RECENT JURISPRUDENCE – POLITICAL LAW

La Bugal B’laan Tribal Association Inc., et al. V. Victor O. Ramos, Secretary Department of Environment and Natural Resources; Horacio Ramos, Director, Mines and Geosciences Bureau (MGB-DENR); Ruben Torres, Executive Secretary; and WMC (Philippines) Inc. G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that participation in the nation’s natural resources is reserved exclusively to Filipinos. Provision must be construed strictly against their enjoyment by non-Filipinos. RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942, or on March 30, 1995, the President signed a Financial and Technical Assistance Agreement (FTAA) with WMCP, a corporation organized under Philippine laws, covering close to 100, 000 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August 15, 1995, the Environment Secretary Victor Ramos issued DENR Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-40, adopted on December 20, 1996. Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and WMCP be declared unconstitutional on ground that they allow fully foreign owned corporations like WMCP to exploit, explore and develop Philippine mineral resources in contravention of Article XII Section 2 paragraphs 2 and 4 of the Charter. In January 2001, MMC – a publicly listed Australian mining and exploration company – sold its whole stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is owned by Indophil Resources, an Australian company. DENR approved the transfer and registration of the FTAA in Sagittarius’ name but Lepanto Consolidated assailed the same. The latter case is still pending before the Court of Appeals. EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept, consider and evaluate proposals from foreign owned corporations or foreign investors for contracts or agreements involving either technical or financial assistance for large scale exploration, development and utilization of minerals which upon appropriate recommendation of the (DENR) Secretary, the president may execute with foreign proponent. WMCP likewise contended that the annulment of the FTAA would violate a treaty between the Philippines and Australia which provides for the protection of Australian investments.

ISSUES: 1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned corporations to exploit Philippine mineral resources 2. Whether or not the FTAA between the government and WMCP is a “service contract” that permits fully foreign owned companies to exploit Philippine mineral resources HELD: First Issue: RA 7942 is Unconstitutional

The present Constitution now allows only “technical and financial assistance. coal.” Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses. coal. The concession amounts to complete control by the concessionaire over the country’s natural resource. inducements or compensations for each other as to warrant a belief that the legislature intended them as a whole. By allowing foreign contractors to manage or operate all the aspects of the mining operation. development or utilization of natural resources. When parts of a statute are so mutually dependent and connected as conditions. development and utilization of Philippine natural resources. and other natural resources are owned by the State. petroleum. “exploration and development and utilization of natural resources shall be under the full control and supervision of the State. leaving the State with nothing but bare title thereto. The same provisions. its pertinent provisions actually treat these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law. for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction. flora and fauna. development and utilization of minerals. the primary feature of service contracts was precisely the evil the drafters of the 1987 Constitution sought to avoid. minerals. The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that participation in the nation’s natural resources is reserved exclusively to Filipinos. RA 7942 has in effect conveyed beneficial ownership over the nation’s mineral resources to these contractors. has deleted the phrase “management or other forms of assistance” in the 1973 Charter. and other mineral oils. exploitation. The 1987 Constitution. Article XII Section 2 of the 1987 Constitution retained the Regalian doctrine which states that “All lands of the public domain. Although the statute employs the phrase “financial and technical agreements” in accordance with the 1987 Constitution. considerations. Under Article XII Section 2 of the 1987 Charter.RECENT JURISPRUDENCE – POLITICAL LAW RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned corporations to exploit Philippine natural resources. and other minerals. conditional or connected must fall with them. petroleum. moreover. permit a circumvention of the constitutionally ordained 60-40% capitalization requirement for corporations or associations engaged in the exploitation. petroleum and other mineral oils. whether by design or inadvertence. wildlife. then if some parts are unconstitutional. Accordingly such provision must be construed strictly against their enjoyment by non-Filipinos.” The same section also states that. The underlying assumption in the provisions of the law is that the foreign contractor manages the mineral resources just like the foreign contractor in a service contract. forests or timber. concessions. all provisions that are thus dependent. .” The management or operation of mining activities by foreign contractors. all forces of potential energy. concession or lease is no longer allowed under the 1987 Constitution. the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area. fisheries. waters. the utilization of inalienable lands of public domain through license. Therefore RA 7942 is invalid insofar as said act authorizes service contracts. foreign owned corporations are limited only to merely technical or financial assistance to the State for large scale exploration. Under the concession system. Y such omission. or leases for the exploration.

Consequently. “Rather the phrase signifies the possibility of the inclusion of other activities. Separate Opinion of Justice Panganiban The FTAA is now to be implemented by a Filipino corporation.” These contractual stipulations and related provisions in the FTAA taken together. the contract from which they spring must be struck down.” Section 1. They are precisely the vices that the fundamental law seeks to avoid. management. The CA case is a dispute between two Filipino corporations (Sagittarius and Lepanto) both claiming the right to purchase the foreign shares in WMCP. when they were crafting and polishing the provisions dealing with financial and/or technical assistance agreements. petroleum and mineral oils to financial or technical assistance. technology. the “exclusive right to explore. the FTAA would still be in the hands of a qualified Filipino firm. and personnel necessary for the Mining Operations. development and utilization of minerals. does not limit foreign participation in the exploration. The members of the Concom actually had in mind the Marcos-era service contracts that they were more familiar with (but which they duly modified and restricted so as to prevent present abuses). moreover.RECENT JURISPRUDENCE – POLITICAL LAW Second Issue: RP Government-WMCP FTAA is a Service Contract The FTAA between WMCP and the Philippine government is likewise unconstitutional since the agreement itself is a device contract. The present Constitution. Regardless of which side eventually prevails. petroleum and mineral oils. the evils that it aims to suppress. and utilization of minerals. Section 1. Excerpts from then deliberations of the Constitutional Commission likewise show that its members discussed “technical or financial assistance agreements” in the same breath as “service contracts” and used the terms interchangeably. provided they bear some reasonable relationship to and compatibility with financial or technical assistance.” . These stipulations are abhorrent to the 1987 Constitution.3 of the FTAA grants WMCP. a fully foreign owned corporation. utilize and dispose of all minerals and by-products that may be produced from the contract area. therefore the Court can no longer declare it unconstitutional. grant WMCP beneficial ownership over natural resources that properly belong to the State and are intended for the benefit of its citizens.” If the drafters intended to strictly confine foreign corporations to financial or technical assistance only.2 of the same agreement provides that WMCP shall provide “all financing. The drafters’ choice of words and excerpts from deliberations of the Constitutional Commission reveal that the present Charter did not limit to financial or technical assistance the participation of foreign corporations in the large-scale exploration. The drafters’ use of the phrase “agreements xxx involving xxx technical or financial assistance” – in Article XII Section 2 of the 1987 Charter does not absolutely show intent to exclude other modes of assistance. they would have employed “restrictive” or “stringent” language. development. exploit. The Concom discussions in their entirely had to do with service contracts that might be given to foreign-owned corporations as exceptions to the general principle of Filipino control of the economy.

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