Republic Act No.

11659 amends the Public Service Act and limits the d…stimulate foreign investment in public service sectors - Cruz Marcelo 2/28/24, 3:01 PM

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11659 amends the

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On 21 March 2022, President Rodrigo Roa Duterte signed Republic Act Recent Posts
(“RA”) No. 11659 or “An act amending Commonwealth Act No. 146,
otherwise known as the ‘Public Service Act’, as amended”. Cruz Marcelo &
Tenefrancia Senior
Associate Raiza Alexis D.
It was published in the Oicial Gazee on 28 March 2022 and took eect
Radoc Completes
after fifteen (15) days following its date of publication or on 12 April International MBA Program
2022. (hps://cruzmarcelo.com/cruz-
marcelo-tenefrancia-

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Republic Act No. 11659 amends the Public Service Act and limits the d…stimulate foreign investment in public service sectors - Cruz Marcelo 2/28/24, 3:01 PM

senior-associate-raiza-
The State recognizes the role of the private sector as one of the main alexis-d-radoc-
engines for national growth and development. Thus, it is the policy of completes-international-
mba-program/)
the State to encourage private enterprise and expand the base of
FEB 28
investment in the Philippines, with the goal of providing eicient,
reliable and aordable basic services to all. These policies are fulfilled
by: (a) ensuring eective regulation of public services; (b) providing Cruz Marcelo &
reasonable rate of return to public services;  rationalizing foreign Tenefrancia Promotes
Rowanie A. Nakan to
equity restrictions by clearly defining the term “public utilities”; and (d)
Senior Partner and Anica
instituting processes for the protection of national security. Angela G. Gomez to Senior
Associate Eective 01
January 2024
Section 11, Article XII of the 1987 Constitution of the Philippines provides (hps://cruzmarcelo.com/cruz-
for the Filipinization of public utilities. The provision of the Constitution marcelo-tenefrancia-
promotes-rowanie-a-
reserves the operation of public utilities to Filipino citizens or
nakan-to-senior-partner-
corporations organized under the Philippine laws and at least sixty and-anica-angela-g-
percent (60%) of whose capital is owned by Filipino citizens. The gomez-to-senior-
associate-eective-01-
purpose of the limitation imposed by the Constitution is to prevent january-2024/)
foreigners from controlling the operations of public utilities in the FEB 21
Philippines which is a sector imbued with public interest.

However, the term “public utility” was not defined under the 1987 The Legal 500 Recognizes
Cruz Marcelo &
Constitution, the old Public Service Act, or any other law. Thus, what is
Tenefrancia As One of the
covered by “public utility” has always been subject to judicial Top-Tier Firms in the
interpretation. Perhaps the most salient amendment introduced by RA Philippines
(hps://cruzmarcelo.com/the-
No. 11659 is defining the term “public utility”. legal-500-recognizes-
cruz-marcelo-tenefrancia-
Under Section 4 of RA No. 11659, “public utility” refers to a public service as-one-of-the-top-tier-
firms-in-the-philippines/)
that operates, manages or controls for public use any of the following:
FEB 1
(1) Distribution of Electricity; (2) Transmission of Electricity; (3)
Petroleum and Petroleum Products Pipeline Transmission Systems; (4)
Water Pipeline Distribution Systems and Wastewater Pipeline Systems, Tweets from
including sewerage pipeline systems; (5) Seaports; and (6) Public Utility @CMTCruzMarcelo
Vehicles.

Section 4 of RA No. 11659 further provides that no other person shall be

deemed a public utility unless otherwise subsequently provided by law. Nothing to
Thus, the definition introduced by RA No. 11659 limits the coverage of
see here -
public utility to specific sectors that will remain subject to the forty
percent (40%) foreign equity ownership limit provided for by the 1987 yet
Constitution. Considering this amendment in the Public Service Act, key When they Tweet, their
Tweets will show up
industries such as telecommunication and transportation have been here.
removed from the definition of public utility. Consequently, these
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Republic Act No. 11659 amends the Public Service Act and limits the d…stimulate foreign investment in public service sectors - Cruz Marcelo 2/28/24, 3:01 PM

removed from the definition of public utility. Consequently, these

industries shall no longer be subject to the foreign equity cap provided
View on Twitter
for by Section 11, Article XII of the 1987 Constitution.

In addition to the foregoing, the President may recommend to Congress

the classification of a public service as a public utility on the basis of the
following criteria: (1) The person or juridical entity regularly supplies and
transmits and distributes to the public through a network a commodity
or service of public consequence; (2) The commodity or service is a
natural monopoly that needs to be regulated when the common good so
requires. For this purpose, natural monopoly exists when the market
demand for a commodity or service can be supplied by a single entity at
a lower cost than by two or more entities; (3) The commodity or service
is necessary for the maintenance of life and occupation of the public;
and (4) The commodity or service is obligated to provide adequate
service to the public on demand.

Section 23 of RA No. 11659 moreover grants the President the power to

suspend or prohibit, in the interest of national security, any proposed
merger or acquisition transaction, or any investment in a public service
that eectively results in the grant of control, whether direct or indirect,
to a foreigner or a foreign corporation.

An entity controlled by or acting on behalf of the foreign government or

foreign state-owned enterprises shall be prohibited from owning capital
in any public service classified as public utility or critical infrastructure.
A critical infrastructure refers to any public service which owns, uses, or
operates systems and assets, whether physical or virtual, so vital to the
Philippines that the incapacity or destruction of such systems or assets
would have a detrimental impact on national security, including
telecommunications and other such vital services as may be declared by
the President.

Further, foreign investments to critical infrastructure projects are

subject to reciprocity clause. Section 25 of RA No. 11659 prohibits
foreign nationals to own more than fifty percent (50%) of the capital of

entities engaged in the operation and management of critical

infrastructure unless the country of such foreign national accords
reciprocity to Philippine Nationals as may be provided by foreign law,
treaty or international agreement.

Entities engaged in the telecommunications business are further

required to obtain and maintain certifications from an accredited
certification body aesting to compliance with relevant International

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 Republic Act No. 11659 amends the Public Service Act and limits the d…stimulate foreign investment in public service sectors - Cruz Marcelo 2/28/24, 3:01 PM

Organization for Standardization (ISO) standards on information

security. This requirement, however, does not apply to micro, small and
medium enterprises under RA No. 6977, otherwise known as the “Magna
Carta for Micro, Small and Medium Enterprises, as amended.”

RA No. 11659 mandates administrative agencies to ensure the annual

conduct of performance audit by an independent evaluation team to
monitor cost, the quality of services provided to the public, and the
ability of the public service provider to immediately and adequately
respond to emergency cases.

The Implementing Rules and Regulations of RA No. 11659 shall be

promulgated within six (6) months from the eectivity of the law.

A copy of the RA No. 11659 can be accessed in:

hps://www.oicialgazee.gov.ph/downloads/2022/03mar/20220321-
RA-11659.pdf
(hps://www.oicialgazee.gov.ph/downloads/2022/03mar/20220321-
RA-11659.pdf)

elo-tenefrancia-bags-multiple-awards-at-asian-legal-business-philippine-law-awards-2022/)
(https://cruzmarcelo.com/ra-11861-expands-the-coverage-of-the-solo-parents-welfare-act/)

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Republic Act No. 11659 amends the Public Service Act and limits the d…stimulate foreign investment in public service sectors - Cruz Marcelo 2/28/24, 3:01 PM

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