Philippines - Guidance and Warnings
Doing business in a new territory you may encounter unexpected problems. In this ‘Guidance and Warnings’ section we offer some basic advice. The best advice, of course, is to instruct a law firm based in the territory which knows how local problems can be overcome.
Chambers & Partners employ a large team of full-time researchers (over 140) working in their London office. They interview thousands of clients each year. The advice in this section is based on the views of clients with in-depth international experience.
GDP in the Philippines grew by 6.6% in 2012, outpacing many of its neighbouring jurisdictions, and a similar growth rate is predicted for 2013. Experienced local players uphold that “the economy has sprung back to life.”
There is increased investor confidence in the jurisdiction, thanks in part to the “buoyant” economy, the strong anti-corruption measures implemented by the government (including the removal of the chief justice in 2012) and perceived political stability. Sources attest that the government have proved that it “was serious about a change from the flawed, lax, 'business as usual' approach.”
Experts consider the Philippines to be “a business-friendly environment but they can still do more.” The recent legislative changes have gone some way to tackling the issue of corruption in the regulatory and judicial systems, for example, but further reforms are needed. Experts in the region also note that “the government has been focussed on anti-corruption measures but should now be shifting its focus to the infrastructure to attract investors.”
The Philippines is a small jurisdiction and family-run enterprises are an important feature of the Filipino business landscape. Personal relationships are an important part of doing business and “face to face meetings, commitments and words ofhonour are valued” in the culture.
Sources note that “the market is about as airtight as a sieve.” This can often work in the client's favour, however, as networks can be relied on to solve problems. “You can get things done effectively – it's just that everyone will know about it," says a source.
The jurisdiction is comprised of 7,000 islands but “everything is in Manila,” according to businesspeople, including the government and the majority of the business, financial and legal activity. 80 dialects are spoken across the islands but foreign players active in the region uphold that communication is not an issue. Observers affirm that “the Filipino culture is welcoming and open to foreign investors and English is widely spoken.”
Legal practice in the Philippines is still closed to international firms but many of the larger local firms have established alliances and affiliations with foreign offices that allow them to leverage off their global network.
The market features a mix of full-service firms and boutiques, with the latter becoming an increasingly popular option with businesspeople for specialised areas such as tax and labour.
Some sources assert that “outside the top three or four firms, your experience can vary widely,” however. There are a handful of firms which have a “deep bench of talent and expertise,” which often leads to conflict of interest issues.
It is advisable to “get the process of choosing counsel started early because you may find that your desired lawyer has a conflict. This is a small, tight-knit market.”
The M&A market in the Philippines is heading for an “upswing” in late 2013 and into 2014 after the elections, according to commentators. It is a small market but sources note that “it has been at the centre of M&A activities in the region for the past 18 months.”
Due to the lack of international presence in the legal market in this jurisdiction, businesspeople recommend engaging a law firm which has relationships with foreign firms. It “shows that they know what they are doing and can communicate with a client who is looking to do a large acquisition in the Philippines. Otherwise, things can literally get lost in translation,” says an interviewee.
Market players stress that it is important to find a lawyer who is able to “navigate the political elements involved in working in the Philippines because there are still restricted areas and you need to know if you're going to be stepping into a political minefield.”
It is generally accepted that fees for a partner in the Philippines start at around USD300 per hour, with senior partners charging up to USD500. Top partners can charge in the region of USD700-800 but it is unusual.
The Philippines is not considered to be a particularly litigious jurisdiction. Sources assert that cases involving M&A are often dealt with “personally and quietly.”
Corruption continues to be an issue, although the recent implementation of anti-corruption measures and the removal of the chief justice have improved the situation. “Progress still has to be made,” according to experts, including “the delivery of judicial decisions in a prompt and impartial manner.”
There are many “bright spots” in the judicial system, although many businesspeople still consider that there is reason to doubt the expertise of judges in commercial and financial matters. An interviewee maintains that “judicial reform is a sore point for the country but it is a work in progress. In the meantime, it is advisable to settle if possible because the courts are swamped and the process can take years.”
Arbitration is a popular alternative when disputes cannot be settled directly between the parties. Foreign players active in the region advocate taking the case to the arbitration facilities in Singapore or Hong Kong. Singapore in particular is noted for “pushing hard to be a reliable arbitration site. They have great incentives for companies to use them.”
The regulatory system is “straightforward in some areas but in others it is archaic and processes are mired in red tape,” according to sources. Experienced businesspeople in the region acknowledge that there is a process of “evolution” happening in the regulatory system, as well as the judicial system, and although “it's been sped up in recent years, it is still ongoing.”
Experienced commentators note that “the issue of regulatory corruption remains a concern for every industry that is subject to government oversight.” However, “major initiatives for good governance” are being introduced and changes are being noticed.
The impeachment of the chief justice “was intended to send a message and show that the government was serious about reform,” according to experts, “and perhaps, more than anything, that is something that has had a significant effect.”
The Central Bank has been singled out by interviewees as being “relatively progressive and staffed with career professionals.” It is generally thought to be an agency that is “ahead of the curve,” although players note that you can still encounter “remnants of the old bureaucratic thinking” on occasion.
Observers affirm that the improvement in the regulatory system “has been tremendous in terms of transparency.” Although the system “may not be simple, the procedures are in place and they are followed and you can approach the officials for guidance and direction.”
It has been noted that “officials are generally happy to meet with businesspeople and they will be encouraging of anything that would improve the business environment and foreign investment.”