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LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC., Represented by its Chairman FLONG MIGUEL M. LUMAYONG; WIGBERTO E. TAADA; PONCIANO BENNAGEN; JAIME TADEO; RENATO R. CONSTANTINO JR.; FLONG AGUSTIN M. DABIE; ROBERTO P. AMLOY; RAQIM L. DABIE; SIMEON H. DOLOJO; IMELDA M. GANDON; LENY B. GUSANAN; MARCELO L. GUSANAN; QUINTOL A. LABUAYAN; LOMINGGES D. LAWAY; BENITA P. TACUAYAN; Minors JOLY L. BUGOY, Represented by His Father UNDERO D. BUGOY and ROGER M. DADING; Represented by His Father ANTONIO L. DADING; ROMY M. LAGARO, Represented by His Father TOTING A. LAGARO; MIKENY JONG B. LUMAYONG, Represented by His Father MIGUEL M. LUMAYONG; RENE T. MIGUEL, Represented by His Mother EDITHA T. MIGUEL; ALDEMAR L. SAL, Represented by His Father DANNY M. SAL; DAISY RECARSE, Represented by Her Mother LYDIA S. SANTOS; EDWARD M. EMUY; ALAN P. MAMPARAIR; MARIO L. MANGCAL; ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO CULAR; MARVIC M.V.F. LEONEN; JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR JR., Represented by Their Father VIRGILIO CULAR; PAUL ANTONIO P. VILLAMOR, Represented by His Parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR; ANA GININA R. TALJA, Represented by Her Father MARIO JOSE B. TALJA; SHARMAINE R. CUNANAN, Represented by Her Father ALFREDO M. CUNANAN; ANTONIO JOSE A. VITUG III, Represented by His Mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, Represented by His Father MANUEL E. NARVADEZ JR.; ROSERIO MARALAG LINGATING, Represented by Her Father RIO OLIMPIO A. LINGATING; MARIO JOSE B. TALJA; DAVID E. DE VERA; MARIA MILAGROS L. SAN JOSE; Sr. SUSAN O. BOLANIO, OND; LOLITA G. DEMONTEVERDE; BENJIE L. NEQUINTO;[1] ROSE LILIA S. ROMANO; ROBERTO S. VERZOLA; EDUARDO AURELIO C. REYES; LEAN LOUEL A. PERIA, Represented by His Father ELPIDIO V. PERIA; [2] GREEN FORUM PHILIPPINES; GREEN FORUM WESTERN VISAYAS (GF-WV); ENVIRONMENTAL LEGAL ASSISTANCE CENTER (ELAC); KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN);[3]PARTNERSHIP FOR AGRARIAN REFORM and RURAL DEVELOPMENT SERVICES, INC. (PARRDS); PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA); WOMENS LEGAL BUREAU (WLB); CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI); UPLAND DEVELOPMENT INSTITUTE (UDI); KINAIYAHAN FOUNDATION, INC.; SENTRO NG ALTERNATIBONG LINGAP PANLIGAL (SALIGAN); and LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC. (LRC), petitioners, vs. VICTOR O. RAMOS, Secretary, Department of Environment and Natural Resources (DENR); HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive Secretary; and WMC (PHILIPPINES), INC.,[4]respondents. RESOLUTION PANGANIBAN, J.: All mineral resources are owned by the State. Their exploration, development and utilization (EDU) must always be subject to the full control and supervision of the State. More specifically, given the inadequacy of Filipino capital and technology in large-scale EDU activities, the State may secure the help of foreign companies in all relevant matters - especially financial and technical assistance -- provided that, at all times, the State maintains its right of full control. The foreign assistor or contractor assumes all financial, technical and entrepreneurial risks in the EDU activities; hence, it may be given reasonable management, operational, marketing, audit and other prerogatives to protect its investments and to enable the business to succeed. Full control is not anathematic to day-to-day management by the contractor, provided that the State retains the power to direct overall strategy; and to set aside, reverse or modify plans and actions of the contractor. The idea of full control is similar to that which is exercised by the board of directors of a private corporation: the performance of managerial, operational, financial, marketing and other functions may be delegated to subordinate officers or given to contractual entities, but the board retains full residual control of the business. Who or what organ of government actually exercises this power of control on behalf of the State? The Constitution is crystal clear: thePresident. Indeed, the Chief Executive is the official constitutionally mandated to enter into agreements with foreign owned corporations. On the other hand, Congress may review the action of the President once it is notified of every contract entered into in accordance with this [constitutional] provision within thirty days from its execution. In contrast to this express mandate of the President and Congress in the EDU of natural resources, Article XII of the Constitution is silent on the role of the judiciary. However, should the President and/or Congress gravely abuse their discretion in this regard, the courts may -- in a proper case -- exercise their residual duty under Article VIII. Clearly then, the judiciary should not inordinately interfere in the exercise of this presidential power of control over the EDU of our natural resources. The Constitution should be read in broad, life-giving strokes. It should not be used to strangulate economic growth or to serve narrow, parochial interests. Rather, it should be construed to grant the President and Congress sufficient discretion and reasonable leeway to enable them to attract foreign investments and expertise, as well as to secure for our people and our posterity the blessings of prosperity and peace. On the basis of this control standard, this Court upholds the constitutionality of the Philippine Mining Law, its Implementing Rules and Regulations -- insofar as they relate to financial and technical agreements -as well as the subject Financial and Technical Assistance Agreement (FTAA).[5]

