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SC ruling sought on foreign gov’t ownership of third player

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Supreme Court

THE Supreme Court (SC) has been asked to review the award of third-player status to a consortium led by Mindanao Islamic Telephone Company Inc. (Mislatel), with the tribunal pressed to clarify whether a consortium member, which is owned by a foreign government, can invest in public utilities.

The petitioner also questioned the selection process for the new entrant to the telecommunications industry, outlined in Memorandum Circular (MC) 09-09-18, saying that the terms of selection excluded many potential interested parties.

The Mislatel consortium was declared the provisional third player on Nov. 7, with China Telecom Corp. as its 40% foreign partner.

Other members of the Mislatel Consortium include Udenna Corp. and Chelsea Logistics and Holdings Corp.

In a 44-page petition-in-intervention, Marlon Anthony R. Tonson also asked that MC 09-09-18 be struck down due to certain provisions that prevent “genuine competition” in the selection process, which was conducted by the National Telecommunications Commission (NTC).

He said that the P1 million cost of the bid documents for the selection process was unreasonably high and kept out “potential participants who simply want to study the requirements before cementing their intent to participate in the selection process.”




The P700 million participation security also “constitutes a substantial deterrent to a more participative selection process.

The performance bond of 10% of the remaining cumulative capital and operational expenditure commitments and the non-refundable P10 million appeal fee “disincentivizes potential players from participating in the selection process.”

Mr. Tonson said that M.C. 09-09-18 lacked a proper screening test to uphold the nationality restriction for public utilities.

Section 11, Article XI of the Constitution only allows Filipinos or corporations or associations 60%-owned by Filipinos, to operate public utilities. “The nationality restriction serves as a proxy at best… with majority ownership belonging to the Filipinos, public utilities will be managed and operated to the country’s interest.”

He argued however that it is not clear whether the constitutional provision allows a foreign state to own a part of the public utility through its government-owned enterprises.

“Given such distinctions, a different rule must therefore apply when it comes to the issue of ownership in a public utility by a foreign State, whether directly or indirectly through a government-owned enterprise,” he said.

The Memorandum Circular also lacked safeguards against foreign control of public utilities as it only stipulated a clearance from the Securities and Exchange Commission that the Bidding Agreement follows the nationality requirements after it confirmed the third player.

Mr. Tonson also claimed that the MC lacks safeguards against the compromise of national individual security or protections against “a number of persons of ill will who would want to use cyberspace technology for mischief and crimes.”

“In the matter of security, the State must be wary, suspicious, vigilant, and forward-looking. Security is, after all, a matter of prevention rather than remediation,” he said.

He also said the selection rules also failed to evaluate the security risk in admitting a foreign-owned entity.

Declaring Mislatel the third player will subject Filipinos “to surveillance and threats to security by a government entity,” putting China in a “strategic position to intrude into fundamental liberties.”

The petition follows Philippine Telegraph and Telephone Corp.’s petition before the SC in November questioning its disqualification from the selection process. — Vann Marlo M. Villegas

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