Hutchison Ports Philippines Limited vs. Subic Bay Metropolitan Authority

A foreign corporation participating in a bidding process for a government concession contract is considered "doing business" in the Philippines and must secure a license to do business before it can sue in Philippine courts. The Court ruled that participating in a bidding process constitutes doing business because it demonstrates the foreign corporation's intention to engage in business in the country and constitutes an exercise of the functions for which it was created.

The Subic Bay Metropolitan Authority (SBMA) invited bids for the development and operation of a marine container terminal within the Subic Bay Freeport Zone. Three entities qualified: International Container Terminal Services, Inc. (ICTSI), Royal Port Services, Inc. (RPSI), and Hutchison Ports Philippines Limited (HPPL). International consultants hired by SBMA unanimously concluded that HPPL's business plan was superior. RPSI and HPPL protested ICTSI's bid based on conflict of interest. The SBMA Pre-qualification, Bids and Awards Committee (PBAC) rejected ICTSI's bid and declared HPPL the winning bidder. ICTSI appealed to the Office of the President. The Chief Presidential Legal Counsel recommended re-evaluating the financial bids, which President Ramos approved. After re-evaluation, the SBMA Board unanimously selected HPPL again. Notwithstanding this, the Office of the President directed the SBMA to refrain from signing the contract with HPPL and to conduct a rebidding.

• The Bidding Process: On February 12, 1996, SBMA advertised an invitation to develop and operate a marine container terminal. Seven bidders responded; three were pre-qualified: ICTSI, RPSI (consortium), and HPPL (consortium). SBMA hired three World Bank-recommended international consultants and a local firm to evaluate the bids. The consultants unanimously found HPPL's business plan "far superior."
• Protests and Initial Award: Before financial bids were opened, RPSI protested ICTSI's participation due to conflict of interest (operating another port), a protest HPPL joined. Financial bids were opened "under advisement" (ICTSI: US$57.80 TEU; HPPL: US$20.50 TEU; RPSI: US$15.08 TEU). On August 15, 1996, the SBMA-PBAC rejected ICTSI's bid and declared HPPL the winning bidder, ordering immediate negotiations.
• Presidential Intervention: ICTSI appealed to the SBMA Board and the Office of the President. Chief Presidential Legal Counsel Renato Cayetano recommended re-evaluating the financial bids, which President Ramos approved. The SBMA Board re-evaluated the bids and, on September 19, 1996, unanimously declared HPPL the winning bidder again as the most advantageous offer. Despite this, Executive Secretary Ruben Torres recommended a rebidding, and the Office of the President directed SBMA to refrain from signing with HPPL and to conduct a rebidding.
• Ombudsman Investigation: The Office of the Ombudsman investigated SBMA-PBAC members for violating RA 3019 but absolved them, finding they were guided by expert reports and that HPPL's plan offered the greatest financial return without placing the government at a disadvantage.
• Lower Court Action: HPPL filed a complaint for specific performance and injunction in the RTC of Olongapo City. While pending, SBMA scheduled a rebidding. HPPL moved to maintain the status quo, but the RTC denied the motion, holding that issuing a cease-and-desist order would violate Section 21 of RA 7227, which reserves injunctions against SBMA projects to the Supreme Court.
• Supreme Court Petition: HPPL filed the present petition for prohibitory injunction with the Supreme Court to enjoin the rebidding pending the RTC case. The Court issued a TRO on December 3, 1997.

• Petitioner HPPL argued that it had acquired a clear and unmistakable right as the winning bidder, entitling it to negotiate the Concession Agreement and barring SBMA from conducting a rebidding.
• HPPL maintained that allowing the rebidding would work an injustice, violate its rights in the pending RTC action, and render the lower court's judgment moot and ineffectual.
• HPPL contended that it was merely engaging in an isolated transaction (the bidding) and therefore did not need a license to do business in the Philippines to be able to sue.

• Respondents argued that the Office of the President had the authority to review and set aside the SBMA's award under Letter of Instruction No. 620.
• SBMA argued that the RTC lacked jurisdiction to issue an injunction under Section 21 of RA 7227, which grants exclusive jurisdiction to the Supreme Court to enjoin SBMA projects.
• Respondents implicitly argued that HPPL was doing business in the Philippines without a license, thus lacking the capacity to sue.

