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In brief

The National Economic Development Authority (NEDA) has issued the implementing rules and regulations (IRR) of the amended Public Service Act or Republic Act No. 11659 (“RA 11659“), which took effect on 4 April 2023.


  1. Recent developments
  2. Salient provisions
  3. Why the IRR of RA 11659 is relevant to you

Recent developments

On 20 March 2023, National Economic and Development Authority (NEDA) issued the implementing rules and regulations (IRR) of Republic Act (RA) 11659, which was approved by 21 government agencies, including the NEDA itself.

Please read our earlier client alert on RA 11659 for further context on the developments leading to its enactment.

Salient provisions

  1. Foreign equity restrictions on certain public service companies remain the same. 
  • The IRR is consistent with the provisions of RA 11659 in considering the following services as ‘public utilities’ and subject to the 40% foreign ownership limitation under the Constitution: (a) distribution and transmission of electricity; (b) petroleum and petroleum products’ pipeline transmission systems; (c) water pipeline distribution systems; (d) wastewater and sewerage pipeline systems; (e) seaports; and (f) public utility vehicles.
  1. The IRR provides the definition of ‘control’ under the amended Public Service Act.
  • The IRR defines “control” as the ability to substantially influence or direct the actions or decisions of an entity. Control exists when a parent company or entity: (a) owns directly or indirectly more than 50% of the capital, taking into account voting power and beneficial ownership of an entity; or (b) controls, through ownership interests, the exercise of more than 50% of the voting rights. This is unless an entity can clearly demonstrate that such ownership does not constitute control.
  • The IRR clarifies that control may still exist in limited circumstances even if the entity owns 50% or less of the voting power of another entity, where there is power, ability, or right to confer decisive influence on the decisions of another entity, or interfere with its management, operation, administration or control.
  • The IRR provides that its definition of control is subject to existing or subsequent jurisprudence on the determination of control.
  • The IRR’s definition of “control” affects the Public Service Act’s definition of what a “Foreign State-Owned Enterprise” is (discussed below). It also possibly affects the extent of what may be considered a public utility, since a public utility refers to a “public service” that “controls for public use” any of the public services enumerated under Section 4 of RA 11659.
  1. Only public services engaged in the provision of telecommunications services are considered as critical infrastructure, until further action by the President. 
  • RA 11659 says that public services engaged in the operation and management of critical infrastructure may be owned by foreign nationals by more than 50%, subject to reciprocity requirements. Such public services are required to act on customer complaints or provide an action plan within 10 days and need to submit monthly reports detailing service interruptions, complaints and actions taken on each complaint. RA 11659 says that only public services engaged in the provision of telecommunications services are considered critical infrastructure, unless otherwise declared by the President of the Philippines. The IRR does not change this. 
  • The IRR categorically says, “No other public service shall be considered critical infrastructure unless declared by the President.” The IRR specifies the process by which the President can declare a public service as a critical infrastructure. According to the IRR, this declaration is done through the issuance of an executive order, and NEDA may recommend to the President that a public service be classified as critical infrastructure on its own accord or upon request of the relevant administrative agency. 
  1.  NEDA has the power to review reclassification of public services as public utilities.
  • RA 11659 provides that upon the recommendation of NEDA, the President may recommend to Congress the classification of a public service as a public utility. A law is required to classify a public service as a public utility. The IRR further provides that NEDA shall have the power to review the reclassification of a public service whether on its own or upon request of the relevant administrative agency.
  • RA 11659 provides that being a natural monopoly is one of the factors for reclassification of a public service, and a “natural monopoly” exists when the market demand for a commodity or service can be supplied by a single entity at a lower cost than by two or more entities. The IRR states that other considerations for a natural monopoly include economies of scale, high fixed cost, industry, insufficient industry or market demand to support two or more firms, and monopoly power not being due solely to regulatory or legal restrictions.
  1. The IRR provides additional qualifications on investment by foreign governments and foreign state-owned enterprises.
  • Under RA 11659, companies controlled by or acting on behalf of a foreign government or foreign state-owned enterprises are prohibited from owning capital in any public service classified as a public utility or critical infrastructure. RA 11659 defines a “foreign state-owned enterprise” as an entity in which a foreign State: (a) directly or indirectly owns more than 50% of the capital taking into account both the voting rights and beneficial ownership; (b) controls, through ownership interests, the exercise of more than 50% of the voting rights; or (c) holds the power to appoint a majority of members of the board of directors or any other equivalent management body. In short, a foreign state-owned enterprise is one which is controlled by a foreign state.
  • The IRR further states that the criteria for a “foreign state-owned enterprise” under RA 11659 also apply to the mode of acquisition of the holding or parent enterprise of subsidiaries of a foreign state-owned enterprise.
  • RA 11659 prohibits foreign governments or foreign state-owned/controlled enterprises from investing additional capital after the law’s effectivity. The IRR clarifies that such entities with existing investments or capital ownership in public services or utilities classified as critical infrastructure prior to the effectivity of RA 11659 may maintain them.
  1. National security reviews may be done by the government on its own, or upon voluntary declaration by a party to a transaction/investment. 
  • RA 11659 gives the President of the Philippines the power to suspend or prohibit merger or acquisition transactions or any investment in the interest of national security. The IRR provides the factors to be considered in conducting a national security review. Essentially, the IRR says that the transactions or investments subject to suspension/prohibition are those that result in a grant of direct or indirect control to a foreign entity and have national security implications.
  • Based on the IRR, the criteria for reviewing investments are, as follows: (a) impact on national security; (b) applicability of other Philippine laws and policies; (c) implication of any national security risk arising from the investment on the Philippine economy and community; (d) whether the investment will affect the ability of the Philippines to protect its strategic and security interests; and (e) nature, history, and previous business transactions of the investor and any cases filed against the same, in their country of origin, or in any other country or state where the investor is involved.
  • The national security review process may be undertaken by the relevant government department or administrative agency on its own accord or upon voluntary declaration by any party to such merger or acquisition, transaction or investment in a public service.
  • Parties to these transactions or investments are not prohibited from consulting with the relevant administrative agency prior to filing a voluntary declaration and, if appropriate, filing a draft declaration to aid in understanding the transaction and providing an opportunity for the administrative agency to request additional information to be included in the declaration.
  • Any information or document filed with a government agency relating to a pre-declaration consultation or national security review shall be exempt from disclosure, and no such information or document shall be made public, except under limited circumstances.
  1. The IRR provides the criteria for satisfying reciprocity requirements.
  • RA 11659 provides that foreign nationals are allowed to own more than 50% of capital in public services engaged in the operation and management of critical infrastructure, but only if the country of such foreign nationals accords reciprocity to Philippine nationals under foreign law or a treaty. Reciprocity may be satisfied by according rights of similar value in other economic sectors for this purpose, and the NEDA shall promulgate rules and regulations in relation to reciprocity requirements. 
  • The IRR provides that reciprocity requirements are deemed satisfied if: (a) Philippine nationals are allowed to own more than 50% of capital stock in any activity related to agriculture, industry and services in the home country of the foreign national; and (b) the home country of the foreign national allows Philippine nationals to invest the same value of capital in any economic activity related to agriculture, industry or services.
  • In case an investment results in the ownership by a foreign national of more than 50% of the capital stock in critical infrastructure services, such entity and the relevant administrative agency should ensure that the country of the foreign national accords reciprocity to Philippine nationals.
  1. The IRR requires information security certification for retention of franchise.
  • Except for micro, small, and medium enterprises (MSMEs), persons and companies engaged in the telecommunications business shall obtain and maintain certifications from an accredited certification body attesting to compliance with relevant ISO standards on information security, as prescribed by the Department of Information and Communications Technology. The maintenance of these certifications shall be a continuing qualification for retention of franchise or other authority to operate. 

