LEGAL MEMORANDUM

To: Dr. Joseph Emmanuel L. Angeles

From: LEGRES Group 8

Re: LEGRES Final Examination

Date: May 17, 2019

Question Presented

Whether or not UBER and GRAB are public utilities subject to foreign investment limits

Discussion

In the department order released by the Department of Transportation and

Communications, Transportation Network Companies (TNC) is defined as “an organization that

provides pre-arranged transportation services for compensation using an online-enabled

application or platform technology to connect passengers with drivers using their personal

vehicles.”1 Under this definition, Uber and Grab are considered TNCs.

The LTFRB issued a department order requiring TNCs to secure a certificate of public

convenience to operate a transportation network vehicle service.2

Under section 11, article XII of the 1987 Constitution, “no franchise, certificate, or any

other form of authorization for the operation of a public utility shall be granted except to

citizens of the Philippines or to corporations or associations organized under the laws of the

Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such

franchise, certificate, or authorization be exclusive in character or for a longer period than fifty

years. Neither shall any such franchise or right be granted except under the condition that it shall

be subject to amendment, alteration, or repeal by the Congress when the common good so requires.

1
Further Amending Department Order No. 97-1097 to Promote Mobility, Dept. Ord. 2015-011, 4 (DEPT. OF
TRANSP. AND COMM. May 8, 2015) (Phil.), available at http://dotr.gov.ph/images/issuances/DO/2015/DO2015-
11.pdf.
2
Implementing Guidelines on the Acceptance of Applications for a Certificate of Public Convenience to Operate a
Transportation Network Vehicle Service, MEM. 2015-017, 1 (DEPT. OF TRANSP. AND COMM. May 28, 2015) (Phil.),
available at http://ltfrb.gov.ph/wp-content/uploads/Memorandum%20Circular/2015/2015-017.pdf.
The State shall encourage equity participation in public utilities by the general public. The

participation of foreign investors in the governing body of any public utility enterprise shall be

limited to their proportionate share in its capital, and all the executive and managing officers of

such corporation or association must be citizens of the Philippines.”3 (Emphasis supplied.)

The case of JG Summit Holdings v. Court of Appeals stated that “a public utility is a

business or service engaged in regularly supplying the public with some commodity or service of

public consequence such as electricity, gas, water, transportation, telephone or telegraph service.

The principal determinative characteristic of a public utility is that of service to, or readiness to

serve, an indefinite public or portion of the public as such which has a legal right to demand and

receive its services or commodities. Stated otherwise, the owner or person in control of a public

utility must have devoted it to such use that the public generally or that part of the public which

has been served and has accepted the service, has the right to demand that use or service so long

as it is continued, with reasonable efficiency and under proper charges.”4 Uber and Grab are

considered as public utilities since they are in a business engaged in regularly supplying the public

with transportation.

Executive Order No.65 provides for the Eleventh Regular Foreign Investment Negative

List. According to the attached list, the foreign equity in the operation of public utilities is limited

up to forty percent (40%) only.5

Conclusion

Uber and Grab are subject to foreign investment foreign equity limit of 40% since they are

public utilities.

3
CONST. (1987), Art. XII § 11, (Phil.), available at https://www.officialgazette.gov.ph/constitutions/1987-
constitution/.
4
JG Summit v. Court of Appeals, G.R. No. 124293, 412 SCRA 10, 20. (September 24, 2003) (Phil.), available at
http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/47672
5
Promulgating the Eleventh Regular Foreign Investment Negative List, Exec. Ord. No. 65, List A § 18 (October 29,
2018) (Phil.), available at http://www.officialgazette.gov.ph/downloads/2018/10oct/20181029-EO-65-RRD.pdf.