Tuesday, November 7, 2017
Virtual businesses owned by foreign corporations — Are they doing business in the Phl?
See - Virtual businesses owned by foreign corporations — Are they doing business in the Phl?
"x x x.
Virtual businesses owned by foreign corporations — Are they doing business in the Phl?
TOP OF MIND
By Betzy C. Nuevo
When then, are foreign corporations considered as doing business in the Philippines? In determining whether or not a foreign corporation is considered doing business, the facts are considered on a case-by-case basis. SEC-OGC Opinion No. 17-03 issued on April 4, 2017 finds particular significance as it found an occasion to determine whether a foreign corporation, transacting through online means, can be deemed to be doing business in the Philippines.
The factual circumstances surrounding said opinion involved a foreign corporation proposing an online platform that offers various content and services, such as an online community and online gaming system. The online platform is an internet-based system, wherein persons in the Philippines can participate in the online community, and purchase and use content from the foreign corporation’s services. This, notwithstanding the company having no physical presence in the Philippines. The said foreign corporation will further undertake activities such as offering and selling its services on the internet to persons located in the Philippines, accepting online payments in any currency, marketing or advertising the online platform in the Philippines through online and printed publications, and television and radio commercials, and hiring independent contractors to market and advertise its products, as well as selling prepaid cards in relation to its online gaming services.
In determining whether the above activities of said foreign corporation constitute doing business in the Philippines, the SEC used the “twin characterization” and “sliding scale” tests.
The “twin characterization test” was discussed by the Supreme Court in the case of Mentholatum Co., Inc. vs. Mangiliman (G.R. No. 47701). In the said case, a foreign corporation is considered “doing business” in the Philippines when (1) the company is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another, and (2) the company is engaged in activities which implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. The twin characterization test aims to identify whether transactions made by the foreign corporation constitute continuing the body or substance of its main business in our country, and determine if it intends to continue the same for some time.
On the other hand, the “sliding scale test” is discussed in the above opinion as a test specifically “tailored to internet activities to determine the level or types of activities that will constitute minimum contacts for jurisdictional purposes.” Using this test, the courts determine whether or not it has personal jurisdiction over the foreign corporation by identifying the nature of the company and the quantity of its commercial activity conducted in the internet.
This test starts by classifying the websites that may be used by the entity as either (1) passive, (2) active and (3) interactive. At one end of the scale are “passive” websites, which are those that do not generate sufficient contacts since they are only used to post information. This type does not place foreign corporations under the jurisdiction of our courts. On the other end are “active” website, which are those that generate sufficient contacts through acts such as selling of contents and services over the internet. This, in turn, subjects foreign corporations to our court’s jurisdiction. Found in between these two categories are “interactive” websites, which combine the elements of both active and passive websites. The courts determine whether it has personal jurisdiction over interactive website owners on a case-by-case basis.
As applied in the recent SEC opinion, the SEC ruled that the foreign corporation fulfilled the requirements of the twin characterization test. The SEC found that some of the activities of the foreign corporation such as the funding of the company’s online wallet, offering and selling of its services, accepting online payments in any currency, marketing or advertising, and hiring of independent contractors for marketing or advertising of its products, and the selling of prepaid cards in relation to its online gaming services, indicate that the entity will be continuing the body or substance for which it was organized in the Philippines. Moreover, the SEC found that these activities will be consummated in the Philippines albeit virtually. The SEC found it relevant to note that the creation of accounts, funding of the online wallet, and payment and delivery of the online content and services will all be made in the Philippines. Likewise, the offering for sale and sale of online content and services will be also be made to an account holder in the Philippines. The funding of the online wallet was, moreover, found to be indicative of intent to continue business for a period of time as the maintenance of funds in such wallet will allow the account holder to resume his transactions on his account. Thus, a business relationship is maintained, notwithstanding the frequency or regularity of the transactions.
Moreover, the SEC also found that the foreign corporation satisfied the sliding scale test by identifying that the company has minimum contacts. The SEC found that the foreign corporation’s website must be considered as an “active” website since it generates sufficient contacts and businesses over the internet through offering and engaging in sale of online content and services to account holders in the Philippines.
