How to Determine Whether a Foreign Corporation May Sue or Be Sued in Philippine Courts
A foreign corporation may discover that a competitor which is doing business in the Philippines is not in compliance with the existing Philippine laws. In this case, the foreign corporation may want to file a suit against the competitor for trademark infringement or for unfair competition or both. A foreign corporation may also want to file a complaint in Philippine courts because it aggrieved in a contract executed with a company in the Philippines.
The main issue here is whether the foreign corporation has the capacity to sue the competitor in Philippine courts.
A foreign corporation’s capacity to sue and be sued in Philippine courts is governed by Section 133 of the Corporation Code.
Sec. 133. Doing business without a license. – No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.
In the SEC-OGC Opinion No. 13-02, the SEC has clarified the rule on the foreign corporation’s capacity to sue and be sued. The rule is that a foreign corporation must first obtain a license to transact business in the Philippines and a certificate from the appropriate government agency before it can transact business in the Philippines.
Foreign corporations doing business in the Philippines without a license are “barred from maintaining or intervening in any action, suit, or proceeding in any court or administrative agency of the Philippines.” (SEC-OGC Opinion No. 13-02). It should be stressed that they can be sued on a valid cause of action under Philippine laws.
However, the SEC has also clarified that it is not the absence of a license but the act of doing business without the requisite license that bars a foreign corporation from gaining access to Philippine courts. In other words, an unlicensed corporation doing business in the Philippines cannot sue before Philippine courts while an unlicensed foreign corporation not doing business in the Philippines can sue before Philippine courts.
Foreign Corporation’s Capacity to Sue or be Sued
In order that foreign corporations may be guided accordingly, the following general rules may be considered:
1. As to whether the foreign corporation may or may not sue
a. A foreign corporation doing business in the Philippines with a license may sue before the Philippine courts
b. A foreign corporation doing business in the Philippines without a license cannot sue in the Philippine courts subject to certain recognized exceptions.
c. A foreign corporation which is not doing business in the Philippines even without a license may sue before the Philippine courts.
2. As to whether the foreign corporation may be sued or not
a. A foreign corporation doing business in the Philippines with a license may be sued before the Philippine courts.
b. A foreign corporation doing business in the Philippines without a license may be sued in Philippine courts.
c. A foreign corporation not doing business in the Philippines cannot be sued in Philippine courts. (Ladia)
So, if your foreign corporation is contemplating on filing a suit for trademark infringement or unfair competition against a competitor here in Philippine courts, it is relevant to ask if your foreign corporation is doing business in the Philippines without a license.
