Executive Secretary v. Southwing Heavy Industries, Inc., G.R. Nos. 164171, 164172 & 168741, [February 20, 2006], 518 PHIL 103-133
ISSUE:
• To be
valid, an administrative issuance, such as an executive order, must comply with
the following requisites:
(1) Its promulgation must be authorized by the legislature;
(2) It must be promulgated in accordance with the prescribed
procedure;
(3) It must be within the scope of the authority given by
the legislature; and
(4) It must be reasonable.
• Did the EO 156 actually satisfy the four?
FACTS:
On December 12, 2002, President Gloria Macapagal-Arroyo
issued EO 156, entitled "PROVIDING
FOR A COMPREHENSIVE INDUSTRIAL POLICY AND DIRECTIONS FOR THE MOTOR VEHICLE
DEVELOPMENT PROGRAM AND ITS IMPLEMENTING GUIDELINES."
The challenged provision states that the importation into
the country, inclusive of the Freeport, of all types of used motor vehicles is
prohibited, except those enumerated under the said law.
The issuance of EO 156 spawned three separate actions for
declaratory relief before Branch 72 of the Regional Trial Court of Olongapo
City, all seeking the declaration of the unconstitutionality of Article 2,
Section 3.1 of said executive order.
Petitioners are now before the Supreme Court contending that
Article 2, Section 3.1 of EO 156 is valid and applicable to the entire country,
including the Freeeport. In support of
their arguments, they raise procedural and substantive issues bearing on the
constitutionality of the assailed proviso.
RULING:
Police power is inherent in a government to enact laws,
within constitutional limits, to promote the order, safety, health, morals, and
general welfare of society. It is lodged
primarily with the legislature. By
virtue of a valid delegation of legislative power, it may also be exercised by
the President and administrative boards, as well as the lawmaking bodies on all
municipal levels, including the barangay.
Such delegation confers upon the President quasi-legislative power which
may be defined as the authority delegated by the law-making body to the
administrative body to adopt rules and regulations intended to carry out the
provisions of the law and implement legislative policy. To be valid, an
administrative issuance, such as an executive order, must comply with the
following requisites:
1) Its promulgation must be authorized by the legislature;
2) It must be promulgated in accordance with the prescribed procedure;
3) It must be within the scope of the authority given by the legislature; and
4) It must be reasonable.
EO 156 actually satisfied the first requisite of a valid
administrative order. It has both
constitutional and statutory bases.
Delegation of legislative powers to the President is
permitted in Section 28(2) of Article VI of the Constitution. It provides:
(2) The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations and restrictions as it
may impose, tariff rates, import and export quotas, tonnage and wharfage dues,
and other duties or imposts within the framework of the national development
program of the Government.
The relevant statutes to execute this provision are:
(1)
The Tariff and Customs Code which authorizes the
President, in the interest of national economy, general welfare and/or national
security, to, inter alia, prohibit the importation of any commodity.
(2)
Executive Order No. 226, the Omnibus Investment
Code of the Philippines empowers the President to approve or reject the
prohibition on the importation of any equipment or raw materials or finished
products.
(3)
Republic Act No. 8800, otherwise known as the
"Safeguard Measures Act" (SMA), and entitled "An Act Protecting
Local Industries By Providing Safeguard Measures To Be Undertaken In Response
To Increased Imports And Providing Penalties For Violation Thereof,"
designated the Secretaries of the DTI and the Department of Agriculture, in
their capacity as alter egos of the President, as the implementing authorities
of the safeguard measures, which include, inter alia, modification or
imposition of any quantitative restriction on the importation of a product into
the Philippines.
There are thus explicit constitutional and statutory
permission authorizing the President to ban or regulate importation of articles
and commodities into the country.
Anent the second requisite, that is, that the order must be
issued or promulgated in accordance with the prescribed procedure, it is
necessary that the nature of the administrative issuance is properly
determined. As in the enactment of laws,
the general rule is that, the promulgation of administrative issuances requires
previous notice and hearing, the only exception being where the legislature
itself requires it and mandates that the regulation shall be based on certain
facts as determined at an appropriate investigation. This exception pertains to
the issuance of legislative rules as distinguished from interpretative rules
which give no real consequence more than what the law itself has already
prescribed; and are designed merely to provide guidelines to the law which the
administrative agency is in charge of enforcing. A legislative rule, on the other hand, is in
the nature of subordinate legislation, crafted to implement a primary
legislation.
In the instant case, EO 156 is obviously a legislative rule
as it seeks to implement or execute primary legislative enactments intended to
protect the domestic industry by imposing a ban on the importation of a
specified product not previously subject to such prohibition. The due process requirements in the issuance
thereof are embodied in Section 401 of the Tariff and Customs Code and Sections
5 and 9 of the SMA which essentially mandate the conduct of investigation and
public hearings before the regulatory measure or importation ban may be issued.
In the present case, respondents neither questioned before
this Court nor with the courts below the procedure that paved the way for the
issuance of EO 156. What they challenged
in their petitions before the trial court was the absence of "substantive
due process" in the issuance of the EO.
Their main contention before the court a quo is that the importation ban
is illogical and unfair because it unreasonably drives them out of business to
the prejudice of the national economy.
