Among the more notable regulations are:
• Republic Act No. 10845, otherwise known as "The Anti-Agricultural Smuggling Act of 2016", which
regulates the illegal importation of agricultural products, especially rice, significantly affecting the
production, availability of supply and stability of prices, and the food security of the State;
• Republic Act No. 7581, otherwise known as the "Price Act", which regulates against hoarding,
profiteering and cartels with respect to the supply, distribution, marketing and pricing of basic
necessities and prime commodities, especially during periods of calamity, emergency, widespread
illegal price manipulation and other similar situations;
• Republic Act No. 1556, otherwise known as the "Livestock and Poultry Feeds Act", which regulates
the manufacture, importation, labelling, advertising and sale of livestock and poultry feeds;
• Act No. 3893, otherwise known as the "General Bonded Warehouse Act", which regulates the
business of receiving commodities for storage, and provides penalties for violation of its provisions;
and
• Republic Act No. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1998",
which imposes limits on the allowable ownership of agricultural lands, and establishes the agrarian
reform program to undertake the distribution of all agricultural lands.
5.7. Industrial conglomerates
5.7.1. The Philippine Competition Act
The PCA or RA 10667 as well as its implementing rules and regulations (PCA-IRR) is the primary competition
law in the Philippines and prohibits anti-competitive agreements, abuse of dominant positions, and anti-
competitive mergers and acquisitions. The PCA establishes the PCC as an independent, quasi-judicial body,
mandated to implement the Philippine national competition policy.
Under the PCA and the PCA-IRR, anti-competitive agreements constituting cartels include price-fixing, bid-
rigging, output restrictions, market allocation and other agreements that may substantially lessen
competition in the relevant market may be deemed anti-competitive by the PCC. Similarly, abuse of a
dominant position in the relevant market is prohibited under the law. In addition, the PCA requires the
mandatory notification of proposed mergers and acquisitions that meet the jurisdictional thresholds under
the PCA-IRR, in order to review possible anti-competitive implications of the proposed transaction.
In line with the above, industrial conglomerates engaged in activities in the Philippines should carefully
review whether existing vertical or horizontal relationships in the relevant market may have anti-
competitive consequences. Further, parties to a proposed merger or acquisition should carefully review
whether the transaction meets the thresholds for mandatory notification under the PCA-IRR. In the event of
uncertainty as to the rules that will apply to an agreement or a particular proposed transaction, it would be
prudent for parties to seek legal advice to manage the possible consequences.
5.7.2. Incentives for the manufacturing industry
2017 Investment Priority Plan
Pursuant to the directives of Executive Order No. 226 (The Omnibus Investment Code of 1987), the 2017
Investment Priority Plan was issued by the BOI through MC No. 2017-004, thereby setting out the preferred
activities where investments are to be encouraged by providing incentives. The incentives that may be given
as provided by the Code include Income Tax Holidays, additional labor expense deduction, tax and duty
exemption on imported capital equipment, and others.
The Priority Plan states that the manufacture of industrial goods into semi-finished/intermediate goods for
use in the production of other goods, as well as finished products or consumer goods for final consumption,
is considered a preferred activity. Also covered is the manufacture of modular housing components and
machinery and equipment including parts and components. The companies, however, must utilize up-to-
date and market-appropriate technology and must comply with the Philippine National Standards or PNS.
The circular further provides that only projects outside Metro Manila, except modernization projects, may
qualify for registration.
To qualify for registration, the applicant must show that: (i) it will manufacture products, the importation of
which grew by an annual average of at least 10% from 2012-2016 or the share of imports to total apparent
demand is at least 60%; (ii) the project's value creation is at least 50%; (iii) it will manufacture products
utilizing a new technology or a world-wide design; (iv) and the project has a core capital equipment cost to
direct labor ratio of not higher than USD 28,000:1 worker at full capacity.
CARS
The CARS Program, as discussed, was issued to encourage the manufacture of automotives in the Philippines.
The order provides fiscal incentives to car makers in order to attract new investments and develop the
country as a regional automotive manufacturing hub.
5.7.3. Updates on consumer laws
Lemon Law
The Philippine Lemon Law (Republic Act No. 10642) and its Implementing Rules and Regulations regulate the
sale and purchase of brand new motor vehicles in the Philippines. A motor vehicle is defined as any self-
propelled, four-wheeled road vehicle designed to carry passengers, including sedans, coupes, station wagons,
convertibles, pick-ups, vans, sports utility vehicles and Asian utility vehicles. Motorcycles, trucks, buses and
vehicles that run only on rails or tracks, among others, are excluded from the provision of the law.
The law gives purchasers of brand new vehicles the right to report nonconformity with the vehicle's
manufacturer or distributor's standards or specification within 12 months from delivery or up to 20,000
kilometers of operation, whichever comes first. Within the same period, and after at least four attempts to
repair the vehicle, the consumer may invoke his lemon rights. The consumer must notify the manufacturer,
distributor, dealer or retailer of his complaint. Upon delivery of the motor vehicle to the manufacturer or
distributor, it shall be the duty of the latter to make the necessary repairs to make the vehicle conform to
the standards of specification.
Gift Check Act
The Gift Check Act of 2017 (Republic Act No. 10962) apply to all issuers of gift checks, which are defined as
any instrument issued to any person, natural or juridical, for monetary consideration honored upon
presentation at a single merchant or an affiliated group of merchants as payment for consumer goods or
services. Gift checks can be in the form of paper, card, code or other device.
The 2017 law prohibits imposing an expiry date on gift checks and on the stored value, credit, or balance of
the gift check. The law also prohibits the issuers from refusing to honor the unused value, credit or balance
stored in the gift checks. However, gift checks that are issued to consumers under loyalty, rewards or other
promotional programs are excluded from the coverage of the act.
Accreditation of Garments Manufacturers, Exporters and Subcontractors
The Joint Department Order No. 1, series of 2017 was issued by the DTI and the DOLE providing the
guidelines in the accreditation of garments manufacturers, exporters and subcontractors availing of
preferential tariffs under the Generalized System of Preference.
The guidelines are put in place in order to safeguard industrial peace in the garments and textile industry by
promoting stable labor-management relations. The committee that will recommend the issuance of the
certification is mandated to consider compliance by the manufacturer, exporter and subcontractor with
minimum labor standards including, but not limited to, freedom of association and recognition of right to
collective bargaining, and acceptable conditions of work.
Shortchanging Act
The No Shortchanging Act of 2016 (Republic Act No. 10909) provides that it shall be the duty of the business
establishment to give the exact change to the consumer without waiting for the consumer to ask for the
same. This law declares that it is unlawful for any business establishment to shortchange a customer,
regardless of the amount of the change, and to ask consumers for permission to be exempted from the law
for any reason, including the non availability of small bills or coins. Furthermore, it also prohibits business
establishments to give change in any form other than the present currency.
The law also imposed the duty on business establishments to use price tags indicating the exact retail price
per unit or service, which must necessarily include the taxes applicable.
5.8. Transportation and logistics
5.8.1. The Civil Code (Republic Act No. 386)
The Civil Code contains provisions that regulate common carriers and the transportation industry in general
[Articles 1732 to 1766]. "Common carriers" are defined as persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, through offering their services to the public. This definition is broad enough to cover majority
of the businesses in the transportation industry.
Under the Civil Code, common carriers are required to exercise extraordinary due diligence in the
transportation of passengers and handling of goods while in their case. Further, if passengers were to suffer
injury of the goods damaged while in their care, there is a presumption that the common carrier was
negligent. The common carrier may overcome this presumption only by proving that it was not negligent
and exercised extraordinary due diligence in its affairs. In terms of liability, the Civil Code provides that the
driver is primarily liable in the event of an accident, although the vehicle owner may be held jointly liable. In
the event of motor vehicle mishaps, the vehicle owner is jointly liable with the driver, if the former was in
the vehicle and could have, by the use of due diligence, prevented the injury. If the owner was not in the
motor vehicle, then provisions relating to vicarious liability apply. Principles of vicarious liability dictate that
a person is not only responsible for torts committed by himself, but also for torts committed by others with
whom he has a certain relationship and for whom he is responsible, such as the person's employees.
However, this responsibility ceases if the vehicle owner proves that he observed the level of diligence
expected of a good father of a family to prevent the damage caused.
5.8.2. Public Service Act (Commonwealth Act No. 146)
The Public Service Act applies to industries/entities engaged in "public service", defined as: "…every person
that now or hereafter may own, operate, manage or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, done for general business purposes,
any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both with or without fixed route and whatever may be its classification…" As such, providing
transportation services to the public for a fee as a common carrier, is considered engaging in a "public
service".
As a rule, no public service can operate in the Philippines without a valid and subsisting certificate known as
a "Certificate of Public Convenience" (CPC) or "certificate of convenience and public necessity". In the case of
common carriers, Section 15 of the Public Service Act requires a common carrier to obtain a CPC. The CPC is
valid only for a certain period of time and may be revoked if the grantee violates any of the terms and
conditions therein. A person who operates a public service without a valid CPC or violates the terms and
conditions of the CPC may also be penalized with fine and imprisonment. For common carriers engaged in
land transportation, it is the Land Transportation Franchising and Regulatory Board that issues the CPC.
5.8.3. Various rules and regulations issued from time to time by the Department of
Transportation (DOTr) and Land Transportation Franchising and Regulatory Board (LTFRB)
The DOTr is the government agency responsible for regulating the transportation industry in the Philippines
and exercises both regulatory and quasi-judicial powers in the pursuit of its mandate to provide viable,
efficient and dependable transportation services. Executive Order No. 125 provides for the structure of the
DOTr as well as its responsibilities, powers and functions.
On the other hand, the LTFRB is an agency under the control and supervision of the DOTr that is responsible
for overseeing land transportation and issuing franchises thereto. Executive Order No. 202 created the LTFRB
and gave it the power to issue CPCs for the operation of public land transportation services by motorized
vehicles and issue rules and regulations related to its functions.
The DOTr and its sub-agencies, including the LTFRB, issue rules and regulations from time to time to
implement their mandate to regulate the transportation industry. Some of the important issuances of the
DOTr include Department Order No. 2015-011, which sets the standard classifications for public transport
conveyances that may be issued CPCs. Recently, the DOTr issued Department Order No. 2018-012, which
places Transport Network Companies and Transportation Network Vehicle Services under the direct
authority of the LTFRB.
6. Technology, Media & Telecommunications

6.1. IOT
As with most countries in APAC, there is no specific law in the Philippines that deals with internet of things
(IOT). However, existing laws and regulations in relation to telecommunications, cybersecurity, and ethics
apply to IOT.
6.1.1. Cybersecurity
Republic Act No. 10175 or the Cybercrime Prevention Act of 2012 and its Implementing Rules and Regulations
(Cybercrime Act) was enacted by the State to protect and safeguard the integrity of computers,
communications systems, networks, and databases, and the confidentiality, integrity, and availability of
information and data stored therein, no matter the type of hardware, devices or thing these data may be
stored in. As such, the Cybercrime Act provides for criminal penalties for actions that violate the
confidentiality, integrity and availability of computer data and systems. These cybercrimes include, among
others, illegal access to a computer system, illegal interception of non-public data, intentional or reckless
computer data interference such as the introduction or transmission of viruses, and computer-related
identity theft.
6.1.2. Data privacy
The Data Privacy Act, its implementing rules and regulations and issuances of the regulator, the NPC
(collectively, the Data Privacy Regulations) govern the processing of personal information by personal
information controllers (PICs) and personal information processors (PIPs). Insofar as IOT connectivity involves
personal data collection, storage, use, analysis or any other form of processing, Data Privacy Regulations
apply. PICs and PIPs must comply with obligations and responsibilities imposed by the law for processing of
personal data, which are rooted in the principles of Transparency, Legitimate Purpose and Proportionality.
Relevantly, Philippine Data Privacy Regulations impose additional consent and/or notification requirements
depending on whether the processing involves the use of automated means, specifically if the processing
involves automated processing, automated decision-making and/or profiling.
"Automated processing" refers to a series or a structured set of automated or automatic processing

operations performed on personal data, such that there is limited to no human intervention in the conduct
of the processing. On the other hand, "automated decision-making" refers to a wholly or partially automated
processing operation that serves as the sole basis for making decisions that would significantly affect a data
subject. Subsumed under automated decision-making is the process of "profiling", which refers to any form
of automated processing of personal data consisting of the use of personal data, such as an individual's
economic situation, political or religious beliefs, behavioral or marketing activities, personal preferences,
electronic communication data, location data, and financial data, among others, in order to evaluate, analyze,
or predict his or her performance, qualities, and behavior, among others.
Depending on whether the processing operations of a PIC or PIP involve automated processing, automated
decision-making and profiling, the PIC or PIP may be required to notify the involved data subjects of the
nature of the said processing operations, obtain the prior consent of the said data subjects thereto and/or
notify the NPC regarding the same.
As a general requirement, Philippine Data Privacy Regulations provide that when a PIC is about to process
the personal data of an individual by automated means, it must make sure that the latter is properly
informed of such processing, including the purpose and extent thereof. However, when the automated
processing operations already involve making decisions that would significantly affect the data subject
(automated decision-making) and/or profiling, then the data subject's prior consent, not mere notice, is
required. In all cases, the data subject may object to the processing of his or her personal data and/or
withhold any consent previously given.
These requirements are summarized as follows:
Notify the data Prior consent Right to object Notify the NPC
subject
Automated processing Yes Not required Yes Not required
Automated decision-making Yes Yes Yes Yes
Profiling Yes Yes Yes Yes
6.1.3. Consumer and electrical safety
The hardware, devices or things that constitute electrical equipment or materials must comply with
consumer protection and electrical safety regulations. Primarily, RA 7394 or the Consumer Act directs the DTI
to formulate consumer product quality and safety regulations on electronic devices that have to be
complied with. The provisions of the Consumer Act in relation to labeling, packaging, express and implied
warranties also have to be followed.
6.1.4. Telecommunications regulations for Service Providers
Under NTC MC No. 05-06-2007, a subscriber of any provider, supplier, mobile service centers and sellers of
telecommunications, or all consumers, end-users, subscribers or any person otherwise adversely affected by
telecommunications providers, have the following rights (among others): (1) must be treated equally as
similarly situated consumers; (2) any data provided by the consumer must be treated as confidential by the
service provider; (3) a consumer can only be charged according to the rates, terms and conditions that
he/she has agreed to. Before the consumer is billed, the service provider shall first secure the consumer's
express agreement, which shall be in written form if practicable; and (4) all terms and conditions of the
service shall be disclosed to the consumer. In case of changes in any term or condition of the service, the
service providers hall send the consumers notice at least 30 days before the intended change; (5) in case of
billing complaints, the service provider has the burden of proving that the complainant/consumer made or
authorized an unverified charge for the service.
6.2. Cloud services

The Public Telecommunications Policy Act of the Philippines (RA 7925 or the Telecoms Act) and its
implementing rules regulate telecommunications services, which include Value-Added Services (VAS). The
provision of cloud computing services will likely be considered as VAS, which is broadly defined by the
implementing rules of the Telecoms Act as "a service which adds a feature or value to basic telephone
service not ordinarily provided by a public telecommunications entity such as format, media, conversion,
encryption, enhanced security features, paging, internet protocol, computer processing and the like".
NTC MC No. 02-05-2008 provides that VAS providers that offer their services to the public for a fee are
required to register their services with the NTC. However, under current NTC policy, only VAS providers that
are owned by citizens of the Philippines or entities that are 60% owned and controlled by Philippine citizens
may register with the NTC.
In practice, however, the NTC differentiates between non-regulated VAS and regulated VAS. The NTC only
applies the VAS restriction requirements (i.e., the registration/nationality restriction requirements) to
regulated VAS providers. VAS providers are regulated if they have the following characteristics: (i) the VAS
services are provided directly to the Philippine public; and (ii) the VAS services are provided for a fee.
The Cybercrime Act also contains rules particularly relevant to cloud service providers. Under the Cybercrime
Act, "service providers" is broadly defined under the Cyber Crime Prevention Act as "(1) any public or private
entity that provides to users of its service the ability to communicate by means of a computer system; and
(2) any other entity that processes or stores computer data on behalf of such communication service or users
of such service." Service providers are required by the Act to preserve the integrity of "traffic data and
subscriber information relating to communication services" for a minimum period of six months from the
date of the transaction (non-content data). On the other hand, content data (defined as "communication or
content of communication, the meaning or purport of the communication, or the message or information
being conveyed by the communication, other than traffic data"), shall also be preserved following an order
from law enforcement authorities.
6.3. Tax around technology

