This case involves a petition filed by members of the House of Representatives challenging the constitutionality of Republic Act No. 8762, also known as the Retail Trade Liberalization Act of 2000. Petitioners argued that the law violates constitutional provisions mandating a self-reliant national economy effectively controlled by Filipinos. The Supreme Court, after relaxing the rules on legal standing due to the transcendental importance of the issues, dismissed the petition. The Court held that R.A. 8762 is constitutional, reasoning that the relevant constitutional principles are not self-executing, and that Congress possesses the discretion to regulate foreign investments and open certain economic sectors, like retail trade, provided there are safeguards, which the Court found to be present in the assailed law.
Primary Holding
The Retail Trade Liberalization Act of 2000 (R.A. 8762) is constitutional; the general principles in Article II of the Constitution regarding national economy are not self-executing, and Article XII grants Congress the discretion to determine which areas of investment may be opened to foreign participation, making R.A. 8762 a valid exercise of legislative power to regulate trade in the interest of public welfare.
Background
Prior to the enactment of R.A. 8762, Republic Act No. 1180 (Retail Trade Nationalization Act) absolutely prohibited foreign nationals from engaging in the retail trade business in the Philippines. R.A. 8762 was passed on March 7, 2000, expressly repealing R.A. 1180 and allowing foreign nationals to engage in the retail trade business under specified categories and conditions, thereby liberalizing this sector of the economy.
History
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Petition assailing the constitutionality of R.A. 8762 filed directly with the Supreme Court on October 11, 2000.
Facts
- On March 7, 2000, President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, the Retail Trade Liberalization Act of 2000, which repealed R.A. 1180 that had previously nationalized the retail trade.
- R.A. 8762 permits foreign participation in the retail trade business under four categories: Category A (less than US$2,500,000 capital) is exclusively for Filipino citizens and wholly Filipino-owned corporations.
- Category B (capital of US$2,500,000 up to less than US$7,500,000) allows up to 60% foreign ownership for the first two years of R.A. 8762's effectivity, after which 100% foreign equity is allowed.
- Category C (capital of US$7,500,000 or more) allows 100% foreign ownership.
- Category D (capital of US$250,000 per store specializing in high-end or luxury products) allows 100% foreign ownership, provided the investment is not less than the Philippine Pesos equivalent of US$830,000.00.
- R.A. 8762 also allows natural-born Filipino citizens who lost their citizenship and now reside in the Philippines to engage in retail trade with the same rights as Filipino citizens.
- On October 11, 2000, petitioners, who are members of the House of Representatives, filed a petition directly with the Supreme Court assailing the constitutionality of R.A. 8762.
Arguments of the Petitioners
- R.A. 8762 contravenes Sections 9, 19, and 20 of Article II of the Constitution, which mandate state policies for a self-reliant national economy under Filipino control, promotion of industrialization, full employment, and protection of Filipino enterprises.
- The implementation of R.A. 8762 would result in alien control of the retail trade sector, leading to a loss of effective Filipino control over the national economy.
- Large foreign retailers like Walmart and K-Mart would overwhelm Filipino retailers and sari-sari store vendors, causing widespread unemployment and destroying self-employment opportunities.
- The passage of R.A. 8762 was improperly imposed by the World Bank-International Monetary Fund as a condition for the release of certain loans.
- There is a clear and present danger that R.A. 8762 would promote monopolies or combinations in restraint of trade.
Arguments of the Respondents
- Petitioners lack legal standing as they have not suffered direct injury, either as taxpayers (since R.A. 8762 does not involve public fund disbursement) or as legislators (as they made no claim that the law infringes on their legislative rights).
- The petition does not present a justiciable controversy because it fails to allege any violation of the rights of the small retail vendors whom petitioners claim to represent.
- Petitioners have not overcome the presumption of constitutionality of R.A. 8762 and have not specified how the law violates the cited constitutional provisions, noting that Sections 9, 19, and 20 of Article II are not self-executing.
- The Constitution mandates the regulation, not the absolute prohibition, of foreign investments and grants Congress discretion to reserve certain investment areas to Filipinos, which does not prevent Congress from allowing foreign entry into industries not constitutionally reserved.
Issues
- Whether or not the petitioner lawmakers possess the legal standing to challenge the constitutionality of R.A. 8762.
- Whether or not R.A. 8762 is unconstitutional for allegedly violating the constitutional mandate for the development of a self-reliant and independent national economy effectively controlled by Filipinos.
Ruling
- The Supreme Court ruled that although petitioners did not clearly demonstrate direct injury to establish legal standing as taxpayers or legislators, the rule on standing can be relaxed because the case involves matters of transcendental importance, overarching significance to society, or paramount public interest.
- The Court held that R.A. 8762 is not unconstitutional. The provisions of Article II of the Constitution (Declaration of Principles and State Policies), specifically Sections 9, 19, and 20, are not self-executing; legislative failure to pursue these policies does not give rise to a cause of action in courts.
- Article XII of the Constitution (National Economy and Patrimony), while advocating economic nationalism, does not impose a policy of Filipino monopoly over the economic environment. Section 10 of Article XII grants Congress the discretion to reserve certain areas of investment to Filipinos or to enact laws allowing foreign entry into industries not constitutionally reserved, depending on economic exigencies and national interest.
- Congress, in enacting R.A. 8762, exercised its discretion to open certain areas of the retail trade business to foreign investments, a policy not opposed by NEDA, and this is within its legislative power.
- The regulation of trade is an exercise of the State's police power. R.A. 8762, by lessening restrictions on foreign participation, does not deny Filipinos' right to property or due process, as they can still engage in retail business.
- The law contains safeguards against undue alien control, such as specific capitalization requirements, reciprocity provisions, and limitations on certain retailing activities for foreign entities.
