LA BUGAL-B’LAAN TRIBAL ASSN. v. DENR SEC.

RAMOS Dec 2004 / Panganiban / Resolution / What need not be proved > Judicial notice Trivia: The term judicial notice appeared only thrice in the entire resolution. No mention of the term was made in any of the opinions, so this digest will only cover the (main) resolution. Quick summary: At issue is the constitutionality of the Philippine Mining Law [RA 7942] + IRR [DAO No. 96-40] as well as Financial and Technical Assistance Agreement [FTAA] between the PH government and WMCP. On 1 January 2004, these were declared unconstitutional on the finding that FTAAs are service contracts prohibited by the 1987 Constitution. In this December 2004 resolution, however, the Supreme Court upheld the constitutionality of the aforementioned, saying that the Constitution should be construed as to grant the President and Congress sufficient discretion and reasonable leeway to enable them to attract foreign investments and expertise. Matters that SC took judicial notice of  The government is and has for many many years been financially strapped, to the point that even the most essential services have suffered serious curtailments and have had to make do with inadequate budgetary allocations.  These foreign entities will not enter into such ―agreements involving assistance‖ without requiring arrangements for the protection of their investments, gains and benefits.  There are numerous intrinsic differences involved in the mining and petroleu m companies’ respective operations and equipment or technological requirements, costs structures and capital investment needs, and product pricing and markets. INTRODUCTION 2 Given the inadequacy of Filipino capital and technology in large-scale EDU activities, the State may secure the help of foreign companies, provided the State maintains its right of full control. The President exercises such power on behalf of the State, but Congress may review the action of the President once it is notified. However, should the President and/or Congress gravely abuse their discretion, the courts may—in a proper case—exercise their residual duty under Article VIII. FACTS See Appendix for Keila’s digest of the Jan 2004 decision for Consti 1 class. CIVPRO (or how the case reached SC for the second time)  Respondents (DENR Secretary, Mines and Geosciences Bureau Director, Executive Secretary, WMCP) filed separate MRs, then SC required the petitioners to comment  Oral argument was held and parties were asked to submit memoranda  SC noted OSG’s manifestation and motion (in lieu of comment) on behalf of the public respondents [OSG: no objection to Chamber of Mines’ [CoM] motion for intervention, as OSG actually adopted CoM’s MR]  This is a special civil action in the SC—prohibition and mandamus ISSUE & HOLDING 1. WON the case has been rendered moot by the sale of WMC shares in WMCP to Sagittarius and by the subsequent transfer and registration of the FTAA from WMCP to Sagittarius. NO 2. WON, assuming that the case has been rendered moot, it would still be proper to resolve the constitutionality of the assailed provisions. YES 3. The proper interpretation of Agreements Involving Either Technical or Financial Assistance [T/F A] RATIO Issue #1 – Mootness The Jan 2004 decision merely shrugged off the Manifestation by WMPC that on January 23, 2001, WMC had sold all its WMCP shares to Sagittarius Mines, 60% of whose equity was held by Filipinos, and that the assailed FTAA had been transferred from WMCP to Sagittarius. The crux of this issue of mootness is the fact that WMCP, at the time it entered into the FTAA, happened to be wholly owned by WMC, which in turn was a wholly owned subsidiary of Western Mining Corporation Holdings Ltd., a publicly listed major Australian mining and exploration company. The nullity of the FTAA was obviously premised upon the contractor being a foreign corporation. Inasmuch as the FTAA is to be implemented now by a Filipino corporation, it is no longer possible to declare it unconstitutional.
1

This was permitted under the 1973 Const. but was subsequently denounced for being antithetical to the principle of sovereignty over our natural resources, because they allowed foreign control over the exploitation of our natural resources, to the prejudice of the Filipino nation. 2 EDU - exploration, development and utilization of mineral resources

a. b. c. d.

