SyCip Salazar Hernandez & Gatmaitan
  October 20, 2022 - Philippines

DOJ: Utilization of RE Resources Not Subject to Foreign Ownership Restrictions
  by Julia Alexandra D. Chu, Rei Luis Anton A. Domingo and Patrice Jane L. Romero

The Philippine Department of Justice (“DOJ”) has issued an opinion to the effect that the exploration, development and utilization (“EDU”) of solar, wind, hydro and ocean or tidal energy sources is not subject to the forty percent (40%) foreign equity limitation under Article XII, Section 2 of the Philippine Constitution.

Prior to the opinion, the Philippine Department of Energy (“DOE”) has required that corporation applicants for renewable energy (“RE”) contracts (subject to exceptions in case of geothermal resources and biomass) be at least sixty percent (60%) Filipino-owned. This is based on the understanding that exploitation of RE resources constitutes EDU of natural resources which, under Article XII, Section 2 of the Philippine Constitution, may only be undertaken by the State or by Filipino citizens or corporations or associations at sixty percent (60%) of whose capital is owned by Filipino citizens. This limitation has hampered foreign investments in and, consequently, the development of, the RE sector in the Philippines. Notably, where an industry or undertaking is nationalized or partly nationalized, aside from equity ownership limitations, foreigners are also prohibited from participating management, operation, control and administration of the enterprise. Thus, foreigners have, to date, been limited to the role of passive investors in RE undertakings.

The DOJ opinion which was issued at the request of and is addressed to the DOE. The DOJ cited the following as basis for its opinion:

The DOJ, however, noted that its opinion is subject to the following limitations: (i) the forty percent (40%) foreign equity limitation would remain unless the implementing rules and regulations of the Renewable Energy Act (Republic Act No. 9513), which restate the limitation, is amended; and (ii) the use of hydro and ocean or tidal energy sources, if the same is directly harvested from the source by foreign nationals or entities, would still not be permitted based on the Water Code and existing jurisprudence.

The DOJ opinion paves the way for the issuance by the DOE of amended implementing rules and regulations to remove foreign equity ownership restrictions in respect of entities engaged in the EDU of solar, wind, hydro and ocean or tidal energy sources.

Read the maiden issue of The SyCipLaw ESG Bulletin here or via this link.




Read full article at: https://mailchi.mp/syciplaw/the-syciplaw-esg-bulletin-issue-no-1-october-2022