Having satisfied both the twin characterization and sliding scale tests, the SEC finally opined that the activities in which the foreign corporation plans to undertake constitutes as “doing business” in the Philippines. The foreign corporation is required to obtain a license to do business in the Philippines, should it wish to continue transacting here, and if it wishes to avoid the adverse consequences of non-compliance, as stated in Section 133 of the Corporation Code.
Pertinently, the said section states that unlicensed foreign corporations transacting business in the Philippines cannot maintain or intervene in any action, suit, or proceeding in any court or administrative agency of the Philippines. As explained in the 1990 case of Granger Associates vs. Microwave Systems, et. al. (G.R. No. 79986), the purpose of the rule requiring corporations to obtain a license to do business in the Philippines is to enable the court to exercise jurisdiction over foreign corporations for the regulation of their activities in our country. Further, as the case cited, while foreign investors are always welcome in this land to collaborate with us for our mutual benefit, they must be prepared, as an indispensable condition, to respect and be bound by Philippine law in proper cases. Thus, foreign corporations who have not complied with the license requirement will be deemed as having no legal capacity to sue before Philippine courts.
Do note, though, that there exists in jurisprudence an exemption to this general rule. In the 2010 case of Global Business Holdings, Inc. vs. Surecomp Software, B.V. (G.R. No. 173463), a foreign corporation doing business in the Philippines without license may sue in Philippine courts a Filipino citizen or a Philippine entity that it had contracted with and benefited from. In the said case, the Supreme Court had occasion to rule that a party, after having acknowledged the personality of a corporation by contracting with it, is estopped from challenging the said personality. The principle derives from estoppel, and is applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract. Thus, we can see that our laws do not intend to put foreign corporations at a disadvantage by requiring them to secure a license. Merely, the law intends to compel the foreign entity desiring to do business in our country to respect and be bound by Philippine laws, and submit itself to the jurisdiction of our courts.
In totality, foreign corporations may consider the Philippines as a place having good business potential wherein they can invest their money and do business with confidence.
Betzy C. Nuevo is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice, Tier 1 transfer pricing practice, Tier 1 leading tax transactional firm and the 2016 National Transfer Pricing Firm of the Year in the Philippines by the International Tax Review.
xxx.
x x x."
(The Philippine Star) | Updated November 7, 2017 - 12:00am
We are now in the information age, and experiencing an era of quick-evolving technology. With such evolution, many types of businesses arose. From the traditional set-up requiring the physical presence of both the suppliers and customers, we can see nowadays that sales occur even without such physical presence. Examples of such businesses are online gaming, online stores, and business process outsourcing. These newly developed arrangements are widely exploited by businesses, including foreign corporations. Thus, the question on when foreign online business may be considered as doing business in the Philippines becomes more relevant.
First off, we will need to identify what a foreign corporation is and what the requirements are when they wish to transact business in the Philippines. Section 123 of the Corporation Code of the Philippines will find significance as it defines a foreign corporation as one that is formed, organized, or existing under any laws other than those of the Philippines, and whose laws allow Filipino citizens and corporations to do business in its own country or state. The provision further states that a foreign corporation shall have the right to transact business in the Philippines after it obtains a certificate of authority from the appropriate government agency and a license to transact business in this country.
However, not all transactions made by a foreign corporation require a license. In the 2002 case of MR Holdings, Ltd. vs. Sheriff Carlos P. Bajar et. al. (G.R. No. 138104), the Supreme Court found that mere ownership by a foreign corporation of a property in a certain state, unaccompanied by its active use in furtherance of its business purpose, is insufficient to constitute the entity as doing business in our country. Fast forward to the 2007 case of B. Van Zuiden Bros., Ltd. vs. GTVL Manufacturing Industries, Inc. (G.R. No. 147905), the Supreme Court also declared that foreign corporations, whose transactions pertain to mere exportation of goods, without doing any specific commercial act within our country, are not considered as doing business in the importing country. Further in the 2012 case of Steelcase, Inc. vs. Design International Selections, Inc., (G.R. No. 171995), the Supreme Court held that foreign corporations are not deemed to be conducting business in the Philippines merely by appointing a distributor.
