Foreign corporations doing business in the Philippines are required by law to obtain the license to do so. Otherwise, they are barred from seeking redress from any Philippine court.
Republic Act No. 7042, otherwise known as the Foreign Investments Act of 1991, contains a comprehensive list of what constitutes doing business in the Philippines and what does not. Under the same law, the appointment of a representative or distributor domiciled in the Philippines which transacts business in the representative’s or distributor’s own name and account is one of the acts that shall not be deemed doing business in the Philippines. The Supreme Court of the Philippines, in Steel Case, Inc. vs. Design International Solutions, Inc., G.R. No. 171995, April 18, 2012, distinguished between a distributor who transacts business in his own name or account and a distributor who is doing business under the full control of the foreign corporation. The Supreme Court states:
From the preceding citations, the appointment of a distributor in the Philippines is not sufficient to constitute doing business unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an independent entity which buys and distributes products, other than those of the foreign corporation, for its own name and its own account, the latter cannot be considered to be doing business in the Philippines.
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In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and managed by the spouses Leandro and Josephine Bantug. In addition to Steelcase products, DISI also distributed products of other companies including carpet tiles, relocatable walls and theater settings.
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This clearly belies DISIs assertion that it was a mere conduit through which Steelcase conducted its business in the country. From the preceding facts, the only reasonable conclusion that can be reached is that DISI was an independent contractor, distributing various products of Steelcase and of other companies, acting in its own name and for its own account.
From the abovementioned, it is clear that a foreign corporation that appoints an independent distributor in the Philippines which buys and distribute products other than that of the former is not doing business in the country. As such, the said entity need not secure a license before it can seek redress from the courts of the Philippines.
