Philippines

By Jacquelyn Ann Marie G Anzures, ACCRA LawJacquelyn Ann Marie G. Anzures

E: jganzures@accralaw.com

 

Earlier this year, the Philippines Securities and Exchange Commission (SEC) issued an opinion stating that an online gaming system with absolutely no physical presence in the Philippines shall be considered as “doing business” in the Philippines and was thus required to obtain a licence to do business from the SEC.

It did not matter that the company had no physical office, no employees and no physical servers located within the Philippines. Anyone from the Philippines who has access to the internet could access the website, open an account and purchase online gaming content. There is no physical delivery of any product to the Philippines, as the content is offered, sold and accessed exclusively online.

The hallmark test for determining whether an entity is doing business in the Philippines is twofold: first, there must be a showing that the foreign corporation is continuing the body or substance of the business or enterprise for which it was organised; and second, the foreign corporation is engaged in activities which implies a continuity of commercial dealings, and contemplates the progressive prosecution of the purpose and object of its organisation. This definition has been codified in the Foreign Investments Act.

So the question remains — is mere online activity sufficient to constitute “doing business”

within the Philippines? The SEC seems to answer in the affirmative. The SEC cited several factors to justify that the corporation was doing business in the Philippines: 1) creation of the online account takes place in the Philippines; 2) access is made by users located in the Philippines; 3) payment of the content is made from within the Philippines using local credit cards; and 4) delivery of the online content is made in the Philippines. The IP address located in the Philippines receives the offer of services, sends the acceptance of the offer to the virtual plane and, finally, the content or service is delivered through said virtual plane to the account holder’s IP address in the Philippines. Clearly, says the SEC, “the transactions will be consummated in the Philippines”.
Under existing laws, aScreen Shot 2017-10-12 at 12.08.52 pm foreign corporation deemed “doing business” in the Philippines is required to obtain a licence to do so from the SEC. The failure to obtain such licence will prevent the foreign corporation from having the personality to take refuge in Philippine courts and from invoking Philippine law, if aggrieved. However, despite the inability to maintain any suit or proceeding, such corporation may be proceeded against before Philippine courts. In short, it can be sued, but it cannot sue.

The SEC opinion, however, has far-reaching implications beyond the requirement to obtain a licence to do business, which may prove problematic for all other entities similarly situated operating solely via the internet. What could be the impact to online retail stores like Amazon and eBay; online social platforms like Facebook;

online news portals like The New York Times and all other entities that have not established physical presence within the Philippines and yet derive business and online traffic from within the Philippines — will all such entities now be required to obtain licences from the SEC? If so, how will Philippine regulatory agencies regulate these activities and impose sanctions, if needed? If these entities will be considered doing business in the Philippines, are nationality requirements applicable to them? And if so, how could the same be enforced against them? This is particularly significant given the recent controversial pronouncements of the SEC defining “mass media”, which must be 100 percent Filipino owned, to include “any medium of communication deigned to reach the masses”. To this end, the SEC has classified even billboards as mass media, which must therefore be 100 percent Filipino owned. Given this, will online media such as The New York Times and even Facebook now be prohibited from making its content accessible in the Philippines? The implications to business and investment are endless and it may take a bit longer than a fortnight before we get some clarity.

(Note: This article first appeared in Business World, a newspaper of general circulation in the Philippines)

 

ACCRALAW LOGO_2015

 

 

 

 

 

