La Bugal-BLaan vs Ramos G.R. No. 127882 December 1, 2004 PONENTE: Panganiban, J.: FACTS: President Fidel V.

Ramos approved R.A. No. 7942 to govern the exploration, development, utilization and processing of all mineral resources. Before the effectivity of R.A. No. 7942, the President entered into a Financial and Technical Assistance Agreement (FTAA) with Western Mining Corporation (Philippines), Inc. (WMCP). Subsequently, DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing Rules and Regulations of R.A. No. 7942 which was also later repealed by DAO No. 96-40. Petitioners then filed a Petition for Prohibition and Mandamus challenging the constitutionality of RA 7942 (The Philippine Mining Act of 1995); its Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and the FTAA dated March 30, 1995. The Court en banc promulgated its Decision granting the Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs are service contracts prohibited by the 1987 Constitution. Subsequently, respondents filed separate Motions for Reconsideration. ISSUE: 1) Whether or not invested in a mining project can be recouped. 2) Whether or not FTAA could only entered into by the government with foreign corporation, never with a Filipino enterprise. 3) Whether or not the term limitation of 25 years agreements for exploration, development and utilization of natural resources apply to FTAA. HELD: 1. NO. Throughout, the contractor assumes all the risks of the business. These risks are indeed very high, considering that the rate of success in exploration is extremely low. The probability of finding any mineral or petroleum in commercially viable quantities is estimated to be about 1:1,000 only. On that slim chance rides the contractors hope of recouping investments and generating profits. And when the contractor has recouped its initial investments in the project, the government share increases to sixty percent of net benefits without the State ever being in peril of incurring costs, expenses and losses. 2. NO. Equally barren of merit is the ground cited by petitioners that the FTAA was intended to apply solely to a foreign corporation, as can allegedly be seen from the provisions therein. They manage to cite only one WMCP FTAA provision that can be regarded as clearly intended to apply only to a foreign contractor: Section 12, which provides for international commercial arbitration under the auspices of the International Chamber of Commerce, after local remedies are exhausted. This provision, however, does not necessarily imply that the WMCP FTAA cannot be

transferred to and assumed by a Filipino corporation like Sagittarius, in which event the said provision should simply be disregarded as a superfluity. Indeed, the nationalistic provisions of the Constitution are all anchored on the protection of Filipino interests. 3. NO. The reason is found within paragraph 1 of section 2 of Article X11, which refers to mineral agreements, co-production agreements, joint venture agreements and mineral productionsharing agreements which the government may enter into with Filipino citizens and corporations, at least 60% owned by Filipino citizens. The word such clearly refers to these three mineral agreements and not FTAAs. Specifically, FTAAs are covered by paragraphs 4 and 5 of Section 2 of Article X11 of the Constitution. It will be noted that there are no term limitations provided for in the said paragraphs dealings with FTAAs. This shows that FTAAs are sui generis. This omission was obviously a deliberate move on the part of the framers. They probably realized that FTAAs would be different in many ways from MPSAs, JVAs and CPAs. The reason the framers did not fix term limitations applicable to FTAAs is that they preferred to leave the matter to the discretion of the legislature and/or the agencies involved in implementing the laws pertaining to FTAAs, in order to give the latter enough flexibility and elbow room to meet changing circumstances.