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THE
Department of Justice (DOJ) has declared in an opinion
that Cebu Air Inc. may use the “most favored treatment”
clause in its franchise to exempt itself from the
limitation on public-equity participation.
Invoking
that clause would allow an individual to own more than
5-percent of its stock offering.
Justice
Secretary Raul Gonzalez issued the opinion in response
to a request of Rep. Danilo Suarez, chairman of the
Oversight Committee, seeking his opinion concerning the
legislative policy on the application of the “ipso
facto” “most favored treatment” clause in laws granting
franchises.
Suarez,
specifically, wants to clarify whether the “most favored
treatment” clause granted to the Cebu Air or its
franchise under Republic Act 7151, applies not only to
tax provisions but to all other favorable terms enjoyed
by its competitors in the sense that the 5-percent
ownership restriction found in its franchise should not
apply to the firm.
Section
11 of Republic Act 7151 states that “in the event that
any competing individual, partnership or corporation
receives and enjoys tax privileges and other favorable
terms which tend to place the herein grantee at any
disadvantage, then such provisions shall be deemed ipso
facto part hereof and shall operate equally in favor of
the grantee.”
“Thus,
the words ‘and other favorable terms’ should not be
construed as limited to tax privileges but applies to
any and all favorable terms—apart from tax
privileges—received or enjoyed by Cebu Air Inc.’s
competitors, which would be to its disadvantage if said
terms are not deemed automatically incorporated in its
franchise,” the DOJ secretary added. |
