Sep 11, 2021 @ 22:33

SC upholds GOCC Governance Act, rejects claim of undue delegation of legislative power

The Supreme Court (SC) has upheld the constitutionality of the GOCC Governance Act of 2011—rejecting the claim of two lawmakers that it unduly delegates legislative power, violates the security of tenure of the officials of government-owned and controlled corporations (GOCCs), supplants the authority of the Civil Service Commission (CSC), violates the equal protection clause, and repeals the individual charters of affected entities.

In a 72-page decision on G.R. Nos. 197422 and 197950, the SC voted unanimously to deny the petitions of Albay 1st District Edcel Lagman and Surigao del Sur 1st District Rep. Prospero Pichay, Jr., assailing the constitutionality of the entire Republic Act No. 10149.

The law created the Governance Commission for GOCCs (GCG), an agency attached to the Office of the President (OP), to evaluate the performance and relevance of GOCCs. It also shortened the fixed terms of the chief executive officers (CEOs) and appointive directors of GOCCs with original charters who were sitting at the time that the law was enacted.

The SC held that there was no undue delegation of legislative power when the GCG was empowered to identify which should be reorganized, merged, streamlined, abolished or privatized. It explained that the GCG “only acts as an investigative body on behalf of Congress.”

It said the law complied with the “completeness and sufficient standards test” because the GCG would only have to determine if a GOCC meets the standards under Section 5(a) for mandatory abolition or reorganization (such as lost relevance, duplicated or overlapping functions, failure to produce the desired outcomes or achieve objectives, dormancy, involvement in an activity best carried out by the private sector, or need for consolidation under a holding company).

“Delegating the power to ascertain facts-in order to determine the propriety of the reorganization, abolition, merger, streamlining or privatization of GOCCs-is not an undue delegation of legislative powers. The standards were set; the policy, fixed. The Governance Commission only needs to carry out the mandate,” read the decision penned by Associate Justice Marvic Leonen.

Similarly, the SC upheld the delegation of the power to establish a Compensation and Position Classification System subject to the president’s approval. It noted that the GCG was given the power to recommend a competitive compensation and remuneration system to attract and retain talent, but the commission would still have to comply with certain governing principles and limitations.

These include equal pay for work of equal value, pay comparable with those in the private sector, and a review of rates taking into account the performance and contribution of the GOCC, as well as the possible erosion in purchasing power.

“Republic Act No. 10149 is but a clear expression of the legislative intent to regulate and rationalize the compensation frameworks of GOCCs by authorizing the president, upon the recommendation of the Governance Commission, to establish a unified Compensation and Position Classification System for GOCCs. The law is consistent with the compensation standardization clause in the Constitution and the intended salary standardization for GOCCs expressed in previous laws,” read the decision.

The SC also disagreed with the contention that the GCG supplanted the constitutional mandate of the CSC. It noted that the GCG is focused on the oversight of GOCCs as public institutions, while the CSC is more focused on the management and qualifications of government personnel.

It added that the GCG’s powers are limited to the corporate entities and their boards of directors and trustees, while the CSC retains the mandate to administer the civil service and handle all personnel matters.

The SC also found nothing in RA 10149 that would remove the CSC’s authority to act on appointments to the GOCCs. Instead, the law merely added an initial screening and selection process by the GCG for directors and trustees to maintain the quality of board governance.

Also, the SC found no violation of the equal protection clause even though some GOCCs were excluded from the law.

It noted that the Bangko Sentral ng Pilipinas (BSP) is validly excluded because its unique function as the country’s independent central monetary authority. Meanwhile, state universities and colleges are supervised by the specialized Commission on Higher Education (CHED) and are not for-profit businesses, similar to research institutions.

Cooperatives are self-sufficient and independent “democratic associations” regulated by the Cooperativee Development Authority (CDA), local water districts (LWDs) should be locally controlled and managed and are supervised by the Local Water Utility Administration (LWUA), and economic zone authorities are mandated to operate special economic zones as decentralized, self-reliant and self-sustaining and are supervised by the Philippine Economic Zone Authority (PEZA).

The unique nature of these entities means there is “reasonable basis” to exclude them from RA 10149, in the absence of unreasonable distinctions within the same classes of entities.

The SC likewise rejected the claim that as a general law, RA 10149 cannot supersede the particular special charters of the GOCCs. It stressed that an exception to the general rule that a prior special law is not repealed by a general law is when “the legislative intent to modify or repeal the earlier special law through the general law is manifest.”

As for the issue of the officers whose terms were cut short, the SC said this was done in “good faith,” because the objective was to “restructure the GOCCs to enable them to respond to the exigencies of the service through fiscal discipline.”

This was in light of revelations that officials and board members of GOCCs and government financial institutions (GFIs) had been granting themselves lavish benefits and bonuses while neglecting public service.

“Public interest warrants the term reduction. Shortening the term of directors to one year allows for a yearly evaluation of their performance and promotes accountability for public funds… Enacting Republic Act No. 10149, including the shortening of terms of appointive directors to one year, fulfills what Congress had considered a great public need,” read the decision.

The SC also stressed that “a public officer has no vested or absolute right to hold public office,” and his claim to security of tenure “cannot be invoked against a valid legislative act resulting in separation from office.”

“While neither Congress nor the president may simply declare a position vacant, Congress acted well within its powers when it legislated a new term. Section 17 of Republic Act No. 10149 merely shortened the terms of incumbent GOCC officers and did not, as petitioners alleged, remove them from service without cause,” read the decision.

“Again, it merely modified the terms of incumbent GOCC officers and by providing for a new, albeit shortened, term for these existing offices moving forward. This is consistent with Congress’s legislative prerogative to modify, through laws, the tenns of public office,” it added.

The SC concluded its decision by reiterating the aim of Congress to address the reported abuses, poor performance, and inefficiencies in the operations of GOCCs.

“These actions were geared toward achieving what Congress perceived to be a great public need. It is not for this Court to address questions of legislative policy or wisdom lest it act as a third Congress and in excess of its duty as a co-equal branch of government. Absent any clear showing of unconstitutionality, these provisions, duly deliberated upon and approved by the legislature, are upheld,” the SC said.

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