Background
The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30, 1995,[6] executed by the government with Western Mining Corporation (Philippines), Inc. (WMCP).[7] On January 27, 2004, the Court en banc promulgated its Decision[8] 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. The Decision struck down the subject FTAA for being similar to service contracts,[9] which, though permitted under the 1973 Constitution,[10] were 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. The Decision quoted several legal scholars and authors who had criticized service contracts for, inter alia, vesting in the foreign contractorexclusive management and control of the enterprise, including operation of the field in the event petroleum was discovered; control of production, expansion and development; nearly unfettered control over the disposition and sale of the products discovered/extracted; effective ownership of the natural resource at the point of extraction; and beneficial ownership of our economic resources. According to the Decision, the 1987 Constitution (Section 2 of Article XII) effectively banned such service contracts. Subsequently, respondents filed separate Motions for Reconsideration. In a Resolution dated March 9, 2004, the Court required

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petitioners to comment thereon. In the Resolution of June 8, 2004, it set the case for Oral Argument on June 29, 2004. After hearing the opposing sides, the Court required the parties to submit their respective Memoranda in amplification of their arguments. In a Resolution issued later the same day, June 29, 2004, the Court noted, inter alia, the Manifestation and Motion (in lieu of comment) filed by the Office of the Solicitor General (OSG) on behalf of public respondents. The OSG said that it was not interposing any objection to the Motion for Intervention filed by the Chamber of Mines of the Philippines, Inc. (CMP) and was in fact joining and adopting the latters Motion for Reconsideration. Memoranda were accordingly filed by the intervenor as well as by petitioners, public respondents, and private respondent, dwelling at length on the three issues discussed below. Later, WMCP submitted its Reply Memorandum, while the OSG -- in obedience to an Order of this Court -filed a Compliance submitting copies of more FTAAs entered into by the government. 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 Resources International Pty., Ltd. (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. Had the FTAA been originally issued to a Filipino-owned corporation, there would have been no constitutionality issue to speak of. Upon the other hand, the conveyance of the WMCP FTAA to a Filipino corporation can be likened to the sale of land to a foreigner who subsequently acquires Filipino citizenship, or who later resells the same land to a Filipino citizen. The conveyance would be validated, as the property in question would no longer be owned by a disqualified vendee. And, inasmuch as the FTAA is to be implemented now by a Filipino corporation, it is no longer possible for the Court to declare it unconstitutional. The case pending in the Court of Appeals is a dispute between two Filipino companies (Sagittarius and Lepanto), both claiming the right to purchase the foreign shares in WMCP. So, regardless of which side eventually wins, the FTAA would still be in the hands of a qualified Filipino company. Considering that there is no longer any justiciable controversy, the plea to nullify the Mining Law has become a virtual petition for declaratory relief, over which this Court has no original jurisdiction. In their Final Memorandum, however, petitioners argue that the case has not become moot, considering the invalidity of the alleged sale of the shares in WMCP from WMC to Sagittarius, and of the transfer of the FTAA from WMCP to Sagittarius, resulting in the change of contractor in the FTAA in question. And even assuming that the said transfers were valid, there still exists an actual case predicated on the invalidity of RA 7942 and its Implementing Rules and Regulations (DAO 96-40). Presently, we shall discuss petitioners objections to the transfer of both the shares and the FTAA. We shall take up the alleged invalidity of RA 7942 and DAO 96-40 later on in the discussion of the third issue.