Why the IRR of RA 11659 is relevant to you

The IRR clarifies and provides additional guidelines for the implementation of RA 11659. The IRR also elaborates on the various processes and procedures outlined in the law, particularly those in relation to classification of public services and national security reviews. 

Existing businesses in the public services sector will need to exercise heightened vigilance in ensuring compliance with the law and the IRR. This is especially true for businesses that are considered public utilities or critical infrastructure (i.e., telecommunications services), given the additional scrutiny by the government and responsibilities imposed upon them.

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*Authored by Quisumbing Torres, a member firm of Baker & McKenzie International, a Swiss Verein. Please contact for inquiries.



Donemark Calimon is a partner and the head of Quisumbing Torres' Dispute Resolution Practice Group and the Industrials, Manufacturing & Transportation Industry Group. Donemark has 19 years of experience in dispute resolution, including civil, criminal, corporate and regulatory litigation, and commercial arbitration. He is one of the founders of the Philippine Institute of Arbitrators (PIArb) and is an accredited arbitrator of the Philippine Dispute Resolution Center, Inc. (PDRCI). He is also an accredited arbitrator of the Construction Industry Arbitration Commission (CIAC). He was appointed as Member of the Panel of Arbitrators of the Singapore International Arbitration Center (SIAC). He was also recently appointed Secretary General of the Philippine International Center for Conflict Resolution, an alternative dispute resolution (ADR) center set up by the Integrated Bar of the Philippines to provide arbitration and ADR services and facilities.