- The Court reiterated that it is not its role to inquire into the wisdom of R.A. 8762, as that is a legislative function, unless the law blatantly violates the Constitution, which petitioners failed to prove.
Doctrines
- Locus Standi (Legal Standing) — The right of a party to bring an action in court, requiring a personal and substantial interest in the case such that the party has sustained or is in immediate danger of sustaining some direct injury as a result of the challenged act. In this case, the Court relaxed the strict application of this rule, allowing the petitioners (legislators) to sue given the transcendental importance and paramount public interest of the constitutional questions raised regarding the Retail Trade Liberalization Act.
- Non-Self-Executing Constitutional Provisions — Principles and state policies declared in Article II of the Constitution are generally not self-executing, meaning they do not create judicially enforceable rights or causes of action without enabling legislation. The Court applied this by stating that petitioners' reliance on Article II, Sections 9, 19, and 20 was misplaced as these provisions do not, by themselves, invalidate R.A. 8762.
- Economic Nationalism (Article XII, Constitution) — A constitutional principle that gives preference to Filipinos in the national economy but does not mandate an absolute monopoly. The Court interpreted this to mean that while the Constitution favors Filipino control and preference, it grants Congress discretion to regulate foreign investments and allow foreign participation in certain sectors based on national interest, equality, and reciprocity, as was done with R.A. 8762.
- Police Power — The inherent power of the State to enact legislation that may interfere with personal liberty or property in order to promote the general welfare. The Court recognized that the regulation of trade, whether nationalizing it (as in R.A. 1180) or liberalizing it (as in R.A. 8762), is a valid exercise of the State's police power.
- Presumption of Constitutionality — An act of the legislature is presumed to be constitutional, and the party challenging its constitutionality bears the burden of proving a clear and unequivocal breach of the Constitution. This principle implicitly guided the Court's approach, requiring petitioners to demonstrate a blatant constitutional violation, which they failed to do.
- Separation of Powers (Wisdom of Legislation) — The principle that courts will not inquire into the wisdom, justice, policy, or expediency of a law, as these are matters within the domain of the legislative branch. The Court applied this by stating it would not question the wisdom of R.A. 8762 unless it was shown to be blatantly unconstitutional.
Key Excerpts
- "Still the Court will resolve the question they raise since the rule on standing can be relaxed for nontraditional plaintiffs like ordinary citizens, taxpayers, and legislators when as in this case the public interest so requires or the matter is of transcendental importance, of overarching significance to society, or of paramount public interest."
- "But, as the Court explained in Tañada v. Angara, the provisions of Article II of the 1987 Constitution, the declarations of principles and state policies, are not self-executing. Legislative failure to pursue such policies cannot give rise to a cause of action in the courts."
- "In other words, while Section 19, Article II of the 1987 Constitution requires the development of a self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, it does not impose a policy of Filipino monopoly of the economic environment."
- "More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when the national interest requires. Thus, Congress can determine what policy to pass and when to pass it depending on the economic exigencies."
- "Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save when it blatantly violates the Constitution."
Precedents Cited
- Tañada v. Angara — Referenced to establish that Article II constitutional provisions are not self-executing and that Article XII's economic nationalism does not mandate a Filipino monopoly but allows for a balance between protecting local interests and engaging in foreign trade and investment.
- Ichong v. Hernandez — Cited as precedent where the Supreme Court upheld the Retail Trade Nationalization Act (R.A. 1180) as a valid exercise of police power, demonstrating the State's authority to regulate retail trade, whether by restriction or liberalization.
- Jumamil v. Cafe — Cited for the general rule on legal standing.
- Abaya v. Ebdane, Jr. — Cited for the definition of legal standing, requiring direct injury.
- BAYAN (Bagong Alyansang Makabayan) v. Executive Secretary Zamora — Cited for the elements of legal standing, such as being denied a right or privilege or being subjected to burdens.
- Public Interest Center, Inc. v. Roxas — Cited in the context of taxpayer standing.
- Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on Ancestral Domain (GRP) — Cited in the context of legislator standing.
- Bagatsing v. Committee on Privatization, PN[O]C — Cited in the context of legislator standing.
- Automotive Industry Workers Alliance (AIWA) v. Hon. Romulo — Cited as authority for relaxing the locus standi rule when matters of transcendental importance are involved.
Provisions
- Constitution, Article II, Section 9 — This provision, mandating the State to promote a just and dynamic social order, was invoked by petitioners. The Court held it to be non-self-executing.
- Constitution, Article II, Section 19 — This provision, requiring the State to develop a self-reliant and independent national economy effectively controlled by Filipinos, was a cornerstone of petitioners' arguments. The Court ruled it as non-self-executing and not prohibitive of foreign participation.
- Constitution, Article II, Section 20 — This provision, recognizing the role of the private sector and encouraging private enterprise, was cited by petitioners. The Court deemed it non-self-executing.
- Constitution, Article XII, Section 10 — This section, empowering Congress to reserve investment areas to Filipinos and regulate foreign investments, was central to the Court's ruling that Congress has discretion to liberalize trade as done in R.A. 8762.
- Constitution, Article XII, Section 12 — This provision, promoting preferential use of Filipino labor and local products, was invoked by petitioners to support their protectionist stance.
- Constitution, Article XII, Section 13 — This provision, mandating a trade policy for general welfare based on equality and reciprocity, was used by the Court to support the idea that the Constitution allows for international economic engagement.
- Republic Act No. 8762 (Retail Trade Liberalization Act of 2000) — This is the statute whose constitutionality was challenged by the petitioners and upheld by the Court.
- Republic Act No. 1180 (Retail Trade Nationalization Act) — This repealed statute, which had nationalized the retail trade, was discussed as historical context for the State's exercise of police power in regulating trade.