JOHN HAY PEOPLES ALTERNATIVE COALITION, MATEO CARIO FOUNDATION INC., CENTER FOR ALTERNATIVE SYSTEMS FOUNDATION INC.

, REGINA VICTORIA A. BENAFIN REPRESENTED AND JOINED BY HER MOTHER MRS. ELISA BENAFIN, IZABEL M. LUYK REPRESENTED AND JOINED BY HER MOTHER MRS. REBECCA MOLINA LUYK, KATHERINE PE REPRESENTED AND JOINED BY HER MOTHER ROSEMARIE G. PE, SOLEDAD S. CAMILO, ALICIA C. PACALSO ALIAS KEVAB, BETTY I. STRASSER, RUBY C. GIRON, URSULA C. PEREZ ALIAS BA-YAY, EDILBERTO T. CLARAVALL, CARMEN CAROMINA, LILIA G. YARANON, DIANE MONDOC, petitioners, vs. VICTOR LIM, PRESIDENT, BASES CONVERSION DEVELOPMENT AUTHORITY; JOHN HAY PORO POINT DEVELOPMENT CORPORATION, CITY OF BAGUIO, TUNTEX (B.V.I.) CO. LTD., ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, Respondents. DECISION CARPIO MORALES, J.: By the present petition for prohibition, mandamus and declaratory relief with prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction, petitioners assail, in the main, the constitutionality of Presidential Proclamation No. 420, Series of 1994, CREATING AND DESIGNATING a portion of the area covered by the former Camp John [Hay] as THE JOHN HAY Special Economic Zone pursuant to Republic Act No. 7227. Republic Act No. 7227, AN ACT ACCELERATING THE CONVERSION OF MILITARY RESERVATIONS INTO OTHER PRODUCTIVE USES, CREATING THE BASES CONVERSION AND DEVELOPMENT AUTHORITY FOR THIS PURPOSE, PROVIDING FUNDS THEREFOR AND FOR OTHER PURPOSES, otherwise known as the Bases Conversion and Development Act of 1992, which was enacted on March 13, 1992, set out the policy of the government to accelerate the sound and balanced conversion into alternative productive uses of the former military bases under the 1947 Philippines-United States of America Military Bases Agreement, namely, the Clark and Subic military reservations as well as their extensions including the John Hay Station (Camp John Hay or the camp) in the City of Baguio.1 As noted in its title, R.A. No. 7227 created public respondent Bases Conversion and Development Authority 2 (BCDA), vesting it with

powers pertaining to the multifarious aspects of carrying out the ultimate objective of utilizing the base areas in accordance with the declared government policy. R.A. No. 7227 likewise created the Subic Special Economic [and Free Port] Zone (Subic SEZ) the metes and bounds of which were to be delineated in a proclamation to be issued by the President of the Philippines.3 R.A. No. 7227 granted the Subic SEZ incentives ranging from tax and duty-free importations, exemption of businesses therein from local and national taxes, to other hallmarks of a liberalized financial and business climate.4 And R.A. No. 7227 expressly gave authority to the President to create through executive proclamation, subject to the concurrence of the local government units directly affected, other Special Economic Zones (SEZ) in the areas covered respectively by the Clark military reservation, the Wallace Air Station in San Fernando, La Union, and Camp John Hay.5 On August 16, 1993, BCDA entered into a Memorandum of Agreement and Escrow Agreement with private respondents Tuntex (B.V.I.) Co., Ltd (TUNTEX) and Asiaworld Internationale Group, Inc. (ASIAWORLD), private corporations registered under the laws of the British Virgin Islands, preparatory to the formation of a joint venture for the development of Poro Point in La Union and Camp John Hay as premier tourist destinations and recreation centers. Four months later or on December 16, 1993, BCDA, TUNTEX and ASIAWORD executed a Joint Venture Agreement 6 whereby they bound themselves to put up a joint venture company known as the Baguio International Development and Management Corporation which would lease areas within Camp John Hay and Poro Point for the purpose of turning such places into principal tourist and recreation spots, as originally envisioned by the parties under their Memorandum of Agreement. The Baguio City government meanwhile passed a number of resolutions in response to the actions taken by BCDA as owner and administrator of Camp John Hay. By Resolution7 of September 29, 1993, the Sangguniang Panlungsod of Baguio City (the sanggunian) officially asked BCDA to exclude all the barangays partly or totally located within Camp

John Hay from the reach or coverage of any plan or program for its development. By a subsequent Resolution8 dated January 19, 1994, the sanggunian sought from BCDA an abdication, waiver or quitclaim of its ownership over the home lots being occupied by residents of nine (9) barangays surrounding the military reservation. Still by another resolution passed on February 21, 1994, the sanggunian adopted and submitted to BCDA a 15-point concept for the development of Camp John Hay. 9 The sanggunians vision expressed, among other things, a kind of development that affords protection to the environment, the making of a family-oriented type of tourist destination, priority in employment opportunities for Baguio residents and free access to the base area, guaranteed participation of the city government in the management and operation of the camp, exclusion of the previously named nine barangays from the area for development, and liability for local taxes of businesses to be established within the camp. 10 BCDA, Tuntex and AsiaWorld agreed to some, but rejected or modified the other proposals of the sanggunian.11 They stressed the need to declare Camp John Hay a SEZ as a condition precedent to its full development in accordance with the mandate of R.A. No. 7227.12 On May 11, 1994, the sanggunian passed a resolution requesting the Mayor to order the determination of realty taxes which may otherwise be collected from real properties of Camp John Hay. 13 The resolution was intended to intelligently guide the sanggunian in determining its position on whether Camp John Hay be declared a SEZ, it (the sanggunian) being of the view that such declaration would exempt the camps property and the economic activity therein from local or national taxation. More than a month later, however, the sanggunian passed Resolution No. 255, (Series of 1994), 14 seeking and supporting, subject to its concurrence, the issuance by then President Ramos of a presidential proclamation declaring an area of 288.1 hectares of the camp as a SEZ in accordance with the provisions of R.A. No. 7227. Together with this resolution was submitted a draft of the proposed proclamation for consideration by the President.15

On July 5, 1994 then President Ramos issued Proclamation No. 420,16 the title of which was earlier indicated, which established a SEZ on a portion of Camp John Hay and which reads as follows: xxx Pursuant to the powers vested in me by the law and the resolution of concurrence by the City Council of Baguio, I, FIDEL V. RAMOS, President of the Philippines, do hereby create and designate a portion of the area covered by the former John Hay reservation as embraced, covered, and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, as the John Hay Special Economic Zone, and accordingly order: SECTION 1. Coverage of John Hay Special Economic Zone. The John Hay Special Economic Zone shall cover the area consisting of Two Hundred Eighty Eight and one/tenth (288.1) hectares, more or less, of the total of Six Hundred Seventy-Seven (677) hectares of the John Hay Reservation, more or less, which have been surveyed and verified by the Department of Environment and Natural Resources (DENR) as defined by the following technical description: A parcel of land, situated in the City of Baguio, Province of Benguet, Island of Luzon, and particularly described in survey plans Psd131102-002639 and Ccs-131102-000030 as approved on 16 August 1993 and 26 August 1993, respectively, by the Department of Environment and Natural Resources, in detail containing : Lot 1, Lot 2, Lot 3, Lot 4, Lot 5, Lot 6, Lot 7, Lot 13, Lot 14, Lot 15, and Lot 20 of Ccs-131102-000030 -andLot 3, Lot 4, Lot 5, Lot 6, Lot 7, Lot 8, Lot 9, Lot 10, Lot 11, Lot 14, Lot 15, Lot 16, Lot 17, and Lot 18 of Psd-131102-002639 being portions of TCT No. T-3812, LRC Rec. No. 87. With a combined area of TWO HUNDRED EIGHTY EIGHT AND ONE/TENTH HECTARES (288.1 hectares); Provided that the area consisting of approximately Six and two/tenth (6.2) hectares, more or less, presently occupied by the VOA and the residence of the Ambassador of the United States, shall be considered as part of the

