Foreign Corporations

Agilent Technologies Singapore (Pte.) Ltd. vs. Integrated Silicon Technology Philippines Corporation
G.R. No. 154618. April 14, 2004

Facts:

Petitioner Agilent is a foreign corporation, which, by its own admission, is not licensed to do business in the
Philippines. Respondent Integrated Silicon is a private domestic corporation, 100% foreign owned, which is
engaged in the business of manufacturing and assembling electronics components. Respondents Teoh Kiang
Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are current members of Integrated Silicon’s
board of directors, while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former
members.

The juridical relation among the various parties in this case can be traced to a 5-year Value Added Assembly
Services Agreement (“VAASA”), entered into between Integrated Silicon and the Hewlett-Packard Singapore
(Pte.) Ltd., Singapore Components Operation (“HP-Singapore”). Under the terms of the VAASA, Integrated
Silicon was to locally manufacture and assemble fiber optics for export to HP-Singapore. HP-Singapore, for its
part, was to consign raw materials to Integrated Silicon; transport machinery to the plant of Integrated Silicon;
and pay Integrated Silicon the purchase price of the finished products.

Later years, HP-Singapore assigned all its rights and obligations in the VAASA to Agilent with the consent of
Integrated Silicon. On May 25, 2001, Integrated Silicon filed a complaint for “Specific Performance and
Damages” against Agilent and its officers Tan Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor,
docketed as Civil Case No. 3110-01-C. It alleged that Agilent breached the parties’ oral agreement to extend the
VAASA.

Agilent on the other hand, filed a separate complaint against Integrated Silicon et. al for specific performance,
recovery of possession, and sum of money with replevin, preliminary mandatory injunction, and damages.
Agilent prayed that the court issued an orer to the defendants to immediately return and deliver to plaintiff its
equipment, machineries and the materials to be used for fiber-optic components which were left in the plant of
Integrated Silicon.

Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C,12 on the grounds of lack of Agilent’s
legal capacity to sue; litis pendentia; forum shopping; and failure to state a cause of action.

Issue:

WON a foreign corporation not licensed to do business in the Philippines is incapacitated from bringing an action
in the Philippine courts hence, Agilent has no capacity to file a suit against the respondent herein.

Ruling:

No. A foreign corporation without a license is not ipso facto incapacitated from bringing an action in the
Philippine courts; License is necessary only if a foreign corporation is “transacting” or “doing business” in the
country. It has been ruled in the number of cases 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. This doctrine of estoppel to deny corporate existence and capacity applies to foreign as well as
domestic corporations. 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.
Foreign Corporations
AIR CANADA vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 169507. January 11, 2016

Facts:

Air Canada is a “foreign corporation organized and existing under the laws of Canada.” On April 24, 2000, it was
granted an authority to operate as an offline carrier by the Civil Aeronautics Board, subject to certain conditions,
which authority would expire on April 24, 2005.6 “As an offline carrier, it does not have flights originating from
or coming to the Philippines and does not operate any airplane in the Philippines.”

Air Canada engaged the services of Aerotel Ltd., Corp. (Aerotel) as its general sales agent in the Philippines.8
Aerotel “sells Air Canada’s passage documents in the Philippines.”

Issue:

WON by that fact alone, Air Canada will be considered as a resident foreign corporation doing business in the
Philippines since it sold airline tickets in the Philippines thus, taxable herein.

Ruling:

Yes. Republic Act No. 7042 or the Foreign Investments Act of 1991 provides guidance with its definition of
“doing business” with regard to foreign corporations. Section 3(d) of the law enumerates the activities that
constitute doing business: 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 totalling 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 progressive prosecution of, commercial gain or of the purpose and object of
the business organization: Provided, however, That the phrase “doing business” shall not be deemed to include
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; nor having a nominee director or officer to represent its interests in
such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts
business in its own name and for its own account.

While Section 3(d) states that “appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account” is not considered as “doing business,” the
Implementing Rules and Regulations of Republic Act No. 7042 clarifies that “doing business” includes
“appointing representatives or distributors, operating under full control of the foreign corporation,
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.