We are now in the information age, and experiencing an era of quick-evolving technology. With such evolution, many types of businesses arose. From the traditional set-up requiring the physical presence of both the suppliers and customers, we can see nowadays that sales occur even without such physical presence. Examples of such businesses are online gaming, online stores, and business process outsourcing. These newly developed arrangements are widely exploited by businesses, including foreign corporations. Thus, the question on when foreign online business may be considered as doing business in the Philippines becomes more relevant.
First off, we will need to identify what a foreign corporation is and what the requirements are when they wish to transact business in the Philippines. Section 123 of the Corporation Code of the Philippines will find significance as it defines a foreign corporation as one that is formed, organized, or existing under any laws other than those of the Philippines, and whose laws allow Filipino citizens and corporations to do business in its own country or state. The provision further states that a foreign corporation shall have the right to transact business in the Philippines after it obtains a certificate of authority from the appropriate government agency and a license to transact business in this country.
However, not all transactions made by a foreign corporation require a license. In the 2002 case of MR Holdings, Ltd. vs. Sheriff Carlos P. Bajar et. al. (G.R. No. 138104), the Supreme Court found that mere ownership by a foreign corporation of a property in a certain state, unaccompanied by its active use in furtherance of its business purpose, is insufficient to constitute the entity as doing business in our country. Fast forward to the 2007 case of B. Van Zuiden Bros., Ltd. vs. GTVL Manufacturing Industries, Inc. (G.R. No. 147905), the Supreme Court also declared that foreign corporations, whose transactions pertain to mere exportation of goods, without doing any specific commercial act within our country, are not considered as doing business in the importing country. Further in the 2012 case of Steelcase, Inc. vs. Design International Selections, Inc., (G.R. No. 171995), the Supreme Court held that foreign corporations are not deemed to be conducting business in the Philippines merely by appointing a distributor.
When then, are foreign corporations considered as doing business in the Philippines? In determining whether or not a foreign corporation is considered doing business, the facts are considered on a case-by-case basis. SEC-OGC Opinion No. 17-03 issued on April 4, 2017 finds particular significance as it found an occasion to determine whether a foreign corporation, transacting through online means, can be deemed to be doing business in the Philippines.
The factual circumstances surrounding said opinion involved a foreign corporation proposing an online platform that offers various content and services, such as an online community and online gaming system. The online platform is an internet-based system, wherein persons in the Philippines can participate in the online community, and purchase and use content from the foreign corporation’s services. This, notwithstanding the company having no physical presence in the Philippines. The said foreign corporation will further undertake activities such as offering and selling its services on the internet to persons located in the Philippines, accepting online payments in any currency, marketing or advertising the online platform in the Philippines through online and printed publications, and television and radio commercials, and hiring independent contractors to market and advertise its products, as well as selling prepaid cards in relation to its online gaming services.
In determining whether the above activities of said foreign corporation constitute doing business in the Philippines, the SEC used the “twin characterization” and “sliding scale” tests.
The “twin characterization test” was discussed by the Supreme Court in the case of Mentholatum Co., Inc. vs. Mangiliman (G.R. No. 47701). In the said case, a foreign corporation is considered “doing business” in the Philippines when (1) the company is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another, and (2) the company is engaged in activities which implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. The twin characterization test aims to identify whether transactions made by the foreign corporation constitute continuing the body or substance of its main business in our country, and determine if it intends to continue the same for some time.
On the other hand, the “sliding scale test” is discussed in the above opinion as a test specifically “tailored to internet activities to determine the level or types of activities that will constitute minimum contacts for jurisdictional purposes.” Using this test, the courts determine whether or not it has personal jurisdiction over the foreign corporation by identifying the nature of the company and the quantity of its commercial activity conducted in the internet.
