PHILIPPINES Law and Practice Contributed by: Patricia A O Bunye, Anica Angela G Gomez, Angel Rae N Balbin and Bianca Marie J Angela M Rañola, Cruz Marcelo & Tenefrancia
while a request for exemption may be granted by the DITTB on a case-to-case basis, the franchisor failed to provide evidence of substantial benefits that will accrue to the economy as a result of the agreement. 6.3 Requiring Franchisees to Purchase Specific Goods and Services Section 87 of the IP Code prohibits clauses that require the licensee to source capital goods, interme - diate products, raw materials or other technologies exclusively from a specified supplier, or to perma - nently employ personnel designated by the licensor. 6.4 Channel Reservation The franchisor’s reservation of its rights to use spe - cific channels is allowed, as long as it does not result in substantial anti-competitive effects in the market. This aligns with the general principle of freedom to contract, also provided under Article 1306 of the Civil Code, which permits parties to agree on terms and conditions they consider appropriate provided these do not violate law, morals, good customs, public order or public policy. 6.5 Vertical Agreement Block Exemptions Sections 87 and 88 of the IP Code provide the pro - hibited and mandatory provisions governing TTAs. Section 87, in particular, prohibits provisions that are considered prima facie to have an adverse effect on competition and trade. However, Section 91 of the IP Code allows parties to apply for an exemption from the requirements of Sec - tions 87 and 88 by submitting a request to the DITTB. This exemption may be granted only in exceptional and meritorious cases where the agreement is shown to provide significant benefits to the economy, such as high technology content, increase in foreign exchange earnings or employment creation, among other things. 7. Choice of Governing Law 7.1 Possibility of a Franchisor Stipulating Non-Local Law Since the franchise agreement involves a TTA, Sec - tion 88.1 of the IP Code requires that Philippine law be its governing law. Should there be a stipulation to
the contrary, the franchise agreement will be deemed unenforceable. 7.2 Local Law Requirements Since the franchise agreement falls under the defini - tion of a TTA, it is mandatory for the agreement to provide that the laws of the Philippines shall govern the interpretation of the same, and, in the event of liti - gation, the venue shall be the proper court in the place where the licensee has its principal office. Otherwise, the TTA will be unenforceable in the Philippines. 7.3 Mandatory Content As a general rule, parties are free to stipulate the terms and conditions of their franchise agreement. However, since the franchise agreement falls under the defini - tion of a TTA, it must comply with the mandatory pro - visions under Section 88 of the IP Code. Particularly, the following terms must be included in an agreement involving a TTA: • the laws of the Philippines shall govern the inter - pretation of the same, and, in the event of litigation, the venue shall be the proper court in the place where the licensee has its principal office; • continued access to improvements in techniques and processes related to the technology shall be made available during the period of the TTA; • in the event the TTA shall provide for arbitration, the Procedure of Arbitration of the Arbitration Law of the Philippines, the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) or the Rules of Conciliation and Arbitration of the International Chamber of Com - merce (ICC) shall apply, and the venue of arbitra - tion shall be the Philippines or any neutral country; and • the Philippine taxes on all payments relating to the TTA shall be borne by the licensor. Nevertheless, under Section 91 of the IP Code, an exemption from the application of Section 88 of the IP Code may be allowed but only in exceptional and meritorious cases, as previously discussed. It must be noted, however, that the IPOPHL does not grant exceptions regarding the governing law. Thus, if the parties use the laws of their own jurisdiction as the
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