In a landmark decision handed down on March 10, 2020, the Supreme Court (SC) declared void the 30-year-old foreign equity limitation on construction companies imposed under the “Revised Rules and Regulations Governing the Licensing and Accreditation of Contractors in the Philippines” or the implementing rules and regulations (IRR) of Republic Act (RA) 4566, or the “Contractors’ License Law.” This pronouncement effectively removed a substantial barrier to the entry of foreign contractors in the construction industry and is indeed a significant step toward fair competition in the Philippines. This decision is very timely, since it would give our economy a much-needed boost during the Covid-19 pandemic.
This case stemmed from the Philippine Contractors Accreditation Board’s (PCAB) denial of applications submitted by Manila Water Co. Inc. to accredit its foreign contractors. The denial was based on Section 3.1, Rule 3 of the IRR, which reserved regular licenses only to contractors or firms that are either Filipino sole proprietorships, Filipino partnerships or corporations with at least 60-percent Filipino equity participation. Aggrieved by the PCAB’s decision, Manila Water filed a petition for declaratory relief before a regional trial court, which rendered a decision favoring the company. The PCAB thus filed a petition for review with the SC.