This test starts by classifying the websites that may be used by the entity as either (1) passive, (2) active and (3) interactive. At one end of the scale are “passive” websites, which are those that do not generate sufficient contacts since they are only used to post information. This type does not place foreign corporations under the jurisdiction of our courts. On the other end are “active” website, which are those that generate sufficient contacts through acts such as selling of contents and services over the internet. This, in turn, subjects foreign corporations to our court’s jurisdiction. Found in between these two categories are “interactive” websites, which combine the elements of both active and passive websites. The courts determine whether it has personal jurisdiction over interactive website owners on a case-by-case basis.
As applied in the recent SEC opinion, the SEC ruled that the foreign corporation fulfilled the requirements of the twin characterization test. The SEC found that some of the activities of the foreign corporation such as the funding of the company’s online wallet, offering and selling of its services, accepting online payments in any currency, marketing or advertising, and hiring of independent contractors for marketing or advertising of its products, and the selling of prepaid cards in relation to its online gaming services, indicate that the entity will be continuing the body or substance for which it was organized in the Philippines. Moreover, the SEC found that these activities will be consummated in the Philippines albeit virtually. The SEC found it relevant to note that the creation of accounts, funding of the online wallet, and payment and delivery of the online content and services will all be made in the Philippines. Likewise, the offering for sale and sale of online content and services will be also be made to an account holder in the Philippines. The funding of the online wallet was, moreover, found to be indicative of intent to continue business for a period of time as the maintenance of funds in such wallet will allow the account holder to resume his transactions on his account. Thus, a business relationship is maintained, notwithstanding the frequency or regularity of the transactions.
Moreover, the SEC also found that the foreign corporation satisfied the sliding scale test by identifying that the company has minimum contacts. The SEC found that the foreign corporation’s website must be considered as an “active” website since it generates sufficient contacts and businesses over the internet through offering and engaging in sale of online content and services to account holders in the Philippines.
Having satisfied both the twin characterization and sliding scale tests, the SEC finally opined that the activities in which the foreign corporation plans to undertake constitutes as “doing business” in the Philippines. The foreign corporation is required to obtain a license to do business in the Philippines, should it wish to continue transacting here, and if it wishes to avoid the adverse consequences of non-compliance, as stated in Section 133 of the Corporation Code.
Pertinently, the said section states that unlicensed foreign corporations transacting business in the Philippines cannot maintain or intervene in any action, suit, or proceeding in any court or administrative agency of the Philippines. As explained in the 1990 case of Granger Associates vs. Microwave Systems, et. al. (G.R. No. 79986), the purpose of the rule requiring corporations to obtain a license to do business in the Philippines is to enable the court to exercise jurisdiction over foreign corporations for the regulation of their activities in our country. Further, as the case cited, while foreign investors are always welcome in this land to collaborate with us for our mutual benefit, they must be prepared, as an indispensable condition, to respect and be bound by Philippine law in proper cases. Thus, foreign corporations who have not complied with the license requirement will be deemed as having no legal capacity to sue before Philippine courts.
Do note, though, that there exists in jurisprudence an exemption to this general rule. In the 2010 case of Global Business Holdings, Inc. vs. Surecomp Software, B.V. (G.R. No. 173463), a foreign corporation doing business in the Philippines without license may sue in Philippine courts a Filipino citizen or a Philippine entity that it had contracted with and benefited from. In the said case, the Supreme Court had occasion to rule that a party, after having acknowledged the personality of a corporation by contracting with it, is estopped from challenging the said personality. The principle derives from estoppel, and is applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract. Thus, we can see that our laws do not intend to put foreign corporations at a disadvantage by requiring them to secure a license. Merely, the law intends to compel the foreign entity desiring to do business in our country to respect and be bound by Philippine laws, and submit itself to the jurisdiction of our courts.
In totality, foreign corporations may consider the Philippines as a place having good business potential wherein they can invest their money and do business with confidence.
Betzy C. Nuevo is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice, Tier 1 transfer pricing practice, Tier 1 leading tax transactional firm and the 2016 National Transfer Pricing Firm of the Year in the Philippines by the International Tax Review.
xxx.
x x x."