Three Issues Identified by the Court


During the Oral Argument, the Court identified the three issues to be resolved in the present controversy, as follows: 1. Has the case been rendered moot by the sale of WMC shares in WMCP to Sagittarius (60 percent of Sagittarius equity is owned by Filipinos and/or Filipino-owned corporations while 40 percent is owned by Indophil Resources NL, an Australian company) and by the subsequent transfer and registration of the FTAA from WMCP to Sagittarius? 2. Assuming that the case has been rendered moot, would it still be proper to resolve the constitutionality of the assailed provisions of the Mining Law, DAO 96-40 and the WMCP FTAA? 3. What is the proper interpretation of the phrase Agreements Involving Either Technical or Financial Assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution?

Should the Motion for Reconsideration Be Granted?


Respondents and intervenors Motions for Reconsideration should be granted, for the reasons discussed below. The foregoing three issues identified by the Court shall now be taken up seriatim. First Issue:

No Transgression of the Constitution by the Transfer of the WMCP Shares


Petitioners claim, first, that the alleged invalidity of the transfer of the WMCP shares to Sagittarius violates the fourth paragraph of Section 2 of Article XII of the Constitution; second, that it is contrary to the provisions of the WMCP FTAA itself; and third, that the sale of the shares is suspect and should therefore be the subject of a case in which its validity may properly be litigated. On the first ground, petitioners assert that paragraph 4 of Section 2 of Article XII permits the government to enter into FTAAs only with foreign-owned corporations. Petitioners insist that the first paragraph of this constitutional provision limits the participation of Filipino corporations in the exploration, development and utilization of natural resources to only three species of contracts -- production sharing, coproduction and joint venture -- to the exclusion of all other arrangements or variations thereof, and the WMCP FTAA may therefore not be validly assumed and implemented by Sagittarius. In short, petitioners claim that a Filipino corporation is not allowed by the Constitution to enter into an FTAA with the government. However, a textual analysis of the first paragraph of Section 2 of Article XII does not support petitioners argument. The pertinent part of the said provision states: Sec. 2. x x x The exploration, development and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into coproduction, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. x x x. Nowhere in the provision is there any express limitation or restriction insofar as arrangements other than the three aforementioned contractual schemes are concerned. Neither can one reasonably discern any implied stricture to that effect. Besides, there is no basis to believe that the framers of the

Mootness

In declaring unconstitutional certain provisions of RA 7942, DAO 96-40, and the WMCP FTAA, the majority Decision agreed with petitioners contention that the subject FTAA had been executed in violation of Section 2 of Article XII of the 1987 Constitution. According to petitioners, the FTAAs entered into by the government with foreignowned corporations are limited by the fourth paragraph of the said provision to agreements involving only technical or financial assistance for large-scale exploration, development and utilization of minerals, petroleum and other mineral oils. Furthermore, the foreign contractor is allegedly permitted by the FTAA in question to fully manage and control the mining operations and, therefore, to acquire beneficial ownership of our mineral resources. The Decision merely shrugged off the Manifestation by WMPC informing the Court (1) that on January 23, 2001, WMC had sold all its shares in WMCP to Sagittarius Mines, Inc., 60 percent of whose equity was held by Filipinos; and (2) that the assailed FTAA had likewise been transferred from WMCP to Sagittarius.[11] The ponencia declared that the instant case had not been rendered moot by the transfer and registration of the FTAA to a Filipino-owned corporation, and that the validity of the said transfer remained in dispute and awaited final judicial determination.[12] Patently therefore, the Decision is anchored on the assumption that WMCP had remained a foreign corporation.