6.3.1. Taxation of software payments
The BIR issued an MC providing for the guidelines for the taxation of computer software payments. Under
Revenue Memorandum Circular (RMC) No. 44-05 issued on 01 September 2005, the character of the
transaction will depend on the nature of the rights that the transferee acquires under the particular
arrangement regarding the use and exploitation of the program. Transactions involving software may take
any one or more of the following categories:
(a) A (full or partial) transfer of a copyright right in software;
(b) A transfer of a copy of the software (a copyrighted article);
(c) The provision of services for the development or modification of the software; or
(d) The provision of know-how relating to software programming techniques.
A transfer of software is classified as a transfer of a copyright right if, as a result of the transaction, a
person acquires any one or more of the rights described below:
(a) The right to make copies of the software for purposes of distribution to the public by sale or other
transfer of ownership, or by rental, lease or lending;
(b) The right to prepare derivative computer programs based upon the copyrighted software;
(c) The right to make a public performance of the software;
(d) The right to publicly display the computer program; or
(e) Any other rights of the copyright owner, the exercise of which by another without his
authority shall constitute infringement of said copyright.
Under the foregoing category, the software payment is characterized as royalties if (a) only copyright rights
are transferred, as opposed to copyright ownership, and/or, (b) not all substantial rights in the copyright
have been transferred. On the other hand, the software payment is characterized as business income if (a)
copyright ownership is transferred, or, (b) all substantial rights in the copyright are transferred.
Payments for transfers of copyrighted articles are classified as business income if the transferee acquires a
copy of the software, but does not acquire any of the five rights mentioned in transfers of copyright rights
(or acquires only a de minimis grant of such rights), and the transfer of the copy of the software does not
involve the provision of services or of know-how.
The BIR has previously ruled that the grant of a right to distribute the software cannot be considered as de
minimis. The grant of this right to a distributor or reseller by the author or owner of the software pertains to
rights which may be subject to infringement and as such gives rise to royalties. According to the BIR, this is
true even if payments to be made by the distributor or reseller to the author or owner are not literally
termed as royalties but merely payments or fees in general and even if the contract between the parties are
not literally termed license contracts but merely contracts of sale, contracts to sell, consignment contracts,
etc., as those generally used when the goods or merchandise involved are non-copyrighted works. What is
essential is that copyright rights are granted under such contract and without which the reseller or
distributor may be regarded as infringing the copyright owner's rights, based on the provisions of the
Intellectual Property Code. (DA-ITAD BIR Ruling No. 017-07, dated 9 February 2007)
6.3.1.1. New Procedure for Claiming Tax Treaty Benefits for Royalty Income of Non-resident Income Earners
The BIR recently issued a new procedure for claiming tax treaty relief benefits for dividend, interest, and
royalty income of non-resident income earners. On March 28, 2017, the BIR issued Revenue Memorandum
Order No. 8-2017 (RMO No. 8-2017) which provides that the mandatory Tax Treaty Relief Application (TTRA)
for claiming treaty benefits for such income shall no longer be filed with the BIR-International Tax Affairs
Division (ITAD).
In lieu of the TTRA, preferential treaty rates for dividends, interests and royalties shall be applied and used
outright by the withholding agents upon mere submission of a Certificate of Residence for Tax Treaty Relief
(CORTT) Form by the non-resident. The use of the preferential rates shall be done through Withholding Final
Taxes at applicable treaty rates. The CORTT Form is composed of two parts, namely: Part I: A. Applicable Tax
Treaty; B. Information of Income Recipient/Beneficial Owner (Individual); C. Information of Income Recipient/
Beneficial Owner (Non-Individual); and D. Certification of Competent Authority or Authorized Tax Office of
Country of Residence; Part II: A. Information of Withholding Agent / Income Payor; B. Details of Withholding
Tax; C. Type of Income Earned within the Philippines in Respect of which Relief is claimed; D. Declaration of
Income Recipient/Beneficial Owner; and E. Declaration of Withholding Agent/Income Payor.
Under RMO 8-2017, the domestic income payor shall be obligated to file BIR Form No. 1601-F (Monthly
Remittance Return of Final Income Taxes Withheld) and BIR Form No. 1601-CF (Annual Information Return of
Income Taxes Withheld on Compensation and Final Withholding Taxes) and pay the withholding tax due on
the royalties. The domestic income payor shall be required to submit the original of the duly accomplished
CORTT to the BIR within 30 days from payment of the withholding tax due on the royalties.
The CORTT Form shall serve as proof of residency of the non-residents. Residency is a minimum requirement
for the availment of preferential tax treaty rates or tax exemption under all effective tax treaties of the
Philippines. Failure to submit a CORTT Form to the withholding agent/income payor would mean that the
non-resident is not claiming any tax treaty relief and therefore such income will be subject to the normal
rate provided under the National Internal Revenue Code of 1997, as amended (Tax Code). The ITAD and
Revenue District Office (RDO) No. 39 shall be in charge of receiving and recording information stated in the
CORTT. Pertinent information from the CORTT Form and data collected from 1601-F and 1604-CF on
availment of treaty rates and income payment made to non-residents, in general, shall be accumulated and
monitored by ITAD and RDO No. 39. Such data shall be used for conducting risk analysis, formulating policies,
developing the country's treaty negotiating positions and generating management reports.
6.3.1.2. Value added tax
In addition to income tax, under Section 108 (A) of the Tax Code, the royalties, being payments for the use of
intangible property (know-how) in the Philippines, are subject to 12% VAT. In case of payments to non-
resident foreign corporations, the VAT system provides for the withholding of VAT by the local payor. In
turn, the VAT withheld constitutes an input VAT, which the local payor may utilize and credit against its own
VAT liability.
6.3.2. Permanent establishment and tax on cloud computing
6.3.2.1. Income Tax PE
Generally, a non-resident foreign corporation is subject to income tax at the rate of 30% of its gross income
received during each taxable year from all sources within the Philippines. However, if the nonresident
foreign corporation: (1) does not have a permanent establishment (PE) in the Philippines to which such gains
could be attributable and (2) is a resident of a country with an existing tax treaty with the Philippines, then
the nonresident foreign corporation would be exempt from Philippine income/withholding tax under the
business profits rule of the applicable tax treaty.
Tax treaties define PE as a "fixed place of business in which the business of the enterprise is wholly or partly
carried on." Under the tax treaties, the term PE usually includes: a seat of management, a branch, an office, a
store or sales outlet, a factory, a workshop, a warehouse, a mine, quarry, a building or construction or
assembly project, and furnishing of services, including consultancy services through the employees of the
resident of the other Contracting State for a period or periods aggregating more than 183 days.
While the Philippines is not a member country of the Organisation for Economic Cooperation and
Development, the BIR typically adopts the commentaries (OECD Commentary) to the OECD Model Tax
Convention on Income and on Capital, Condensed Version (2010) (OECD MTC) on questions of PE. Although
Philippine courts are not bound by the BIR's tax positions, the latter's interpretation of tax law (such as
those in BIR rulings) are entitled to great weight since BIR is the administrative agency in charge of
enforcing tax laws in the Philippines. 27
In interpreting the Tax Treaties, the Philippines also takes into account the rules of interpretation under the
Vienna Convention on the Law of Treaties (Vienna Convention), to which the Philippines is a signatory.
The OECD Commentary states that the term "place of business" covers any premises, facilities or installations
used for carrying on the business of the enterprise whether or not they are used exclusively for that
purpose. The OECD Commentary also provides that a "place of business" can, in certain instances, be
machinery or equipment.
27
Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, G.R. No. 182722, January 22, 2010.
"Equipment"
In interpreting an undefined term, such as "equipment", the Philippines takes into account the Vienna
Convention, Paragraph 1, Article 31 (General Rule of Interpretation), Section 31 (Interpretation of Treaties)
which states that "a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be
given to the terms of the treaty in their context and in the light of its object and purpose." Under this rule,
an interpretation of a term consistent with its ordinary meaning refers to such meaning or meanings
generally attributed to a term while taking into account the context and purpose for which the term is used
and intended by the drafters of the relevant treaty.
In giving ordinary meaning to the term "equipment," the BIR has cited the definition of the term under the
Webster Dictionary. The Webster Dictionary defines "equipment" as "implements (as machinery or tools)
used in an operation or activity."
"Fixed"
To be considered a PE, the place of business must also be "fixed," i.e., it must be established at a distinct
place with a certain degree of permanence. The degree of permanence is established if the place of business
is not of a purely temporary nature.
6.3.2.2. Business carried out through a fixed place of business
To meet the definition of a FPOB PE, the foreign enterprise must be able to carry out its business through
the fixed place of business. In this determination, the BIR would look to whether the place of business is "at
the disposal" of the foreign enterprise.
According to a BIR ruling, the mere presence of an enterprise at a particular location does not necessarily
mean that the location is at the disposal of that enterprise. The BIR ruled that a—
warehouse is not at the disposal of the non-resident foreign corporation because of the very limited
nature of activity that the non-resident foreign corporation is allowed to carry out in these fixed
place of business, where such warehouses merely serve as temporary storage for the coals before
their withdrawal.
In the ruling, the warehouses served as temporary storage for steam coals delivered by Gulf Coast to Apo
Cement and Solid Cement before these were actually withdrawn. According to the BIR, such warehouses do
not constitute a PE for Gulf Coast in the Philippines. The BIR reasoned that the warehouses in question were
not at the disposal of Gulf Coast because of the very limited nature of the activity that Gulf Coast was
allowed to carry out in the warehouses.
6.3.2.3. Application to servers
The OECD Commentary provides that, similar to the idea of website hosting, the server of an Internet Service
Provider (ISP) and the server's location is typically not at the disposal of the enterprise which carries on its
business through a web site hosted on that server. This applies even if the enterprise has been able to
determine that its web site should be hosted on a particular server at a particular location. In such a case, the
enterprise does not even have a physical presence at that location since the web site is not tangible. As such,
the web site cannot be considered as having acquired a place of business by virtue of that hosting
arrangement.
6.3.3. Tax on downloadable content
The Tax Code provides that a non-resident foreign corporation is subject to income tax at the rate of 30% on
its gross income during each taxable year from all sources within the Philippines. Any gain from the sale of
goods is considered as income from within the Philippines if the title to the goods transfers in the
Philippines. On the other hand, income from the provision of services rendered by a non-resident foreign
corporation is considered derived from sources within the Philippines if the services are performed in the
Philippines.
To determine whether the payments made by Philippine users for downloading content are subject to
Philippine income tax, we must first resolve whether they involve a sale of goods or a sale of services.
According to BIR Ruling No. 009-05, if possession of property rights is transferred from the seller to the
purchaser, the transaction involves a sale of property and not a provision of a service. On the other hand, if
the purchaser does not receive an interest in property, the transaction is a sale of a service.
In transactions where the purchaser is allowed to electronically download digital products, such as software,
images, sounds or text, for his own use or enjoyment, the payment therefor is essentially for the acquisition
of data transmitted in the form of a digital signal. The copying of the digital signal onto the purchaser's hard
disk or other non-temporary media is merely the means by which the digital signal is captured and stored.
As such, the payments received from its customers who download content are payments for the
performance of services, since no possession of property rights are transferred to the purchaser and neither
does the purchaser receive an interest in property. The purchaser is merely given the capability to capture
and store digital signal.
6.4. Technology disputes

The digital economy gave rise to the blurring of spatial and time boundaries, which in turn result in issues in
conflict of laws and the exercise of jurisdiction over persons and entities involved in cross-border data flows
or multi-jurisdictional transactions or cybercrimes.
6.4.1. Data privacy
The DPA applies to all forms of processing of personal information performed in the Philippines regardless of
the nationality or place of residence of the data subjects. Similarly, the law also applies to the processing of
personal information outside of the Philippines for as long as (a) the personal information belongs to citizens
or residents of the Philippines and (b) the data controller has commercial links to the Philippines. Commercial
links to the Philippines are established by any of the following:
(a) A contract is entered in the Philippines;
(b) A juridical entity unincorporated in the Philippines but has central management and control in the
country; and
(c) An entity that has a branch, agency, office or subsidiary in the Philippines and the parent or affiliate
of the Philippine entity has access to personal information.
The NPC also stated that the DPA also applies to the processing in the Philippines of personal information
originally collected from residents of foreign jurisdictions in accordance with the laws of those foreign
jurisdictions, including any applicable data privacy laws. According to the NPC, the law of the foreign
jurisdiction shall apply on the point of collection of said personal data; however, the security requirements of
the DPA shall apply once said personal data is imported into the Philippines for further processing.
The DPA allows the cross-border transfer of personal data, provided that the PIC shall use contractual or
other reasonable means to protect the personal data subject of the transfer. The common ways of
protecting personal data are through the use and implementation of data sharing agreements for controller-
to-controller transfers, outsourcing agreements for controller-to-processor transfers, or binding corporate
rules for intra-group transfers.
6.4.2. Cybercrime
Republic Act No. 10175, or the Cybercrime Prevention Act of 2012 and its Implementing Rules and Regulations
(Cybercrime Act) penalizes by fine and/or imprisonment those offenses against the confidentiality, integrity
and availability of computer data and systems. These cybercrimes include, among others, illegal access to a
computer system, illegal interception of non-public data, intentional or reckless computer data interference
such as the introduction or transmission of viruses, and computer-related identity theft.
Generally, there is no corporate criminal liability under Philippine law. However, under the Cybercrime Act, if
any of the cybercrimes were committed on behalf of or for the benefit of any juridical person by its
authorized representative, or the commission of the crime results from the juridical person's failure to
supervise or control its representative, the juridical person faces liability under the Cybercrime Act in the
form of fines, without prejudice to the criminal liability of the natural person(s) who committed the offense.
Jurisdiction over cybercrimes, including those committed by a Filipino national abroad, shall be with the
Regional Trial Court if any of the elements was committed within the Philippines, or committed with the use
of any computer system that is wholly or partly situated in the country, or when by such commission any
damage is caused to a natural or juridical person who, at the time the offense was committed, was in the
Philippines. Cases shall be heard by designated special cybercrime courts manned by specially trained judges
to handle cybercrime cases.
In 2018, the Supreme Court of the Philippines promulgated the Rule on Cybercrime Warrants, which
identified new types of cybercrime warrants that law enforcement agencies can apply for with the courts
involving computer data in connection with the Cybercrime Act. In all instances, law enforcement
authorities seeking these warrants must describe the relevance and necessity of the data it seeks and the
likely offense involved.
The warrants are as follows:
• The Warrant to Disclose Computer Data (WDCD) requires any person or service provider to disclose
subscriber’s information, traffic data, or relevant data in their possession within 72 hours from
receipt of the order. The warrant may only be filed when a complaint has been officially docketed
and assigned for investigation.
• The Warrant to Intercept Computer Data (WICD) authorizes law enforcement to listen to, record,
monitor, or conduct surveillance of the content of communications, including the use of electronic
eavesdropping or tapping devices.
• The Warrant to Search, Seize, and Examine Computer Data (WSSECD) authorizes law enforcement to
search a particular place for items to be seized and/or examined. The request must contain an
explanation of the search and seizure strategy to be implemented.
• The Warrant to Examine Computer Data (WECD) is a warrant issued when a computer device or
system has been previously seized by another lawful method, such as a warrantless arrest, before
law enforcement authorities may search said computer device or system for the purpose of securing
the computer data therein for forensic examination.
6.5. Data centers

