FedEx CA cased called ‘death verdict’

MANILA, Philippines - The decision of the Court of Appeals to nullify Federal Express Pacific Inc.’s (FedEx) license to operate as an international airfreight forwarder has stormed a hornet’s nest among industry observers who find lit as a ‘death verdict’ on the industry according to industry sources.

FedEx got its regular five-year license from the Civil Aeronautics Board (CAB) on March 14, 2011 valid up to May 2016.

Two local air forwarding firms – Merit Freight International, Inc. and Ace Logistics, Inc. – claiming that they would be greatly injured by the CAB’s decision brought the case before the CA.

The CA upheld the two local firms’ claim that FedEx, being foreign-owned public utility, is prohibited by the Constitution to operate locally.

This has jolted industry with one renowned stockbroker, Joey Roxas, president of Eagle Securities Inc. exclaiming that such a move “smacks of s shakedown.”Makati Business Club (MBC) chairman Ramon del Rosario said the move is “most unfortunate as it highlighted the risks that make foreign investors think twice about doing business here,” while Management Association of the Philippines (MAP) president Melito Salazar Jr. said the decision is “adverse since it is a setback to broader efforts to bring in more foreign investments to the country.”

Their varied opinions siding with FedEx are not without legal basis. Under the Civil Aeronautics Act (Republic Act 776),  Philippine citizenship is required only for the issuance of “a permit authorizing a person to engage in domestic air commerce;” and in various opinions from as far back as 1946 (with the latest one being issued in 2011), the secretary of justice has interpreted the Constitutional provision requiring Philippine nationality for public utilities as not covering airfreight forwarders exclusively engaged in international commerce and carriers engaged exclusively in the foreign transport of passengers or goods or both, to and from Philippine airports and seaports. 

Del Rosario said: “The decision illustrates the lack of stability and predictability in our economic policy environment” and that the court ruling “emphasizes the urgent need to address a fundamental problem in attracting foreign investments  which are the restrictive economic provisions of the 1987 Constitution that limit foreign ownership to 40 percent of any local firm. It also demonstrates the inadequacy of relying on executive pronouncements and rulings that are subject to judicial challenge, without dealing with the constitutional restrictions.”

Salazar echoed Del Rosario’s sentiments saying: “The whole incident proves the need to amend the economic provisions of the Constitution to liberalize entry of foreign investors bringing funds, creating jobs and introducing greater competition benefiting consumers,” while Roxas said that the decision “is not what the business community needs. Foreign investors must be assured of a level playing field and clear rules that do not change every so often.”