MEL STA.MARIA | Chief Justice Sereno shouldn't resign
See - MEL STA.MARIA | Chief Justice Sereno shouldn't resign
"x x x.
MEL STA.MARIA | Chief Justice Sereno shouldn’t resign
By Mel Sta. Maria
| November 7, 2017, 7:38 AM
Philstar file photographAtty. Mel Sta. Maria is the Dean of the Far Eastern University Institute of Law. He also teaches at the Ateneo de Manila School of Law and the Pamantasan ng Lungsod ng Maynila College of Law.
For presidential spokesman Harry Roque to suggest that Chief Justice Maria Lourdes Sereno resign “ to spare the institution from any further damage” is ridiculous.
The rate the Supreme Court is churning out decisions that are highly controversial and/or, worse, perceived as subservient to the wishes of Malacañan, is more reason why the Chief Justice should not resign, to preserve what is left of the good reputation of not only the Supreme Court but the whole government and our democratic system.
For example, the high court ruling allowing the late dictator Ferdinand Marcos — who, together with his cohorts, stole billions of pesos from the Philippine treasury and whose regime resulted in thousands of death and/or disappearances of Filipinos — to be buried at the Libingan ng mga Bayani was so preposterous. The Chief Justice strongly dissented in that case saying that the burial “would be to disregard historical truths and legal principles that persist after death … It would be to degrade the State’s duty to recognize the pain of countless victims of Marcos and Martial law.”
The decision upholding President Rodrigo Duterte’s placing all of Mindanao under Martial Law even though there was no actual rebellion or invasion in many peaceful places is considered by many critics as virtually planting the legal foundation for authoritarianism. The Chief Justice dissented against the almost absolute grant of power to the executive by the majority of the Supreme Court on the imposition of Martial Law, strongly stating that, according to the text and spirit of the Constitution, “ the President, in the exercise of his commander-in-chief-powers, does not have unbridled discretion as to when, where and how martial law is to be declared.”
The acquittal of Gloria Macapagal Arroyo in the plunder case against her was, to many, so premature it prompted the Chief Justice to dissent, stating that the Sandiganbayan resolution to proceed with the trial “cannot be overridden willy-nilly by this Court.”
When the majority of the Supreme Court granted bail to Senator Juan Ponce Enrile, it was so astonishing as it was not strongly premised on anything textually allowed by the Constitution. Again, the Chief Justice openly declared that her position was “an unqualified concurrence with the dissent” of Justice Marvic Leonen, who disagreed with the majority because, in so doing, they concede that there are “those among us who are powerful and networked enough to enjoy privileges not shared by all.”
The absolute pardon granted former President Joseph Estrada was disappointing as it smacks of impunity. The Chief Justice joined the dissent of Justice Leonen who stated that “impunity, in any form, should be abhorred especially when it gives advantage to the privileged and the powerful.”
There can be no dispute that Chief Justice Sereno, together with a small minority in the Supreme Court, provides the rational voice of decency, rationality, historicity, and intelligence in the tribunal. And even if her position did not prevail in the above-mentioned cases, this is so not for poor arguments but simply because there were more votes obtained by the opposite side.
And from the institutional perspective, Chief Justice Maria Lourdes Sereno is the only head of a branch of government not at the beck and call of President Duterte. Speaker Pantaleon Alvarez is an avid follower of the President while Senate President Koko Pimentel is a party-mate. Not only is this the demand of Chief Justice Sereno’s position, in order to preserve whatever perception of independence the Supreme Court still has today, but, more paramount, such attitude is required of the public so they can have the confidence that there is someone authoritative enough and ready to relay to them, if warranted, why the President, the Senate and House of Representatives are, in certain important cases, wrong. That is an imperative in a robust democracy.
Ironically, to maintain Chief Justice Sereno in her position in the Supreme Court will do President Duterte more good than harm. For one, it will show the confidence of his administration in the workings of our institutions despite contrary views espoused by some of its members, especially the Chief Justice of the Supreme Court. That is an indicator of stability. not insecurity.