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Constitution, a majority of whom were obviously concerned with furthering the development and utilization of the countrys natural resources, could have wanted to restrict Filipino participation in that area. This point is clear, especially in the light of the overarching constitutional principle of giving preference and priority to Filipinos and Filipino corporations in the development of our natural resources. Besides, even assuming (purely for arguments sake) that a constitutional limitation barring Filipino corporations from holding and implementing an FTAA actually exists, nevertheless, such provision would apply only to the transfer of the FTAA to Sagittarius, but definitely not to the sale of WMCs equity stake in WMCP to Sagittarius. Otherwise, an unreasonable curtailment of property rights without due process of law would ensue. Petitioners argument must therefore fail. million and a paid up capital of P60 million. Therefore, at the time of approval of the sale by the DENR, the debt-to-equity ratio of the transferee was over 9:1 -- hardly ideal for an FTAA contractor, according to petitioners. However, private respondents counter that the Deed of Sale specifically provides that the payment of the purchase price would take placeonly after Sagittarius commencement of commercial production from mining operations, if at all. Consequently, under the circumstances, we believe it would not be reasonable to conclude, as petitioners did, that the transferees high debt-to-equity ratio per se necessarily carried negative implications for the enterprise; and it would certainly be improper to invalidate the sale on that basis, as petitioners propose.

FTAA Not Intended Solely for Foreign Corporation


Equally barren of merit is the second 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.

FTAA Not Void, Thus Transferrable


To bolster further their claim that the case is not moot, petitioners insist that the FTAA is void and, hence cannot be transferred; and that its transfer does not operate to cure the constitutional infirmity that is inherent in it; neither will a change in the circumstances of one of the parties serve to ratify the void contract. While the discussion in their Final Memorandum was skimpy, petitioners in their Comment (on the MR) did ratiocinate that this Court had declared the FTAA to be void because, at the time it was executed with WMCP, the latter was a fully foreign-owned corporation, in which the former vested full control and management with respect to the exploration, development and utilization of mineral resources, contrary to the provisions of paragraph 4 of Section 2 of Article XII of the Constitution. And since the FTAA was per se void, no valid right could be transferred; neither could it be ratified, so petitioners conclude. Petitioners have assumed as fact that which has yet to be established. First and foremost, the Decision of this Court declaring the FTAA void has not yet become final. That was precisely the reason the Court still heard Oral Argument in this case. Second, the FTAA does not vest in the foreign corporation full control and supervision over the exploration, development and utilization of mineral resources, to the exclusion of the government. This point will be dealt with in greater detail below; but for now, suffice it to say that a perusal of the FTAA provisions will prove that the government has effective overall direction and control of the mining operations, including marketing and product pricing, and that the contractors work programs and budgets are subject to its review and approval or disapproval. As will be detailed later on, the government does not have to micromanage the mining operations and dip its hands into the day-to-day management of the enterprise in order to be considered as having overall control and direction. Besides, for practical and pragmatic reasons, there is a need for government agencies to delegate certain aspects of the management work to the contractor. Thus the basis for declaring the FTAA void still has to be revisited, reexamined and reconsidered. Petitioners sniff at the citation of Chavez v. Public Estates Authority,[14] and Halili v. CA,[15] claiming that the doctrines in these cases are wholly inapplicable to the instant case. Chavez clearly teaches: Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen. Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved. In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party.[16] In their Comment, petitioners contend that in Chavez and Halili, the object of the transfer (the land) was not what was assailed for alleged unconstitutionality. Rather, it was the transaction that was assailed; hence subsequent compliance with constitutional provisions would cure its infirmity. In contrast, in the instant case it is the FTAA itself, the object of the transfer, that is being assailed as invalid and unconstitutional. So,

No Need for a Separate Litigation of the Sale of Shares


Petitioners claim as third ground the suspicious sale of shares from WMC to Sagittarius; hence, the need to litigate it in a separate case. Section 40 of RA 7942 (the Mining Law) allegedly requires the Presidents prior approval of a transfer. A re-reading of the said provision, however, leads to a different conclusion. Sec. 40. Assignment/Transfer -- A financial or technical assistance agreement may be assigned or transferred, in whole or in part, to a qualified person subject to the prior approval of the President: Provided, That the President shall notify Congress of every financial or technical assistance agreement assigned or converted in accordance with this provision within thirty (30) days from the date of the approval thereof. Section 40 expressly applies to the assignment or transfer of the FTAA, not to the sale and transfer of shares of stock in WMCP . Moreover, when the transferee of an FTAA is another foreign corporation, there is a logical application of the requirement of prior approval by the President of the Republic and notification to Congress in the event of assignment or transfer of an FTAA. In this situation, such approval and notification are appropriate safeguards, considering that the new contractor is the subject of a foreign government. On the other hand, when the transferee of the FTAA happens to be a Filipino corporation, the need for such safeguard is not critical; hence, the lack of prior approval and notification may not be deemed fatal as to render the transfer invalid. Besides, it is not as if approval by the President is entirely absent in this instance. As pointed out by private respondent in its Memorandum,[13] the issue of approval is the subject of one of the cases brought by Lepanto against Sagittarius in GR No. 162331. That case involved the review of the Decision of the Court of Appeals dated November 21, 2003 in CA-GR SP No. 74161, which affirmed the DENR Order dated December 31, 2001 and the Decision of the Office of the President dated July 23, 2002, both approving the assignment of the WMCP FTAA to Sagittarius. Petitioners also question the sale price and the financial capacity of the transferee. According to the Deed of Absolute Sale dated January 23, 2001, executed between WMC and Sagittarius, the price of the WMCP shares was fixed at US$9,875,000, equivalent to P553 million at an exchange rate of 56:1. Sagittarius had an authorized capital stock of P250