The establishment and operation of a data center in the Philippines require the consideration of several legal,
regulatory, and contractual matters in planning, regulatory and environmental hurdles in owning and
operating a data center, cybersecurity protections, disaster recovery/business continuity plans, terms of
service availability, speed of processing/service, service support and flexibility of capacity. Major
considerations are compliance with telecommunications, including requirements on importation of ICT
equipment and devices, and data privacy laws and regulations.
6.5.1. The Telecoms Act
The Telecoms Act and its implementing rules regulate the performance of telecommunications services in the
Philippines. Telecommunications services are defined as those services involving "any process which enables
a telecommunications entity to relay and receive voice, data, electronic messages, written or printed matter,
fixed or moving pictures, words, music or visible or audible signals or any control signals of any design and
for any purpose by wire, radio or other electromagnetic, spectral, optical or technological means."
6.5.2. The Public Service Law
The Philippines' Public Service Law (Commonwealth Act No. 146) is the law that applies to
industries/entities engaged in "public service" in general. The Public Service law therefore applies to
telecommunications services offered to the public.
The regulatory body in charge of telecommunications services in the Philippines is the National
Telecommunications Commission (NTC). By virtue of the authority granted to it by the Telecoms Act and the
Public Service Law, the NTC has regulatory and quasi-judicial powers. The NTC can also enforce compliance
of its issuances by initiating complaints (which may result in fines and imprisonment) and/or imposing fees
and penalties.
6.5.3. Provision of telecommunications services by a public telecommunications entity
The provision of telecommunications services by a public telecommunications entity (PTE) is heavily

regulated. A PTE is a person, firm, partnership or corporation, government or private, engaged in the
provision of telecommunications services: (a) to the public; (b) for compensation. Generally, a PTE is required
to secure a legislative franchise from the Philippine Congress and a CPCN or Provisional Authority (PA) from
the NTC. The franchise contains conditions as to its grant, such as restrictions on transfers and annual
reporting obligations.
On the other hand, the CPCN issued by the NTC certifies that the telecommunications service to be provided
by the enfranchised entity is feasible and necessary. It is usually granted after an entity's showing of its
legal, technical and financial capability to provide the contemplated service. Additionally, a PTE is required to
be at least 60% Filipino-owned.
6.5.4. Value-added services
Regulated telecommunications services also include VAS. The Telecoms Act provides that a "VAS operator" is
"an entity which, relying on the transmission, switching and local distribution facilities of the local exchange
and inter-exchange operators, and overseas carriers, offers enhanced services beyond those ordinarily
provided for by such carriers." The implementing rules of the Telecoms Act define "VAS" as "a service which
adds a feature or value to basic telephone service not ordinarily provided by a PTE such as format, media,
conversion, encryption, enhanced security features, paging, internet protocol, computer processing and the
like." Under the Telecoms Act, a VAS provider is not considered a PTE, provided that it does not put up its
own network.
NTC MC No. 02-05-2008 provides that VAS providers that offer their services to the public for a fee are
required to register their services with the NTC. However, under current NTC policy, only VAS providers that
are owned by citizens of the Philippines or entities that are 60% owned and controlled by Philippine citizens
may register with the NTC.
In practice, however, the NTC differentiates between non-regulated VAS and regulated VAS. The NTC only
applies the VAS restriction requirements (i.e., the registration / nationality restriction requirements) to
regulated VAS providers. VAS providers are regulated if they have the following characteristics: (i) the VAS
services are provided directly to the Philippine public; and (ii) the VAS services are provided for a fee.
6.5.5. Importation/distribution of telecommunications equipment
Under current NTC regulations, type approval or type acceptance is required for all customer premises
equipment (CPE) and radio transmitters and transceivers, that is, devices capable of emitting radio waves or
energy. "Type approval" refers to the process by which an equipment is evaluated for conformance to
established standards by undergoing laboratory tests and measurements. "Type acceptance", on the other
hand, is a process by which an equipment is evaluated for acceptability for use on the basis of type approval
tests done by reputable foreign approval or certification agencies. The importer/distributor of CPEs and radio
transmitters/transceivers should secure authorization from the NTC in order to supply these equipment.
An import permit must be secured from the NTC in order to import equipment that requires type approval or
acceptance. The NTC import permit will be required by the BOC as a condition for customs clearance.
6.5.6. Data privacy
The DPA applies to the processing of all types of personal information and to any natural and/or juridical
person involved in personal information processing, including those personal information controllers and
processors who, although not found or established in the Philippines: (1) use equipment that are located in
the Philippines or maintain an office, branch or agency in the Philippines; and (2) process personal
information pertaining to a Philippine citizen or resident and maintain commercial links to the Philippines.
"Personal Information" is defined as any information from which the identity of an individual is apparent or
can be reasonably and directly ascertained, or that, when put together with other information, would
directly and certainly identify an individual.
"Sensitive personal information," on the other hand, is defined as personal information: (1) about an
individual's race, ethnic origin, marital status, age, color, and religious, philosophical or political affiliations; (2)
about an individual's health, education, genetic or sexual life of a person, or to any proceeding for any
offense committed or alleged to have been committed by such person, the disposal of such proceedings, or
the sentence of any court in such proceedings; (3) issued by government agencies peculiar to an individual,
which includes but is not limited to social security numbers, previous or current health records, licenses or
denials, suspension or revocation, and tax returns; and (4) specifically established by an executive order or an
act of Philippine Congress to be kept classified.
In general, the DPA prohibits the processing of personal information without the express and recorded
consent of the data subject. The law also enumerates the rights of data subjects (i.e., notice, access, control,
data portability, and the right to be indemnified by PICs for damages arising from the unlawful processing of
personal information) and the obligations of PICs and processors to ensure the privacy, security and integrity
of personal information, including but not limited to a breach notification requirement). More particularly,
the DPA requires PICs to employ reasonable and appropriate organizational, physical and technical measures
to protect the security of personal information. At a minimum, these measures should include: (1) anti-
computer hacking safeguards; (2) a security policy; (3) a process for preventing and mitigating security
breaches; (4) contractual or other reasonable data protection arrangements with third-party contractors; and
(5) the appointment of an information security officer who will ensure the entity's compliance with the DPA.
In addition, the DPA has created the NPC, which is tasked with administering and implementing the
provisions of the law, as well as with monitoring and ensuring compliance with international standards for
data protection.
Under the DPA, personal information may only be processed if: (a) the data subject has given his or her
consent; (b) the processing of personal information is necessary and is related to the fulfillment of a contract
with the data subject or in order to take steps at the request of the data subject prior to entering into a
contract; (c) the processing is necessary for compliance with a legal obligation to which the PIC is subject; (d)
the processing is necessary to protect vitally important interests of the data subject; (e) the processing is
necessary in order to respond to a national emergency, to comply with the requirements of public order and
safety, or to fulfill functions of public authority; or (f) the processing is necessary for the purposes of the
legitimate interests of the PIC or by a third party or parties to whom the data is disclosed.
On the other hand, processing of sensitive personal information is only allowed if: (a) the employee has
given his or her consent; (b) the processing is provided for by existing law, in case the employee's consent is
not required by such law; (c) it is necessary to protect the life and health of the employee or another person,
and the employee is not legally or physically able to express his consent prior to the processing; (d) it is
necessary to achieve the lawful and non-commercial objectives of public organizations and associations,
provided that the same is limited only to their members and prior consent was obtained; (e) it is carried out
by a medical practitioner or a medical treatment institution and necessary for purposes of medical
treatment; (f) it is necessary for the protection of lawful rights and interests of natural or legal persons in
court proceedings, or for the establishment, exercise or defense of legal claims, or when provided to
government or public authority.
The DPA sets forth a detailed schedule of penalties, which include both imprisonment and fines, for
violations of such Act, such as unauthorized processing, accessing due to negligence, improper disposal,
processing for unauthorized purposes, unauthorized access or intentional breach, concealment of security
breaches, malicious disclosure, and unauthorized disclosure of personal information and sensitive personal
information.
On 25 August 2016, the NPC issued the implementing rules and regulations (Rules) of the DPA. The Rules
took effect on 9 September 2016.
In addition to the more general requirements of the DPA on the processing of personal information, the
Rules impose several registration and compliance obligations on covered controllers and processors. The
most important of these obligations are:
Registration of Personal Data Processing Systems. A PIC or a PIP is required to appoint a DPO under the DPA
and the Rules.
Additionally, a PIC or PIP is required to register with the NPC if it is processing personal data in the
Philippines and operating under any of the following conditions:
(a) The PIC or PIP employs at least 250 employees.
(b) The processing includes sensitive personal information of at least 1,000 individuals.
(c) The PIC or PIP belongs to the list of business sectors which the NPC has identified to be covered by
the registration requirement. The NPC's current list include government agencies, banks and
financial institutions, telecommunications networks, BPOs, the academe, hospitals, insurance
companies and brokers, direct marketers and networkers, providers of reward cards and loyalty
programs, pharmaceutical companies engaged in research, PIPs of the foregoing PICs, and operators
of data processing systems involving automated decision-making.
Reportorial Requirements. PICs are required to notify the NPC and affected data subjects of a data breach
within 72 hours from the discovery thereof. In addition, covered entities shall also report to the NPC with a
summary of documented security incidents and data breaches on an annual basis and notify the NPC when
automated processing becomes the sole basis of making decisions about a data subject.
Nature of Consent of Data Subjects. The Rules clarify that in cases not exempt from the consent
requirement, the data subject's consent to the personal information processing should be time-bound in
relation to the purpose of the processing. Data sharing, even between entities belonging to the same
corporate organization, should also have the prior consent of the affected data subjects.
Minimum Security Requirements; Contents of Data Transfer Agreements between Controllers and Processors.
The Rules enumerate the specific minimum organizational, physical and technical requirements that
controllers and processors are required to implement while processing personal information. These security
standards are subject to periodic evaluation and updating by the NPC via subsequent issuances. The Rules
also contain the minimum requirements as to the compliance provisions to be included in any data
processing agreement between PICs and PIPs.
Subsequent to the issuance of the Rules, the NPC also released several circulars and advisories that state the
requirements and guidelines on the following matters: (a) the public sector's compliance with the DPA; (b)
personal data breach management and notification; (c) the NPC's rules on practice and procedure, including
rules for requesting the NPC's advisory opinions; (d) appointment of DPOs and compliance officers for
privacy; (e) registration of data processing systems with the NPC, including a list of the business sectors
covered by the mandatory registration requirement; (f) conduct of privacy impact assessments; (g) security
incident and personal data breach reportorial requirements; (h) annual security incident report templates;
and (i) guidelines on the NPC's conduct of compliance checks which include a privacy sweep, documents
submission, and/or on-site visit.
6.5.7. Minimum security requirements for government cloud service providers
Private entities who will participate as accredited cloud service providers (CSPs) of the Philippine
government are covered by Department of Information and Technology Department Circular No. 2017-
002 on Prescribing the Philippine Government's Cloud First Policy. Data center operators providing cloud
computing services to the government are required to meet international security standards, will be certified
appropriately and will abide by all relevant Philippine laws and industry standards. The circular sets forth the
baseline and optional security controls, and requires that government CSPs provide logical security audit on
data access, including logs and audit trails to ensure the prescribed security and privacy requirements are
met. A Service Level Agreement (SLA) should be in place between the contracting government agency and
CSP. A sample of an SLA is also annexed to the circular.
6.6. Cyber security

The laws that regulate cyber security in the Philippines are as follows:
6.6.1. Access Devices Regulation Act
Republic Act No. 8484 or The Access Devices Regulation Act of 1998 (Access Devices Regulation Act)
defines "access device" as any card, plate, code, account number, electronic serial number, personal
identification number, or other telecommunications service, equipment, or instrumental identifier, or other
means of account access that can be used to obtain money, goods, services, or any other thing of value or to
initiate a transfer of funds (other than a transfer originated solely by paper instrument). This law penalizes
various acts constituting access device fraud and punishes the same with a fine and imprisonment, without
prejudice to any liability under the Revised Penal Code or any other law.
In case of loss of an access device, the holder thereof must notify the issuer of the access device of the
details and circumstances of such loss upon knowledge of the loss. This will absolve the access device holder
of any financial liability from fraudulent use of the access device from the time the loss or theft is reported
to the issuer.
Banks, financing companies, and financial institutions issuing access devices are required to report annually
to the Credit Card Association of the Philippines regarding access device fraud committed against the access
device holders of such entities, which shall then be consolidated and submitted to the National Bureau of
Investigation.
6.6.2. Electronic Commerce Act
Republic Act No. 8792 or the Electronic Commerce Act of 2000 (Electronic Commerce Act), punishes, among
others, hacking or crackling. This refers to unauthorized access into or interference in a computer
system/server or information and communication system; or any access in order to corrupt, alter, steal, or
destroy using a computer or other similar information and communication devices, without the knowledge
and consent of the owner, resulting in the corruption, destruction, alteration, theft or loss of electronic data
messages or electronic documents. Hacking or cracking shall be punished with both a fine and imprisonment.
6.6.3. Cybercrime Act
The Cybercrime Act penalizes by fine and/or imprisonment those offenses against the confidentiality,
integrity and availability of computer data and systems. These cybercrimes include, among others, illegal
access to a computer system, illegal interception of non-public data, intentional or reckless computer data
interference such as the introduction or transmission of viruses, and computer-related identity theft,
without prejudice to any liability for violation of any provision of the Revised Penal Code, as amended, or
special laws.
In addition, if a violation of the Revised Penal Code, and special laws is committed through the use of
information and communications technologies, the penalty to be imposed shall be one (1) degree higher than
that provided for by the Revised Penal Code and special law.
6.6.4. Data Privacy Act
The DPA requires entities dealing in personal data to enact technical security measures to ensure protection
of such data. These measures include: (i) requirement to enact security policy for personal data processing;
(ii) enactment of computer network safeguards; (iii) ensuring confidentiality, integrity, availability, and
resilience of processing systems and services; (iv) regular monitoring for security breaches; (v) ensuring
ability to timely restore the availability and access to personal data in case of physical or technical incidents;
(vi) setup process for regular testing of the effectiveness of security measures; and (vii) encryption of
personal data during storage and, while in transit, authentication process, and other technical security
measures that control and limit access.
XVI. Dispute resolution

1. Legal and judicial system
1.1. Type of legal system
The Philippine legal system is a blend of the Roman civil law and the Anglo-American common law systems.
The civil law system operates in the areas of family relations, property, succession, contracts and criminal law;
while statutes and principles of common law origin are evident in fields such as constitutional law, procedure,
corporation law, negotiable instruments, taxation, insurance, labor relations, and banking laws. Islamic
personal law is recognized and is operative in some parts of Mindanao with the establishment of Shari'ah
courts and the Shari'ah Bar.
1.2. Main sources of law