Divina Ilas-Panganiban, CIPM is a partner and the head of Quisumbing Torres’ Intellectual Property, Data and Technology Practice Group and co-heads the Technology, Media & Telecommunications (TMT) Industry Group. She participates in initiatives of Baker & McKenzie International of which Quisumbing Torres is a member firm. She is a member of Baker & McKenzie International's Asia Pacific TMT, and the Asia Pacific Intellectual Property Steering Committees.
Divina is a Certified Information Privacy Manager by the International Association of Privacy Professionals (IAPP). She currently serves as the Vice-President and Director of the Philippine Chapter of the Licensing Executives Society International, the Regional Vice-chair of the LESI's Education Committee, the Co-chairperson of the Committee on Intellectual Property Rights of The American Chamber of Commerce of the Philippines, and the Chairperson of the IAPP KnowledgeNet Chapter for the Philippines.
Divina was recently appointed to be a member of the Advisory Council for Intellectual Property (ACIP) of the Intellectual Property Office of the Philippines (IPOPHL). The ACIP is an advisory board composed of a select group of people from different sector to which IP is of great value. She was recently recognized in the Hall of Fame for Best External Lecturers by the IP Academy of the IPOPHL.
Divina just finished her stint as the chair the Unreal Campaign of the International Trademarks Association (INTA) for East Asia and the Pacific and continues to organize anti-counterfeiting activities in schools and universities around the country, educating the youth about the importance of intellectual property protection.
Divina is a multi-awarded lawyer with a stellar track record in the IP, data and technology fields. She has garnered numerous awards and accolades, including the Woman Lawyer of the Year by the ALB Philippine Law Awards 2023. She has been cited as leading lawyer for intellectual Property and TMT by The Legal 500 Asia Pacific, Chambers Asia Pacific, Managing IP, World Trademark, Asialaw and IAM Patent 1000, among others. Known for her exceptional legal expertise and unwavering commitment to her clients, Divina has established herself as a leader in her profession.


Kristine Anne Mercado-Tamayo is a partner and the head of Quisumbing Torres’ Tax Practice Group. She heads the Industrials, Manufacturing & Transportations Industry Group and is also a member of the Consumer Goods & Retail. She has 16 years of experience assisting and advising clients on tax issues relating to corporate restructuring and mergers and acquisitions. Kristine also handles customs and international trade matters, including border and post-clearance disputes. She advocates on clients' behalf in controversies involving disputed assessments, representing clients before the Bureau of Internal Revenue and the Bureau of Customs.
Kristine Anne obtained her Doctor of Law degree from the Ateneo de Manila in 2005. She is cited as a Next Generation Partner in Tax by the Legal 500 Asia Pacific for 2020 to 2023. More recently, she has been named highly regarded lawyer for General corporate tax, and Women in tax by ITR World Tax 2023.


Alain Charles Veloso is a partner in Quisumbing Torres’ Corporate & Commercial Practice Group. He has 11 years of legal practice, advising several investment banks, funds, and multinational corporations with regard to their transactions in the Philippines, including private and public M&A transactions, debt, and equity capital markets transactions, and structuring and establishment of their Philippine presence, as applicable.


Marvin Masangkay is a senior associate in Quisumbing Torres’ Dispute Resolution Practice Group. He is the head of the Aviation sector of the firm's Industrials, Manufacturing & Transportation Industry Group. He has 14 years of experience handling commercial, civil, criminal and appellate litigation, and alternative dispute resolution. He was instrumental in the formation and is a founding member of the European Chambers of Commerce of the Philippine's Aviation Committee. He is currently the Co-Chairperson of the said committee.


Jared is a senior associate in Quisumbing Torres' Dispute Resolution Practice Group. He heads the Firm's Transportation and Logistics Industry Group Subsector. Jared has 10 years of litigation experience, with a particular focus on criminal litigation and arbitration.
He is one of a handful of Philippine Fellows of the Chartered Institute of Arbitrators (FCIArb) and the Philippine Institute of Arbitrators (FPIArb). He is an accredited arbitrator of the Philippine Dispute Resolution Center Inc. (PDRCI) and an accredited arbitrator and mediator of the Philippine Wholesale Electricity Spot Market (WESM). Jared sat as an arbitrator in the first WESM arbitrations in the Philippines, and has acted as counsel in ad hoc and institutional arbitrations.
He conducts MCLE lectures on commercial arbitration, and has co-authored a book on the matter. He currently teaches Civil Procedure and Sales Law at the Far Eastern University Institute of Law. He is also a supervising lawyer at the Ateneo Legal Services Center, where he oversees students in handling pro bono cases.
Jared studied at the Ateneo Law School (2010) where he received the Dean's Silver Medal for his J.D. thesis on foreign arbitral awards. He served as president of the Ateneo Society of International Law and was part of teams that represented the Philippines and won in moot court competitions in Florida (1st runner-up; 2007 Stetson International Environmental Law Moot Court Competition) and Japan (1st; 2008 Asia Cup International Law Moot Court Competition).


Danielle Joanna Gaite is a junior associate in Quisumbing Torres. She works with the Dispute Resolution, Intellectual Property, Data & Technology, Employment, and Corporate & Commercial/M&A practice groups. Dani graduated with honors from the Ateneo de Manila University School of Law in 2019, and ranked 8th in her batch.  She also received the Dean's Silver Medal for her J.D. thesis on the interplay between trade conditionalities and human rights.

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