No transgression of the Constitution by the transfer of WMCP shares FTAA not intended solely for foreign corporation No need for a separate litigation of the sale of shares FTAA not void thus transferrable

Issue #2 – WON SC can still decide, even assuming it is moot The Court must recognize the exceptional character of the situation and the paramount public interest involved, as well as the necessity for a ruling to put an end to the uncertainties plaguing the mining industry and the affected communities as a result of doubts cast upon the constitutionality and validity of the Mining Act, the subject FTAA and future FTAAs, and the need to avert a multiplicity of suits. The real issue in this case is whether Art. XII, Sec. 2, par. 4 is contravened by RA 7942 and DAO 96-40, not whether it was violated by specific acts implementing RA 7942 and DAO 96-40. ―[W]hen an act of the legislative department is seriously alleged to have infringed the Constitution, settling the controversy becomes the duty of this Court. By the mere enactment of the questioned law or the approval of the challenged action, the dispute is said to have ripened into a judicial controversy even without any other overt act.‖ Issue #3 – The proper interpretation Art. XII, Sec. 2, par. 4: The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. At this point, the Supreme Court proceeded by ruling on the matter in light of three principles of constitutional construction—verba legis [ordinary meaning], ratio legis est anima [intent of framers], and ut magis valeat quam pereat [interpret as a whole]. VERBA LEGIS 1. The drafters’ choice of words does not indicate the intent to exclude other modes of assistance. 2. If the real intention was to exclude other modes, their language would have been so restrictive and stringent as to leave no doubt about their true intent. 3. SC does not see how a verba legis approach leads to the conclusion that ―the management or operation of mining activities by foreign contractors xxx was precisely the evil that the drafters xxx sought to eradicate.‖ 4. A literal and restrictive interpretation suffers from internal logical inconsistencies that generate ambiguities. 5. It is argued that Section 2 of Article XII authorizes nothing more than a rendition of specific and limited financial service or technical assistance by a foreign company. To whom or for whom would it be rendered? Who is being assisted? If the answer is ―The State,‖ then it necessarily implies that the State is the one directly and solely undertaking the large-scale EDU, it follows that the State must bear the liability of repaying the financing sourced from the foreign lender and/or of paying compensation to the foreign entity rendering technical assistance. However, it is of common knowledge, and of judicial notice as well, that the government is and has for many many years been financially strapped, to the point that even the most essential services have suffered serious curtailments -- education and health care, for instance, not to mention judicial services -- have had to make do with inadequate budgetary allocations . It is difficult to imagine that such a provision restricting foreign companies to the rendition of only T/F A was deliberately crafted by the drafters of, who were all well aware of the nature of large-scale mineral or petroleum extraction and the country’ s deficiency in those areas. To say so would be tantamount to asserting that the provision was designed to ladle the large-scale EDU with impossible conditions, and to remain forever and permanently ―reserved‖ for future generations of Filipinos. 6. The drafters chose to emphasize agreements involving either T/F A in relation to foreign corporations’ participation in large-scale EDU. This recognizes the fact that foreign business entities are the ones with the resources and know-how. As business persons well know and as a matter of judicial notice, this matter is not just a question of signing a promissory note or executing a technology transfer agreement . Foreign corporations usually require that they be given a say in the management. The drafters will have to be credited with enough pragmatism and savvy to know that these foreign entities will not enter into such “agreements involving assistance” without requiring arrangements for the protection of their investments, gains and benefits. The drafters necessarily gave implied assent to everything that these agreements necessarily entailed, or that could reasonably be deemed necessary to make them tenable and effective, including management authority with respect to the day-to-day operations of the enterprise and

7.

measures for the protection of the interests of the foreign corporation, PROVIDED THAT Philippine sovereignty over natural resources and full control over the enterprise undertaking the EDU activities remain firmly in the State. If they had meant to ban service contracts altogether, they would have had to provide for the termination or pre-termination of the existing contracts.

