When Can Foreign Corporations Sue in the Philippines? A Guide

Can an unlicensed foreign corporation sue in Philippine courts? The answer depends on one crucial question: is it is the actual performance of specific commercial acts within Philippine territory. The Philippines has no jurisdiction over commercial acts performed in foreign territories.

In this case, the series of transactions between Van Zuiden and GTVL were perfected and consummated in Hong Kong. Van Zuiden did not open an office in the Philippines, appoint a local representative or distributor, or manage or supervise a local business. There was no distributorship agreement between the parties, unlike in the earlier case of Eriks Pte., Ltd. v. Court of Appeals, where such an agreement supported a finding of doing business.

The Court rejected the argument that the identity of the parties alone determines whether a foreign corporation is doing business locally, regardless of where the transactions occurred. It noted that an exporter in one country may export products to many importing countries without performing specific commercial acts within those territories. The mere act of exporting, without more, cannot be deemed as doing business in the importing country.

The Court further warned that adopting the contrary view would have a deleterious effect on global trade. Philippine exporters could be considered as doing business in every foreign country where they export products, requiring them to secure licenses everywhere, even without performing any commercial act within those territories.

Practical Takeaways

• An unlicensed foreign corporation may sue in Philippine courts if it is not doing business in the Philippines.
• "Doing business" requires actual performance of commercial acts within Philippine territory, not merely exporting goods to the Philippines.
• The place where transactions are perfected and consummated is material. If the sale is completed abroad, the foreign seller is generally not considered as doing business locally.
• A distributorship agreement or similar arrangement with a local party can be evidence of doing business, as shown in the Eriks case.
• Foreign corporations should carefully structure their transactions to avoid inadvertently creating a presence that Philippine law treats as "doing business."

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.