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John Hay Peoples Alternative Coalition vs.

Lim

[GR 119775, 24 October 2003] En Banc, Carpio-Morales (J): 9 concur, 2 took no part

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.

Facts: Republic Act 7227, entitled "An Act Accellerating the Convetsion 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," was enacted on 13 March 1992. The law 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) in the City of Baguio. RA 7227 created the Bases Conversion and Development Authority' (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. RA 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; and granted the Subic SEZ incentives ranging from tax and duty-free importations, exemption of businesses therein from local and national taxes, to other hall-narks of a liberalized financial and business climate. RA 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. On 16 August 1993, BCDA entered into a Memorandum of Agreement and Escrow Agreement with Tuntex (B.V.L) 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. 4 months later or on 16 December 16, 1993, BCDA, TUNTEX and ASIAWORLD executed a Joint Venture Agreements 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 AZemorandmn 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 Resolution of 29 September 1993, the Sangguniang Panlungsod of Baguio City 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 Resolution dated 19 January 1994, the sanggunian sought from BCDA an abdication, waiver or quitclaim of its ownership over the home lots being occupied by residents of 9 barangays surrounding the military reservation. Still by another resolution passed on 21 February 1994, the sanggunian adopted and submitted to BCDA a 15-point concept for the development of Camp John Hay. The sanggunian's 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." BCDA, TUNTEX and ASIAWORLD agreed to some, but rejected or modified the other proposals of the sanggunian." 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 RA 7227. On 11 May 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. The resolution was intended to intelligently guide the sanggunian in determining its position on whether Camp John Hay be declared a SEZ, the sanggunian being of the view that such declaration would exempt the camp's property and the economic activity therein from local or national taxation. More than a month later, however, the sanggunian passed Resolution 255, (Series of 1994)," seeking and supporting, subject to its concurrence, the issuance by then President Ramos of a presidential proclamation declaring an

area of 285.1 hectares of the camp as a SEZ in accordance with the provisions of RA 7227. Together with this resolution was submitted a draft of the proposed proclamation for consideration by the President. On 5 July 1994 then President Ramos issued Proclamation 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 7227." The John Hay Peoples Alternative Coalition, et. al. filed the petition for prohibition, mandamus and declaratory relief with prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction on 25 April 1995 challenging, in the main, the constitutionality or validity of Proclamation 420 as well as the legality of the Memorandum of Agreement and Joint Venture Agreement between the BCDA, and TUNTEX and ASIAWORLD.
Issue: 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.

Held: 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. 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.[4 Issue 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.[

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. Held:

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.