GR 185582; (February, 2012) (Digest)
G.R. No. 185582 ; February 29, 2012
TUNA PROCESSING, INC., Petitioner, vs. PHILIPPINE KINGFORD, INC., Respondent.
FACTS
Petitioner Tuna Processing, Inc. (TPI), a foreign corporation not licensed to do business in the Philippines, was established per a Memorandum of Agreement (MOA) with several Philippine tuna processors, including respondent Philippine Kingford, Inc. The MOA granted TPI the exclusive right to license a patent and collect royalties in the Philippines. After a dispute arose, TPI obtained a favorable foreign arbitral award against Kingford in California.
TPI filed a Petition for Confirmation, Recognition, and Enforcement of the Foreign Arbitral Award before the Regional Trial Court (RTC) of Makati. The RTC dismissed the petition, ruling that TPI lacked legal capacity to sue in the Philippines under Section 133 of the Corporation Code, which bars an unlicensed foreign corporation transacting business in the country from maintaining any suit.
ISSUE
Whether an unlicensed foreign corporation can sue in the Philippines to enforce a foreign arbitral award.
RULING
Yes. The Supreme Court reversed the RTC, holding that TPI has the legal capacity to sue for the enforcement of the foreign arbitral award. The legal logic is twofold. First, the Court distinguished between a foreign corporation “doing business” and one merely “doing a single or isolated act.” The act of filing a suit to enforce a final arbitral award is an isolated judicial act necessitated by the respondent’s breach; it is not an act of transacting business that would require a license. The prohibition in the Corporation Code applies to initiating business suits, not to enforcing a final right adjudicated in a foreign proceeding.
Second, and more critically, the Court applied the principle of reciprocity and comity under the New York Convention, to which the Philippines is a signatory. The Convention obligates contracting states to recognize and enforce foreign arbitral awards. Denying TPI the capacity to sue to enforce the award would contravene this international obligation and undermine the state policy favoring arbitration. The enforcement proceeding is not an ordinary action but a special proceeding to give effect to a binding international award. Therefore, the lack of a Philippine business license is not a bar to maintaining this specific enforcement action. The case was remanded to the RTC for further proceedings on the merits of the petition for enforcement.