The Supreme Court reiterated that Filipino companies can be held liable for contracts they entered into with their foreign counterparts even though the latter do not have any license to do business in the Philippines.
In Steelcase, Inc. vs. Design International Selections, Inc. (G.R. No. 171995, April 18, 2012), Steelcase, a US-registered office furniture company, sued Design International Selections, a domestic corporation, for sum of money. The local company asked for the dismissal of Steelcase’s complaint saying that the American entity is not licensed to do business in the Philippines and, therefore, it does not have any legal capacity to sue in this jurisdiction.
The High Tribunal held that even though Steelcase did not secure any license to do business in the Philippines as required by Section 133 of the Corporation Code, Steelcase can still sue the Filipino entity as the latter acknowledged the due existence of its foreign counterpart when it entered into a dealership agreement with the same company and profited from such an arrangement. Thus, Design International Selections is estopped from denying the capacity to sue of Steelcase.
This decision of the Court cited the cases of Communication Materials and Design, Inc. vs. Court of Appeals (329 Phil. 487 [1996]) and Rimbunan Hijau Group of Companies vs. Oriental Wood Processing Corporation (507 Phil. 631 [2005]) to emphasize that the lack of a Philippine business license is not a hindrance for an aggrieved foreign entity from seeking the court’s assistance to enforce the existing obligations against Filipino companies.
The Court further took note, following its decision in Antam Consolidated, Inc. v. Court of Appeals (227 Phil. 267, 276 [1986]), of the common ploy of invoking the incapacity to sue of an unlicensed foreign corporation utilized by defaulting domestic companies which seek to avoid the suits by the former and held that the courts will not allow this to continue by always ruling in favor of local companies, despite the injustice to the overseas corporation which is left with no available remedy.
The Court explained that to do otherwise would seriously jeopardize the desirability of the Philippines as an investment site and possibly have the deleterious effect of hindering trade between Philippine companies and international corporations.
Foreign companies who want to do business in the Philippines have to establish a legal presence in this jurisdiction by opening any of the following business vehicles and secure a license from the Securities and Exchange Commission:
a. representative office, which is limited to non-income generating activities, communications and coordination; promotions and liaison;
b. regional operating headquarters, for income generating activities through qualifying services to head office, affiliates, subsidiaries or branches in the Philippines, and other markets;
c. regional or area headquarters, for supervisory, communications and coordinating center for subsidiaries, affiliates and branches in the region; non-income generating;
d. branch, which requires the appointment of a resident agent; or
e. wholly-owned subsidiary, for industries open to foreign investment.
(June 20, 2012)