Republic Act No. 11659, signed on 21 March 2022 and effective 12 April 2022, amended the Public Service Act (Commonwealth Act No. 146) and made one of the most consequential changes to Philippine foreign investment rules in decades. The problem it solved was definitional. The Constitution reserves the operation of a PUBLIC UTILITY to Filipino citizens or to corporations at least sixty percent (60%) Filipino-owned, but neither the Constitution nor the old Public Service Act defined what a public utility was. The gap was filled by judicial interpretation, which had swept in industries such as telecommunications and transport, so the 40% foreign equity ceiling applied to them. RA 11659 supplies a statutory definition and it is a CLOSED LIST. Under the amended law, a public utility is a public service that operates, manages, or controls for public use any of the following: (1) distribution of electricity; (2) transmission of electricity; (3) petroleum and petroleum products pipeline transmission systems; (4) water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; (5) seaports; and (6) public utility vehicles. The law then states that NO OTHER PERSON SHALL BE DEEMED A PUBLIC UTILITY unless subsequently provided by law. The consequence is that only those six remain subject to the constitutional 60/40 requirement. Everything else that is a public SERVICE but not a public UTILITY — notably telecommunications, air carriers, domestic shipping, railways and subways, expressways and tollways, and airports — falls outside the equity restriction and may be up to one hundred percent (100%) foreign-owned, subject to the other laws that apply to them. The reform is not unqualified. The law introduces safeguards that operate alongside the liberalisation: a national security review mechanism for foreign investments in critical infrastructure, with the President empowered to suspend or prohibit a transaction; restrictions on entities controlled by a FOREIGN STATE or state-owned enterprise investing in or owning capital in a public service classified as critical infrastructure; reciprocity requirements in defined cases; and performance, service, and reporting obligations on public services, with the regulators retaining rate-setting and enforcement powers. So RA 11659 did not deregulate public services; it narrowed which of them carry the constitutional ownership ceiling, while adding a national security layer that did not previously exist.
The Problem It Solved
The Constitution reserves a PUBLIC UTILITY to Filipinos or corporations at least 60% Filipino-owned, but never defined the term. Judicial interpretation had swept in telecommunications and transport, so the 40% cap applied to them.
The Closed List of Six
- Distribution of electricity;
- Transmission of electricity;
- Petroleum and petroleum products pipeline transmission systems;
- Water pipeline distribution and wastewater systems, including sewerage;
- Seaports; and
- Public utility vehicles.
- The law adds that NO OTHER PERSON shall be deemed a public utility unless a later law says so.
What Was Freed
Anything that is a public SERVICE but not a public UTILITY falls outside the equity restriction and may be up to 100% foreign-owned — notably telecommunications, air carriers, domestic shipping, railways and subways, expressways and tollways, and airports.
The Safeguards Added
- A national security review of foreign investment in critical infrastructure, with the President able to suspend or prohibit a transaction;
- Restrictions on entities controlled by a FOREIGN STATE or state-owned enterprise in critical infrastructure;
- Reciprocity requirements in defined cases; and
- Performance, service, and reporting obligations, with regulators keeping rate-setting and enforcement powers.
The Net Effect
RA 11659 did not deregulate public services. It narrowed which ones carry the constitutional ownership ceiling, while adding a national security layer that did not exist before.
Frequently Asked Questions
What is a public utility under RA 11659? A public service operating, managing, or controlling for public use any of six things: distribution of electricity, transmission of electricity, petroleum pipeline transmission, water and wastewater pipeline systems, seaports, and public utility vehicles.
Can foreigners now fully own a telecommunications company? Telecommunications is no longer within the statutory definition of a public utility, so it falls outside the constitutional 60/40 requirement, subject to the other laws applicable to it and to the national security safeguards the amendment introduced.
Which sectors still carry the 40 percent foreign equity cap? Only the six categories the amended law defines as public utilities. No other person is deemed a public utility unless a subsequent law provides otherwise.
Did RA 11659 remove regulation of public services? No. Regulators retain rate-setting and enforcement powers, performance and reporting obligations apply, and the law adds a national security review for foreign investment in critical infrastructure.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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