SEZ only upon turnover of the properties to the government of the Republic of the Philippines. Sec. 2. Governing Body of the John Hay Special Economic Zone . Pursuant to Section 15 of Republic Act No. 7227, the Bases Conversion and Development Authority is hereby established as the governing body of the John Hay Special Economic Zone and, as such, authorized to determine the utilization and disposition of the lands comprising it, subject to private rights, if any, and in consultation and coordination with the City Government of Baguio after consultation with its inhabitants, and to promulgate the necessary policies, rules, and regulations to govern and regulate the zone thru the John Hay Poro Point Development Corporation, which is its implementing arm for its economic development and optimum utilization. Sec. 3. Investment Climate in John Hay Special Economic Zone. Pursuant to Section 5(m) and Section 15 of Republic Act No. 7227, the John Hay Poro Point Development Corporation shall implement all necessary policies, rules, and regulations governing the zone, including investment incentives, in consultation with pertinent government departments. Among others, the zone shall have all the applicable incentives of the Special Economic Zone under Section 12 of Republic Act No. 7227 and those applicable incentives granted in the Export Processing Zones, the Omnibus Investment Code of 1987, the Foreign Investment Act of 1991, and new investment laws that may hereinafter be enacted. Sec. 4. Role of Departments, Bureaus, Offices, Agencies and Instrumentalities. All Heads of departments, bureaus, offices, agencies, and instrumentalities of the government are hereby directed to give full support to Bases Conversion and Development Authority and/or its implementing subsidiary or joint venture to facilitate the necessary approvals to expedite the implementation of various projects of the conversion program. Sec. 5. Local Authority. Except as herein provided, the affected local government units shall retain their basic autonomy and identity. Sec. 6. Repealing Clause. All orders, rules, and regulations, or parts thereof, which are inconsistent with the provisions of this Proclamation, are hereby repealed, amended, or modified accordingly.

Sec. 7. Effectivity. This proclamation shall take effect immediately. Done in the City of Manila, this 5th day of July, in the year of Our Lord, nineteen hundred and ninety-four. The issuance of Proclamation No. 420 spawned the present petition17 for prohibition, mandamus and declaratory relief which was filed on April 25, 1995 challenging, in the main, its constitutionality or validity as well as the legality of the Memorandum of Agreement and Joint Venture Agreement between public respondent BCDA and private respondents Tuntex and AsiaWorld. Petitioners allege as grounds for the allowance of the petition the following: I. PRESIDENTIAL PROCLAMATION NO. 420, SERIES OF 1990 (sic) IN SO FAR AS IT GRANTS TAX EXEMPTIONS IS INVALID AND ILLEGAL AS IT IS AN UNCONSTITUTIONAL EXERCISE BY THE PRESIDENT OF A POWER GRANTED ONLY TO THE LEGISLATURE. II. PRESIDENTIAL PROCLAMATION NO. 420, IN SO FAR AS IT LIMITS THE POWERS AND INTERFERES WITH THE AUTONOMY OF THE CITY OF BAGUIO IS INVALID, ILLEGAL AND UNCONSTITUTIONAL. III. PRESIDENTIAL PROCLAMATION NO. 420, SERIES OF 1994 IS UNCONSTITUTIONAL IN THAT IT VIOLATES THE RULE THAT ALL TAXES SHOULD BE UNIFORM AND EQUITABLE. IV. THE MEMORANDUM OF AGREEMENT ENTERED INTO BY AND BETWEEN PRIVATE AND PUBLIC RESPONDENTS BASES CONVERSION DEVELOPMENT AUTHORITY HAVING BEEN ENTERED INTO ONLY BY DIRECT NEGOTIATION IS ILLEGAL. V. THE TERMS AND CONDITIONS OF THE MEMORANDUM OF AGREEMENT ENTERED INTO BY AND BETWEEN PRIVATE AND PUBLIC RESPONDENT BASES CONVERSION DEVELOPMENT AUTHORITY IS (sic) ILLEGAL. VI. THE CONCEPTUAL DEVELOPMENT PLAN OF RESPONDENTS NOT HAVING UNDERGONE ENVIRONMENTAL IMPACT ASSESSMENT IS BEING ILLEGALLY CONSIDERED WITHOUT A VALID ENVIRONMENTAL IMPACT ASSESSMENT.

A temporary restraining order and/or writ of preliminary injunction was prayed for to enjoin BCDA, John Hay Poro Point Development Corporation and the city government from implementing Proclamation No. 420, and Tuntex and AsiaWorld from proceeding with their plan respecting Camp John Hays development pursuant to their Joint Venture Agreement with BCDA.18 Public respondents, by their separate Comments, allege as moot and academic the issues raised by the petition, the questioned Memorandum of Agreement and Joint Venture Agreement having already been deemed abandoned by the inaction of the parties thereto prior to the filing of the petition as in fact, by letter of November 21, 1995, BCDA formally notified Tuntex and AsiaWorld of the revocation of their said agreements.19 In maintaining the validity of Proclamation No. 420, respondents contend that by extending to the John Hay SEZ economic incentives similar to those enjoyed by the Subic SEZ which was established under R.A. No. 7227, the proclamation is merely implementing the legislative intent of said law to turn the US military bases into hubs of business activity or investment. They underscore the point that the governments policy of bases conversion can not be achieved without extending the same tax exemptions granted by R.A. No. 7227 to Subic SEZ to other SEZs. Denying that Proclamation No. 420 is in derogation of the local autonomy of Baguio City or that it is violative of the constitutional guarantee of equal protection, respondents assail petitioners lack of standing to bring the present suit even as taxpayers and in the absence of any actual case or controversy to warrant this Courts exercise of its power of judicial review over the proclamation. Finally, respondents seek the outright dismissal of the petition for having been filed in disregard of the hierarchy of courts and of the doctrine of exhaustion of administrative remedies. Replying,20 petitioners aver that the doctrine of exhaustion of administrative remedies finds no application herein since they are invoking the exclusive authority of this Court under Section 21 of R.A. No. 7227 to enjoin or restrain implementation of projects for conversion of the base areas; that the established exceptions to the aforesaid doctrine obtain in the present petition; and that they possess the standing to bring the petition which is a taxpayers suit.