The main sources of Philippine law are the Constitution, statutes, treaties and conventions, and judicial
decisions. The Constitution is the fundamental law of the land and as such, it is authority of the highest
order against which no law can prevail. Every official action, to be valid, must be in accordance with and
conform to the Constitution. On the other hand, statutes are enactments passed by the Philippine
Legislature. Statutes also include presidential decrees issued during the martial law period, and executive
orders issued by the President under the 1986 Provisional "Freedom" Constitution.
Treaties entered into by the Philippines with other states have the same force of authority as legislative
enactments. Philippine law is also derived from case decisions because the Civil Code provides that "judicial
decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the
Philippines." Only decisions of the Supreme Court, however, establish jurisprudence and are binding on all
other courts.
2. The courts
2.1. Trial courts
At the first level are the Metropolitan Trial Courts (MeTC), Municipal Trial Courts (MTC), the Municipal Trial
Courts in Cities (MTCC), and Municipal Circuit Trial Courts (MCTC). MeTCs are stationed by law in the cities
and municipalities making up the metropolitan areas such as Metro Manila, Cebu and Davao. In cities outside
the metropolitan areas, first level courts are called MTCC. There is an MTC in every municipality, and an
MCTC presides over two or more municipalities grouped into a circuit.
First level courts are essentially trial courts. They try and decide only cases specified by law. These courts
have jurisdiction over cases of ejectment, recovery of personal property with a value of not more than PHP
300,000 (or PHP 400,000 in Metro Manila), cases involving title to or possession of real property where the
assessed value of the property is not more than PHP 20,000 (or PHP 50,000 in Metro Manila), exclusive of
interest, damages of whatever kind, attorney's fees, litigation expenses and costs, the amount of which
must be specifically alleged. These courts also have delegated jurisdiction over cadastral or land registration
cases covering lots where there is no controversy or opposition, or contested lots where the value does not
exceed PHP 100,000.
First level trial courts have also been given jurisdiction over small claims cases, which are defined as actions
for payment of money where the value of the claim does not exceed PHP 300,000 28, exclusive of interest
28
Increased from PHP 200,000 per Office of the Court Administrator OCA Circular No. 165-2018 dated 7 August 2018.
and costs. The action is commenced by filing a statement of claims, in a standard form issued by the
Supreme Court, together with supporting affidavits and documents. No formal pleading is necessary. The
defendant, once summoned, is required to file a response within 10 days from receipt of the summons. The
parties must appear personally, and lawyers are not allowed to appear unless they are the plaintiffs or
defendants. At the hearing, the judge is required to exert efforts to bring the parties to an amicable
settlement. If such efforts fail, the judge shall proceed to hear the case and issue a decision on the same day
as the hearing. The decision is final and executory, and cannot be appealed.
At the second level are the Regional Trial Courts. The Philippines is divided into 13 regions and in each region
there is a Regional Trial Court that may have one or more branches. Like the first level courts, Regional Trial
Courts are trial courts. They are courts of general jurisdiction; they try and decide not only the particular
classes or kinds of cases assigned to them by law, but also those that are not otherwise within the exclusive
jurisdiction of first level courts or any other tribunal. Regional Trial Courts also exercise appellate jurisdiction
over decisions rendered by the first level courts.
Regional Trial Courts have jurisdiction over cases the subject matter of which is incapable of pecuniary
estimation; or those involving title to, or possession of, real property where the assessed value of the
property exceeds PHP 20,000 (or PHP 50,000 in Metro Manila), except cases of ejectment; all actions in
admiralty and maritime jurisdiction where the demand or claim exceeds PHP 300,000 (or PHP 400,000 in
Metro Manila); and those where the demand, exclusive of interest, damages of whatever kind, attorney's
fees, litigation expenses and costs, or the value of the personal property in controversy exceeds PHP
300,000 (or PHP 400,000 in Metro Manila).
2.2. Appellate courts

At the third level is the Court of Appeals. It is essentially an appellate court. While it exercises exclusive
original jurisdiction over actions for annulment of judgments of Regional Trial Courts, the Court of Appeals
principally exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, except
those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution. The
Court of Appeals may review questions of fact or mixed questions of fact and law.
Appeal of decisions rendered by the Regional Trial Courts in the exercise of the latter's original jurisdiction is
a matter of right, but appeal of decisions rendered by the Regional Trial Courts in the exercise of appellate
jurisdiction is a matter of discretion.
The Supreme Court is the highest court of the land. It is the court of last resort, from whose judgment no
appeal lies. It exercises appellate jurisdiction over cases decided by the Court of Appeals and the Regional
Trial Courts. As a general rule, appeals to the Supreme Court are not a matter of right, and only questions of
law may be raised in such appeals. The only exception is with respect to criminal cases where the penalty of
death, 29 reclusion perpetua, or life imprisonment has been imposed by the lower courts. Such cases are
subject to automatic review by the Supreme Court, and both issues of fact and law may be raised.
2.3. Language of the courts

The language used in and by the courts is English (i.e., in hearings, pleadings, court orders and decisions).
Statements made in court in another language are required to be translated to English.
In selected first and second level courts in Quezon City, Makati, Angeles, Iloilo, Davao and Cebu, where
piloting of proposed revisions to the rules on civil procedure on preliminary conference and trial is effective,
29
The imposition of the death penalty has been suspended by Republic Act No. 9346.
witnesses may testify in Filipino without the need for an English translation. Witnesses may also testify in
other dialects or languages, but the same should be quoted in English or Filipino in written court
submissions.
3. Litigation
3.1. Civil cases
3.1.1. Commencing proceedings
A civil action is generally commenced by the filing of a complaint containing a statement of the plaintiff's
cause or causes of action. The complaint is required to contain a certification against forum shopping to the
effect that the plaintiff has not commenced any action or filed any claim involving the same issue(s) in any
court, tribunal or quasi-judicial agency and to the best of his knowledge, no such other action or claim is
pending therein. Failure to comply with this requirement is a ground for dismissal of the case. The filing of
the complaint must also be accompanied by the payment of the prescribed docket fee; otherwise, the trial
court will not acquire jurisdiction over the case.
Unlicensed foreign corporations (i.e., foreign corporations that have not obtained a license from the SEC to
do business in the Philippines) transacting business in the Philippines are not permitted to commence,
maintain or intervene in any court action, suit or proceeding in the Philippines. It bears noting that this rule
does not apply to international arbitration.
Upon the filing of the complaint and the payment of the requisite legal fees, the clerk of court will issue the
corresponding summons to the defendant, together with a copy of the complaint.
When the defendant is a foreign private juridical entity that has transacted business in the Philippines,
service of summons may be made on its resident agent designated in accordance with law for that purpose,
or if there is no such agent, on the government official designated by law to that effect or on any of its
officers or agents within the Philippines. If the foreign private juridical entity is not registered in the
Philippines or has no resident agent, service may, with leave of court, be effected out of the Philippines
through any of the following means:
(a) By personal service through the appropriate court in the foreign country with the assistance of the
Department of Foreign Affairs (DFA)
(b) By publication in a newspaper of general circulation in the country where the defendant may be
found and by serving a copy of the summons and the court order by registered mail at the last
known address of the defendant
(c) By facsimile or any recognized electronic means that can generate proof of service
(d) By such other means as the court may, in its discretion, direct
3.1.2. Piloting of a new system for speedy court trial
The Supreme Court approved the piloting of proposed revisions to the rules on civil procedure on preliminary
conference and trial. The pilot courts are selected first and second level courts in Quezon City, Makati, Angeles,
Iloilo, Davao and Cebu. The proposed rules include use of video-conferencing in the preparation of judicial
affidavits, the preparation of a terms of reference during preliminary conference, giving the court the
discretion to conduct alternate trial (where the parties take turns presenting their witnesses) or face-to-face
trial (where witnesses from contending sides sit face-to-face around a table in a non-adversarial environment,
and answer questions from the court as well as the parties' counsels respecting the factual issues under
consideration).
3.1.3. Default judgment
If the defendant fails to file an answer within the required period, the court may issue an order of default
upon motion of the plaintiff. The court will then proceed to render judgment as the pleading may warrant,
unless the court in its discretion requires the claimant to submit evidence. A judgment rendered against a
party in default must not exceed the amount or be different in kind from that sought in the pleading. The
court may not award unliquidated damages.
The order of default may be set aside, upon motion filed by the party declared in default at any time after
notice and before judgment, by showing that the failure to answer was due to fraud, accident, mistake or
excusable negligence, and that the defaulting party has a meritorious defense.
In any case, the party declared in default is entitled to notice of subsequent proceedings, but may not take
part in the trial.
3.1.4. Summary judgment
A summary judgment, upon motion of either party, is granted by the court for an expeditious settlement of
the case if it appears from the pleadings, affidavits, depositions and admissions that, except as to the
amount of damages, there are no genuine questions or issues of fact involved and that the movant is
entitled to a judgment as a matter of law. Summary judgment may be rendered upon the whole case or only
on parts thereof where some facts appear to be without genuine controversy.
3.1.5. Provisional remedies
3.1.5.1. Preliminary attachment
At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party
may have the property of the adverse party attached as security for the satisfaction of any judgment that
may be recovered in certain cases involving fraud or intent to defraud creditors.
3.1.5.2. Preliminary injunction
A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or
final order, requiring a party or a court, agency or a person to refrain from a particular act or acts. It may also
require the performance of a particular act or acts, in which case it shall be known as a preliminary
mandatory injunction.
If, based on affidavits or on the verified application, it is shown that the applicant may suffer great or
irreparable injury before the matter can be heard on notice, the court may issue a temporary restraining
order before a hearing is conducted.
3.1.5.3. Receivership
One or more receivers may be appointed by the court where the action is pending, or by the Court of
Appeals or the Supreme Court, or a member thereof, in the following cases:
(a) When the applicant has an interest in the property or fund that is the subject of the action or
proceeding, and that such property or fund is in danger of being lost, removed or materially injured
(b) When, in an action for foreclosure, it appears that the property is in danger of being wasted or
dissipated or materially injured, and that its value is probably insufficient to discharge the mortgage
debt, or that the parties have so stipulated in the contract of mortgage
(c) To preserve the property during appeal, or to dispose of it according to the judgment, or to aid
execution when the execution or the judgment obligor refuses to apply his property in satisfaction
of the judgment, or otherwise to carry the judgment into effect
(d) Whenever it is the most convenient and feasible means of preserving, administering or disposing of
the property in litigation
3.1.5.4. Replevin
A party praying for the recovery of possession of personal property may, at the commencement of the
action or at any time before filing an answer, apply for an order for the delivery of such property to him.
3.1.5.5. Support pendente lite
At the commencement of the proper action or proceeding, or at any time prior to the judgment or final
order, a verified application for support pendente lite may be filed by any party, stating the grounds for the
claim and the financial conditions of both parties, and accompanied by affidavits, depositions or other
authentic documents in support thereof.
3.1.6. Discovery/disclosure
It is the duty of each contending party to lay before the court all the material and relevant facts known to
him, suppressing or concealing nothing, nor preventing another party from also presenting all the facts
within his knowledge. As only the ultimate facts are set forth in pleadings, evidentiary matters may be
inquired into and learned by the parties before the trial through the deposition-discovery mechanism.
Refusal to comply with an order for discovery may result in various sanctions against the disobedient party,
including refusal to allow said party to support or oppose designated claims or defenses, prohibiting said
party from introducing in evidence designated documents or things or items of testimony, striking out of
pleadings or parts thereof, dismissal of the action, or rendition of a judgment by default against said party.
However, despite the provisions allowing various types of discovery (e.g., depositions, interrogatories,
requests for admission), resort to such procedures is not prevalent in the Philippine legal system.
3.1.7. Remedies
3.1.7.1. Motion for new trial
Within 15 days from receipt of the decision or judgment, a party may move to set aside the judgment or
final order and grant a new trial for one or more of the following grounds:
(a) Fraud, accident, mistake or excusable negligence that ordinary prudence could not have guarded
against and by reason of which such party has probably been impaired in his rights
(b) Newly discovered evidence, which a party could not, with reasonable diligence, have discovered and
produced at the trial, and which if presented would probably alter the result
3.1.7.2. Motion for reconsideration
Within 15 days from receipt of the decision or judgment, a party may move for reconsideration on the
grounds that the damages awarded are excessive, that the evidence is insufficient to justify the decision or
final order, or that the decision or final order is contrary to law.
If the motion for reconsideration is denied, the movant has a fresh period of 15 days from receipt or notice of
the order denying or dismissing the motion for reconsideration within which to file a notice of appeal.
3.1.7.3. Petition for relief
When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any
court through fraud, accident, mistake or excusable negligence, he may file a petition in such court and in
the same case praying that the judgment, order or proceeding be set aside.
When a judgment or final order is rendered by any court in a case, and a party thereto, by fraud, accident,
mistake or excusable negligence has been prevented from taking an appeal, he may file a petition in such
court and in the same case praying that the appeal be given due course.
The petition shall be filed within 60 days after the petitioner learns of the judgment, final order or other
proceeding to be set aside, and not more than six months after such judgment or final order was entered.
3.1.7.4. Petition for certiorari, prohibition and/or mandamus
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, a
person aggrieved may file a verified petition for the annulment or modification of the proceedings of such
tribunal, board or officer.
When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial,
quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, a person aggrieved may file a verified petition to
require the respondent to desist from further proceedings in the action or matter specified therein.
When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act that
the law specifically enjoins as a duty resulting from an office, trust or station, or unlawfully excludes another
from the use and enjoyment of a right or office to which such other is entitled, the person aggrieved may
file a verified petition to command the respondent to do the act required to be done to protect the rights of
the petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts of the
respondent.
As a rule, the foregoing remedies are available only if there is no appeal, or any plain, speedy and adequate
remedy in the ordinary course of law.
The petition must be filed not later than 60 days from notice of the judgment, order or resolution being
questioned. In case a motion for reconsideration or new trial is timely filed, the petition must be filed not
later than 60 days counted from the notice of the denial of the motion.
3.1.8. Costs
Generally, costs are awarded to the prevailing party, but the court may for special reasons adjudge that
either party pay the costs, or that the same be divided equitably. Attorney's fees and expenses of litigation,
other than judicial costs, are not recoverable in the absence of stipulation, except in specific cases
enumerated in the Civil Code.
3.1.9. Appeals
Appeals from first level courts can only be taken to the proper Regional Trial Courts, that is, the Regional
Trial Court that has territorial jurisdiction over the first level court that rendered the decision. The appeal is a
matter of right and made by filing a Notice of Appeal within 15 days after notice to the appellant of the
judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice
of appeal and a record on appeal within 30 days after notice of the judgment or final order.
The mode of appeal from decisions rendered by the Regional Trial Court depends on several factors (i.e.,
whether the judgment was rendered in its original or appellate jurisdiction and whether the appeal involves
questions of fact and/or law).
When the Regional Trial Court renders a decision in the exercise of its original jurisdiction, the appeal
normally goes to the Court of Appeals. The appeal is a matter of right when questions of fact, or mixed
questions of fact and law, are raised. The appeal is made by the filing of a notice of appeal with the Regional
Trial Court within 15 days from notice of the judgment or final order appealed from. In the event that a
losing party files a motion for new trial or reconsideration within the 15-day period for filing of appeal, the
said party has 15 days from receipt or notice of a denial of the motion within which to file a notice of appeal.
A motion for extension of time to file a motion for new trial or reconsideration is not allowed.
When the judgment to be appealed is rendered by the Regional Trial Court in the exercise of its appellate
jurisdiction, appeal is not a matter of right, regardless of whether only questions of law, of fact, or mixed
questions of fact and law, are involved. It will be given due course by the Court of Appeals only when the
petition shows prima facie that the lower court has committed errors in its conclusions of fact or law that
will warrant reversal or modification of the decision sought to be reviewed. The method of appeal is by
petition for review, which should be filed and served within 15 days from notice of the decision sought to be
reviewed. Upon proper motion and the payment of the full amount of fees before the expiration of the
initial period, the Court of Appeals may grant an additional period of 15 days within which to file the petition
for review. No further extension will be granted except for the most compelling reason, and in no case may
exceed 15 days.
When the judgment to be appealed is rendered by the Regional Trial Court in the exercise of its original (not
appellate) jurisdiction, and the appellant intends to raise only pure questions of law, the appeal from the
Regional Trial Court may be taken directly to the Supreme Court, by petition for review on certiorari. The
appeal, in this instance, is not a matter of right but subject to the discretion of the Supreme Court. The
petition must be filed within 15 days from notice of the judgment or final order appealed from. On motion
duly filed and served, with full payment of fees before the expiration of the reglementary period, the
Supreme Court may, for justifiable reasons, grant an extension of 30 days within which to file the petition.
Appeals from the Court of Appeals are taken to the Supreme Court by petition for review on certiorari, the
appeal being discretionary and generally limited to questions of law. The petition must be filed within 15
days from notice of the judgment or final order appealed from. On motion duly filed and served, with full
payment of fees before the expiration of the reglementary period, the Supreme Court may for justifiable
reasons grant an extension of 30 days within which to file the petition.
3.1.10. Enforcement of judgments
Execution will issue as a matter of right on motion, upon the expiration of the period to appeal. If the appeal
has been duly perfected and finally resolved, execution may be applied for in the court of origin on motion.
By way of exception, the prevailing party may file a motion for execution of a judgment or final order that
has been appealed. Discretionary execution may only issue upon good reasons to be stated in the order after
due notice and hearing.
Judgments in actions for injunction, receivership, accounting and support are immediately executory and are
not stayed by appeal, unless otherwise ordered by the trial court. Moreover, a decision by a first level court
(e.g., Municipal Trial Courts, Metropolitan Trial Courts) against the defendant in an action for ejectment is
executory and can be enforced pending appeal, unless the following requisites have been complied with: (i)
an appeal has been perfected; (ii) defendant posts a sufficient supersedeas bond approved by the first level
court; and (iii) defendant deposits with the appellate court the amount of rent due from time to time.
A final and executory judgment or order may be executed on motion within five years from the date of its
entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be
enforced by action. The revived judgment may also be enforced by motion within five years from the date
of its entry and thereafter by action before it is barred by the statute of limitations.
If a judgment debtor does not comply with the judgment upon demand, judgments may be enforced as
follows:
• Satisfaction by levy, by seizure of sufficient property of the judgment debtor
• Garnishment of debts and credits
• Where a judgment directs a party to perform a specific act, a direction from the court that the act
be done at the cost of the disobedient party
• Where a judgment is for the sale of real or personal property, a direction to a sheriff of the court to
sell such property and apply the proceeds
• Delivery or restitution of real property
• Removal of improvements on property subject to execution through a special order of the court
3.1.11. Recognition of foreign laws
Philippine contract law recognizes the validity of contractual choice of law provisions. However, parties may
not contract away applicable provisions of law, especially provisions dealing with matters heavily impressed
with public interest.
A party whose cause of action or defense depends upon a foreign law has the burden of proving the foreign
law. Such foreign law is treated as a question of fact to be properly pleaded and proved. Otherwise, foreign
law shall be presumed to be the same as Philippine law.
3.1.12. Recognition and enforcement of foreign judgments
A judgment of another state may not be directly enforced in the Philippines. A separate action must be filed
in the Philippines for the foreign judgment to be recognized or enforced. The Philippine courts must be
convinced that there has been opportunity for a full and fair trial abroad before a court of competent
jurisdiction. Moreover, a foreign judgment will not be enforced or recognized when it runs counter to laws
that have for their object public order, public policy and good customs.
In case of a judgment in actions affecting title to or possession of real property or any interest therein, the
judgment is conclusive upon the title to the property. However, in the case of a judgment in personal actions
(e.g., actions against a person for his personal liability), the judgment is merely presumptive evidence of a

