By Damon Vis-Dunbar
8 June 2009
A petition lodged with the Philippine Supreme Court by non-governmental organizations (NGOs) argues that the investment chapter of the Japan-Philippines Economic Partnership Agreement (JPEPA) violates the Philippine constitution.
The Japan-Philippines EPA—a comprehensive trade and investment agreement—grants Japanese the right to establish investments in sectors like public utilities, education, mass media and advertising, in violation of constitutional limits on foreign ownership in these sectors, argue the Philippine NGOs.
Under the Philippine constitution, foreigners are restricted to a 40% ownership stake in public utilities and education, 30% for advertising, and no foreign ownership of mass media is allowed.
The NGOs also maintain that the JPEPA liberalizes land ownership, in violation of the strict limits currently in place. Only Filipino citizens and corporations with at least 60% Filipino-owned capital may acquire private lands.
Although the Philippines exempts national treatment for the establishment of investments in private land ownership for manufacturing and services, it does not exclude other subsectors, such as real estate development, residential purchases and agribusiness ventures. As a result, the NGOs argue that “if a Japanese corporation wishes to own private lands in the Philippines for its real estate projects and/or agribusiness, it may do so …”.
NGOs seek to bar implementation of JPEPA
It is a matter of contention whether an exchange of notes that followed the JPEPA ensures harmony between the Philippine Constitution and the JPEPA. The note agreed to by both the Philippines and Japan in August 2008, states that the JPEPA must be implemented in accordance with their respective constitutions. Yet the NGOs charge that despite the note the JPEPA is still incompatible with the Philippine constitution.
The Philippine Solicitor General has yet to respond on behalf of the Philippine Government to the claims made by the Philippine NGOs. ITN also requested comment from Senator Mar Roxas, Chairman of the Senate Committee on Trade and Commerce and a co-sponsor of JPEPA, but he declined to respond.
The NGOs are seeking an order from the Supreme Court that would bar the implementation of the agreement. However, JPEPA has already been ratified by the Senate, and the process of implementing the agreement has been underway since December 2008.
Moreover, the question of the JPEPA’s compatibility with the constitution may become at least partly moot by the time a Supreme Court ruling is rendered. The Philippine Congress is currently considering amending the constitution to ease foreign ownership restrictions.
Nonetheless, a complete lifting of foreign ownership restrictions in sensitive sectors like education, mass media and public utilities is unlikely. The Philippine Chamber of Commerce and Industry, for example, has endorsed the idea of relaxing foreign ownership restrictions in principle, but cautions it “should not apply to all industries, because some may benefit and some might be harmed due to this proposal.”
No consent for investor-to-State arbitration
As ITN previously reported, the JPEPA is notable for the fact that it does not provide consent to arbitrate investor disputes through international arbitration.
The agreement states: “the disputing Party may, at its option or discretion, grant or deny its consent in respect of each particular investment dispute and that, in the absence of the express written consent of the disputing Party, an international conciliation or arbitration tribunal shall have no jurisdiction over the investment dispute involved.”
Following the signing of the JPEPA in 2006, a Japanese official confided to ITN that the Philippines had resisted including a provision that would allow investment disputes to be settled through international arbitration, in part because the Philippines was involved in fending itself against a high-profile investment-treaty claim by the German firm Fraport AG.
A member of an NGO who helped draft the Supreme Court petition said the failure adequately to exclude certain sectors from the national treatment provisions of the investment chapters was “blunted” by the absence of an investor-state dispute settlement mechanism.
A right to transparency?
This is the second Supreme Court case that Philippine civil society groups have launched in reaction to the JPEPA. The first saw a petition in 2005 for access to the full text of the draft agreement, as well as the Philippine and Japanese negotiating offers.
The petitioners submitted that the JPEPA was sufficiently in the public interest to require the disclosure of draft texts and other documents related to the negotiations pursuant to a constitutional right of access to information (currently, the Philippines does not have Freedom of Information legislation which implements this right).
As it was, the court ruled by majority against disclosure, but only after the negotiations had been concluded, at which point the text of the agreement had been made public. As for access to the Japanese and Philippine offers, the court refused to order disclosure due to the privileged character of diplomatic negotiations.
The Initiative for Dialogue and Empowerment through Alternative Legal Services (IDEALS), a Philippine NGO, is currently preparing to bring a similar case to the United Nations Committee on Human Rights by the middle of August. IDEALS will be joined by the Center for International Environmental Law (CIEL) and the Open Society Initiative, both based in the United States.
CIEL, together with two other American NGOs, launched a similar case in 2001 in the United States, seeking access to records related to the negotiation of the United States-Chile Free Trade Agreement. In that case, a U.S. District Judge ordered the USTR to release documents which revealed the negotiating positions of the United States and Chile.