Public respondents have filed their Rejoinder 21 and the parties have filed their respective memoranda. Before dwelling on the core issues, this Court shall first address the preliminary procedural questions confronting the petition. The judicial policy is and has always been that this Court will not entertain direct resort to it except when the redress sought cannot be obtained in the proper courts, or when exceptional and compelling circumstances warrant availment of a remedy within and calling for the exercise of this Courts primary jurisdiction.22 Neither will it entertain an action for declaratory relief, which is partly the nature of this petition, over which it has no original jurisdiction. Nonetheless, as it is only this Court which has the power under Section 2123 of R.A. No. 7227 to enjoin implementation of projects for the development of the former US military reservations, the issuance of which injunction petitioners pray for, petitioners direct filing of the present petition with it is allowed. Over and above this procedural objection to the present suit, this Court retains full discretionary power to take cognizance of a petition filed directly to it if compelling reasons, or the nature and importance of the issues raised, warrant.24 Besides, remanding the case to the lower courts now would just unduly prolong adjudication of the issues. The transformation of a portion of the area covered by Camp John Hay into a SEZ is not simply a re-classification of an area, a mere ascription of a status to a place. It involves turning the former US military reservation into a focal point for investments by both local and foreign entities. It is to be made a site of vigorous business activity, ultimately serving as a spur to the countrys long awaited economic growth. For, as R.A. No. 7227 unequivocally declares, it is the governments policy to enhance the benefits to be derived from the base areas in order to promote the economic and social development of Central Luzon in particular and the country in general.25 Like the Subic SEZ, the John Hay SEZ should also be turned into a self-sustaining, industrial, commercial, financial and investment center.26 More than the economic interests at stake, the development of Camp John Hay as well as of the other base areas unquestionably has critical links to a host of environmental and social concerns. Whatever use to which these lands will be devoted will set a chain of events that can affect one way or another the social and

economic way of life of the communities where the bases are located, and ultimately the nation in general. Underscoring the fragility of Baguio Citys ecology with its problem on the scarcity of its water supply, petitioners point out that the local and national government are faced with the challenge of how to provide for an ecologically sustainable, environmentally sound, equitable transition for the city in the wake of Camp John Hays reversion to the mass of government property. 27 But that is why R.A. No. 7227 emphasizes the sound and balanced conversion of the Clark and Subic military reservations and their extensions consistent with ecological and environmental standards.28 It cannot thus be gainsaid that the matter of conversion of the US bases into SEZs, in this case Camp John Hay, assumes importance of a national magnitude. Convinced then that the present petition embodies crucial issues, this Court assumes jurisdiction over the petition. As far as the questioned agreements between BCDA and Tuntex and AsiaWorld are concerned, the legal questions being raised thereon by petitioners have indeed been rendered moot and academic by the revocation of such agreements. There are, however, other issues posed by the petition, those which center on the constitutionality of Proclamation No. 420, which have not been mooted by the said supervening event upon application of the rules for the judicial scrutiny of constitutional cases. The issues boil down to: (1) Whether the present petition complies with the requirements for this Courts exercise of jurisdiction over constitutional issues;

appropriate case; (2) a personal and substantial interest of the party raising the constitutional question; (3) the exercise of judicial review is pleaded at the earliest opportunity; and (4) the constitutional question is the lis mota of the case.29 An actual case or controversy refers to an existing case or controversy that is appropriate or ripe for determination, not conjectural or anticipatory. 30 The controversy needs to be definite and concrete, bearing upon the legal relations of parties who are pitted against each other due to their adverse legal interests.31 There is in the present case a real clash of interests and rights between petitioners and respondents arising from the issuance of a presidential proclamation that converts a portion of the area covered by Camp John Hay into a SEZ, the former insisting that such proclamation contains unconstitutional provisions, the latter claiming otherwise. R.A. No. 7227 expressly requires the concurrence of the affected local government units to the creation of SEZs out of all the base areas in the country. 32 The grant by the law on local government units of the right of concurrence on the bases conversion is equivalent to vesting a legal standing on them, for it is in effect a recognition of the real interests that communities nearby or surrounding a particular base area have in its utilization. Thus, the interest of petitioners, being inhabitants of Baguio, in assailing the legality of Proclamation No. 420, is personal and substantial such that they have sustained or will sustain direct injury as a result of the government act being challenged.33 Theirs is a material interest, an interest in issue affected by the proclamation and not merely an interest in the question involved or an incidental interest,34 for what is at stake in the enforcement of Proclamation No. 420 is the very economic and social existence of the people of Baguio City. Petitioners locus standi parallels that of the petitioner and other residents of Bataan, specially of the town of Limay, in Garcia v. Board of Investments35 where this Court characterized their interest in the establishment of a petrochemical plant in their place as actual, real, vital and legal, for it would affect not only their economic life but even the air they breathe. Moreover, petitioners Edilberto T. Claravall and Lilia G. Yaranon were duly elected councilors of Baguio at the time, engaged in the local governance of Baguio City and whose duties included deciding for and on behalf of their constituents the question of whether to

(2) Whether Proclamation No. 420 is constitutional by providing for national and local tax exemption within and granting other economic incentives to the John Hay Special Economic Zone; and (3) Whether Proclamation No. 420 is constitutional for limiting or interfering with the local autonomy of Baguio City; It is settled that when questions of constitutional significance are raised, the court can exercise its power of judicial review only if the following requisites are present: (1) the existence of an actual and

concur with the declaration of a portion of the area covered by Camp John Hay as a SEZ. Certainly then, petitioners Claravall and Yaranon, as city officials who voted against36 the sanggunian Resolution No. 255 (Series of 1994) supporting the issuance of the now challenged Proclamation No. 420, have legal standing to bring the present petition. That there is herein a dispute on legal rights and interests is thus beyond doubt. The mootness of the issues concerning the questioned agreements between public and private respondents is of no moment. By the mere enactment of the questioned law or the approval of the challenged act, the dispute is deemed to have ripened into a judicial controversy even without any other overt act. Indeed, even a singular violation of the Constitution and/or the law is enough to awaken judicial duty.37 As to the third and fourth requisites of a judicial inquiry, there is likewise no question that they have been complied with in the case at bar. This is an action filed purposely to bring forth constitutional issues, ruling on which this Court must take up. Besides, respondents never raised issues with respect to these requisites, hence, they are deemed waived. Having cleared the way for judicial review, the constitutionality of Proclamation No. 420, as framed in the second and third issues above, must now be addressed squarely. The second issue refers to petitioners objection against the creation by Proclamation No. 420 of a regime of tax exemption within the John Hay SEZ. Petitioners argue that nowhere in R. A. No. 7227 is there a grant of tax exemption to SEZs yet to be established in base areas, unlike the grant under Section 12 thereof of tax exemption and investment incentives to the therein established Subic SEZ. The grant of tax exemption to the John Hay SEZ, petitioners conclude, thus contravenes Article VI, Section 28 (4) of the Constitution which provides that No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. Section 3 of Proclamation No. 420, the challenged provision, reads:

