Exemption from Compulsory Notification – Circumstances Where it May Apply
On 16 June 2020, the Philippine Competition Commission (“PCC”) signed PCC Memorandum Circular Nos. 20-001 and 20-002, outlining the procedures for the exemption from compulsory notification under the Philippine Competition Act (“PCA”) of certain Joint Ventures (“JVs”) between private entities in Unsolicited Public-Private Partnership (“PPP”) Projects, and of JVs of private entities and the Philippine government pursuant to the JV Guidelines of the National Economic Development Authority (“NEDA”).
Implications for business in the Philippines
The PCA and its Implementing Rules and Regulations (“IRR”) expressly cover joint ventures, regardless of the composition of its members, and require them to notify the PCC if they breach the notification thresholds. The notification allows the PCC to conduct a full review on the proposed transaction and determine if competition issues will arise therefrom.
The Circulars are applicable solely to JV projects undertaken together by government entities and private entities pursuant to the Guidelines and Procedures for Entering Into Joint Venture Agreements between Government and Private Entities of NEDA (or the “NEDA JV Guidelines”), and JVs formed by private firms for unsolicited PPP projects.
The issuance of the Circulars is a follow up to PCC Memorandum Circular No. 19-001 or the rules on the exemption from compulsory notification of JVs in solicited PPP projects issued in 2019.
Significant provisions of the Circulars
The PCC’s reviewing power covers the nature and scope of the infrastructure project, the competition concerns that may arise from the nature and/or composition of the prospective bidders or the winning project proponent as well as the bidding design and process.
In seeking for exemption from compulsory notification, it is the government agency concerned that has to apply for the application for a Certificate of Project Exemption from the PCC.
Below is a quick summary of the periods for the procedure review:
| JVs Between Government and Private Entities pursuant to NEDA JV Guidelines | JVs Between Private Entities in an Unsolicited PPP Project | |
| When to file the application |
| Any time from the commencement of the negotiations with the OP but prior to the issuance of a Certificate of Successful Negotiation. |
| When PCC issues a Notice of Sufficiency | Within seven working days from complete submission of all Project Documents. | |
| PCC’s Review Period | Period not exceeding 20 days from the issuance of the Notice of Sufficiency. During the Review Period, the PCC may request for additional information or documents. | Period not exceeding 20 days from the issuance of the Notice of Sufficiency, but in case a new draft of the Unsolicited Contract is submitted to the PCC, the PCC shall have ten calendar days to review it. During the Review Period, the PCC may request for additional information or documents. |
While the PCC review is ongoing, the government agency concerned can continue processing the PPP projects.
Other than the review mechanism, the PCC’s mandate also includes providing inputs on the project itself. In particular, the PCC may provide its inputs on the documents, feasibility study, draft agreements or proposals, eligibility documents and other relevant documents submitted by the government agency. Ultimately, the PCC may provide its inputs on how the project may affect competition in the market/s affected by the JV or Unsolicited PPP Project.
In addition to this, the PCC may also require the bidders to commit to and comply with a list of undertakings that will address any potential competition issues identified by the PCC.
Within seven working days from submission to the PCC of the final project documents evidencing observance of the procedures and adoption of PCC’s inputs or from submission of executed undertakings, the PCC shall issue a Certificate of Project Exemption in favor of the prospective winning private sector participant in a JV project or prospective winning project proponent in an Unsolicited PPP project.
In any case, the winning participant or proponent may still be required to comply with the compulsory notification under the PCA and its IRR, giving the PCC the authority to conduct a full review of the transaction, if any of the following instances is present:
- if PCC’s inputs were not implemented;
- if PCC’s inputs were secured on the basis of fraud or false material information;
- if the required undertakings were not duly executed;
- if substantial changes to the project take place subsequent to PCC’s review.
Lastly, a new application for a Certificate of Project Exemption must be filed in case of an unsuccessful negotiation or if there is substitution of any of the members of an OP or if the project is bid out for competitive selection or solicited proposal, or the concerned government agency accepts a new negotiated JV project or accepts a new unsolicited proposal.
Conclusion
Before the issuance of the Circulars, JVs of private entities and the government and JVs of private entities in unsolicited PPP projects were subject to PCC’s full review. With the new framework in place, businesses seeking to join the infrastructure projects and programs of the Philippine government can expect an expedited review processing of the projects they want to undertake, while at the same time, the PCC can continue to champion the country’s pro-competitive initiatives.
The issuance of the new Circulars provides the means for the government to balance its mandate to ensure fair competition in the market and its goal of enticing businesses to invest in infrastructure projects by providing an environment with minimum government regulation.
If you have any questions or require any additional information, please contact Felix Sy or Reeneth B. Santos of Insights Philippines Legal Advisors (a member of ZICO Law).
This alert is for general information only and is not a substitute for legal advice.
