The Failed Takeover Threat

It will not happen now; there will be no takeover of the oil industry. But let us look at the two provisions in law which have been cited or hinted at as possible justification for a takeover.

The first is Section 17 of Article XII of the Constitution which says: "In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest."

The second is Section 14(e) of the Oil Deregulatin Law, which is a faint imitation of the constitutional provision. It says: In times of national emergency, when the public interest so requires, the DOE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the Industry."

To understand the import of these provisions it will help to trace the lineage of the constitutional provision. The Oil Deregulation Law provision is obviously just an attempt to apply the constitutional provision to the oil industry.

The constitutional provision deals merely with the temporary state take over of "the operation of any privately owned public utility or business affected with public interest." It is not authority for outright confiscation. But it is important to note that the provision was first introduced as Section 7 of Article XIV in the 1973 Constitution. It read: "In times of national emergency when the public interest so requires, the State may temporarily take over or direct the operation of any privately owned public utility or business affected with public interest." It was a product of the prevailing "martial law" thinking of the 1971 Constitutional Convention.

At the time of the approval of this provision, Letter of Instruction No. 2 of President Marcos dated 22 September 1972 was in effect. The Letter instructed the Secretary of National Defense, Juan Ponce Enrile, to take over "the management, control and operation of the Manila Electric Company, the Philippine Long Distance Telephone Company, the National Waterworks and Sewerage Authority, the Philippine National Railways, the Philippine Air Lines, Air Manila (and) Filipinas Orient Airways . . . for the successful prosecution by the Government of its effort to contain, solve and end the present national emergency."

It is therefore no surprise that Senator Enrile has been reported as saying that the government can takeover the operation of oil distribution.

The Marcos Letter of Instruction was among the executive acts which the Convention wanted transformed into a constitutional provision through Section 3(2), Article XVII of the 1973 Constitution. It was thus clear that in the mind of the Convention the power, as granted under the 1973 Constitution, could be exercised by the executive arm of the government. And it was for the executive arm to decide whether "national emergency" and "public interest" demanded the temporary take over.

It should also be noted that when Congress grants emergency powers to the President under Section 23(2), Article VI of the present Constitution, the powers cease upon the next adjournment of Congress unless sooner withdrawn by Congress. Under Section 17, however, no time limit is placed on the duration of the emergency take over. While the takeover would be temporary, the duration of the take over would be discretionary with the power that imposed it.

To repeat, Section 17 is a child of martial law born at a time when Congress had been scuttled! Section 14(e) of the Oil Deregulation Law, however, is an attempted of Section 17 even while Congress exists.

What is the status of Section 17 today? On the correct interpretation of Section 17 of the Constitution will depend the interpretation of Section 14(e) of the Oil Deregulation Law.

Section 17 deals with public utilities and "business affected with public interest." The oil industry is not a public utility but most certainly it is a business affected with public interest.

An important matter is the nature of the "emergency" that can justify takeover and the seat of the power that can declare the emergency. The emergency can be external aggression, internal conflicts, natural or man-made calamities or disasters. But who declares the emergency that can trigger the temporary takeover? Can Malacañang do it?

Section 17 is unclear on this matter and there is no authoritative judicial interpretation of the provision. The best we have is an obiter dictum in a 2006 decision which says that the power given by Section 17 is activated only when Congress grants emergency powers to the President under Article VI, Section 23. The Court said that Section 17 must be read with Article VI, Section 23 because Section 17 gives the power to the State and not to the President. The President acquires emergency powers when given to her by Congress in a state of emergency declared by Congress. Corollarily, therefore, Section 14(e) of the Oil Deregulation Act must await an emergency declaration by Congress.

I subscribe to this interpretation. The takeover of public utilities and business affected with public interest is too radical an action to be loft solely to the discretion of the President or of a Department Secretary. It is an entrenched doctrine, after all, that police power is activated only by legislative authorization.

16 November 2009