right as between the parties and their successors in interest by a subsequent title. In either case, the
judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact.
Comity and reciprocity are also factors to be considered in the recognition and enforcement of a foreign
judgment by a Philippine court. 30
3.2. Criminal cases

3.2.1. Commencing proceedings
A criminal case is generally commenced by the filing of a Complaint (for crimes that do not require a
preliminary investigation 31) or Information (for crimes that undergo preliminary investigation) in the trial
courts (either in the first level courts, second level courts or the Sandiganbayan) depending on the crime
involved).
Within 10 days from the filing of the Complaint or Information, the trial court will evaluate the resolution of
the prosecution and the supporting evidence. If it finds probable cause, a warrant of arrest will be issued
against the accused.
All criminal cases are prosecuted under the direction and control of the public prosecutor. However, a private
prosecutor (e.g., private counsel engaged by the complainant) may be authorized in writing by the Chief of
the Prosecution Office or the Regional State Prosecution to prosecute the criminal case.
3.2.2. Continuous trial of criminal cases
Criminal cases are now subject to the Revised Guidelines for Continuous Trial of Criminal Cases.
The Revised Guidelines seek to streamline the criminal litigation process by introducing several changes to
existing trial procedures. To achieve this objective, the Revised Guidelines has, among others, set out revised
rules on the form and timing of presentation of witnesses, which are expected to impact trial preparation. In
summary, the Revised Guidelines provide:
(a) In criminal cases before first level courts, witness testimonies shall consist of (i) duly subscribed
written statements given to law enforcement officers; or (ii) affidavits or counter-affidavits
submitted during preliminary investigation; or (iii) if (i) and (ii) are not available, judicial affidavits.
(b) In criminal cases before Regional Trial Courts, the Sandiganbayan, and the Court of Tax Appeals, the
form of witness testimonies depends on the nature of the crime involved.
In criminal cases where (i) the demeanor of the witness is not essential in determining the credibility
of the said witness, such as expert witnesses who will testify on the authenticity, due execution,
and contents of public documents or reports; or (ii) in criminal cases that are transactional in
character such as falsification, malversation, or estafa, or other crimes where the culpability or
innocence of the accused can be established through documents, the testimonies of the witnesses
shall be the duly subscribed written statements given to law enforcement officers or the affidavits
or counter-affidavits submitted during preliminary investigation, or if these are not available,
judicial affidavits.
30
Marcos, Jr. v. Republic of the Philippines, G.R. No. 189434, 12 March 2014.
31
Preliminary investigation "is an inquiry or proceeding to determine whether there is sufficient ground to engender a
well-founded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held
for trial" (Rule 112, Section 1, Rules of Court).

In all other cases where the culpability or innocence of the accused is based on the testimonies of
eyewitnesses, the testimonies of these witnesses shall be in oral form.
(c) Trial dates shall be scheduled one day apart.
(d) The Revised Guidelines provide that courts should strictly enforce the rule that each witness shall be
fully examined in one day, although in practice, courts tend to relax this requirement on a case-to-
case basis.
3.2.3. Judgment
Judgment should be written in the official language (i.e., English), personally and directly prepared by the
judge, signed by him, and shall clearly and distinctly state therein the statement of facts and the law upon
which the judgment is based.
The judgment is promulgated by reading it in the presence of the accused and any judge of the court in
which it was rendered. The court promulgating the judgment shall have authority to accept the notice of
appeal and to approve the bail bond pending appeal.
3.2.4. Remedies
3.2.4.1. Motion for new trial
Within 15 days from promulgation of a judgment of conviction, the court may, on motion of the accused or
at its own instance but with the consent of the accused, grant a new trial for one or more of the following
grounds:
(a) That errors of law or irregularities prejudicial to the substantial rights of the accused have been
committed during the trial.
(b) That new and material evidence has been discovered, which the accused could not with reasonable
diligence have discovered and produced at the trial, and which if introduced and admitted would
probably change the judgement.
3.2.4.2. Motion for reconsideration
Within 15 days from receipt of the decision or judgment, a party may move for reconsideration on the
ground of errors of law or fact in the judgment, which requires no further proceedings.
3.2.4.3. Petition for certiorari, prohibition and mandamus
The remedies of petition for certiorari, prohibition and mandamus discussed in paragraph 3.1.7.4 above are
also available in criminal cases, provided that there is no appeal, or any plain, speedy and adequate remedy
in the ordinary course of law.
The petition must be filed not later than 60 days from notice of the judgment, order or resolution being
questioned. In case a motion for reconsideration or new trial is timely filed, the petition must be filed not
later than 60 days counted from the notice of the denial of the motion.
3.2.5. Appeals
Any party may appeal from a judgment or final order unless the accused will be placed in double jeopardy.
Appeals from a first level court can only be taken to the proper second level court that has territorial
jurisdiction over the first level court that rendered the decision. The appeal is a matter of right and is made

by filing a Notice of Appeal with the court that rendered the judgment or final order appealed from within
15 days from promulgation of judgement.
Appeals from second level courts to the Court of Appeals is not a matter of right and are made by filing a
Petition for Review within 15 days from receipt of the adverse decision.
Appeals from the Court of Appeals are taken to the Supreme Court by petition for review on certiorari, the
appeal being discretionary and generally limited to questions of law. The petition must be filed within 15
days from notice of the judgment or final order appealed from. On motion duly filed and served, with full
payment of fees before the expiration of the reglementary period, the Supreme Court may for justifiable
reasons grant an extension of 30 days within which to file the petition.
When the judgment to be appealed is rendered by the Regional Trial Court in the exercise of its original (not
appellate) jurisdiction, and the appellant intends to raise only pure questions of law, the appeal from the
Regional Trial Court may be taken directly to the Supreme Court, by petition for review on certiorari. The
appeal, in this instance, is not a matter of right but subject to the discretion of the Supreme Court. The
petition must be filed within 15 days from notice of the judgment or final order appealed from. On motion
duly filed and served, with full payment of fees before the expiration of the reglementary period, the
Supreme Court may, for justifiable reasons, grant an extension of 30 days within which to file the petition.
4. Arbitration
Parties have the option to resort to arbitration in resolving their disputes in the Philippines.
All types of commercial disputes may be referred to arbitration. The word "commercial" is broadly defined as
"matters arising from all relationships of a commercial nature, whether contractual or not."
The following disputes may not be submitted to commercial arbitration: (a) labor disputes covered by
Presidential Decree No. 442 (PD 442), otherwise known as the Labor Code, as amended, and its
Implementing Rules and Regulations; (b) the civil status of persons; (c) the validity of a marriage; (d) any
ground for legal separation (of married persons); (e) the jurisdiction of courts; (f) future legitime; (g) criminal
liability; and (h) those disputes that by law cannot be compromised.
4.1. Advantages of arbitration compared with court litigation

Arbitration, which is steadily growing in popularity as an alternative mode of dispute resolution, may be
more attractive than court litigation for several reasons.
4.1.1. Speed
Despite the efforts of the Supreme Court to streamline the judiciary, the dockets of Philippine courts remain
clogged. Consequently, it usually takes several years for the trial courts to hear and resolve cases filed with
them. In contrast, disputes submitted to arbitration are relatively more speedily resolved, as parties may
choose arbitrators whose schedules can accommodate the long hours necessary to hear and decide a case.
4.1.2. Flexibility of the rules
Foreign investors who are not familiar with local court procedures may prefer a more neutral process.
Arbitration allows the parties to choose or craft the rules that will govern the arbitration proceedings. Since
the procedure is mutually agreed upon, the parties have more faith in the integrity of the process. Also, the
parties need not be bound by the strict rules of evidence.

4.1.3. Choice of arbitrators
The parties are generally free to choose the arbitrators who will resolve their disputes, subject to the
requirement that the chosen arbitrators are impartial and independent. In many cases, parties appoint
experienced professionals or individuals with the relevant expertise as arbitrators. The ability to choose the
arbitrator(s) is especially attractive to a foreign party who may harbor reservations about the neutrality of a
"home court" judge.
4.1.4. Finality of the award
Unlike court decisions, arbitral awards in commercial arbitration are generally final and unappealable. An
arbitral award can be refused enforcement on limited grounds.
4.1.5. Confidentiality
Whereas court proceedings are open to the public, arbitration proceedings are generally private and
confidential. Documents and information disclosed in arbitration proceedings, including witness statements
made in the course of arbitral proceedings, 32 are generally confidential and may be disclosed to third parties
only under exceptional circumstances.
4.2. Arbitration as a contract

An agreement to arbitrate is a contract, the relation of the parties is contractual, and the rights and liabilities
of the parties are controlled by the law of contracts. As a general rule, there can be no arbitration unless the
parties agree to submit their dispute to arbitration. If there is no agreement to submit a dispute to
arbitration, the remedy of the aggrieved party is to file a case in court. An aggrieved party cannot compel
the other party to arbitrate. When there is an agreement to arbitrate, the same can take effect only between
the parties, their assigns and heirs. Thus, as a general rule, a corporation's representative who did not
personally bind himself to an arbitration agreement cannot be forced to participate in arbitration
proceedings made pursuant to an agreement entered into by the corporation. 33 However, corporate
representatives may be compelled to submit to arbitration proceedings pursuant to a contract entered into
by the corporation they represent if there are allegations of bad faith or malice in their acts representing the
corporation in order to determine if the distinction between the personality of the corporation and the
personalities of its representatives should be disregarded. 34
Philippine law recognizes the principle of separability of arbitration contracts. An arbitration agreement that
forms part of the main contract shall not be regarded as invalid or non-existent just because the main
contract is invalid or did not come into existence, since the arbitration agreement shall be treated as a
separate agreement independent of the main contract. 35 In PEZA v. Edison (Bataan) Cogeneration
Corporation, 36 the Supreme Court further held that "the invalidity of the main contract, also referred to as
the 'container' contract, does not affect the validity of the arbitration agreement."
The right to refer a dispute to arbitration can be waived by estoppel. 37
32
See Federal Express Corp. v. Airfreight 2100, Inc., G.R. No. 216600, 21 November 2016.
33
See Aboitiz Transport System v. Carlos A. Gothong Lines, G.R. No. 198226, 18 July 2014.
34
Lanuza v. BF Corporation, G.R. No. 174938, 1 October 2014.
35
Cargill Philippines, Inc. v. San Fernando Regala Trading, Inc., G.R. No. 175404, 31 January 2011.
36
G.R. No. 179537, 23 October 2009.
37
Benguet Corporation v. Department of Environment and Natural Resources – Mines Adjudication Board, et al., G.R. No.
163101, 13 February 2008.

