The relatively poor performance of our judicial system is a major disincentive to doing business in the Philippines. Unfortunately, not many studies have been conducted to empirically measure this. But clearly, the difficulty in settling legal conflicts is a major obstacle. It negatively affects business enterprises and could result in huge losses.
One articulated concern here is the issue on the unpredictability and, to some extent, unfairness in the resolution of cases. The landmark case of Manila Prince Hotel v. GSIS illustrates this.
In the said case, GSIS decided to sell 31-51% of Manila Hotel to Malaysian firm Renong Berhad, which was the highest bidder. Unfortunately, the Court disqualified the firm, citing the fact that Manila Hotel falls under national patrimony and should therefore be awarded to qualified Filipinos. Here, the Court expanded the definition of national patrimony by covering not only natural resources, as prudently believed, but also cultural heritage. In so awarding the contract to Filipino-owned MPH, the Court likewise expanded the definition of cultural heritage by embracing Manila Hotel, because it’s been around for so long, bearing mute witness to the “triumphs and failures” of the Filipinos. This pronouncement, of course, is absurd not just because it ludicrously makes a friend’s house in Quezon City part of national patrimony, having been the meeting of place of so many youth organizations during the dictatorship, but also because it unjustly awarded the contract to a non-deserving bidder.
Indeed, while the decision, at first glance, might have some nationalistic tone to it, it was thoughtlessly (if not deliberately) made simply to disqualify a qualified bidder. The Malaysian firm reportedly lost a lot of money and could not, up to this day, understand why it was disqualified despite compliance with legal processes.
Another concern that causes apprehension among businesses is the high cost of litigation, exacerbated by delay in the disposition of cases. We’ve seen how petitions in court, including trivial ones, can drag on for years. This is not good from a business standpoint where huge resources are at stake.
Delay evidently is caused by several factors. These include perceived incompetence of judges and court personnel (lawyers included, of course), resource constraints that result in clogging of court dockets, antiquated judicial procedures, intense political pressures, and judicial corruption. If you are a businessman, you would definitely think twice about finalizing a contract because any case of breach would likely end up in court.
The Supreme Court has introduced a number of judicial reforms which, as I discussed in last week’s column, are not that significant in bringing about changes. Ultimately, the Court will probably implement appropriate innovations that work (I’m trying to be generous, of course). In the meantime, though, those involved in business might have to resort to non-judicial means to settle their conflicts. They could use arbitration, mediation, and other forms of alternative dispute resolutions which in many sophisticated economies have proven effective. They are simple, efficient and less costly.
The only problem, though, is that Filipinos are not accustomed to using any of those and are much more comfortable going to court. I don’t know why. It’s a culture thing, really.
Atty. Edward P. Chico is the chair of the Commercial Law Department of the Ramon V. Del Rosario College of Business, De La Salle University. He may be emailed at firstname.lastname@example.org. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.