Sec. 3. Investment Climate in John Hay Special Economic Zone. Pursuant to Section 5(m) and Section 15 of Republic Act No. 7227, the John Hay Poro Point Development Corporation shall implement all necessary policies, rules, and regulations governing the zone, including investment incentives, in consultation with pertinent government departments. Among others, the zone shall have all the applicable incentives of the Special Economic Zone under Section 12 of Republic Act No. 7227 and those applicable incentives granted in the Export Processing Zones, the Omnibus Investment Code of 1987, the Foreign Investment Act of 1991, and new investment laws that may hereinafter be enacted. (Emphasis and underscoring supplied) Upon the other hand, Section 12 of R.A. No. 7227 provides: xxx (a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments; b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines; (c) The provisions of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one

percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the Municipality of Subic, and other municipalities contiguous to be base areas. In case of conflict between national and local laws with respect to tax exemption privileges in the Subic Special Economic Zone, the same shall be resolved in favor of the latter; (d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and futures shall be allowed and maintained in the Subic Special Economic Zone; (e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks and other financial institutions within the Subic Special Economic Zone; (f) Banking and Finance shall be liberalized with the establishment of foreign currency depository units of local commercial banks and offshore banking units of foreign banks with minimum Central Bank regulation; (g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than Two Hundred fifty thousand dollars ($250,000), his/her spouse and dependent children under twenty-one (21) years of age, shall be granted permanent resident status within the Subic Special Economic Zone. They shall have freedom of ingress and egress to and from the Subic Special Economic Zone without any need of special authorization from the Bureau of Immigration and Deportation. The Subic Bay Metropolitan Authority referred to in Section 13 of this Act may also issue working visas renewable every two (2) years to foreign executives and other aliens possessing highly-technical skills which no Filipino within the Subic Special Economic Zone possesses, as certified by the Department of Labor and Employment. The names of aliens granted permanent residence status and working visas by the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation within thirty (30) days after issuance thereof; x x x (Emphasis supplied) It is clear that under Section 12 of R.A. No. 7227 it is only the Subic SEZ which was granted by Congress with tax exemption, investment incentives and the like. There is no express extension of the aforesaid benefits to other SEZs still to be created at the time via presidential proclamation.

The deliberations of the Senate confirm the exclusivity to Subic SEZ of the tax and investment privileges accorded it under the law, as the following exchanges between our lawmakers show during the second reading of the precursor bill of R.A. No. 7227 with respect to the investment policies that would govern Subic SEZ which are now embodied in the aforesaid Section 12 thereof: xxx Senator Maceda: This is what I was talking about. We get into problems here because all of these following policies are centered around the concept of free port. And in the main paragraph above, we have declared both Clark and Subic as special economic zones, subject to these policies which are, in effect, a free-port arrangement. Senator Angara: The Gentleman is absolutely correct, Mr. President. So we must confine these policies only to Subic. May I withdraw then my amendment, and instead provide that THE SPECIAL ECONOMIC ZONE OF SUBIC SHALL BE ESTABLISHED IN ACCORDANCE WITH THE FOLLOWING POLICIES. Subject to style, Mr. President. Thus, it is very clear that these principles and policies are applicable only to Subic as a free port. Senator Paterno: Mr. President. The President: Senator Paterno is recognized. Senator Paterno: I take it that the amendment suggested by Senator Angara would then prevent the establishment of other special economic zones observing these policies. Senator Angara: No, Mr. President, because during our short caucus, Senator Laurel raised the point that if we give this delegation to the President to establish other economic zones, that may be an unwarranted delegation. So we agreed that we will simply limit the definition of powers and description of the zone to Subic, but that does not exclude the possibility of creating other economic zones within the baselands.

Senator Paterno: But if that amendment is followed, no other special economic zone may be created under authority of this particular bill. Is that correct, Mr. President? Senator Angara: Under this specific provision, yes, Mr. President. This provision now will be confined only to Subic.38 x x x (Underscoring supplied). As gathered from the earlier-quoted Section 12 of R.A. No. 7227, the privileges given to Subic SEZ consist principally of exemption from tariff or customs duties, national and local taxes of business entities therein (paragraphs (b) and (c)), free market and trade of specified goods or properties (paragraph d), liberalized banking and finance (paragraph f), and relaxed immigration rules for foreign investors (paragraph g). Yet, apart from these, Proclamation No. 420 also makes available to the John Hay SEZ benefits existing in other laws such as the privilege of export processing zone-based businesses of importing capital equipment and raw materials free from taxes, duties and other restrictions; 39 tax and duty exemptions, tax holiday, tax credit, and other incentives under the Omnibus Investments Code of 1987;40 and the applicability to the subject zone of rules governing foreign investments in the Philippines.41 While the grant of economic incentives may be essential to the creation and success of SEZs, free trade zones and the like, the grant thereof to the John Hay SEZ cannot be sustained. The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support therein. Neither does the same grant of privileges to the John Hay SEZ find support in the other laws specified under Section 3 of Proclamation No. 420, which laws were already extant before the issuance of the proclamation or the enactment of R.A. No. 7227. More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. 42 Other than Congress, the Constitution may itself provide for specific tax exemptions,43 or local governments may pass ordinances on exemption only from local taxes.44

The challenged grant of tax exemption would circumvent the Constitutions imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress.45 In the same vein, the other kinds of privileges extended to the John Hay SEZ are by tradition and usage for Congress to legislate upon. Contrary to public respondents suggestions, the claimed statutory exemption of the John Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based; it must be expressly granted in a statute stated in a language too clear to be mistaken.46 Tax exemption cannot be implied as it must be categorically and unmistakably expressed. 47 If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption and incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227. This Court no doubt can void an act or policy of the political departments of the government on either of two groundsinfringement of the Constitution or grave abuse of discretion.48 This Court then declares that the grant by Proclamation No. 420 of tax exemption and other privileges to the John Hay SEZ is void for being violative of the Constitution. This renders it unnecessary to still dwell on petitioners claim that the same grant violates the equal protection guarantee. With respect to the final issue raised by petitioners that Proclamation No. 420 is unconstitutional for being in derogation of Baguio Citys local autonomy, objection is specifically mounted against Section 2 thereof in which BCDA is set up as the governing body of the John Hay SEZ.49 Petitioners argue that there is no authority of the President to subject the John Hay SEZ to the governance of BCDA which has just oversight functions over SEZ; and that to do so is to diminish the city governments power over an area within its jurisdiction, hence, Proclamation No. 420 unlawfully gives the President power of control over the local government instead of just mere supervision.