4.3. Arbitration law

The following laws govern arbitration in the Philippines: Republic Act No. 876 (Arbitration Law), Republic Act
No. 9285 (Alternative Dispute Resolution Act of 2004 or ADR Act), Implementing Rules and Regulations of
the ADR Act (ADR Act IRR), Executive Order No. 1008 (Construction Industry Arbitration Law), and the
Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules).
The Office for Alternative Dispute Resolution, the government agency tasked to promote ADR in the
Philippines, has recently released its proposed amendments to the ADR Act.
4.3.1. International arbitration
International commercial arbitrations seated 38 in the Philippines are governed by the Model Law on
International Commercial Arbitration adopted by the United Nations Commission on International Trade Law
on 21 June 1985 (United Nations Document A/40/17).
Arbitration is considered international under any of the following circumstances:
(a) The parties to an arbitration agreement have, at the time of the conclusion of such agreement, their
places of business in different countries.
(b) One of the following places is situated outside the state in which the parties have their places of
business:
(i) the place of arbitration determined in or pursuant to the arbitration agreement
(ii) any place where a substantial part of the obligations of the commercial relationship is to be
performed or the place with which the subject matter of the dispute is most closely
connected
(c) The parties have expressly agreed that the subject matter of the arbitration agreement relates to
more than one country.
4.3.2. Domestic arbitration
The Arbitration Law, as amended by the ADR Act, applies to domestic arbitrations. "Domestic arbitration" is
defined as arbitration that is not international. Thus, if the dispute is between parties who have their place
of business in the Philippines, the place of arbitration is the Philippines, their obligations are to be performed
in the Philippines, and there is no stipulation in the arbitration agreement that the subject matter of the
arbitration agreement relates to another country, the arbitration will be considered domestic.
4.3.3. Construction arbitration
The arbitration of construction disputes is governed by the Constitution Industry Arbitration Law. The CIAC
has original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into
38
These are the instances when the Philippines is chosen as the place or seat of arbitration. The place or seat of
arbitration is the legal or juridical home (or domicile) of the arbitration, the choice of which results in a number of highly
significant legal consequences as it determines the (a) the national arbitration legislation applicable to the arbitration; (b)
the law applicable to the "external" relationship between the arbitration and national law and courts (including
annulment of awards and selection and removal of arbitrators); (c) the law applicable to the "internal" procedures of the
arbitration (including requirements for equality of treatment and due process); and (d) the law presumptively applicable
to the substantive validity of the arbitration agreement. (GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION, (2014), 2051)

by parties involved in construction in the Philippines; all that is needed for the CIAC to acquire jurisdiction is
for the parties to agree to submit the same to arbitration.
The Philippine Supreme Court has held that "as long as the parties agree to submit their dispute to voluntary
arbitration, regardless of what forum they may choose, their agreement will fall within the jurisdiction of the
CIAC, such that, even if they specifically choose another forum, the parties will not be precluded from
electing to submit their dispute before the CIAC because this right has been vested by law." 39 The agreement
to submit a construction dispute to arbitration need not be contained in a signed and finalized construction
contract, as long as it is in writing. 40
In Ibex International, Inc. v. GSIS, et al., 41 the Supreme Court held: "The CIAC is the duly constituted quasi-
judicial agency accorded with jurisdiction to resolve disputes arising from construction contracts in the
Philippines. This Court must confer finality to its factual findings as they are supported by evidence."
On average, proceedings in the CIAC take around six months.
4.4. Role of the courts in arbitration

The Special ADR Rules define the role of the courts in relation to arbitration proceedings, including: challenge
to the existence, validity and enforceability of arbitration agreements; referral to arbitration; interim
measures of protection; appointment, challenge and termination of arbitrators; assistance in taking evidence;
confidentiality/protective orders; confirmation, correction or vacation of awards in domestic arbitration;
recognition and enforcement or setting aside of international commercial arbitration awards; recognition and
enforcement of foreign arbitral awards; and appeals to the Court of Appeals and the Supreme Court. The
Special ADR Rules reiterate the state policy of promoting arbitration.
In BCDA v. DMCI Project Developers, Inc., 42 the Philippine Supreme Court held that in interpreting arbitration
agreements, courts should render effective an arbitration clause if the terms of the agreement allow for such
interpretation.
4.5. Arbitral institutions

Several arbitral institutions have been established in the Philippines, similar to those of the International
Chamber of Commerce, Hong Kong International Arbitration Center and the Singapore International
Arbitration Center. The leading commercial arbitration center in the Philippines is the Philippine Dispute
Resolution Center, Inc. (PDRCI).
The PDRCI is a non-stock, non-profit organization incorporated in 1996 out of the Arbitration Committee of
the Philippine Chamber of Commerce and Industry. It was formed for the purpose of promoting and
encouraging the use of arbitration as an alternative mode of settling commercial transaction disputes and
providing dispute resolution services to the business community. PDRCI's membership includes prominent
lawyers and members of the judiciary, academicians, arbitrators, bankers, accountants, engineers, architects
and businessmen. The average duration of arbitral proceedings at the PDRCI is around one year.
PDRCI amended its Rules of Arbitration and Guidelines on Fees on 1 January 2015. The revised rules contain
new provisions on joinder of additional parties, consolidation of arbitrations, appointment of emergency
arbitrator and expedited procedure, among others.
39
National Irrigation Administration v. Court of Appeals, G.R. No. 129169, 17 November 1999.
40
Federal Builders, Inc, v. Power Factors, Inc., G.R. No. 211504, 8 March 2017.
41
G.R. No. 162095, 12 October 2009.
42
G.R. Nos. 173137 & 173170, 11 January 2016.

4.6. Ad hoc arbitration

There is no prohibition in the Philippines regarding the conduct of ad hoc arbitrations in accordance with the
existing policy in favor of arbitration.
4.7. Enforcement of awards

The Philippines is a party to the New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards 1958. An action for the recognition and/or enforcement of a foreign arbitral award must be
filed with the proper Regional Trial Court and a copy of the award and the original agreement must likewise
be submitted. If the said award or agreement is not made in an official language of the Philippines, the
party-applicant shall produce a translation of the documents into the official language. The translation shall
be certified by an official or sworn translator or by a diplomatic or consular agent.
The Special ADR Rules provide rules for the confirmation of awards in domestic arbitration, as well as the
recognition/enforcement of international commercial arbitration awards and foreign arbitral awards.
4.8. Challenging awards

The grounds to set aside arbitral awards are limited. Generally, awards may only be challenged on the basis
of due process and procedural grounds, and not on questions of facts or law affecting the merits of the
award.
The following are the grounds to challenge awards in international arbitrations:
(a) A party to the arbitration agreement was under some incapacity, or the said agreement is not valid
under the law to which the parties have subjected it, or failing any indication thereof, under
Philippine law.
(b) The party making the application to set aside or resist enforcement was not given proper notice of
the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present
his or her case.
(c) The award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or contains decisions on matters beyond the scope of the submission to
arbitration; provided that if the decisions on matters submitted to arbitration can be separated
from those not so submitted, only that part of the award that contains decisions on matters not
submitted to arbitration may be set aside or only that part of the award that contains decisions on
matters submitted to arbitration may be enforced.
(d) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was in conflict with a provision of Philippine law
from which the parties cannot derogate, or failing such agreement, was not in accordance with
Philippine law.
(e) The subject-matter of the dispute is not capable of settlement by arbitration under the law of the
Philippines.
(f) The recognition or enforcement of the award would be contrary to public policy.
An additional ground for opposing recognition/enforcement is that "the award has not yet become binding
on the parties or has been set aside or suspended by a court of the country in which that award was made."

In Tuna Processing Inc. v. Philippine Kingford, Inc., 43 the Philippine Supreme Court held that an arbitral award
cannot be set aside or refused enforcement on the basis of the rule in court litigation that "an unlicensed
foreign corporation doing business in the Philippines has no capacity to sue in Philippine courts."
In Fruehauf Electronics Philippines Corp. v. Technology Electronics Assembly and Management Pacific Corp., 44
the Philippine Supreme Court held that the only remedy against a final domestic arbitral award is to file a
petition to vacate or to modify/correct the award not later than 30 days from the receipt of the award.
Unless a ground to vacate has been established, the court must confirm the arbitral award as a matter of
course.
Domestic arbitral awards may be vacated on any of the following grounds:
(a) The arbitral award was procured through corruption, fraud or other undue means.
(b) There was evident partiality or corruption in the arbitral tribunal or any of its members.
(c) The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially
prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause
shown or to hear evidence pertinent and material to the controversy.
(d) One or more of the arbitrators was disqualified to act as such under the law and willfully refrained
from disclosing such disqualification.
(e) The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete,
final and definite award upon the subject matter submitted to them was not made.
(f) The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract
or is otherwise unenforceable.
(g) A party to arbitration is a minor or a person judicially declared to be incompetent.
5. Other modes of alternative dispute resolution

There have been increased efforts in recent years to institutionalize alternative dispute resolution (ADR) in
the Philippine legal system to aid in the speedy administration of justice.
5.1. Court-annexed ADR

5.1.1. Court-annexed mediation
Beginning in 2001, the Supreme Court, in the exercise of its supervisory and regulatory powers over the
Philippine judicial system, implemented, initially on a trial basis, the requirement for the conduct of
mediation for certain cases commenced before the courts. In 2011, the Supreme Court expanded the cases
covered by the court-annexed mediation (CAM) scheme. The following cases are currently covered by the
rule on CAM:
(a) All civil cases and the civil liability of criminal cases covered by the Rules on Summary Procedure,
including civil liability for violation of the Bouncing Checks Law
(b) Special proceedings for the settlement of estates
43
G.R. No. 185582, 29 February 2012.
44
G.R. No. 204197, 23 November 2016.

(c) All civil and criminal cases requiring a certificate to file action under the Revised Katarungang
Pambarangay Law
(d) The civil aspect of quasi-offenses under the Revised Penal Code
(e) The civil aspect of less grave felonies not exceeding six years of imprisonment where the offended
party is a private person
(f) Civil aspects of estafa (swindling), theft and libel
(g) All civil cases and probate proceedings brought on appeal from the first-level courts
(h) All cases of forcible entry and unlawful detainer brought on appeal from the first-level courts
(i) All civil cases involving title or possession of real property or interest therein brought on appeal
from first-level courts
(j) Habeas corpus cases brought up on appeal from the first-level courts
The following cases are not proper subject of CAM:
(a) Civil cases that by law cannot be compromised
(b) Other criminal cases not covered by numbers 3 to 6 above
(c) Habeas corpus petitions
(d) All cases under the Violence Against Women and Children Act
(e) Cases with pending applications for restraining orders or preliminary injunctions
The court before which a case was filed involving any of the aforementioned disputes calls the parties to a
conference before a mediator appointed by the trial court from the list provided by the Supreme Court.
During the mediation period, the court orders the suspension of the proceedings before it for 30 days.
Individual parties are required to personally appear for mediation unless they send a representative who is
fully authorized to appear, negotiate and enter into a compromise, through a special power of attorney.
Corporations, partnerships or other juridical entities shall be represented by a ranking corporate officer fully
authorized by a board resolution to offer, negotiate, accept, decide and enter into a compromise agreement,
without need of further approval by or notification to the authorizing party.
If a settlement is reached, the compromise agreement entered into between the parties is submitted to the
court and serves as basis for the rendition of a judgment by compromise that may be enforced by execution.
Otherwise, the case is returned to the court.
Any and all matters discussed or communications made and documents presented during the mediation
proceedings are privileged and confidential and inadmissible as evidence for any purpose in any other
proceedings.
The period during which the case is undergoing mediation or conciliation are excluded from the regular and
mandatory periods for trial and rendition of judgment in ordinary cases, as well as in cases under summary
procedure.
5.1.2. Judicial dispute resolution
Judicial dispute resolution (JDR) is governed by A.M. No. 11-1-6 SC-PHILJA and was promulgated to give
effect to the state policy under the ADR Act to actively promote the use of ADR as an important means to

achieve speedy and impartial justice and de-clog court dockets. Together with CAM, JDR is intended to put
an end to pending litigation through a compromise agreement and help unclog court dockets in the country.
Cases covered by CAM are also subject to JDR.
Judicial proceedings covered by JDR are divided into two stages: (1) from the filing of the complaint to the
conduct of CAM and JDR; and (2) pre-trial proper to trial and judgment. The judge to whom the case had
been originally assigned is referred to as the JDR judge, who presides over the first stage. Another judge,
called the trial judge, presides over the second stage. At the initial stage of the preliminary conference, the
JDR judge briefs the parties on CAM and JDR. Upon failing to secure a settlement of the dispute during CAM,
a second attempt to arrive at a compromise agreement is made through JDR. The JDR judge facilitates the
settlement discussions between the parties and tries to reconcile their differences, assesses the relative
strengths and weaknesses of each party's case, and makes a non-binding and impartial evaluation of the
chances of each party's success in the case. On the basis of this neutral evaluation, the judge seeks to
persuade the parties to a fair and mutually acceptable settlement of their dispute. The JDR judge may not
preside over the trial of the case if the parties do not settle their dispute at JDR.
To complete the JDR process, judges of the first level courts shall have a period of not exceeding 30 days,
while judges of the second level courts shall have a period of not exceeding 60 days. A longer period,
however, may be granted upon the discretion of the JDR judge if there is a high probability of settlement
and upon joint written motion of the parties. Both periods shall be computed from the date when the
parties first appeared for JDR proceedings, as directed in the respective orders issued by the judge.
If full settlement of the dispute is reached within 30 days (in the first level court) or 60 days (in the second
level court), the parties, assisted by their respective counsels, shall draft a compromise agreement, which
shall be submitted to the court for a judgment upon compromise, enforceable by execution. Only upon
failure of the JDR will parties proceed to trial proper, when the case is turned over to the trial judge.
Any and all matters discussed or communications made, including requests for mediation, and documents
presented during the JDR proceedings before the trial judge, are privileged and confidential and inadmissible
as evidence for any purpose in any other proceedings. Further, the JDR judge may not pass any information
obtained in the course of conciliation and early neutral evaluation to the trial judge or to any other person.
5.1.3. Philippine Mediation Center - Appeals Court Mediation
At the Court of Appeals level, cases covered by CAM and JDR that have not been settled and went to trial
must be referred to the Philippine Mediation Center - Appeals Court Mediation unit for mediation.
5.2. Commercial ADR

The ADR Act, without limiting the modes of ADR that the parties can avail of, provide for, in addition to
arbitration, the following modes of ADR:
5.2.1. Mediation
Mediation is a voluntary process in which a mediator, selected by the disputing parties, facilitates
communication and negotiation, and assists the parties in reaching a voluntary agreement regarding a
dispute. Information obtained through mediation is privileged and confidential. A party, a mediator or a non-
party participant may refuse to disclose and may prevent any other person from disclosing a mediation
communication.
A mediated settlement agreement may be deposited with the appropriate clerk of a Regional Trial Court of
the place where one of the parties resides. Where there is a need to enforce the settlement agreement, a
petition may be filed by any of the parties with the same court. Pursuant to the Special ADR Rules, after a

summary hearing, if the court finds that the agreement is a valid mediated settlement agreement, that there
is no merit in any of the affirmative or negative defenses raised, and the respondent has breached that
agreement, in whole or in part, the court shall order the enforcement thereof; otherwise, it shall dismiss the
petition.
The parties may agree in the settlement agreement that the mediator shall become a sole arbitrator for the
dispute and shall treat the settlement agreement as an arbitral award that shall be subject to enforcement.
5.2.2. Early neutral evaluation
Early neutral evaluation is an ADR process wherein parties and their lawyers are brought together early in
the pre-trial phase to present summaries of their cases and to receive a non-binding assessment by an
experienced neutral person with expertise in the subject matter or substance of the dispute.
All papers and written presentations communicated to the neutral third person, including any paper
prepared by a party to be communicated to the neutral third person or to the other party as part of the
dispute resolution process, and the neutral third person's written non-binding assessment or evaluation, shall
be treated as confidential.
The proceedings are governed by the rules and procedure agreed upon by the parties. By default, the ADR
Act IRR shall govern.
5.2.3. Mediation-Arbitration or Med-Arb
Med-Arb is a two-step dispute resolution process involving mediation and then followed by arbitration. It is
governed by the rules and procedure agreed upon by the parties. Otherwise, the ADR Act IRR shall govern.
As a general rule, a mediator may not act as an arbitrator in respect of the same dispute, or vice-versa.
5.2.4. Mini-trial
Mini-trial is a structured dispute resolution method in which the merits of a case are argued before a panel
composed of senior decision-makers, with or without the assistance of a neutral third person, before which
the parties seek a negotiated settlement. It shall be governed by the rules and procedure agreed upon by
the parties. Otherwise, the ADR Act IRR shall govern.