RATIO LEGIS EST ANIMA 1. Portions of the ConCom deliberations conclusively show that they discussed agreements involving either T/F A in the same breath as service contracts and used the terms interchangeably. 2. The drafters knew that the agreements were going to entail not mere T/F A but, rather, foreign investment in and management of an enterprise involved in large-scale EDU of minerals, petroleum, other mineral oils. UT MAGIS VALEAT QUAM PEREAT Ultimate Test: State’s “Control” Determinative of Constitutionality The question to be answered is whether RA 7942 + IRR enable the government to exercise that degree of control sufficient to direct and regulate the conduct of affairs of individual enterprises and restrain undesirable activities. 1. Sufficient control over mining operations vested in the State by RA 7942 + IRR 2. The [above] provisions of the WMCP FTAA taken together, far from constituting a surrender of control and a grant of beneficial ownership of mineral resources to the contractor in question, bestow upon the State more than adequate control and supervision over the activities of the contractor and the enterprise 3. [The Ponente has several other sub-headings to show that indeed, the FTAA is not a bad idea after all, but these discuss very particular topics re: FTAA] 4. Anyway, there is a heading entitled The Mining and the Oil Industries Different From Each Other. I am only putting special emphasis as the third and final judicial notice term appears in this part. To better understand this part, I will also discuss the section right before it: An objection provides that in FTAAs with a foreign contractor, the State must receive at least 60% of the after-tax income from the exploitation of its mineral resources. This is the equivalent of the constitutional requirement that at least 60% of the capital, and hence 60% of the income, of mining companies should remain in Filipino hands. 5. Now back to the comparison of the mining and oil industries: [T]here is no independent showing that the taking of at least a 60 percent share in the after-tax income of a mining company operated by a foreign contractor is fair and reasonable under most if not all circumstances. The fact that some petroleum companies like Shell acceded to such percentage of sharing does not ipso facto mean that it is per se reasonable and applicable to nonpetroleum situations (that is, mining companies) as well. We can take judicial notice of the fact that there are, after all, numerous intrinsic differences involved in their respective operations and equipment or technological requirements, costs structures and capital investment needs, and product pricing and markets. 6. In the end, the Supreme Court made it clear that there is simply no constitutional or legal provision fixing the minimum share of the government in an FTAA at 60% of the net profit. [T]he government must be trusted xxx to deal xxx upon terms that it ascertains to be most favorable xxx under the circumstances, even if it means agreeing to less than 60%. 7. Capital and expertise provided, yet all risks assumed by contractor! PS. I’m not very sure how we’ll discuss this case in relation to judicial notice, but here’s my best bet. Good luck to us!

APPENDIX: KEILA’S DIGEST La Bugal-B’Laan Tribal Assn., Inc. v. Ramos GR. No. 127882. January 27, 2004 Special Civil Action. Mandamus & Prohibition. Facts:

citizens and fully foreign-owned corporations of the nation’s marine wealth

○ RA 7942 violates Art. XII ○ RA 7942 violates Sec. 1(1), Sec. 2(4)
Art. II for allowing inequitable sharing or wealth recommending approval and implementation of FTAA granted to WMCP is illegal and unconstitutional ● WMCP filed a manifestation on September 22, 2001 alleging that on January 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc., and was named Tampakan Mineral Resources Corporation. WMCP claimed that at least 60% of the equity of Sagittarius is Filipino-owned, whereas WMCP before was WMC Resources International, a publicly listed Australian mining and exploration company. ● On December 18, 2001, DENR Secretary approved the transfer and registration of the FTAA to Sagittarius from WMCP. Issues:

State shall promote the development and use of local scientific and technical resources‖. It also accounts for provisions on how State may proceed with EDU of natural resources:

● Aquino, on July 25, 1987, issued EO 279,
which authorizes the DENR Secretary to accept, consider, and evaluate proposals from foreign-based corporations or foreign investors for contracts of agreements involving either T/F A for large-scale EDU of minerals. Upon recommendation of the DENR Secretary, the President may execute contract with foreign proponent. Large-scale mining shall mean contracts involving a committed single unit capital of at least $50M.

○ The

■ ■ ■ ■

Direct control Co-production or joint venture with Filipino citizens or corporations at least 60% Filipino-owned. Small-scale utilization by Filipino citizens

● On March

3, 1995, then President Ramos approved RA 7942 known as the Philippine Mining Act of 1995 to ―govern the EDU, and processing of all mineral resources‖. The act goes into details of contracts, agreements for mining operations, settlement of conflicts among holders of mining rights, and specifies grounds for the cancellation, revocation, and termination of agreements and permits. ● On April 9, 1995, 30 days following the publication of the act on March 10, RA 7942 took effect. However, before the effectivity date, the President entered into an FTAA on March 30 with Western Mining Corporation, Philippines (WMCP) covering lands in South Cotabato, Sultan Kudarat, Davao Del Sure, and North Cotabato.

