Postscript to the Gamboa Ruling: Meaning of “Capital” in the Constitutional Provision Re the 60-40 Equity Structure of Public Utilities

The case of Wilson P. Gamboa vs. Finance Secretary Margarito Teves (G.R. No. 176579) promulgated on June 28, 2011 involves the determination of the correct meaning of the word “capital” in Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution, which provides:

Section 11. No franchise . . . for the operation of a public utility shall be granted except to . . . corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; . . . The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

Detailed Digest of Gamboa vs. Finance Secretary, G.R. No. 176579, June 28, 2011

WILSON P. GAMBOA vs. FINANCE SECRETARY TEVES

G.R. No. 176579, promulgated June 28, 2011

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D E C I S I O N

CARPIO, J.:

I.      THE FACTS

This is a petition to nullify the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based investment management and holding company and a shareholder of the Philippine Long Distance Telephone Company (PLDT).