XVII. Insolvency in the Philippines
1. Overview and introduction to the jurisdiction / applicable legislation
There are three types of remedies available to a financially distressed individual or juridical person:
suspension of payments (only available to individuals), corporate rehabilitation (voluntary/involuntary, pre-
negotiated, or out-of-court or informal restructuring agreements) and liquidation. The applicable laws and
regulations are the Civil Code, the Financial Rehabilitation and Insolvency Act (FRIA), Presidential Decree No.
902-A (PD 902-A), 45 the Financial Rehabilitation Rules of Procedure (Financial Rehabilitation Rules), 46 and
the Financial Liquidation and Suspension of Payments Rules for Procedure for Insolvent Debtors (FLSP
Rules). 47 The type of proceeding that applies to a debtor depends on the particular relief sought.
The FRIA became effective on 31 August 2010. It provides for a more comprehensive framework for
rehabilitation and liquidation of debtors, whether corporate or individual. More importantly, the FRIA has
made available to partnerships and individuals the benefits of rehabilitation proceedings. This is
advantageous for small businesses as they are more commonly formed as partnerships or individual
enterprises. However, banks, insurance companies and pre-need companies, and national and local
government agencies or units are not covered under the FRIA.
On 27 August 2013, the Supreme Court promulgated the Financial Rehabilitation Rules, which provide for the
procedure governing rehabilitation proceedings under the FRIA. On 21 April 2015, the Supreme Court also
promulgated the FLSP Rules, which provide for the procedure governing liquidation proceedings of insolvent
juridical and individual debtors and suspension of payments of insolvent individual debtors under the FRIA.
On 21 June 2016, the Supreme Court expanded the coverage of the current Special Commercial Courts to
include cases governed by the FRIA. 48 On 5 October 2016, the Supreme Court also issued the schedule of legal
fees for proceedings under the FRIA. 49
If what is sought is merely a little financial breathing space, then the remedy is a suspension of payments,
which provides for the deferment of payments and temporary protection against actions / executions by
unsecured creditors. If, on the other hand, the rehabilitation of a company entails more radical measures,
such as changes in organization, management and/or strategy, and requires temporary protection against
both secured and unsecured creditors, then the remedy is to seek corporate rehabilitation. Finally, if the
debtor company has become insolvent and incapable of being rehabilitated, it may apply for liquidation and
have its assets distributed accordingly among its creditors. In all cases under the FRIA, the debtor shall be
insolvent or is generally unable to pay its or his liabilities as they fall due in the ordinary course of business
or has liabilities that are greater than its or his assets.
Each of these remedies is discussed in more detail below.
45
After the promulgation of Republic Act 8799 or the Securities Regulation Code, jurisdiction over petitions of
corporations, partnerships or associations to be declared in the state of suspension of payments was transferred from
the SEC to the Regional Trial Court. The SEC, however, retained jurisdiction over pending suspension of payments and
rehabilitation cases filed as of 30 June 2000 until final disposition of such cases.
46
Supreme Court Administrative Matter No 12-12-11.
47
Supreme Court Administrative Matter No. 15-04-06-SC.
48
49

2. Proceedings for solvent debtors (individuals or corporations)

2.1. Suspension of payments
An individual debtor who possesses sufficient property to cover all of his or her debts, but foresees the
impossibility of meeting them when they respectively fall due, may file a petition with a Philippine Regional
Trial Court (Court) to be declared in a state of suspension of payments. The petition must be filed with the
Court of the place where the debtor has resided at least six months prior to the filing of the petition.
2.1.1. Action on the petition for suspension of payments
If the Court finds the petition for suspension of payments sufficient in form and substance, it will issue an
order:
(a) Calling a meeting of all the creditors named in the schedule of debts and liabilities (Creditors'
Meeting)
(b) Directing such creditors to prepare and present written evidence of their claims before the
Creditors' Meeting
(c) Directing the publication of the said Order in a newspaper of general circulation
(d) Directing the clerk of court to cause the sending of a copy of the Order to all creditors named in the
schedule of debts and liabilities
(e) Forbidding the individual debtor from selling, transferring, encumbering or disposing of in any
manner his or her property, except those used in the ordinary operations of commerce or of
industry in which the petitioning individual debtor is engaged, so long as the proceedings relative to
the suspension of payments are pending
(f) Prohibiting the individual debtor from making any payment outside of the necessary or legitimate
expenses of his or her business or industry, so long as the proceedings relative to the suspension of
payments are pending
(g) Appointing a commissioner to preside over the Creditors' Meeting.
2.1.2. Actions suspended
Upon motion filed by the individual debtor, the Court may issue an order suspending any pending execution
against the individual debtor, provided that properties held as security by secured creditors will not be the
subject of such suspension order.
A creditor may not sue or institute proceedings to collect his or her claim from the debtor from the time of
the filing of the petition for suspension of payments and for as long as proceedings remain pending, except
for the following:
(a) Creditors having claims for personal labor, maintenance, expense of last illness and funeral of the
wife or children of the debtor incurred in the 60 days immediately prior to the filing of the petition
(b) Secured creditors
2.1.3. Agreement for suspension of payments
The petition for suspension of payments must include a statement of the debtor's assets and liabilities, and
the debtor's proposed agreement with the creditors for the suspension of payments. The presence of

creditors holding claims amounting to at least three-fifths of the liabilities is necessary for holding a
Creditors' Meeting. The proposed agreement must be approved by two-thirds of the creditors representing
at least three-fifths of the debtor's total liabilities. The proposed agreement will be deemed rejected if the
number of creditors required for holding a Creditors' Meeting is not attained, or if the required vote is not
achieved. In such instances, the proceeding will be terminated and the creditors may enforce their respective
credits.
If the required vote is achieved without any objection from the creditors, or the decision of the majority of
the creditors to approve the proposed agreement or any amendment thereof made during the Creditors'
Meeting is upheld by the Court, the latter will issue an order that the proposed agreement be carried out,
and such agreement shall be binding on all creditors that have been properly summoned and included in the
schedule of debts and liabilities. However, the agreement will not be binding upon those creditors
mentioned in 2.1.2. (a) and (b) above.
If the required vote is achieved but there is an objection from any of the creditors, the Court will conduct a
hearing on the objection. If the objection is found to be meritorious, the proceeding will terminate. If the
objection is found to be unmeritorious, the Court will proceed as though no objection has been made.
The amount of the debts of the debtor is not affected by a suspension of payments. However, the payment
for such debts is delayed.
2.1.4. Objections to the debtor's proposed agreement
The possible grounds for objecting to the proposed agreement are the following:
(a) Defects in the call for the meeting of the creditors, in the holding thereof, and in the deliberations
thereat, which prejudice the rights of the creditors
(b) Fraudulent connivance between one or more creditors and the debtor to vote in favor of the
proposed agreement
(c) Fraudulent conveyance of claims for the purpose of obtaining the required majority
If the debtor fails wholly or in part to perform the Court-approved agreement, the rights that the creditors
had against the debtor before the agreement shall re-vest in them. In such case, the individual debtor may
be made subject to the insolvency proceedings in the manner established by the FRIA.
2.2. Court-supervised rehabilitation

Some of the salient provisions of the FRIA on court-supervised rehabilitation are as follows:
(a) Under the FRIA, obligations incurred after the commencement date 50 to finance the rehabilitation of
the debtor are considered administrative expenses. Thus, these obligations can be paid in the
ordinary course of business during the rehabilitation period and enjoy priority in preference of
credits. This provision improves creditor rights for creditors coming in during rehabilitation. By way
of comparison, under the Rules on Corporate Rehabilitation, a stay order directs the payment of
new loans or other forms of credit accommodations obtained for the rehabilitation of the debtor
only with prior court approval.
50
Under the FRIA, the commencement date refers to the date on which the court issues the commencement order, which
shall be retroactive to the date of filing of the petition for voluntary/involuntary proceedings.

(b) The FRIA also provides for a waiver of taxes and fees due to the government (national and local)
upon issuance of the commencement order by the court and until approval of the rehabilitation plan
or dismissal of the petition, whichever is earlier.
(c) The duration of a stay order extends from the issuance of the commencement order until the
termination of the proceedings, unlike before where the stay order was effective only until the
approval of the rehabilitation plan.
(d) Compensation of employees required to carry on the business shall be considered an administrative
expense. Claims for salary and separation pay for work performed after the commencement date
shall also be an administrative expense. However, claims of separation pay for months worked prior
to the commencement date shall be considered a pre-commencement claim.
(e) The FRIA provides further clarifications on the treatment of contracts. Under the FRIA, unless
cancelled by a final judgment of a court of competent jurisdiction issued prior to the issuance of the
commencement order, or at any time thereafter by the court before which the rehabilitation
proceedings are pending, all valid and subsisting contracts of the debtor with creditors and other
third parties as at the commencement date shall continue in force, provided that within 90 days
following the issuance of the commencement order, the debtor, with the written consent of the
rehabilitation receiver, must notify in writing each contractual counter-party whether it is
confirming the particular contract. Contractual obligations of the debtor arising or performed during
this period, and afterwards for confirmed contracts, are considered administrative expenses.
Contracts not confirmed within the required deadline shall be considered terminated. Claims for
actual damages, if any, arising as a result of the election to terminate a contract shall be considered
pre-commencement claims against the debtor, to be filed with the rehabilitation court as a separate
claim. The claim will be considered in the rehabilitation plan with the other claims against the
debtor. The provisions of the FRIA do not prevent the cancellation or termination of any contract of
the debtor for any ground provided by law.
(f) The ability of the debtor's directors or officers to dispose of the debtor's assets is restricted.
Directors or officers may be held liable for double the value of the property involved if having
notice of the commencement of the proceedings under the FRIA, or having reason to believe that
proceedings are about to be commenced, or in contemplation of the proceedings, willfully: (a)
dispose or cause to be disposed of any property of the debtor other than in the ordinary course of
business or authorize or approve any transaction in fraud of creditors or in a manner grossly
disadvantageous to the debtor and/or creditors; or (b) conceal or authorize or approve the
concealment, from the creditors, or embezzle or misappropriate, any property of the debtor. The
liability of the director or officer shall be determined by considering the amount of shareholding or
equity interest of such director or officer, the degree of his control, and the extent of his
involvement in the actual management of the operations of the corporation.
2.2.1. Types of proceedings
2.2.1.1. Voluntary proceedings
An insolvent debtor (whether a sole proprietorship, partnership or corporation) may initiate voluntary
proceedings by filing a petition for rehabilitation with the Philippine Regional Trial Court, which has
jurisdiction over the principal office of the debtor, as specified in its articles of incorporation or partnership,
or in cases of sole proprietorships, in its registration papers with the DTI. A group of debtors may also jointly
file a petition for rehabilitation when one or more of its members foresee the impossibility of meeting debts
when they respectively fall due, and the financial distress would likely adversely affect the financial

condition and/or operations of the other members of the group, and/or the participation of the other
members of the group is essential under the terms and conditions of the proposed rehabilitation plan.
2.2.1.2. Involuntary proceedings
Any creditor or group of creditors with a claim of, or the aggregate of whose claims is, at least PHP 1 million
or at least 25% of the subscribed capital stock or partners' contributions, whichever is higher, may initiate
involuntary proceedings with the Philippine Regional Trial Court, which has jurisdiction over the principal
office of the debtor, as specified in its articles of incorporation or partnership, or in cases of sole
proprietorships, in its registration papers with the DTI against the debtor by filing a petition for
rehabilitation with the court, under any of the following circumstances:
(a) There is no genuine issue of fact or law on the claim/s of the petitioner/s, and the due and
demandable payments thereon have not been made for at least 60 days or the debtor has failed
generally to meet its liabilities as they fall due.
(b) A creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor,
which will prevent the debtor from paying its debts as they become due or will render it insolvent.
2.2.2. Action on the petition and commencement of proceedings
If the court finds the petition sufficient in form and substance, it will, not later than five working days from
the filing of the petition, issue a commencement order, which, among others: (a) declares that the debtor is
under rehabilitation; (b) appoints a rehabilitation receiver; (c) prohibits the debtor from selling, encumbering,
transferring or disposing of in any manner any of its properties except in the ordinary course of business; (d)
prohibits the debtor from making any payment of its liabilities outstanding as at the date of filing of the
petition; (e) prohibits the debtor's suppliers of goods or services from withholding the supply of goods and
services in the ordinary course of business for as long as the debtor makes payments for the services and
goods supplied after the issuance of the commencement order; (f) authorizes the payment of administrative
expenses as they become due; (g) suspends all actions or proceedings, in court or otherwise, for the
enforcement of claims against the debtor; (h) suspends all actions to enforce any judgment, attachment or
other provisional remedies against the debtor; 51 (i) sets an initial hearing on the petition; and (j) directs all
creditors and interested parties to file their claims at least five days before the said initial hearing.
If, within the same period, the court finds the petition deficient in form or substance, it may give the
petitioner/s not more than five working days to amend or supplement the petition. If the deficiency is not
cured within the extended five-day period, the court must dismiss the petition.
Upon issuance of the commencement order and until approval of the Rehabilitation Plan or dismissal of the
petition, whichever is earlier, the imposition of all taxes and fees including penalties, interests and charges
thereof due to the national government or to local government units will be considered waived, in
furtherance of the objectives of rehabilitation.
51
The issuance of a stay or suspension order suspending all actions or proceedings for enforcement of all claims against
the debtor, and any judgment, attachment or other provisional remedies against the debtor that prohibits the debtor
from selling, encumbering, transferring or disposing of any of its properties except in the ordinary course of business and
from making any payment for its outstanding liabilities as of commencement date, does not affect the right to
commence actions or proceedings in order to preserve ad cautelam a claim against the debtor and to toll the running of
the prescriptive period to file the claim.

2.2.3. Effectivity and duration of commencement order
Unless lifted by the court, or where the rehabilitation plan is seasonably confirmed or approved, or the
rehabilitation proceedings are ordered terminated by the court, the commencement order will be effective
for the duration of the rehabilitation proceedings for as long as there is a substantial likelihood that the
debtor will be successfully rehabilitated.
2.2.4. Court proceedings
If, after the initial hearing on the petition for rehabilitation, the court is satisfied that there is merit in the
petition, it will give due course to the petition and refer the same to the rehabilitation receiver. The
rehabilitation receiver will evaluate the rehabilitation plan and submit his or her recommendations to the
court within a period of not more than 90 days. However, the court may also refer any dispute relating to
the rehabilitation plan or the rehabilitation proceedings to arbitration or other modes of dispute resolution.
If the petition is dismissed because of a finding that: (a) debtor is not insolvent; (b) the petition is a sham
filing intended only to delay the enforcement of the rights of the creditor/s or of any group of creditors; (c)
the petition, the rehabilitation plan and the attachments thereto contain any materially false or misleading
statements; (d) the debtor has committed acts of misrepresentation or in fraud of its creditor/s or a group of
creditors, the court may, in its discretion, order the petitioner to pay damages to any creditor or to the
debtor, as the case may be, who may have been injured by the filing of the petition, to the extent of any
such injury.
The court may also convert the proceedings into one for the liquidation of the debtor upon a finding that:
(a) the debtor is insolvent; (b) there is no substantial likelihood for the debtor to be successfully rehabilitated
as determined in accordance with the rules promulgated by the Supreme Court; and (c) there is failure of
rehabilitation.
The court may also convert the proceedings into liquidation under any of the following circumstances:
(a) Upon motion of the debtor (juridical debtor) at any time during the pendency of court-supervised
or pre-negotiated rehabilitation proceedings
(b) When, one year from the date of filing of the petition to confirm a rehabilitation plan, no
rehabilitation plan is confirmed within the said period
(c) In cases of termination of proceedings due to failure of rehabilitation or dismissal of petition for
reasons other than technical grounds
(d) Upon verified motion of three or more creditors whose aggregate claims total at least PHP 1 million
or at least 25% of the subscribed capital or partners' contributions of the debtor, whichever is
higher.
2.2.5. Management of the juridic debtor
Unless otherwise ordered by the court upon motion of any interested party, the management of the juridical
debtor will remain with the existing management, subject to the applicable laws and agreements, if any, on
the election or appointment of directors, managers or managing partner. However, all disbursements,
payments or sale, disposal, assignment, transfer or encumbrance of property, or any other act affecting title
or interest in property, will be subject to the approval of the rehabilitation receiver and/or the court.

