On 4 April 2023, the Implementing Rules and Regulations ("IRR") of Republic Act No. 11659 which amended Commonwealth Act No.146 or the Public Service Act ("Amended Public Service Act") took effect. The IRR was released by the National Economic and Development Authority ("NEDA") on 20 March 2023. It implements the Amended Public Service Act, which liberalised foreign ownership restrictions in key public services such as airports, railways, expressways, and telecommunications, but also retained foreign restrictions in public utilities, namely, distribution and transmission of electricity, petroleum and petroleum products' pipeline transmission systems, water pipeline distribution systems, wastewater and sewerage pipeline systems, seaports, and public utility vehicles.
The Amended Public Service Act has also introduced the concept of critical infrastructures, the operation and management of which are subject to a 50% foreign ownership restriction unless the country of the foreign national intending to own more than 50% of the critical infrastructure extends reciprocal rights to Philippine nationals. The IRR clarifies that reciprocity requirements are deemed satisfied when (i) Philippine nationals are allowed to own more than 50% of capital stock in any activity related to agriculture, industry and services in the home country of the foreign national, and (ii) the home country of the foreign national allows Philippine nationals to invest the same value of capital in any economic activity related to agriculture, industry, or services.
The Amended Public Service Act also specifically recognises only telecommunication services as critical infrastructure. The IRR has likewise recognised only telecommunications services as critical infrastructure and provided that no other public service shall be considered critical infrastructure unless declared so by the President through an executive order. The classification of a public service as a critical infrastructure by executive fiat shall apply prospectively.
The Amended Public Service Act grants the President to power to suspend or prohibit merger and acquisition transactions and other investments on the basis of national security. The IRR clarifies the criteria for reviewing these investments:
- impact on national security;
- applicability of other Philippine laws and policies;
- implication of any national security risk arising from the investment to the Philippine economy and community;
- whether the investment will affect the ability of the Philippines to protect its strategic and security interests; and
- nature, history, and previous business transactions of the investor and any cases filed against the same, in their country of origin, or in any other country or state where the investor is involved.
The review may be undertaken by any relevant government agency.
