This is a petition for review on certiorari seeking to annul and set aside a Court of Appeals judgment denying the appeal of the petitioner against the decision of the Regional Trial Court. The petitioner, Capitol Wireless Inc (Capwire), is a Philippine corporation in the business of providing international telecommunications services. It has signed agreements with other local and foreign telecommunications companies covering an international network of submarine cable systems such as the Asia Pacific Cable Network System (APCN) (which connects Australia, Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Japan, Indonesia and the Philippines); the Brunei-Malaysia-Philippines Cable Network System (BMP-CNS), the Philippines-Italy (SEA-ME-WE-3 CNS), and the Guam-Philippines (GP-CNS) systems. The agreements provide for co-ownership and other rights among the parties over the network. Capwire claims that it is co-owner only of the so-called 'wet segment' of the APCN, while the landing stations or terminals and Segment E of APCN located in Nasugbu, Batangas, are owned by the Philippine Long Distance Telephone Corporation (PLDT). Moreover, it alleges that the wet segment is laid in international, and not Philippine, waters. Capwire claims that it is therefore not liable to pay taxes on the cable system as determined by the Provincial Assessor.

Held: Petition denied. Court of Appeals judgment affirmed.

It is not in dispute that the submarine cable system's landing station in Nasugbu, Batangas, is owned by PLDT and not by Capwire. Obviously, Capwire is not liable for real property tax on this landing station. Nonetheless, Capwire admits that it co-owns the submarine cable system that is the subject of the tax assessed and being collected by the respondents. As the Court takes judicial notice that Nasugbu is a coastal town and the surrounding sea falls within what arts 2 and 3 of UNCLOS define as the country's territorial sea (to the extent of 12 nautical miles outward from the nearest baseline) over which the country has sovereignty, including the seabed and subsoil, it follows that a portion of the submarine cable system lies within Philippine territory and thus falls within the jurisdiction of the local taxing authorities. It easily belies Capwire's contention that the cable system is entirely in international waters. And even if such portion does not lie in the 12-nautical-mile vicinity of the territorial sea but further inward, in Magallona v Ermita (see CMI564) this Court held that 'whether referred to as Philippine "internal waters" ... or as "archipelagic waters" under UNCLOS [art 49] the Philippines exercises sovereignty over the body of water lying landward of [its] baselines, including the air space over it and the submarine areas underneath'. Further, under art 79 of UNCLOS, the Philippines clearly has jurisdiction with respect to cables laid in its territory that are utilised in support of other installations and structures under its jurisdiction.

As far as local government units are concerned, the areas described above are to be considered subsumed under the term 'municipal waters' which, under the Local Government Code, includes 'not only streams, lakes, and tidal waters within the municipality, not being the subject of private ownership and not comprised within the national parks, public forest, timber lands, forest reserves or fishery reserves, but also marine waters included between two lines drawn perpendicularly to the general coastline from points where the boundary lines of the municipality or city touch the sea at low tide and a third line parallel with the general coastline and fifteen (15) kilometers from it'.

Thus, the jurisdiction or authority over such part of the subject submarine cable system lying within Philippine jurisdiction includes the authority to tax the same, for taxation is one of the three basic and necessary attributes of sovereignty and such authority has been delegated by the national legislature to the local governments with respect to real property taxation.​