Second, it will prove that conflicting positions among the three branches of government, or some members of it, are not generated by personalities but by substantial issues better resolved not by ousting people as bullies — accustomed to have their way by brute force — are wont to do, but by the strength of persuasion necessary in a democratic system. That is critical but positive engagement.
And lastly, leaving Chief Justice Maria Lourdes Sereno to perform her official functions, thus not giving any occasion for President Duterte to appoint a new Chief Justice of his choice, will diminish the perception that autocracy led by the executive and with the connivance of the other two other great branches of government — the legislature and the judiciary — is President Duterte’s ultimate objective. That is democratic.
It is not hard to see therefore that nothing can be more inane and nonsensical than insisting that Chief Justice Maria Lourdes Sereno desist from performing her task mandated by the Constitution. She poses no grave danger to the nation, does not subvert our democratic institutions, and is not a menace to the third great branch of government — the judiciary.
The country needs her in these trying times.
x x x."
Monday, November 6, 2017
Drug War
See - https://www.youtube.com/playlist?list=PLOCWSOHhjJPUCq2DmLNPz0qaywLuQBnk2
Drug War
Sam Warner
1
26:43
The Great Depression, Jazz, and Harry Anslinger: The War on Drugs Before Nixon
misesmedia
2
36:24
Chris Calton: Historical Controversies
misesmedia
3
38:55
The Attack on Marijuana During the 1930s
misesmedia
4
47:21
The Opioid Epidemic | Mark Thornton
misesmedia
5
44:13
The Milk of the Poppy
misesmedia
6
42:55
Culture, Coca-Cola, and the CIA: The History of Cocaine
misesmedia
7
3:48
Craig Cesal - Serving Life for Pot
Amy Povah
8
37:38
A Bad Trip: The US Government and LSD
misesmedia
9
39:09
Then Came Nixon
misesmedia
10
19:56
Massacres and Marijuana: Vietnam and the Drug War
misesmedia
11
8:55
Jacob Hornberger: End the Drug War Conference at FAMU
The Future of Freedom Foundation
12
31:14
Ken Williams: End the Drug War Conference at FAMU
The Future of Freedom Foundation
13
31:49
Kassandra Frederique: End the Drug War Conference at FAMU
The Future of Freedom Foundation
14
33:42
Laurence M. Vance: End the Drug War Conference at FAMU
The Future of Freedom Foundation
15
17:31
Ethan Nadelmann: Why we need to end the War on Drugs
TED
16
18:47
Drugs, "thugs," and other things we're taught to fear | Gabriel Sayegh | TEDxBinghamtonUniversity
TEDx Talks
17
12:28
Drug Smuggler Speaks Out About Incarceration and Marijuana | Richard Stratton | TEDxFultonStreet
TEDx Talks
18
14:43
Everything you think you know about addiction is wrong | Johann Hari
TED
19
15:52
Making peace with cannabis | Zachary Walsh | TEDxPenticton
TEDx Talks
20
31:53
The rise and fall of the global drug prohibition regime. Ethan Nadelmann
The Monthly Video
21
55:32
Randy E. Barnett: The Harms of Drug Prohibition
Libertarianism.org
22
29:30
Thomas Szasz: The Right to Take Drugs
Libertarianism.org
23
31:56
Drugs: The Good, The Bad and The Ugly | Mark Thornton
misesmedia
24
7:45
What's the best wording for the non-aggression principle?
RidleyReport
25
23:59
Yellow Journalism and Cheech and Chong: Drug Policy in the 70s
misesmedia
26
33:08
Just Say No: Reagan Militarizes the War on Drugs
misesmedia
27
24:18
America's Prison Population Bomb
misesmedia
The Political Thought of Étienne de La Boétie - The Politics of Obedience: The Discourse of Voluntary Servitude
The Politics of Obedience: The Discourse of Voluntary Servitude by Étienne de La Boétie (narrated by Dr. Floy Lilley). Download/read here: https://mises.org/library/politics-ob...
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