Point of Law

Francisco Ed. Lim

Can Congress lift the nationality restriction on land ownership?

Francisco Ed. Lim

March 14, 2016

The common understanding is that the 60/40 percent nationality restriction on ownership by corporations of private land is constitutional  in nature.

But is it really constitutional that an amendment to the Constitution is needed to lift or liberalize the restriction?  Or can it be done through an act of Congress?

As background, the 1987 Constitution provides that “[s]ave  in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.” (Section 7, Article XII).

The capacity to acquire or hold lands of the public domain is found in the Public Land Act. Section 22 pertinently provides that  “any corporation or association of which at least sixty per centum of the capital stock or of any interest in said capital stock belongs wholly to citizens of the Philippines, and which is organized and constituted under the laws of Philippines … may purchase any tract of public agricultural land disposable under this Act …. not to exceed … one thousand and twenty-four hectares.”

It appears, therefore, that if Congress amends the Public Land Act authorizing private corporations with more than 40 percent foreign ownership to acquire lands of the public domain, then such corporations can acquire private lands.

Due to the popular understanding on the issue, I had some quick research  done on the matter.

There are two readily apparent conclusions.

First, there is no Supreme Court decision directly saying that domestic corporations with more than 40 percent foreign ownership cannot own private lands, unless there is a constitutional amendment to that effect.

Second, there was an attempt during the 1986 constitutional deliberations to allow foreign investors to acquire private land.

In particular, Commissioner Padilla wanted to exempt foreign investors engaged in the manufacture of export products from section 7, article XII of the Constitution.

After some debate,  Commissioner Padilla’s proposal was eventually rejected.

But my point of law is: If the intent was to really make the nationality restriction constitutional, then why was not it expressly provided?  For example, there is a constitutional provision expressly stating that “[n]o franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to … corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens ….”  (section 11, Article XII). Likewise, there is another constitutional provision that “[t]he ownership and management of mass media shall be limited to … corporations, cooperatives or associations, wholly owned and managed by such citizens.” (section 11, Article XVI)

Could it be then that the Constitutional Commission left the matter for  Congress to decide?

I’m not a constitutional expert and perhaps there may be other constitutional provisions aside from section 7, Article XII or Supreme Court decisions that have to be taken into account. I believe, though,  that the issue is worth exploring and if constitutionally feasible, the next Congress may want to do it  in line with the global trend to liberalize the business environment to attract foreign investments.