Philippine Contractors Accreditation Board v. Manila Water Company, Inc. G.R. No. 217590 | March 10, 2020

 CASE DIGEST

Philippine Contractors Accreditation Board v. Manila Water Company, Inc.

G.R. No. 217590 | March 10, 2020

EN BANC, GESMUNDO, J.

 

Unconstitutionality of PCAB’s Implementing Rules; Limits of Administrative Rule-Making

 

The clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation. 

 

Manila Water Company, Inc. sought accreditation for its foreign contractors to undertake construction projects for its waterworks and sewerage systems. The Philippine Contractors Accreditation Board (PCAB) denied the request, citing Section 3.1, Rule 3 of the Revised Rules and Regulations Governing Licensing and Accreditation of Constructors, which reserved Regular Licenses for Filipino-owned firms (at least 60% Filipino equity participation) while allowing foreign firms only a Special License for a single specific project. 

Manila Water filed a Petition for Declaratory Relief, arguing that the rule was unconstitutional as it imposed foreign ownership restrictions without Congressional authority. The Regional Trial Court (RTC) ruled in favor of Manila Water, declaring Section 3.1, Rule 3 void for exceeding PCAB’s delegated powers under Republic Act No. 4566 (Contractors’ License Law). 

PCAB appealed, asserting that it had the authority to regulate the construction industry and that the rule was consistent with the 1987 Constitution’s policy on professions and national economic protectionism. The case reached the Supreme Court.

 

 

Whether Section 3.1, Rule 3 of PCAB’s Implementing Rules, which imposes nationality restrictions on contractor licensing, is unconstitutional. 

YES. The Supreme Court struck down the nationality-based licensing requirement as unconstitutional, ruling that: 

1.    PCAB exceeded its delegated powers – The Contractors’ License Law (R.A. No. 4566) does not impose nationality restrictions on contractor licensing, and PCAB had no authority to create such a limitation. Administrative rules cannot go beyond the law they seek to implement. 

2.    Contracting is not a profession – PCAB wrongly classified construction as a profession subject to nationality restrictions under Section 14, Article XII of the 1987 Constitution. The Court clarified that construction is an industry, not a profession, and thus, should not be subject to restrictions on professional practice. 

3.    The restriction violates economic competition principles – The nationality-based rule unfairly restricted market entry, discouraging foreign investment in the construction industry, and contradicting economic policies promoting open competition. 

4.    The rule lacked basis in the Constitution or law – The Court emphasized that only Congress can impose nationality restrictions on economic activities under Section 10, Article XII of the Constitution, and there was no law reserving the construction industry exclusively for Filipinos.

 

Since Republic Act No. 4566 does not impose nationality-based restrictions, PCAB had no authority to create them through its rules. The Court affirmed the RTC ruling and declared void the nationality-based restrictions under Section 3.1, Rule 3 of PCAB’s Implementing Rules.

 

 

CLICK TO READ FULL TEXT