● WON ● WON

EO 279, the law in force when WMC’s FTAA was executed, is an invalid law and thus did not actually take effect. RA 7942 and DAO 96-40 are unconstitutional and thus, the FTAA transferred and granted is invalid.

Held:

● NO,

● DENR

Secretary Victor Ramos issued DAO No. 95-23, s. 1995 known as the Implementing Rules and Regulations of RA No. 7942. This was repealed by DAO No. 96-40, s. 1996.

EO 279 is an effective and validly enacted statute.

○ Ratio: While petitioners argue that EO
279 was signed into law two days before the opening of Congress in 1987, and that the order could have only taken effect 15 days after publication at a time when the legislative powers of the President has already been ceased, EO 279 became effective immediately upon its publication as found in a provision in the order. Where a law provides for its own date of effectivity, such date prevails. That such effectivity took place even after the convening of the Congress is irrelevant because at the time when EO 279 was issued, the President was still validly exercising legislative powers. The convening of the Congress merely precluded the exercise of the President’s legislative powers and did not prevent the effectivity of the laws previously enacted.

● Petitioners and their counsels sent a letter
to the DENR Secretary demanding DENR to stop the implementation of Phil. Mining Act and DAO 96-40, giving the DENR 15 days to act on it. No response. ● Petitioners thus filed this present petition for prohibition and mandamus with a prayer for TRO. Petitioners alleged that at the time of the filing of the petition, 100 FTAA applications had already been filed, 64 of which were made by fully foreignowned corporations, and at least one fully foreign-owned mining company. They claimed that DENR Secretary acted without or in excess of jurisdiction by assailing that RA 7942, DAO 96-40, and the FTAA granted to WMCP are unconstitutional on the following ground: ○ DAO 96-40 implements RA 7942, which is claimed unconstitutional for allowing fully-foreign owned corporations to EDU and exploit mineral resources in a manner contrary to Sec. 2(4) Art. XII

Agreements with foreignowned corporations for TFA (large-scale exploration) ○ Although DENR Secretary contends that the FTAA also acts as a ―service contract‖, framers specifically omitted that same phrase from the 1973 Constitution, which allowed foreignowned corporations to directly manage and then operate mining activities. Instead, what was replaced was the phrase ―T&F A‖, which effectively limited the capacities of foreign-owned companies in utilizing the nation’s natural resources for the benefit of the Filipinos. ○ Under RA 7942, an FTAA contractor warrants that it ―has or has access to all the financing, managerial, and technical expertise‖, which suggests that an FTAA contractor is bound to provide management assistance – something that has been explicitly eliminated in the 1987 Constitution. The act has conveyed beneficial ownership to foreign contractors over the nation’s mineral resources, leaving the State with nothing but bare title. Ruling: Petition granted. The Court declares the following unconstitutional and void: ● RA 7942 Sec. 3, 23, 33 to 41, 56, 81 (2, 3), 90 ● All provisions of DAO 96-40 which are not in conformity with the Decision

● The FTAA between gov’t and WMC
Separate Opinion: Panganiban, J.:

● Controversy Now Moot ○ Nullity of FTAA is

● YES,

RA 7942 and DAO 96-40 are unconstitutional. FTAA granted to WMCP is invalid.

based upon the contractor being a foreign corporation. Since the FTAA is now to be implemented by a majority Filipinobased corporation, how can the Court still declare it unconstitutional? allowing ―service contracts‖ to be given to foreign contractors in special circumstances. The members of the Constitutional Commission had in mind the Marcos era service contracts that they were familiar with. Put differently, ―TFAA‖ were understood by the delegates to include service contracts modified to prevent abuse.

● Not Limited to T/F A Only ○ Framers actually mentioned

○ Ratio:

○ RA ○ RA

7942 is unconstitutional for allowing the taking of private property without determination of public use and for just compensation 7942 violates Sec. 1 Art III by denying equal protection of the laws allowing the enjoyment of foreign

○ RA 7942 violates Sec. 2(2) Art. XII by

Sec. 2(4) Art. XII states that ―The President may enter into agreements with foreign-owned corporations involving either T/F A for large-scale ED/U of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the

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