• Procedural Issues:
  • Whether HPPL has the legal capacity to sue in Philippine courts as a foreign corporation doing business without a license.
• Substantive Issues:
  • Whether HPPL has a clear and unmistakable right to the award that warrants the issuance of a writ of preliminary injunction to stop the rebidding.
  • Whether the Office of the President has the authority to set aside the SBMA Board's award of the contract to HPPL.

• Procedural: The Court ruled that HPPL lacked the legal capacity to sue. Participating in a bidding process for a concession contract constitutes "doing business" in the Philippines because it demonstrates the corporation's intention to engage in business and constitutes an exercise of the functions for which it was created. Because HPPL did not possess the requisite license to do business, it is incapacitated from seeking redress in Philippine courts.
• Substantive: The Court ruled that HPPL did not possess a clear and unmistakable right to the award. The SBMA is an instrumentality under the control and supervision of the Office of the President. Pursuant to Letter of Instruction No. 620, the President's approval is required for SBMA contracts involving substantial amounts. The President validly exercised prerogative in directing a rebidding and setting aside the SBMA's award. Because the award was not final and binding prior to Presidential approval, no clear right was invaded, negating the requisites for injunction.

• Doing Business by Foreign Corporations — A single act or transaction may be considered "doing business" when a corporation performs acts for which it was created or exercises some of the functions for which it was organized. The amount or volume of business is immaterial if the act indicates the foreign corporation's intention to do business. Participating in a bidding process for a government concession constitutes doing business because it shows the intention to engage in business and is an exercise of the corporation's purpose for creation. A foreign corporation doing business in the Philippines without a license lacks the capacity to sue in Philippine courts.
• Requisites for Injunction — For a writ of injunction to issue, the applicant must prove: (1) a clear and unmistakable right; (2) a material and substantial invasion of such right; and (3) an urgent and permanent necessity for the writ to prevent serious damage. The absence of a clear legal right precludes the issuance of the writ.
• Presidential Control over SBMA — The SBMA, as a chartered institution and instrumentality, is under the direct control of the Office of the President, particularly concerning contracts involving substantial amounts. Pursuant to LOI 620, the President may overturn or reverse any award made by the SBMA Board of Directors for justifiable reasons.

• "Participating in the bidding process constitutes 'doing business' because it shows the foreign corporation’s intention to engage in business here. The bidding for the concession contract is but an exercise of the corporation’s reason for creation or existence."
• "If a foreign corporation operates a business in the Philippines without a license, and thus does not submit itself to Philippine laws, it is only just that said foreign corporation be not allowed to invoke them in our courts when the need arises."

• Mentholatum Co. v. Mangaliman, 72 Phil. 524 (1941) — Cited for the principle that there is no general rule as to what constitutes "doing business"; each case depends on its peculiar circumstances.
• Avon Insurance PLC v. CA, 273 SCRA 312 (1997) — Followed for the rule that a single act may constitute doing business if it involves performing acts for which the corporation was created, regardless of volume.
• Granger Associates v. Microwave Systems, Inc., 189 SCRA 631 (1990) — Followed for the principle that a foreign company invited to bid for international projects in the Philippines is considered doing business requiring a license, and that unlicensed foreign corporations cannot invoke Philippine laws in court.
• Inter-Asia Services Corp. (International) v. CA, 263 SCRA 408 (1996) — Cited for the principle that courts will not generally interfere with the executive department's wide latitude of discretion to accept or reject bids unless unfairness or injustice is apparent.

• Section 21, Republic Act No. 7227 — Provides that the implementation of projects for the conversion of military reservations into alternative productive uses shall not be restrained or enjoined except by an order issued by the Supreme Court. Applied to justify the RTC's denial of the status quo motion and establish the Supreme Court's exclusive jurisdiction over injunctions against SBMA projects.
• Letter of Instruction No. 620 — Mandates that the approval of the President is required in all contracts of national government offices, agencies, and instrumentalities, including GOCCs, involving two million pesos and above. Applied to establish that the SBMA's award to HPPL was not final and binding without Presidential approval, and that the President had the authority to set aside the award and order a rebidding.

Puno, Kapunan, and Pardo, JJ., concur. Davide, Jr., C.J., (Chairman), in the result.