Petitioner is undoubtedly “doing business” or “engaged in trade or business” in the Philippines. Aerotel performs
acts or works or exercises functions that are incidental and beneficial to the purpose of petitioner’s business. The
activities of Aerotel bring direct receipts or profits to petitioner. There is nothing on record to show that Aerotel
solicited orders alone and for its own account and without interference from, let alone direction of, petitioner. On
the contrary, Aerotel cannot “enter into any contract on behalf of petitioner Air Canada without the express
written consent of the latter” and it must perform its functions according to the standards required by petitioner.
Through Aerotel, petitioner is able to engage in an economic activity in the Philippines. Further, petitioner was
issued by the Civil Aeronautics Board an authority to operate as an offline carrier in the Philippines for a period
of five years, or from April 24, 2000 until April 24, 2005. Petitioner is, therefore, a resident foreign corporation
that is taxable on its income derived from sources within the Philippines. Petitioner’s income from sale of airline
tickets, through Aerotel, is income realized from the pursuit of its business activities in the Philippines.
Foreign Corporations
TUNA PROCESSING, INC. vs. PHILIPPINE KINGFORD, INC.
G.R. No. 185582. February 29, 2012

Facts:

This is a Petition for Review on Certiorari filed by the petitioner Tuna Processing, Inc. (TPI), a foreign
corporation not licensed to do business in the Philippines, praying that the Resolution made by the RTC, Makati
City be declared void.

The antecedent facts are as follows: The parties herein entered into a Memorandum of Agreement which the
series of events not mentioned in the petition, the respondent withdrew from petitioner TPI and correspondingly
reneged on their obligations. Petitioner submitted the dispute for arbitration before the International Centre for
Dispute Resolution in the State of California, United States and won the case against respondent.

To enforce the award, petitioner TPI filed a Petition for Confirmation, Recognition, and Enforcement of Foreign
Arbitral Award before the RTC of Makati City. Kingford on the other hand, filed a motion to dismiss the said
petition, which upon motion for reconsideration it does, on the ground of petitioner’s lack of legal capacity to sue
in the Philippines.

Issue:

WON a foreign corporation not licensed to do business in the Philippines may sue here to enforce a foreign
arbitral award.

Ruling:

Yes. The foreign corporation’s capacity to sue in the Philippines is not material insofar as the recognition and
enforcement of a foreign arbitral award is concerned. There is no need to consider respondent’s contention that
petitioner TPI improperly raised a question of fact when it posited that its act of entering into a MOA should not
be considered “doing business” in the Philippines for the purpose of determining capacity to sue.

To discuss further, Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in
an application for recognition and enforcement of the arbitral award may raise only those grounds that were
enumerated under Article V of the New York Convention, which not one of those exclusive grounds touched on
the capacity to sue of the party seeking the recognition and enforcement of the award.

Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution, which was promulgated by
the Supreme Court, likewise support this position. Rule 13.1 of the Special Rules provides that “[a]ny party to a
foreign arbitration may petition the court to recognize and enforce a foreign arbitral award.” The contents of such
petition are enumerated in Rule 13.5. Capacity to sue is not included. Oppositely, in the Rule on local arbitral
awards or arbitrations in instances where “the place of arbitration is in the Philippines,” it is specifically required
that a petition “to determine any question concerning the existence, validity and enforceability of such arbitration
agreement” available to the parties before the commencement of arbitration and/or a petition for “judicial relief
from the ruling of the arbitral tribunal on a preliminary question upholding or declining its jurisdiction” after
arbitration has already commenced should state “[t]he facts showing that the persons named as petitioner or
respondent have legal capacity to sue or be sued.”

Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we deny availment
by the losing party of the rule that bars foreign corporations not licensed to do business in the Philippines from
maintaining a suit in our courts. When a party enters into a contract containing a foreign arbitration clause and, as
in this case, in fact submits itself to arbitration, it becomes bound by the contract, by the arbitration and by the
result of arbitration, conceding thereby the capacity of the other party to enter into the contract, participate in the
arbitration and cause the implementation of the result.