2.2.6. Claw-back provisions
The court may, upon motion and after notice and hearing, rescind or declare as null and void any sale,
payment, transfer or conveyance of the debtor's unencumbered property or any encumbering thereof by the
debtor or its agents or representatives after the commencement date that are not in the ordinary course of
business of the debtor.
The court may also rescind or declare as null and void any transaction that occurred prior to the
commencement date entered into by the debtor or involving its funds or assets, on the ground that the
same was executed with intent to defraud a creditor or creditors, or constitute undue preference of
creditors.
2.2.7. Rehabilitation plan
2.2.7.1. Confirmation of the rehabilitation plan
If no objections to the rehabilitation plan are filed within the relevant period or if the objections filed are
found by the court to be lacking in merit or have been cured or have been resolved pursuant to an order to
cure issued by the court, then the court must issue an order confirming such rehabilitation plan. The court
may confirm the rehabilitation plan notwithstanding the existence of unresolved disputes over claims if the
rehabilitation plan has made adequate provisions for paying such claims.
2.2.7.2. Effect of confirmation of the rehabilitation plan
(a) The confirmed rehabilitation plan will be binding upon the debtor and all persons who may be
affected by it, including the creditors, whether or not they participated in the proceedings, opposed
the rehabilitation plan, or whether or not their claims have been included in the schedule.
(b) The debtor must comply with the provisions of the rehabilitation plan and take all actions necessary
to carry them out.
(c) Payments will be made to the creditors in accordance with the provisions of the rehabilitation plan.
(d) Contracts and other arrangements between the debtor and its creditors will be deemed as
continuing in application but only to the extent that they do not conflict with the provisions of the
rehabilitation plan.
(e) Any compromise on amounts or rescheduling of timing of payments by the debtor will be binding
on creditors regardless of the successful implementation of the rehabilitation plan.
(f) Claims arising after approval of the rehabilitation plan that are otherwise not treated by the
rehabilitation plan are not subject to any suspension order.
2.2.8. Termination of rehabilitation proceedings
The rehabilitation proceedings may be terminated upon motion by an interested party or the rehabilitation
receiver if: (i) there is a successful implementation of the rehabilitation plan; or (ii) there is a failure of
rehabilitation.
There is failure of rehabilitation in the following cases: (a) dismissal of the petition by the court; (b) the
debtor fails to submit a Rehabilitation Plan; (c) there is no substantial likelihood that the debtor can be
rehabilitated within a reasonable period based on the rehabilitation plan submitted by the debtor; (d) the
rehabilitation plan or its amendment is approved by the court but the debtor fails to perform its obligations
thereunder or there is a failure to realize the objectives, targets or goals set forth therein; (e) the commission

of fraud in securing the approval of the rehabilitation plan or its amendment; and (f) other analogous
circumstances.
2.3. Pre-negotiated rehabilitation

An insolvent debtor, by itself or jointly with any of its creditors, may file a verified petition with the court
for the approval of a pre-negotiated rehabilitation plan, supported by an affidavit showing the written
endorsement or approval of creditors holding at least two-thirds of the total liabilities of the debtor,
including secured creditors holding more than 50% of the total secured claims of the debtor and unsecured
creditors holding more than 50% of the total unsecured claims of the debtor.
2.4. Out-of-court or informal restructuring agreements and rehabilitation plans

In addition to the existing court-supervised and pre-negotiated rehabilitation, the FRIA introduces out- of-
court rehabilitation (OCRA) or informal restructuring.
2.4.1. Minimum requirements
The following are the minimum requirements for an out-of-court or informal restructuring/workout
agreement or rehabilitation plan under the FRIA:
(a) The debtor must agree to the out-of-court or informal restructuring/workout agreement or
Rehabilitation Plan.
(b) It must be approved by creditors representing at least 67% of the secured obligations of the debtor.
(c) It must be approved by creditors representing at least 75% of the unsecured obligations of the
debtor.
(d) It must be approved by creditors holding at least 85% of the total liabilities, secured and unsecured,
of the debtor.
A standstill period, not exceeding 120 days, may be agreed upon by the parties pending negotiation and
finalization of the out-of-court or informal restructuring. The standstill period will be effective and
enforceable not only against the contracting parties but also against the other creditors, provided that the
necessary creditor approval on the standstill period is obtained and notice thereof is published in a
newspaper of general circulation once a week for two consecutive weeks.
2.4.2. Cram-down effect
A restructuring/workout agreement or rehabilitation plan that is approved pursuant to an informal workout

framework will have the same legal effect as a court-approved rehabilitation plan.
Any court action or other proceedings arising from, or relating to, the out-of-court or informal restructuring
shall not stay its implementation, unless the relevant party is able to secure a temporary restraining order or
injunctive relief from the Court of Appeals.
3. Liquidation proceedings (individuals or corporations)

In cases where the debtor does not have enough assets/properties to cover his or her obligations or is
generally unable to pay his or her liabilities as they fall due in the ordinary course of business, a liquidation
proceeding may be initiated. It may be voluntary or involuntary.

3.1. Voluntary liquidation
An insolvent debtor may apply for liquidation by filing a verified petition for liquidation with the court. The
petition must establish the insolvency of the debtor, and must contain the following:
(a) A schedule of the debtor's debts and liabilities, including a list of creditors with their addresses,
amounts of claims and collaterals, or securities, if any
(b) An inventory of all its assets, including receivables and claims against third parties
(c) The names of at least three nominees to the position of liquidator
At any time during the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the
debtor may also initiate liquidation proceedings by filing a motion to convert the rehabilitation proceedings
into liquidation proceedings in the same court where the rehabilitation proceedings are pending.
If the court finds the petition or the motion, as the case may be, to be sufficient in form and substance, the
court will issue a liquidation order.
3.2. Involuntary liquidation

Three or more creditors of a corporate debtor whose total credits amount to at least PHP 1 million or at least
25% of the subscribed capital stock or partners' contribution of the debtor, whichever is higher, may seek the
liquidation of an insolvent corporate debtor by filing a petition for liquidation of the debtor with the court.
At any time during the pendency of or after a court-supervised or pre-negotiated rehabilitation proceedings,
three or more creditors whose claims are at least either PHP 1 million or at least 25% of the subscribed capital
or partner's contributions of the debtor, whichever is higher, may also initiate liquidation proceedings by
filing a motion in the same court where the rehabilitation proceedings are pending, to convert the
rehabilitation proceedings into liquidation proceedings.
If the court determines the petition or motion to be meritorious, it will issue a liquidation order.
On the other hand, any creditor or group of creditors with a claim of, or with claims aggregating at least PHP
500,000 against an individual debtor, may file a verified petition for liquidation with the court of the city or
province in which the debtor resides. The court will issue an order requiring the individual debtor to show
cause why he or she should not be declared an insolvent. If the individual debtor shall default, or if after trial
the issues are found in favor of the petitioning creditors, the court will issue the liquidation order.
3.3. Effects of the liquidation order

Upon the issuance of the liquidation order:
(a) The juridical debtor will be deemed dissolved and its corporate or juridical existence terminated.
(b) Legal title to and control of all the assets of the debtor, except those that may be exempt from
execution, will be deemed vested in the liquidator, or pending his or her election or appointment,
with the court.
(c) All contracts of the debtor will be deemed terminated and/or breached, unless the liquidator, within
90 days from the date of his or her assumption of office, declares otherwise and the contracting
party agrees.
(d) No separate action for the collection of an unsecured claim will be allowed. Such actions already
pending will be transferred to the liquidator to accept and settle or contest. If the liquidator

contests or disputes the claim, the court will allow, hear and resolve such contest except when the
case is already on appeal. In such a case, the suit may proceed to judgment, and any final and
executory judgment therein for a claim against the debtor will be filed and allowed in court.
(e) No foreclosure proceeding will be allowed for a period of 180 days.
3.4. Rights of secured creditors

The liquidation order will not affect the right of a secured creditor to enforce his or her lien in accordance
with the applicable contract or law. A secured creditor may undertake either of the following:
(a) Waive his or her right under the security or lien, prove his or her claim in the liquidation proceedings
and share in the distribution of the assets of the debtor
(b) Maintain his or her rights under the security or lien
If the secured creditor maintains his or her rights under the security or lien:
(a) The value of the property may be fixed in a manner agreed upon by the creditor and the liquidator.
When the value of the property is less than the claim it secures, the liquidator may convey the
property to the secured creditor and the latter will be admitted in the liquidation proceedings as a
creditor for the balance. If its value exceeds the claim secured, the liquidator may convey the
property to the creditor and waive the debtor's right of redemption upon receiving the excess from
the creditor.
(b) The liquidator may sell the property and satisfy the secured creditor's entire claim from the
proceeds of the sale.
(c) The secured creditor may enforce the lien or foreclose on the property pursuant to applicable laws.
3.5. Liquidation plan

Within three months from assumption into office, the liquidator must submit a liquidation plan to the court.
The liquidation plan must, as a minimum, enumerate all the assets of the debtor, all the claims against the
debtor, and a schedule of liquidation of the assets and payment of the claims.
The liquidator must implement the Liquidation Plan as approved by the court. Payments must be made to
creditors only in accordance with the provisions of the Liquidation Plan. But if the debtor and creditor are
mutually debtor and creditor of each other, one may be set off against the other. If there is any balance,
then the balance may be claimed in the liquidation proceedings.
3.6. Concurrence and preference of credits

The liquidation plan must ensure that the concurrence and preference of credits as enumerated in the Civil
Code and other relevant laws will be observed, unless a preferred creditor voluntarily waives his or her
preferred right. Credits for services rendered by employees or laborers to the debtor shall enjoy first
preference, unless the claims constitute legal liens under relevant provisions of the Civil Code.
Certain types of credits enjoy preference with respect to specific movable or immovable properties (Special
Preferred Credits).
Among the Special Preferred Credits, taxes and assessments due upon the property to which the claims
relate enjoy absolute preference. All the remaining classes of Special Preferred Credits with respect to
specific movable or immovable property (e.g., credits secured by a pledge or mortgage) do not enjoy priority

among themselves, but must be paid concurrently and pro rata, that is, in proportion to the amount of the
respective credits.
Credits that do not enjoy any preference with respect to specific property are satisfied in the order
established in Article 2244 of the Civil Code. Article 2244 provides for the preference of certain claims and
credits which, without special privilege, appear in: (i) a public instrument (i.e., the instrument is notarized); or
(ii) a final judgment. These credits have preference among themselves in the order of priority of the dates of
the instruments and of the judgments, respectively.
3.7. Claw-back provisions

Any transaction occurring prior to the issuance of the liquidation order, or in the case of conversion of the
rehabilitation proceedings, prior to the commencement date, entered into by the debtor or involving its
assets, may be rescinded or declared null and void on the ground that the same was executed with intent to
defraud a creditor or creditors, or it constitutes undue preference of creditors.
The liquidator or a creditor, with the liquidator's conformity, may initiate and prosecute any action to
rescind, or declare null and void, any transaction described in the immediately preceding paragraph.
4. Cross-border insolvency proceedings

The FRIA provides for recognition of foreign insolvency proceedings and adopts the Model Law on Cross-
Border Insolvency of the UNCITRAL, subject to the FRIA Rules.
• The FRIA Rules apply when assistance is sought before a Philippine court by a foreign court or a
foreign representative in connection with a foreign proceeding.
• Assistance is sought in a foreign state in connection with a proceeding governed by the FRIA and
the FRIA Rules.
• A foreign proceeding and a proceeding governed by the FRIA and the FRIA Rules are concurrently
taking place.
• Creditors in a foreign state have an interest in requesting the commencement of, or participating in,
a proceeding under the FRIA Rules for court-supervised rehabilitation, pre-negotiated rehabilitation
or OCRA.
Foreign creditors are accorded the same rights as creditors in the Philippines in proceedings involving court-
supervised rehabilitation, pre-negotiated rehabilitation and OCRA governed by the FRIA Rules.
However, courts must refuse to take any action in any cross-border insolvency proceeding where: (a) the
action would be manifestly contrary to the public policy of the Philippines; and (b) the court finds that the
country where the foreign rehabilitation proceeding is taking place does not extend recognition to a
Philippine rehabilitation proceeding, or that the country of which the petitioner-foreign creditor is a national
does not grant the same rights to a Philippine creditor in a manner substantially in accordance with the FRIA
Rules.
5. Consequences on shareholders of insolvent corporations

If an insolvent corporation is under rehabilitation, the shareholders' proportion of ownership of the insolvent
corporation may be altered depending on the rehabilitation plan that will be recommended to and approved
by the court. Certain debts may be recommended to be converted to equity, so the creditors may become
new shareholders of the insolvent corporation. Unless otherwise ordered by the court, distribution of

dividends will also be discontinued since this will constitute disposing of properties outside the ordinary
course of business, which is disallowed by the stay order.
If an insolvent corporation is under liquidation, the insolvent corporation will be dissolved and liquidated,
and all its debts and obligations would have to be paid first before its remaining assets (if any) can be
distributed to its shareholders.

Quisumbing Torres provides a global reach, working
with other member firms of Baker & McKenzie
International
Asia Pacific Europe, Middle East & Africa North and Latin America
Australia Abu Dhabi*** Bogota

Bangkok Africa Brasília****
Beijing* Almaty Buenos Aires
Hanoi* Amsterdam** Chicago
Ho Chi Minh City* Barcelona** Dallas
Hong Kong* Belgium** Houston
Jakarta* Budapest Lima***
Joint Asian Offices (JAO) Cairo*** Los Angeles
Kuala Lumpur* Casablanca Mexico
Manila*** Dubai*** Miami
Seoul* EMEA+ New York
Shanghai* Geneva Palo Alto
Singapore* Germany Porto Alegre****
Taipei Gulf** Rio de Janeiro****
Tokyo Istanbul*** San Francisco
Yangon Johannesburg** Santiago
Kyiv Sao Paulo****
London** Toronto
Luxembourg Venezuela
Madrid** Washington, DC
Milan
Moscow
Paris
Prague
Rome
Spain
St. Petersburg
Stockholm**
Vienna
Warsaw
Zurich
*Joint Asian Offices
**EMEA+ offices
***Member firms
**** Associated firms

CONTACT:
RAMON QUISUMBING
Managing Partner
Tel.: +63 2 819 4700
[email protected]
QUISUMBING TORRES
12th Floor, Net One Center
26th Street corner 3rd Avenue
Crescent Park West, Bonifacio Global City
Taguig City, Philippines 1634
Tel.: +63 2 819 4700
Fax: +63 2 816 0080

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The law is stated as of 15 August 2019.

2. The courts ................................................................................................................ 93

Quisumbing Torres iii

• Consumer Goods & Retail

• Energy, Mining & Infrastructure

• Industrials, Manufacturing & Transportation

• Technology, Media & Telecommunications

1.1. Acts that constitute "doing business"

• Soliciting orders, service contracts

• Opening offices, whether "liaison" offices or branches

1.2. Exceptions to "doing business"

• Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do

• Having a nominee director or officer to represent its interest in such corporation

• The publication of a general advertisement through any print or broadcast media

• Collecting information in the Philippines

2. Foreign equity restrictions

2.2. Extent of foreign equity in general enterprises

2.3. Extent of foreign equity for particular activities

• Mass media, except recording and internet business 8

• Organization and operation of private detective, watchmen or security guard agencies

• Ownership, operation and management of cockpits

• Manufacture of firecrackers and other pyrotechnic devices

Up to 25% foreign equity

• Private recruitment, whether for local or overseas employment

• Contracts for the construction of defense-related structures

Up to 30% foreign equity

• Exploration, development and utilization of natural resources

• Ownership of private lands

• Private radio communications network

• Ownership of condominium units

• Operation of deep-sea commercial fishing vessels

• Manufacture, repair, storage and/or distribution of products requiring Department of National

• Manufacture and distribution of dangerous drugs

2.4. Developments relating to activities that are governed by nationality restrictions

2.5. Anti-Dummy Law

II. Private company investments

1.1. Sole proprietorship

1.3. Domestic/foreign corporation

Domestic corporation vs. branch

Regional or area headquarters

Regional operating headquarters

(a) General administration and planning

(b) Business planning and coordination

(c) Sourcing/procurement of raw materials and components

(d) Corporate finance advisory services

(e) Marketing control and sales promotion

(f) Training and personnel management

(g) Logistics services

(h) Research and development services and product development

(i) Technical support and maintenance

(j) Data processing and communication

(k) Business development

2. Other regulatory approvals and registrations

• Amendment of the articles of incorporation

• Adoption and amendment of by-laws

• Incurring, creating or increasing bonded indebtedness

• Increase or decrease of capital stock

• Merger or consolidation of the corporation with another corporation or other corporations