As a general rule, no foreign
corporation transacting business in the Philippines without a license shall be permitted
to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines.
In a number of cases, however, the Supreme
Court has held that an unlicensed foreign corporation doing business in the
Philippines may bring suit in Philippine courts against a Philippine citizen or
entity who had contracted with and benefited from said corporation. Such a suit
is premised on the doctrine of estoppel. A party is estopped from challenging
the personality of a corporation after having acknowledged the same by entering
into a contract with it. The application of this principle prevents 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.
The principles regarding the right
of a foreign corporation to bring suit in Philippine courts may be
condensed in four statements:
(1) if
a foreign corporation does business in the Philippines without a license, it
cannot sue before the Philippine courts;
(2) if
a foreign corporation is not doing business in the Philippines, it needs
no license to sue before Philippine courts on an isolated transaction or on a
cause of action entirely independent of any business transaction;
(3) if
a foreign corporation does business in the Philippines without a license, a
Philippine citizen or entity which has contracted with said corporation may be
estopped from challenging the foreign corporation’s corporate personality in a
suit brought before Philippine courts; and
(4) if
a foreign corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction.
On the other hand, the Foreign
Investments Act of 1991 (the "FIA"; Republic Act No. 7042, as
amended), defines "doing business" as follows:
Sec. 3, par. (d). The phrase "doing business"
shall include soliciting orders, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year stay in
the country for a period or periods totaling one hundred eighty (180) days or
more; participating in the management, supervision or control of any domestic
business, firm, entity, or corporation in the Philippines; and any other act or
acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in the progressive prosecution
of, commercial gain or of the purpose and object of the business organization.
Section 1 of the Implementing Rules
and Regulations of the FIA (as amended by Republic Act No. 8179) provides that
the following shall not be deemed "doing business":
(1) Mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor;
(2) Having a nominee director or
officer to represent its interest in such corporation;
(3) Appointing a representative or
distributor domiciled in the Philippines which transacts business in the representatives
or distributors own name and account;
(4) The publication of a general
advertisement through any print or broadcast media;
(5) Maintaining a stock of goods in
the Philippines solely for the purpose of having the same processed by another
entity in the Philippines;
(6) Consignment by a foreign entity
of equipment with a local company to be used in the processing of products for
export;
(7) Collecting information in the
Philippines; and
(8) Performing services auxiliary
to an existing isolated contract of sale which are not on a continuing basis,
such as installing in the Philippines machinery it has manufactured or exported
to the Philippines, servicing the same, training domestic workers to operate
it, and similar incidental services.
In essence, to constitute
"doing business", the activity to be undertaken in the Philippines is
one that is for profit-making. (See Steelcase, Inc. v. Design International Selections, Inc. [2012]; Agilent Technologies Singapore (Pte.), Ltd. v.
Integrated Silicon Technology Philippines Corporation [2004])