Considering the settled principle that in the absence of
strong evidence to the contrary, acts of the other branches of the government
are presumed to be valid, and there being no objection from the respondents as
to the procedure in the promulgation of EO 156, the presumption is that said
executive issuance duly complied with the procedures and limitations imposed by
law.
To determine whether EO 156 has complied with the third and
fourth requisites of a valid administrative issuance, to wit, that it was
issued within the scope of authority given by the legislature and that it is
reasonable, an examination of the nature of a Freeport under RA 7227 and the
primordial purpose of the importation ban under the questioned EO is necessary.
RA 7227 was enacted providing for, among other things, the
sound and balanced conversion of the Clark and Subic military reservations and
their extensions into alternative productive uses in the form of Special
Economic and Freeport Zone, or the Subic Bay Freeport, in order to promote the
economic and social development of Central Luzon in particular and the country
in general.
The Freeport was designed to ensure free flow or movement of
goods and capital within a portion of the Philippine territory in order to
attract investors to invest their capital in a business climate with the least
governmental intervention.
With minimum interference from the government, investors
can, in general, engage in any kind of business as well as import and export
any article into and out of the Freeport.
These are among the rights accorded to Subic Bay Freeport Enterprises
under Section 39 of the Rules and Regulations Implementing RA 7227.
However, contrary to the claim of petitioners, there is
nothing in the foregoing excerpts which absolutely limits the incentive to
Freeport investors only to exemption from customs duties and taxes. Mindful of the legislative intent to attract investors,
enhance investment and boost the economy, the legislature could not have
limited the enticement only to exemption from taxes. The minimum interference policy of the government
on the Freeport extends to the kind of business that investors may embark on
and the articles which they may import or export into and out of the zone. A contrary interpretation would defeat the
very purpose of the Freeport and drive away investors.
It does not mean, however, that the right of Freeport
enterprises to import all types of goods and article is absolute. Such right is
of course subject to the limitation that articles absolutely prohibited by law
cannot be imported into the Freeport.
From the foregoing discussions, the Court held that the
importation ban runs afoul the third requisite for a valid administrative
order. To be valid, an administrative
issuance must not be ultra vires or beyond the limits of the authority
conferred. It must not supplant or modify the Constitution, its enabling
statute and other existing laws, for such is the sole function of the
legislature which the other branches of the government cannot usurp.
In the instant case, the subject matter of the laws
authorizing the President to regulate or forbid importation of used motor
vehicles, is the domestic industry. EO
156, however, exceeded the scope of its application by extending the
prohibition on the importation of used cars to the Freeport, which RA 7227,
considers to some extent, a foreign territory. The domestic industry which the
EO seeks to protect is actually the "customs territory" which is
defined under the Rules and Regulations Implementing RA 7227.
This brings us to the fourth requisite. It is an axiom in administrative
law that administrative authorities should not act arbitrarily and capriciously
in the issuance of rules and regulations.
To be valid, such rules and regulations must be reasonable and fairly
adapted to secure the end in view. If
shown to bear no reasonable relation to the purposes for which they were
authorized to be issued, then they must be held to be invalid.
There is no doubt that the issuance of the ban to protect
the domestic industry is a reasonable exercise of police power. The deterioration of the local motor
manufacturing firms due to the influx of imported used motor vehicles is an
urgent national concern that needs to be swiftly addressed by the
President. In the exercise of delegated
police power, the executive can therefore validly proscribe the importation of
these vehicles.
The problem, however, lies with respect to the application
of the importation ban to the Freeport.
The Court finds no logic in the all encompassing application of the
assailed provision to the Freeport which is outside the customs territory. As long as the used motor vehicles do not
enter the customs territory, the injury or harm sought to be prevented or
remedied will not arise. The application
of the law should be consistent with the purpose of and reason for the
law. Ratione cessat lex, et cessat
lex. When the reason for the law ceases,
the law ceases. It is not the letter
alone but the spirit of the law also that gives it life. To apply the proscription to the Freeport
would not serve the purpose of the EO.
Instead of improving the general economy of the country, the application
of the importation ban in the Freeport would subvert the avowed purpose of RA
7227 which is to create a market that would draw investors and ultimately boost
the national economy.
The importation ban in this case should also be declared
void for its too sweeping and unnecessary application to the Freeport which has
no bearing on the objective of the prohibition.
If the aim of the EO is to prevent the entry of used motor vehicles from
the Freeport to the customs territory, the solution is not to forbid entry of
these vehicles into the Freeport, but to intensify governmental campaign and
measures to thwart illegal ingress of used motor vehicles into the customs
territory.
In sum, the Court finds that Article 2, Section 3.1 of EO
156 is void insofar as it is made applicable to the presently secured fenced-in
former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Pursuant to the separability clause of EO
156, Section 3.1 is declared valid insofar as it applies to the customs
territory or the Philippine territory outside the presently secured fenced-in
former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Hence, used motor vehicles that come into the
Philippine territory via the secured fenced-in former Subic Naval Base area may
be stored, used or traded therein, or exported out of the Philippine territory,
but they cannot be imported into the Philippine territory outside of the
secured fenced-in former Subic Naval Base area.
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