Petitioners arguments are bereft of merit. Under R.A. No. 7227, the BCDA is entrusted with, among other things, the following purpose:50 xxx (a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air Station, ODonnell Transmitter Station, San Miguel Naval Communications Station, Mt. Sta. Rita Station (Hermosa, Bataan) and those portions of Metro Manila Camps which may be transferred to it by the President; x x x (Underscoring supplied) With such broad rights of ownership and administration vested in BCDA over Camp John Hay, BCDA virtually has control over it, subject to certain limitations provided for by law. By designating BCDA as the governing agency of the John Hay SEZ, the law merely emphasizes or reiterates the statutory role or functions it has been granted. The unconstitutionality of the grant of tax immunity and financial incentives as contained in the second sentence of Section 3 of Proclamation No. 420 notwithstanding, the entire assailed proclamation cannot be declared unconstitutional, the other parts thereof not being repugnant to law or the Constitution. The delineation and declaration of a portion of the area covered by Camp John Hay as a SEZ was well within the powers of the President to do so by means of a proclamation. 51 The requisite prior concurrence by the Baguio City government to such proclamation appears to have been given in the form of a duly enacted resolution by the sanggunian. The other provisions of the proclamation had been proven to be consistent with R.A. No. 7227. Where part of a statute is void as contrary to the Constitution, while another part is valid, the valid portion, if separable from the invalid, may stand and be enforced.52 This Court finds that the other provisions in Proclamation No. 420 converting a delineated portion of Camp John Hay into the John Hay SEZ are separable from the invalid second sentence of Section 3 thereof, hence they stand. WHEREFORE, the second sentence of Section 3 of Proclamation No. 420 is hereby declared NULL AND VOID and is accordingly

declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaid void provision. Proclamation No. 420, without the invalidated portion, remains valid and effective.

[G.R. No. 119775. March 29, 2005] JOHN HAY vs. LIM EN BANC Sirs/Mesdames: Quoted hereunder, for your information, is a resolution of this Court dated MAR 29 2005. G.R. No. 119775 (JOHN HAY PEOPLES ALTERNATIVE COALITION, MATEO CARIO FOUNDATION INC., CENTER FOR ALTERNATIVE SYSTEMS FOUNDATION INC., REGINA VICTORIA A. BENAFIN REPRESENTED AND JOINED BY HER MOTHER MRS. ELISA BENAFIN, IZABEL M. LUYK REPRESENTED AND JOINED BY HER MOTHER MRS. REBECCA MOLINA LUYK, KATHERINE PE REPRESENTED AND JOINED BY HER MOTHER ROSEMARIE G. PE, SOLEDAD S. CAMILO, ALICIA C. PACALSO ALIAS "KEVAB," BETTY I. STRASSER, RUBY C. GIRON, URSULA C. PEREZ ALIAS "BA-YAY," EDILBERTO T. CLARAVALL, CARMEN CAROMINA, LILIA G. YARANON, DIANE MONDOC vs. VICTOR LIM, PRESIDENT, BASES CONVERSION DEVELOPMENT AUTHORITY; JOHN HAY PORO POINT DEVELOPMENT CORPORATION, CITY OF BAGUIO, TUNTEX (B.V.I.) CO. LTD., ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES.) By their separate motions for reconsideration, public respondents Bases Conversion Development Authority (BCDA) John Hay Management Corporation (JHMC)[1] and Victor Lim, and respondent-in-intervention CJH Development Corporation (CJHDC) seek the reconsideration of this Court's Decision of October 24, 2003[2]` which invalidated the second sentence of Section 3 of Proclamation No. 420 insofar as it granted tax exemptions and incentives to the John Hay Special Economic Zone (SEZ). It may be recalled that on March 13, 1992, Republic Act No. 7227,[3] otherwise known as the "Bases Conversion and Development Act of 1992," was enacted with the declared policy of accelerating "the sound and balanced conversion into alternative productive uses of the Clark and Subic military reservations and their extensions" -including the John Hay Station. [4]
[5]

R.A. No. 7227 likewise authorized the President, subject to the concurrence of the local government units directly affected, to create through executive proclamation other SEZs in the areas covered respectively by the Clark military reservation, the Wallace Air Station in San Fernando, La Union, and the Camp John Hay in Baguio. And upon recommendation by the BCDA, the law also authorized the President to create SEZs in the municipalities of Morong, Hermosa, Dinalupihan, Castillejos, and San Marcelino.[8] On July 5, 1994, then President Ramos, on the request of the Sangguniang Panlungsod of Baguio City,[9] issued Proclamation No. 420 establishing the John Hay SEZ: PROCLAMATION NO. 420 CREATING AND DESIGNATING A PORTION OF THE AREA COVERED BY THE FORMER CAMP JOHN [HAY] AS THE JOHN HAY SPECIAL ECONOMIC ZONE PURSUANT TO REPUBLIC ACT NO. 7227 Pursuant to the powers vested in me by the law and the resolution of concurrence by the City Council of Baguio, I, FIDEL V. RAMOS, President of the Philippines, do hereby create and designate a portion of the area covered by the former John Hay reservation as embraced, covered, and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, as the John Hay Special Economic Zone, and accordingly order: SECTION 1. Coverage of John Hay Special Economic Zone. - The John Hay Special Economic Zone shall cover the area consisting of Two Hundred Eighty Eight and one/tenth (288.1) hectares, more or less, of the total of Six Hundred Seventy-Seven (677) hectares of the John Hay Reservation, more or less, which have been surveyed and verified by the Department of Environment and Natural Resources (DENR) as defined by the following technical description: A parcel of land, situated in the City of Baguio, Province of Benguet, Island of Luzon, and particularly described in survey plans Psd-131102-002639 and Ccs-131102-000030 as approved on 16 August 1993 and 26 August 1993, respectively, by the Department of Environment and Natural Resources, in detail containing :

To this end, R.A. No. 7227 created public respondent BCDA, the Subic SEZ[6] and the Subic Bay Metropolitan Authority.[7]

Lot 1, Lot 2, Lot 3, Lot 4, Lot 5, Lot 6, Lot 7, Lot 13, Lot 14, Lot 15, and Lot 20 of Ccs-131102000030 - andLot 3, Lot 4, Lot 5, Lot 6, Lot 7, Lot 8, Lot 9, Lot 10, Lot 11, Lot 14, Lot 15, Lot 16, Lot 17, and Lot 18 of Psd-131102-002639 being portions of TCT No. T-3812, LRC Rec. No. 87. With a combined area of TWO HUNDRED EIGHTY EIGHT AND ONE/TENTH HECTARES (288.1 hectares); Provided that the area consisting of approximately Six and two/tenth (6.2) hectares, more or less, presently occupied by the VOA and the residence of the Ambassador of the United States, shall be considered as part of the SEZ only upon turnover of the properties to the government of the Republic of the Philippines. Sec. 2. Governing Body of the John Hay Special Economic Zone . - Pursuant to Section 15 of Republic Act No. 7227, the Bases Conversion and Development Authority is hereby established as the governing body of the John Hay Special Economic Zone and, as such, authorized to determine the utilization and disposition of the lands comprising it, subject to private rights, if any, and in consultation and coordination with the City Government of Baguio after consultation with its inhabitants, and to promulgate the necessary policies, rules, and regulations to govern and regulate the zone thru the John Hay Poro Point Development Corporation, which is its implementing arm for its economic development and optimum utilization. Sec. 3. Investment Climate in John Hay Special Economic Zone . Pursuant to Section 5(m) and Section 15 of Republic Act No. 7227, the John Hay Poro Point Development Corporation shall implement all necessary policies, rules, and regulations governing the zone, including investment incentives, in consultation with pertinent government departments. Among others, the zone shall have all the applicable incentives of the Special Economic Zone under Section 12 of Republic Act No. 7227 and those applicable incentives granted in the Export Processing Zones, the Omnibus Investment Code of 1987, the Foreign Investment Act of 1991, and new investment laws that may hereinafter be enacted.