W: www.accralaw.com

E: jganzures@accralaw.com

T: (632) 830-8000

F: (632) 4037007, (632) 4037008

Tags: Internet, The Philippines, TMT
Related Articles by Firm
Philippines: The POGO problem – Harmonising immigration, gaming and gambling
It is highly illegal to gamble in China save for a few state-run lotteries. To avoid this prohibition, gambling companies operate offshore so that they may continue catering to Chinese nationals who play casino and e-games online ...
Developments in the Philippine Competition Commission’s enforcement activities
Early this year, the Philippine Competition Commission (PCC) Enforcement Office launched a leniency/whistleblower programme offering immunity from suit and reduction of fines to cartel members who will provide information that will help the PCC investigate and prosecute cartels ...
Revisiting the AMLA in light of transnational money laundering
For several decades, money laundering has extended the reach of transnational organised crime throughout various nations ...
Revisiting important concepts in arbitration
Philippine courts are keen on making arbitration and other modes of ADR the staple in settling disputes domestically.
Keeping your mobile number for a lifetime
A new law facilitates the easy movement of subscribers from one service provider to another.
The right to know: Freedom of information in the Supreme Court
Like all other rights, the “right to know” is not an absolute right.
The Philippines 11th Foreign Investment Negative List and its impact on online businesses
A more liberalised foreign participation may change the internet-based business landscape in the Philippines ...
The Philippine Competition Commission bares its teeth
For the first time since its inception in 2015, the Commission has blocked a merger after conducting its review.
A peek into the revised Corporation Code of the Philippines
On February 20, 2019, President Rodrigo Duterte signed into law Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines (the New Code) ...
Philippines: Protecting indigenous knowledge systems and practices in intellectual property rights registration
Indigenous peoples (IPs) and indigenous cultural communities (ICCs), though explicitly protected under the constitution itself, sadly remain one of the most marginalised and forgotten sectors in Philippine society ...
Philippines: The right to know – Freedom of information in the Supreme Court
Freedom of Information is a right enshrined in our fundamental law ...
Investments for the environment
In a recent report released by the leading international body for assessment of climate change, the UN Intergovernmental Panel on Climate Change (UN IPCC), established a target global warming limit of 1.5°C ...
The PCC’s Joint Venture Guidelines
The Philippine Competition Commission must strive to strike a balance ...
How the Mental Health Act affects employees
Mental health conditions, which include anxiety and panic disorders, depression, eating disorders, substance abuse and addictions, have become a pervasive issue which permeates our present society ...
The Ease of Doing Business Act tapers red tape
RA 11032 is a welcome step towards achieving the quality government services that Filipinos deserve.
Much EndO about nothing
President Duterte says he has put an end to the “Endo” or the practice of engaging employees on a contractual basis. But has he?
Philippines: Proposed rules and regulations on crowdfunding
Crowdfunding (CF) platforms have proven to be a popular way to solicit charitable donations and to raise funds for projects or business ventures ...
Virtual currency in the Philippines: Recognition and regulation
Bitcoin is essentially a virtual currency (VC), which is any type of digital unit that is used as a medium of exchange — a veritable currency that exists in the digital world. Since it is electronic currency, VC is easily transferable ...
Protection of women employees in the Philippines
According to the World Economic Forum’s Global Gender Gap (GGG) Report conducted in 2016, the Philippines is the most gender-equal country in the Asia-Pacific region, having closed nearly 79 percent of its gender gap ...
Anti-Trust & Competition: Philippines - Towards robust yet balanced competition in the Philippines
The state of Philippine competition regulation has been slowly taking shape barely over two years after the passage of the Philippine Competition Act (RA 10667) ...
Philippines: Psychological disorders in the workplace
The problem of mental health presents a particular conundrum under labour relations and standards ...
Clarifying the role of contractors and subcontractors
Recent changes to labour laws in the Philippines attempt to clarify the status of contractors and subcontractors in certain industries ...
Fake news and its web of legal issues in the post-truth era
Oxford Dictionaries’ Word of the Year for 2016 is “post-truth” — an adjective defined as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. ...
Dollar-denominated securities in relation to Corporation Code’s provisions on capital
The Philippines Stock Exchange (PSE) issued rules on December 2, 2016 governing the listing, trading and settlement of US dollar-denominated securities (DDS)....
Cyber bullying in the Philippines
The pen is mightier than the sword or so the adage goes. When this was once said, it was to highlight the power of thoughts and ideas over brute force and violence as a way to effect change. Today, the ...
Uber/GrabCar drivers: Independent contractors or employees?
The buzz about the legality of Uber and GrabCar operating in the Philippines might have died down, but now there is another legal issue surrounding them: whether their drivers are employees or ...
Price fixing in the context of the Philippine Competition Act
In light of the enactment of the Philippine Competition Act (PCA) in 2015, competitors, manufacturers, retailers and sellers or suppliers, in general, should be ...
Implementation of the data privacy act in Philippines now in full swing
Since 2012, the Philippines has had a comprehensive law governing personal data privacy. However, full implementation ...
Taxability of service fees received by non-resident foreign companies from online advertising in the Philippines
The use of the internet for the promotion of goods and services, particularly social media (Facebook, Twitter and ...
Levelling the playing field in the Philippines
Before the enactment of the Philippine Competition Act in 2015, the Philippines was the only founding member of Asean that did not have a comprehensive competition law in place. Francisco Ed Lim, Patricia-Ann T Prodigalidad, Eric R Recalde of <...
Age discrimination in the workplace
Republic Act No. 10911 (also known as the ‘Anti-Age Discrimination in Employment Act’) lapsed into law on 21 July ...
Green jobs: greening the Philippine labour sector
With the threat of climate change, the international community created the Paris Agreement which aims to stop global warming and preserve ...
Interplay of domestic law on compulsory licensing and international agreements on medicine prices
The price of pharmaceutical products in the Philippines appears to be on the high side compared to that in other Asian ...
Restrictive covenants in employment contracts
One of the means of keeping afloat in today’s competitive market is to hire employees who are ‘fit’ for a particular job. However, before employers ...
Make our system work: litigation practice expedited
The perception that litigation is a slow and arduous process has drawn many of us closer to the idea of alternative modes of dispute resolution. ...
Department of Labor and Employment (DOLE) Department Order No. 18-A: The Rules and Regulations on Contracting
On December 4, 2011, Department of Labor and Employment (DOLE) Department Order No. 18-A (D.O. 18-A), the new Rules Implementing Articles 106 to 109 ...
An overview of Philippine Data Privacy Law
Republic Act No. 10173, or the Philippine Data Privacy Act of 2012 (RA10173), was signed into law on August 15, 2012. This is the ...
New competition law for the Philippines
The Philippine Competition Act (PCA) went into effect on August 5, 2015. The law applies not only to acts committed in the Philippines but ...
Related Articles
UAE Ministry of Finance issues guidance on Economic Substance Regulations
Thirteen topics covered in the guidance that may be of interest to businesses affected by the regulations.
The New Normal: An interview with LOD’s head of innovation and design
We speak with Anthony Wright about the development of lexvoco, joining forces with LOD and the future of legal in Asia.
Don’t suffer FOMO* for Southeast Asia LegalTech!
Avoid the 'fear of missing out' by embracing the incredible opportunities technology offers.
Related Articles by Jurisdiction
Revisiting important concepts in arbitration
Philippine courts are keen on making arbitration and other modes of ADR the staple in settling disputes domestically.
Department of Labor and Employment (DOLE) Department Order No. 18-A: The Rules and Regulations on Contracting
On December 4, 2011, Department of Labor and Employment (DOLE) Department Order No. 18-A (D.O. 18-A), the new Rules Implementing Articles 106 to 109 ...
Casino Covered by Philippine Anti-Money Laundering Laws
The Philippine government has expanded anti-money laundering laws to include casinos, including internet and ship-based casinos ...
Latest Articles
UAE Ministry of Finance issues guidance on Economic Substance Regulations
Thirteen topics covered in the guidance that may be of interest to businesses affected by the regulations.
David Miles remembered
We mourn the passing of a remarkable lawyer and dear friend.