November 12, 2004 (STAR) By Aurea Calica - The constitutional requirement of Filipinos owning majority stakes in public utility firms engaged in land transportation and air commerce does not apply in cases of ownership of international air freight forwarders, the Department of Justice (DOJ) said.

The DOJ issued a new rule reversing an earlier legal opinion that imposed the citizenship requirement on air freight forwarders, being public utility firms that should comply with the constitutional requirement of 60-40 ownership for Filipino citizens.

Opinion No. 98, signed by Justice Secretary Raul Gonzalez last Nov. 9, stressed the importance of a definitive stand on the issue with the aim of attracting more investments, job creation, and spurring economic growth.

Gonzalez said the previous DOJ opinions issued on Sept. 11, 1946 and Opinion Nos. 218 and 71 issued in 1975 and 1976, respectively stated utility firms engaged exclusively in international commerce are beyond the purview of the constitutional prohibition limiting foreigners from owning more than 40 percent of the firm.

But Opinion Nos. 20 and 49 issued in 1999 and May 25, 2004, respectively, stated that as public utility firms, air freight forwarders should be covered by the citizenship requirement.

Gonzalez said that in line with "considerations of sound public policy and national interest," the new legal opinion will not carry the ownership requirement on international air freight forwarders.

"We revert to our view expressed in our Opinion dated Sept. 11, 1946, that the nationality requirement applies only to domestic air commerce and/or air transportation, and does not apply to international air freight forwarders," the new DOJ opinion said.

Section 12 of Republic Act 776 or the Civil Aeronautics Act of the Philippines enforcing the citizenship requirement would apply only to those engaged in domestic air commerce and/or air transportation, the DOJ said.

"Accordingly, the citizenship requirement does not apply if there is a provision in the Constitution which exempts such person from the said requirement or if there is a treaty in which the Philippines is a signatory which allows a person to participate in a States’ domestic air commerce and/or air transportation without the necessity of complying with any citizenship requirement," the DOJ said.

The new DOJ opinion was addressed to Civil Aeronautics Board (CAB) executive director Tomas Mañalac who sought an opinion over the issue in pointing out several petitions filed in his office by several firms seeking permission to engage in international air freight forwarding business.

Mañalac said most of the applicant firms have their shares of stock wholly owned or 60 percent under ownership of foreigners or foreign corporations.

"The moment you prohibit open skies (for cargo), you will be never a trade hub in Asia," Gonzalez said.

The May 25 opinion of the DOJ had kept CAB under the view that the constitutional requirement of 60-40 ownership for Filipinos should be strictly implemented.

However, he said the CAB probably thought an open skies policy for cargo could not be beneficial for the domestic air industry.

He signed the new opinion in acting on the motion for reconsideration by the Department of Transportation and Communications (DOTC) on the May 25 opinion.

The new DOJ opinion was issued amid warnings made by the European Chamber of Commerce (ECC) that international air forwarders based in the Philippines with more than 40 percent foreign shareholdings would face either cancellation of their licenses or denial of their pending applications.

The ECC said this could be a ground for cancellation or denial of their licenses since it viloates the Philippine constitutional provision of 60-40 ownership.

The chamber also said the May 25 opinion countered those issues in 1975 and 1999 declaring an air freight forwarder an indirect carrier not subject to the nationality requirement.

Meanwhile, the CAB said the proposed air talks between the Philippines and other countries originally set in the last quarter of this year have been considered for rescheduling.

The CAB made the announcement as it submitted to the DOTC a matrix of existing air services agreement between the Philippines and other countries, and a status report on pending and proposed air talks.

DOTC Secretary Leandro Mendoza earlier directed CAB to submit the documents to help the department introduce institutional reforms in the country’s civil aviation sector.

Among those submitted was a status report on pending and proposed air talks between the Philippines, Myanmar and Nepal which have proposed new dates for air talks in lieu of the original schedules set in October and November this year.

Up for confirmation of a new date are the proposed air talks between the Philippines and Turkmenistan, while the RP-India talks have yet to be scheduled.

Reported by: Sol Jose Vanzi

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