Sec. 4. Role of Departments, Bureaus, Offices, Agencies and Instrumentalities. - All Heads of departments, bureaus, offices, agencies, and instrumentalities of the government are hereby directed to give full support to Bases Conversion and Development Authority and/or its implementing subsidiary or joint venture to facilitate the necessary approvals to expedite the implementation of various projects of the conversion program. Sec. 5. Local Authority. - Except as herein provided, the affected local government units shall retain their basic autonomy and identity. Sec. 6. Repealing Clause. - All orders, rules, and regulations, or parts thereof, which are inconsistent with the provisions of this Proclamation, are hereby repealed, amended, or modified accordingly. Sec. 7. Effectivity. This proclamation shall take effect immediately. Done in the City of Manila, this 5th day of July, in the year of Our Lord, nineteen hundred and ninety-four. On April 25, 1995, petitioners filed their Petition for prohibition, mandamus and declaratory relief assailing (1) the constitutionality of Proclamation No. 420 and (2) the legality of the Memorandum of Agreement and Joint Venture Agreement previously entered into[10] between public respondent BCDA and private respondents Tuntex (B.V.I.) Co., Ltd. (TUNTEX) and Asiaworld Internationale Group, Inc. (ASIAWORLD). The questions regarding the validity of the agreements between BCDA and TUNTEX and ASIAWORLD were rendered moot and academic[11]by BCDA's revocation of these agreements by letter of November 21, 1995.[12] On October 24, 2003, this Court promulgated its Decision, which disposed as follows: WHEREFORE, the second sentence of Section 3 of Proclamation No. 420 is hereby declared NULL AND VOID and is accordingly declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaid void provision. Proclamation No. 420, without the invalidated portion, remains valid and effective.

SO ORDERED. In their Motion for Reconsideration with Manifestation filed on December 29, 2003, public respondents, through the Office of the Government Corporate Counsel, submit the following grounds for reconsideration: I THE HONORABLE COURT ERRED IN RULING THAT SECTION 3 OF PROCLAMATION NO. 420 IS NULL AND VOID AS THE JOHN HAY SPECIAL ECONOMIC ZONE ENJOYS EXEMPTION FOR(sic) TAXES, AS WELL AS OTHER FINANCIAL INCENTIVES GRANTED TO THE SUBIC SPECIAL ECONOMIC ZONE, IN THAT: A. THE LAW, CONSIDERED IN ITS ENTIRETY SUPPORTS THE CONCLUSION THAT THE JOHN HAY SPECIAL ECONOMIC ZONE ENJOYS THE SAME PRIVILEGES AS THE SUBIC SPECIAL ECONOMIC ZONE. B. THE GRANT OF TAX EXEMPTION AND OTHER FINANCIAL INCENTIVES IS INHERENT IN "SPECIAL ECONOMIC ZONES." II ASSUMING ARGUENDO THAT REPUBLIC ACT NO. 7227 DOES NOT GRANT TAX EXEMPTIONS TO SPECIAL ECONOMIC ZONES, THE SECOND SENTENCE OF SECTION THREE OF PROCLAMATION NO. 420 IS SUSCEPTIBLE OF OTHER PLAUSIBLE INTERPRETATIONS WHICH WOULD ADDRESS THE ALLEGED CONSTITUTIONAL INFIRMITY. Ill THE JOHN HAY SPECIAL ECONOMIC ZONE MAY BE GRANTED FINANCIAL INCENTIVES UNDER OTHER LAWS, AS IMPLEMENTED BY THE EXECUTIVE. IV THE HONORABLE COURT ERRED IN RULING PETITIONERS HAVE LEGAL STANDING TO SUE. THAT

respondent BCDA for the development of the John Hay SEZ; and that it "stands to be most affected" by this Court's Decision "invalidating the grant of tax exemption and other financial incentives" in the John Hay SEZ since "[i]ts financial obligations and development and investment commitments under the Lease Agreement were entered into upon the premise that these incentives are valid and subsisting." CJHDC, proffering grounds parallel to those of public respondents,[14] thus prays that: (1) it be granted leave to intervene in this case; (2) its attached Motion for Reconsideration in Intervention be admitted; and (3) this Court's Decision of October 24, 2003 be reconsidered and petitioners' petition dismissed. By Order of May 25, 2004, this Court granted CJHDC's Motion for leave to Intervene and noted its Motion for Reconsideration in Intervention.[15] At bottom, the controversy centers on whether the tax exemptions and other financial incentives granted to the Subic SEZ under Section 12 of R.A. No. 7227 are applicable to the John Hay SEZ. Section 12 of R.A. No. 7227, which provides for the "policies" to govern and regulate the Subic SEZ, reads as follows: SECTION 12. Subic Special Economic Zone. Subject to the concurrence by resolution of the sangguniang panlungsod of the City of Olongapo and the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa, there is hereby created a Special Economic and Free-port Zone consisting of the City of Olongapo and the Municipality of Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered, and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America as amended, and within the territorial jurisdiction of the Municipalities of Morong and Hermosa, Province of Bataan, hereinafter referred to as the Subic Special Economic Zone whose metes and bounds shall be delineated in a proclamation to be issued by the President of the Philippines. Within thirty (30) days after the approval of this Act, each local government unit shall submit its resolution of concurrence to join the Subic Special Economic Zone to the office of the President. Thereafter, the President of the Philippines shall issue a proclamation defining the metes and bounds of the Zone as provided herein.

Intervenor CJHDC filed on March 5, 2004 a Motion for Leave to Intervene alleging that it, together with its consortium partners FilEstate Management Inc. and Penta Capital Investment Corporation, entered into a Lease Agreement dated October 19, 1996 [13] with

The abovementioned zone shall be subject to the following policies: (a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments; b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines; (c) The provisions of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the Municipality of Subic, and other municipalities contiguous to [the] base areas. In case of conflict between national and local laws with respect to tax exemption privileges in the Subic Special Economic Zone, the same shall be resolved in favor of the latter; (d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and futures shall be allowed and maintained in the Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks and other financial institutions within the Subic Special Economic Zone; (f) Banking and Finance shall be liberalized with the establishment of foreign currency depository units of local commercial banks and offshore banking units of foreign banks with minimum Central Bank regulation; (g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than Two Hundred fifty thousand dollars ($250,000), his/her spouse and dependent children under twenty-one (21) years of age, shall be granted permanent resident status within the Subic Special Economic Zone. They shall have freedom of ingress and egress to and from the Subic Special Economic Zone without any need of special authorization from the Bureau of Immigration and Deportation. The Subic Bay Metropolitan Authority referred to in Section 13 of this Act may also issue working visas renewable every two (2) years to foreign executives and other aliens possessing highly-technical skills which no Filipino within the Subic Special Economic Zone possesses, as certified by the Department of Labor and Employment. The names of aliens granted permanent residence status and working visas by the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation within thirty (30) days after issuance thereof; (h) The defense of the zone and the security of its perimeters shall be the responsibility of the National Government in coordination with the Subic Bay Metropolitan Authority. The Subic Bay Metropolitan Authority shall provide and establish its own internal security and firefighting forces; and (i) Except as herein provided, the local government units comprising the Subic Special Economic Zone shall retain their basic autonomy and identity. The cities shall be governed by their respective charters and the municipalities shall operate and function in accordance with Republic Act No. 7160, otherwise known as the Local Government Code of 1991. (Emphasis supplied) In their first line of argument, respondents allege that the foregoing "policies" or incentives, while enumerated in reference to the Subic SEZ, are nonetheless expressly made applicable to the other SEZs subsequently created by presidential proclamation,

