SEC-PLDT ‘capital’ definition worse than Parity Amendment

Third of a series on the foreign investment issue

The Philippine Long Distance Telephone Co.’s (PLDT) definition of corporate control that included owners of preferred shares—later on suspiciously and scandalously adopted by the Securities and Exchange Commission—would have, as the Supreme Court itself put it, “far reaching implications to the entire nation, and to future generations of Filipinos.”

The PLDT and SEC’s definition of “capital” would be as detrimental to Filipinos’ control of the Philippine economy as the so-called Parity Rights our former colonizers held for decades, the Supreme Court claimed in its resolution dated October 9, 2012. Senior justice Antonio Carpio wrote the resolution, which was concurred with by nine of the 12 justices voting, including Chief Justice Ma. Lourdes Sereno.

The resolution threw out PLDT’s petition to reverse its earlier decision in 2011 that the telephone company is foreign-controlled with 64 percent of its common stocks held by foreigners, and therefore violating the Constitution.

As I explained in my column on Wednesday, PLDT and other companies like Globe had justified foreign control of their firms by arguing that in the computation of “capital” and corporate control, even non-voting preferred shares, which essentially are debts and whose owners have absolutely no say in the firm, should be included.

PLDT and Meralco: End of Americans’ Parity Rights in 1974 allowed Filipinos to control these utility firms. Supreme Court asks: Why do we allow them now to be controlled by Indonesians?
PLDT and Meralco: End of Americans’ Parity Rights in 1974 allowed Filipinos to control these utility firms. Supreme Court asks: Why do we allow them now to be controlled by Indonesians?

The so-called “Parity Amendment’ had been the most blatant means for US economic exploitation of its former colony even after its independence, since it allowed US companies to have equal rights with Filipinos in the utilization and exploitation of natural resources.

The Court itself described what this was:

“Filipinos have only to remind themselves of how this country was exploited under the Parity Amendment, which gave Americans the same rights as Filipinos in the exploitation of natural resources, and in the ownership and control of public utilities, in the Philippines. To do this, the 1935 Constitution, which contained the same 60 percent Filipino ownership and control requirement as the present 1987 Constitution, had to be amended to give Americans parity rights with Filipinos. There was bitter opposition to the Parity Amendment and many Filipinos eagerly awaited its expiration.”

US companies’ “parity rights” —actually a euphemism—was such a blatant violation of our sovereignty that it was the casus belli that stoked the nationalist movement starting in the 1960s. Since our elite saw nothing wrong with it, the Communist Party appropriated the issue to argue the need for armed revolution against the “US puppet” administration.

Stunning claim
The Court emphasized what is really a stunning claim:

(PLDT and its allies’) interpretation of “capital” (to include preferred shares) would bring us back to the same evils spawned by the Parity Amendment, effectively giving foreigners parity rights with Filipinos, but this time even without any amendment to the present Constitution. “ (Emphasis in the original)

The Court pointed out that what PLDT has done is even worse than parity rights:

“Worse, their interpretation opens up our national economy to effective control not only by Americans but also by all foreigners, be they Indonesians, Malaysians or Chinese, even in the absence of reciprocal treaty arrangements. At least the Parity Amendment…gave the capital-starved Filipinos theoretical parity – the same rights as Americans to exploit natural resources, and to own and control public utilities, in the United States of America. Here, their interpretation would effectively mean a unilateral opening up of our national economy to all foreigners, without any reciprocal arrangements.

The court warned: “That would mean that Indonesians, Malaysians and Chinese nationals could effectively control our mining companies and public utilities while Filipinos, even if they have the capital, could not control similar corporations in these countries.” (Emphasis mine)

The Court in its resolution concluded: “The 1935, 1973 and 1987 Constitutions have the same 60 percent Filipino ownership and control requirement for public utilities like PLDT. Any deviation from this requirement necessitates an amendment to the Constitution as exemplified by the Parity Amendment. This Court has no power to amend the Constitution for its power and duty is only to faithfully apply and interpret the Constitution.”

Maybe the Salim conglomerate took those words quite seriously— the part saying that an amendment to the Constitution is necessary. Maybe that’s why the lobbying for amending the economic provisions of the constitution has intensified.

It continues to be a Damocles sword above the Salim group controlling PLDT. The company itself has been forced in its disclosures to admit that one of its major corporate risks involves the allegation that its foreign ownership “exceeds the 60% to 40% Filipino-alien equity requirement as provided under the Philippine Constitution.”

In its decision, the Supreme Court emphasized: “In fact, a resolution of this issue will determine whether Filipinos are masters, or second-class citizens, in their own country. What is at stake here is whether Filipinos or foreigners will have effective control of the Philippine national economy. “

The Court did resolve it, with its final ruling throwing out PLDT’s justification for foreigners’ control of it made in October 2012 —more than two years ago.

Are we so debased as a Republic only pretending to be under the rule of law that even a Supreme Court decision “with far-reaching implications” has been ignored by the SEC, with PLDT and Globe sticking to its convenient definition of “capital” that has been its flimsy excuse for being controlled by Indonesians and Singaporeans?

I hope that they haven’t “reached” even the last bastion for the rule of law in our nation. the Supreme Court.

And nobody, not the President, not the Congress, not even the “nationalist bloc” there, not most of us care?

To be continued on Wednesday: Why the Court’s reference to parity rights is stinging indictment of Meralco and PLDT.