JOHN LESTER O. SANCHEZ
Student No.: C19-0095
ATTY. FERDIE SALES
Professor
Date: October 3, 2021
Subject: International Business Trade
1. DIGEST REPORT: Steelcase, Inc., Petitioner, vs, Design International Selections, Inc.,
Respondent [G.R. No. 171995: April 18, 2012]
FACTS:
During 1986 or 1987 Steelcase, Inc. (Steelcase) a foreign corporation under
Michigan Law, and a manufacturer of office furniture with dealers worldwide orally entered
into a dealership agreement with Design International Selections, Inc. (DISI) granted them
the right to market, sell, distribute, install, and service its products to end-user customers
within the Philippines. The agreement was terminated in the year 1999 following a breach
of the agreement with neither party admitting responsibility. On January 18, 1999,
Steelcase filed a complaint against DISI alleging, among others, that DISI had an unpaid
account of US$600,000.000. However, DISI argued that the lawsuit lacked a cause of
action and the requisite claims about Steelcase's competence to sue in the Philippines,
despite the fact that it was doing business in the country without the appropriate license.
Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign Investments Act of
1991 (FIA) expressly states that the phrase doing business excludes the appointment by
a foreign corporation of a local distributor domiciled in the Philippines which transacts
business in its own name and for its own account. Steelcase further claims that DISI, as
a non-exclusive dealer in the Philippines, had the right to market, sell, distribute and
service Steelcase products in its own name and for its own account. Hence, DISI was an
independent distributor of Steelcase products, and not a mere agent or conduit of
Steelcase. On the other hand, DISI argues that it was appointed by Steelcase as the
latter’s exclusive distributor of Steelcase products. DISI further insists that Steelcase
treated and considered DISI as a mere conduit, as evidenced by the fact that Steelcase
itself directly sold its products to customers located in the Philippines who were classified
as part of their "global accounts."
ISSUES:
1. Whether or not Steelcase is doing business in the Philippines without a license; and
2. Whether or not DISI is estopped from challenging the Steelcase’s legal capacity to sue
RULING:
The Court rules in favor of the petitioner. Steelcase is an unlicensed foreign
corporation NOT doing business in the Philippines. 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. Here, DISI was an independent contractor which sold Steelcase
products in its own name and for its own account. As a result, Steelcase cannot be
considered to be doing business in the Philippines by its act of appointing a distributor as
it falls under one of the exceptions under R.A. No. 7042.
2. Does Information Technology work as catalyst for international business?
Explain
Information technology allows international business to reach customers from
other countries, build customer relationship across the world, and deliver a high quality
product and services. In addition, information technology helps businesses to survive the
economic slump that is still ongoing when the pandemic has started.
3. What entities would fall under the definition of “Philippine National” under the
Foreign Investments Act of 1991 as amended.
According to the REPUBLIC ACT NO. 7042, a domestic partnership or association
wholly owned by citizens of the Philippines; or a corporation organized under the laws of
the Philippines of which at least sixty percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the Philippines or a corporation organized
abroad and registered as doing business in the Philippine under the Corporation Code of
which one hundred percent (100%) of the capital stock outstanding and entitled to vote is
wholly owned by Filipinos or a trustee of funds for pension or other employee retirement
or separation benefits, where the trustee is a Philippine national and at least sixty percent
(60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where
a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange
Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock
outstanding and entitled to vote of each of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent (60%) of the members of the Board
of Directors of each of both corporations must be citizens of the Philippines, in order that
the corporation shall be considered a Philippine national.
4. What is the nationality of a foreign corporation organized under the laws of
Singapore, which is hundred percent owned by Filipinos and doing business in
the Philippines if it will invest in the Philippines? Explain.
A corporation organized abroad and registered as doing business in the Philippine
under the Corporation Code of which one hundred percent (100%) of the capital stock
outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for
pension or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit
of Philippine nationals.
5. Gawsengsit Corp. is a corporation incorporated in Singapore. It invested in
Bumblebee Corp., a Philippine corporation, by acquiring 30% of its shares. As a
result, Gawsengsit Corp. nominated 30% of the directors of Bumblebee Corp., all
of whom are Singaporeans and officers of Gawsengsit Corp. Choose the correct
statement relating to Gawsengsit Corp.
a. Gawsengsit Corp. is doing business in the Philippines and requires a license
from the Securities and Exchange Commission (SEC);
b. Gawsengsit Corp. has to appoint a resident agent in the Philippines;
c. Gawsengsit Corp. cannot elect directors in Bumblebee Corp.
d. Gawsengsit Corp. is not doing business in the Philippines by its mere investment
in a Philippine corporation and does need a license from the SEC.
NONE OF THE ABOVE, because Gawsengsit Corp. is not doing business in the
Philippines by its mere investment in a Philippine corporation and does NOT need a
license from the SEC.
6. A foreign company has been exporting goods to a Philippine company for
several years now. When the Philippine company failed to pay the latest
exportation, the foreign company sued to collect in the Philippines. The
Philippine company interposed the defense that the foreign company was doing
business in the Philippines without a license; hence, could not sue before a
Philippine court. Is this defense tenable? Explain your answer.
The defense is note tenable. Exporting from one's own nation without doing any
specific commercial act within the importing country's territory is not considered doing
business. Thus, despite not having a business license in the Philippines, the foreign
corporation can sue.