including the John Hay SEZ, by Section 15 of R.A. No. 7227. Thus, public respondents argue: That the privileges of tax exemption and other financial incentives were expressly provided under Section 12, constituting the SSEZ, is merely a result of the then reality that it is (sic) was only in Subic Bay where the precise metes and bounds of the SSEZ, as well as other relevant information, were then available to the Senate. But the intention of the Senate was clearly to empower the President, who would then have the luxury of time and further studies, to constitute special economic zones in the former Clark Air Base and its extensions, including Camp John Hay. This power to proclaim the other base areas as special economic zones, including all privileged appurtenant thereto, was instead delegated to the President in Section 15 of the law. xxx Republic Act No. 7227 authorizes the President to delineate Special Economic Zones in the former base areas. True, section 12 of the said law enumerating the tax exemptions and the financial incentives of the Subic Special Economic Zone, is expressly made applicable to the former Subic Bay Naval Base. However, there is no showing that the term "special economic zones", used to denote what the President can establish in John Hay, does not have the same definition and characteristics as the SSEZ. (Emphasis supplied; underscoring in the original) A reading of Section 15 of R.A. No. 7227 does not, however, support this proposition. There is no doubt that under Section 15 (as in Section 12) the President has the power to delineate, by proclamation, the metes and bounds of SEZs which may be created in the other former base lands. However, there is neither an express reference to Section 12 nor to the incentives granted to the Subic SEZ: SECTION 15. Clark and Other Special Economic Zones. Subject to the concurrence by resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the

United States of America, as amended, located within the territorial jurisdiction of Angeles City, Municipalities of Mabalacat and Porac, Province of Pampanga, and the Municipality of Capas, Province of Tarlac, in accordance with the policies as herein provided insofar as applicable to the Clark military reservations. The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with such powers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66 as amended. The policies to govern and regulate the Clark Special Economic Zone shall be determined upon consultation with the inhabitants of the local government units directly affected which shall be conducted within six (6) months upon approval of this Act. Similarly, subject to the concurrence by resolution of the local government units directly affected, the President shall create other Special Economic Zones, in the base areas of Wallace Air Station in San Fernando, La Union (excluding areas designated for communications, advance warning and radar requirements of the Philippine Air Force to be determined by the Conversion Authority) and Camp John Hay in the City of Baguio. Upon recommendation of the Conversion Authority, the President is likewise authorized to create Special Economic Zones covering the Municipalities of Morong, Hermosa, Dinalupihan, Castillejos, and San Marcelino. (Emphasis supplied) Respondent-in-intervention CJHDC submits that by authorizing the President to create SEZs "in accordance with the policies as herein provided insofar as applicable," the first paragraph of Section 15 refers to the policies enumerated in Section 12, including exemption from local and national taxes. This allusion to "the policies as herein provided" can by no means be considered an explicit or unequivocal conferment of the tax exemptions and other incentives set forth in Section 12 on other SEZs. Notably, the preceding portions of R.A. No. 7227 make mention of two sets of "policies:" (1) the general "policies" that the law is intended to further, viz:

Sec. 2. Declaration of Policies. It is hereby declared the policy of the Government to accelerate the sound and balanced conversion into alternative productive uses of the Clark and Subic military reservations and their extensions (John Hay Station, Wallace Air Station, O'Donnell Transmitter Station, San Miguel Naval Communications Station and Capas Relay Station), to raise funds by the sale of portions of Metro Manila military camps, and to apply said funds as provided herein for the development and conversion to productive civilian use of the lands covered under the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended. It is likewise the declared policy of the Government to enhance the benefits to be derived from said properties in order to promote the economic and social development of Central Luzon in particular and the country in general., and (2) the above-quoted "policies" governing the Subic SEZ. Considering that the subject matter of the first paragraph of Section 15 is the authority of the President to create other SEZs in the former base lands, it stands to reason that the same should be exercised "in accordance with the policies" which provide the rationale for the law as laid down in Section 2 of R.A. No. 7227. In contradistinction, a provision authorizing the President to define the metes and bounds of other SEZs "in accordance with" the tax and financial incentives of the Subic SEZ would be nonsensical. These tax and financial incentives provide neither direction nor guidance to the President in his determination (subject to the concurrence of the affected local government units) of the geographic composition of the SEZs. Moreover, the third and fourth paragraphs of Section 15 explicitly provide that the "policies to govern and regulate" the John Hay SEZ "shall be determined upon consultation with the inhabitants of the local government units directly affected," thereby implying that the governing policies of the John Hay SEZ, unlike that of the Subic SEZ, were yet to be specified and, thus, not provided for by R.A. No. 7227 itself. In any event, whether it is Section 12 or Section 15 of R.A. No. 7227 which is scrutinized, the result is the same. There is no express extension of the incentives or benefits granted to the Subic SEZ to the other SEZs still to be created via presidential proclamation.

As for respondent-in-intervention CJHDC's argument that the President's "power to create Special Economic Zones carries with it the power to provide for tax and financial incentives," it does not lie. It is the legislative branch which has the inherent power not only to select the subjects of taxation but to grant exemptions.[16] Paragraph 4, Section 28 of Article VI of the Constitution is crystal clear: "[n]o law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress." Hence, it is only the legislature, as limited by the provisions of the Constitution, which has full power to exempt any person or corporation or class of property from taxation. The Constitution itself may provide for specific tax exemptions [17] or local governments may pass ordinances providing for exemption from local taxes,[18] but, otherwise, it is only the legislative branch which has the power to grant tax exemptions, its power to exempt being as broad as its power to tax.[19] Perhaps realizing that R.A. No. 7227 does not contain an express grant of tax exemptions and financial incentives covering the John Hay SEZ, respondents, as a second line of argument, implore the Court to construe the existence of such a grant pursuant to what they claim to be the legislative intent of the law. To this end, they posit that the Court should not apply the deeplyentrenched rule that tax exemptions cannot be implied but must be categorically and unmistakably expressed[20] in a language too clear to be mistaken.[21] In this vein, respondent-in-intervention CJHDC, although acknowledging that "the law frowns against exemptions from taxation,"[22] nevertheless argues that "[t]he grant of tax exemption privileges to the [John Hay SEZ] was addressed primarily to public respondent BCDA" in order "to achieve its mandate for an accelerated conversion of the former baselands into economically productive uses, at the least cost and exposure to the government." Thus, it contends that the Court should "apply, at least by analogy, the principle that strict construction is not applicable where the grantee of the exemption is a political subdivision or instrumentality." The Court is not persuaded. True, it is a recognized principle that the rule on strictissimi juris does not apply in the case of exemptions in favor of a government political subdivision or instrumentality, [23] the rationale for which has been identified as follows:

