Case Summary (G.R. No. 217590)
Issue Presented
Whether PCAB’s Institutional Rules and Regulations (IRR) Section 3.1—imposing nationality-based license classifications—exceeded its delegated authority under R.A. 4566 and violated constitutional economic and competition policies.
Petitioner’s Arguments
- PCAB is empowered by R.A. 4566 Sections 5 and 17 to issue licenses and adopt “reasonably necessary” rules to classify contractors.
- Section 3.1 merely regulates licensing of foreign contractors, ensuring monitoring and enforcement of warranties under Civil Code and procurement rules.
- Classification is supported by Article XII, Section 14 of the 1987 Constitution and professional-fees law, limiting practice of professions to Filipinos except as prescribed by law.
Respondent’s Arguments
- Only Congress may impose nationality restrictions under Article XII, Section 10 of the Constitution. PCAB’s rule adds requirements not found in R.A. 4566.
- Executive policy favors liberalizing construction investment (DOJ, DTI, CIAP memoranda; updated Foreign Investment Negative Lists).
- Construction is an industry, not a profession; Section 14, Article XII on professions does not apply to corporate licenses.
Amicus Curiae’s Perspective (Philippine Competition Commission)
- The nationality-based classification acts as a barrier to entry, violating the constitutional policy against unfair competition (Article XII, Section 19).
- Data (2013–2015) show minimal foreign participation and stagnant industry competition.
- Foreign investment brings technology, capacity, and consumer welfare benefits; restrictions deter these gains.
- The antitrust provision in Article XII, Section 19 is directly enforceable to nullify regulations that restrain competition.
Court’s Analysis on Delegated Power
- R.A. 4566 Section 17 authorizes classification only within statutorily defined branches (general engineering, general building, specialty contracting).
- IRR Section 5.1 properly sub-classified technical areas, but Section 3.1 went beyond statutory classifications by adding nationality criteria.
- An agency may not amend or expand a statute by regulation; PCAB exceeded its rule-making authority.
Court’s Analysis on Constitutional and Economic Policies
- Construction licenses under R.A. 4566 are not professional practice licenses restricted to natural-person Filipinos; they regulate corporate contracting.
- Article XII, Sections 10 and 19 of the 1987 Constitution reserve certain investments to Filipinos and guard against unfair competition but do not mandate blanket prohibitions or equity thresholds for foreign contractors.
- Economic nationalism does not imply isolationism; the Constitution contemplates measured foreign participation on equal and reciprocal terms (TaAada, Espina).
- Structural
Case Syllabus (G.R. No. 217590)
Facts
- On July 9, 2012, Manila Water Company, Inc. (respondent) requested PCAB accreditation for its foreign contractors to build waterworks and sewerage facilities.
- On November 8, 2012, PCAB replied that Section 3.1, Rule 3 of the IRR—implementing RA 4566—reserves “Regular Licenses” to Filipino firms with at least 60 percent equity.
- Manila Water filed a petition for declaratory relief in RTC Quezon City, Branch 83, challenging the validity of Section 3.1, Rule 3 as unconstitutional and beyond PCAB’s authority.
- The RTC, by Resolutions of February 24, 2014 and Order of February 10, 2015, declared Section 3.1 void; PCAB’s motion for reconsideration was denied.
- PCAB then filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court.
Statutory and Regulatory Provisions
- Republic Act No. 4566 (1965), Sec. 5: grants PCAB power to issue, suspend, revoke licenses and promulgate implementing rules.
- Republic Act No. 4566, Sec. 16–17: defines three contracting branches (general engineering, general building, specialty) and empowers PCAB to adopt “reasonably necessary” rules to classify contractors.
- IRR of RA 4566, Rule 3, Sec. 3.1: creates two license types—Regular License (reserved to Filipino-equity firms) and Special License (for single projects, including foreign firms).
- IRR of RA 4566, Rule 12, Sec. 12.7: provides that introduction of foreign equity into a Regular License holder invalidates the license.
- 1987 Constitution, Art. XII, Secs. 10, 14, 19: reserve certain investment areas to Filipinos, limit professions to citizens, and prohibit unfair competition.
- Executive Orders on Foreign Investment Negative Lists and related laws (e.g., RA 7718, EO 858/98).
Issue
- Whether Section 3.1, Rule 3 (and related provisions) of the IRR of RA 4566 is valid or void for having been promulgated beyond PCAB’s delegated authority and for conflicting with RA 4566, constitutional provisions on foreign investment, and competition policy.
Petitioner PCAB’s Contentions
- PCAB has express authority under Sec. 5 and Sec. 17 of RA 4566 to issue the IRR and classify contractors.
- Section 3.1 does not bar foreign contractors; it merely regulates their licensing in recognition of their being based abroad.
- The classification is consistent with constitutional Sec. 14 (professional practice), RA 465 as amended by RA 6511, and protects public interest by ensuring enforcement of warranties and liabilities.
- Limiting professional practice to F