"The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions, even more obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize differential treatment and foster impartiality, fairness, and equality of treatment among tax payers. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax liability of such agencies."[24] (Emphasis supplied; italics in the original) However, the foregoing finds no application to the present case. First, there is absolutely nothing in R.A. No. 7227 which can be considered a grant of tax exemption in favor of public respondent BCDA. Rather, the beneficiaries of the tax exemptions and other incentives in Section 12 (the only provision in R.A. No. 7227 which expressly grants tax exemptions) are clearly the business enterprises located within the Subic SEZ. To be sure, nowhere in any of respondents' pleadings is it pretended that the legislature exempted the BCDA from taxation in order to accomplish its mandate. On the contrary, the alleged tax exemptions and financial incentives are plainly asserted to be in favor of private enterprises doing business in the John Hay SEZ. Second, as noted above, the liberal construction of tax exemptions in favor of the government is premised on their resulting only in a reduction in infra-governmental fund transfers, but not government revenue. Evidently, this rationale does not apply, whether by analogy or otherwise, in favor of private business enterprises, such as respondent-in-intervention CJHDC. Consequently, respondents' arguments for a liberal construction of R.A. 7227 in favor of tax exemptions and incentives to business enterprises in the John Hay SEZ must necessarily fail. As the Court, speaking through Mr. Justice Vicente V. Mendoza, in the recent case of Philippine Long Distance Telephone Company, Inc. v. City of Davao,[25] had occasion to stress:

. . . Along with the police power and eminent domain, taxation is one of the three necessary attributes of sovereignty. Consequently, statutes in derogation of sovereignty, such as those containing exemption from taxation, should be strictly construed in favor of the sate. A state cannot be stripped of this most essential power by doubtful words and of this highest attribute of sovereignty by ambiguous language. [26] (Emphasis supplied) Necessarily, respondents' other arguments, dependent as they are on a liberal construction of tax exemptions, also fail. Public respondents' argument that tax exemptions are "inherent" in the term "special economic zone" stands the concept on its head and cannot be accepted. The tax exempt character of an SEZ proceeds from the statutory provisions expressly conferring such exemptions, not vice-versa. The tail does not wag the dog. Moreover, a careful scrutiny of the Senate deliberations does not disclose a clear intention on the part of the law making power to make the tax exemptions and financial incentives in Section 12 applicable in the other SEZs. The adoption of a single uniform set of tax exemptions and financial incentives for all SEZs in the former base lands was indeed suggested by Senator Paterno when Section 12 was under consideration in the Senate: xxx Senator Paterno: Thank you Mr. President.

Now, with respect to "B," Mr. President, on items 1 to 6, [27] what are they supposed to be? Are these policies? Because in my reading, subparagraph, subparagraph "1" and subparagraph "6" refer to activities; namely, shipping and tourism-related; while subparagraphs "2, 3, 4, and 5" represent policies which shall apply within the zone. Senator Shahani: think the intention here really was to specify the activities which should take place within this economic zone. But, on second reading, yes, I think there is a mix-up here of activities and policies. Senator Paterno: Yes.

Senator Shahani: Maybe some of these could be transferred to Section 13. Senator Paterno: Now, No. "1" and No. "6", are these authorizations to engage in these activities, or are they mandates for the special economic zone to engage in these activities? Senator Shahani: Yes, this is an attempt to specify the features, the kind of specific activities which would be unique to the special economic zone of Subic. This is why shipping is given. Senator Paterno: Yes. Then I would propose, Mr. President, that these two activities, namely "1" and "6," be segregated as being applicable to the Subic economic zone, because they will not be applicable, for example, in the Clark economic zone because there would be no shipping in Clark. Senator Shahani: Mr. President, Section 12, refers exclusively to Subic. There is no attempt now in this BCDA to do anything for Clark. I think there is no time. Senator Paterno: Yes. Yet, Mr. President, paragraph "C" authorizes the President of the Philippines to proclaim, delineate and specify the metes and bounds of other special economic zones with particular reference to Clark. We need to set up certain standards which the President would observe in setting up those zones. So I would propose that the policies applicable to all economic zones be specified here, and those which relate only to Subic be put in a standard for the Subic economic zone. Senator Shahani: Mr. President, I thought that this was the special concern of our Colleague from Cavite. I remember quite clearly that last night, some concern was expressed, including from this Representation, that there was no special attention being given to Clark. It think it was also Senator Enrile who said that Clark has specific features; it is landlocked, et cetera. Senator Paterno: Yes.

legislating every detail of what a special economic zone should be, I thought it was agreed last night that we should authorize the President to create special economic zones with specific reference to Clark. This is why this appears in this form, Mr. President. Senator Paterno: Yes. Without going into the crafting of the text, Mr. President, it was my thought that, perhaps, there could be a section which specifies the policies which shall apply to all special economic zones. Then there would be another section which, in effect, will create the Subic economic zone which would refer to those unique activities in Subic. Then there would be another section which would authorize the President to create other special economic zones, with particular reference to Clark, in which special economic zones, the standards set up in the first section would apply. Senator Shahani: reordering this section. I take it that, that is just a matter of

Senator Paterno: Yes. In other words, I would like to suggest that the bill contain the features of any special economic zone, and then another section would contain the features unique to Subic as a special economic zone. [28] (Emphasis supplied) However, as respondent CJHDC itself admits, "Senator Paterno's proposal that 'the policies applicable to all special economic zones be specified here (in what would eventually be Section 15) and those which relate only to Subic be put in a standard for the Subic economic zone' was not carried out, as Section 15 as finally passed does not contain an enumeration of policies specific only to non-Subic SEZs." (Underscoring supplied) Instead, as previously noted, Section 15 of R.A. No. 7227 provides that the "policies to govern and regulate" the John Hay SEZ "shall be determined upon consultation with the inhabitants of the local government units directly affected." Significantly, these policies need not be identical to those implemented in the Subic SEZ since there may be real and substantial differences in development priorities, local conditions and other relevant matters, as the consultations may reveal. However, insofar as these policies may include tax exemptions, paragraph 4, Section 28 of Article VI of the Constitution requires that any such exemptions must be in the form of legislation passed

Senator Shahani: So, to show that we are still interested in Clark and its development, and to avoid this very long process of

with the concurrence of a majority of all the Members of the Congress. Finally, contrary to public respondents' interpretation, the Decision of October 24, 2003 does not "tie the hands" of executive or administrative agencies from implementing any present or future legislation which affords tax or other financial incentives to qualified persons doing business in the John Hay SEZ or elsewhere. The second sentence of Section 3 of Proclamation No. 420 was declared null and void only insofar as it purported to grant, by executive proclamation and without statutory basis, tax exemptions and other financial incentives to business enterprises located in John Hay SEZ. However, where there is statutory basis for exemptions or incentives, there is nothing to prevent qualified persons from applying for and availing thereof. As stated in the dispositive portion of the decision, Proclamation No. 420, without the invalidated portion, remains valid and effective. WHEREFORE, the motions hereby DENIED with FINALITY. for reconsideration are