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petitioners claim that the subsequent transfer of a void FTAA to a Filipino corporation would not cure the defect. Petitioners are confusing themselves. The present Petition has been filed, precisely because the grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be gainsaid that anyone would have asserted that the same FTAA was void if it had at the outset been issued to a Filipino corporation. The FTAA, therefore, is not per se defective or unconstitutional. It was questioned only because it had been issued to an allegedly non-qualified, foreign-owned corporation. We believe that this case is clearly analogous to Halili, in which the land acquired by a non-Filipino was re-conveyed to a qualified vendee and the original transaction was thereby cured. Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the invalidity of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a Filipino corporation -- can no longer be assailed; the objective of the constitutional provision -- to keep the exploration, development and utilization of our natural resources in Filipino hands -- has been served. More accurately speaking, the present situation is one degree better than that obtaining in Halili, in which the original sale to a non-Filipino was clearly and indisputably violative of the constitutional prohibition and thus void ab initio. In the present case, the issuance/grant of the subject FTAA to the then foreign-owned WMCP was not illegal, void or unconstitutional at the time. The matter had to be brought to court, precisely for adjudication as to whether the FTAA and the Mining Law had indeed violated the Constitution. Since, up to this point, the decision of this Court declaring the FTAA void has yet to become final, to all intents and purposes, the FTAA must be deemed valid and constitutional.[17] At bottom, we find completely outlandish petitioners contention that an FTAA could be entered into by the government only with a foreign corporation, never with a Filipino enterprise. Indeed, the nationalistic provisions of the Constitution are all anchored on the protection of Filipino interests. How petitioners can now argue that foreigners have the exclusive right to FTAAs totally overturns the entire basis of the Petition - preference for the Filipino in the exploration, development and utilization of our natural resources. It does not take deep knowledge of law and logic to understand that what the Constitution grants to foreigners should be equally available to Filipinos. Second Issue: entered into under the provisions of the Mining Act invites potential litigation for as long as the constitutional issues are not resolved with finality. Nevertheless, we must concede that there exists the distinct possibility that one or more of the future FTAAs will be the subject of yet another suit grounded on constitutional issues. But of equal if not greater significance is the cloud of uncertainty hanging over the mining industry, which is even now scaring away foreign investments. Attesting to this climate of anxiety is the fact that the Chamber of Mines of the Philippines saw the urgent need to intervene in the case and to present its position during the Oral Argument; and that Secretary General Romulo Neri of the National Economic Development Authority (NEDA) requested this Court to allow him to speak, during that Oral Argument, on the economic consequences of the Decision of January 27, 2004.[20] We are convinced. We now agree that 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. Paraphrasing Gonzales v. Commission on Elections,[21] it is evident that strong reasons of public policy demand that the constitutionality issue be resolved now.[22] In further support of the immediate resolution of the constitutionality issue, public respondents cite Acop v. Guingona,[23] to the effect that the courts will decide a question -- otherwise moot and academic -- if it is capable of repetition, yet evading review.[24] Public respondents ask the Court to avoid a situation in which the constitutionality issue may again arise with respect to another FTAA, the resolution of which may not be achieved until after it has become too late for our mining industry to grow out of its infancy. They also recall Salonga v. Cruz Pao,[25] in which this Court declared that (t)he Court also has the duty to formulate guiding and controlling constitutional principles, precepts, doctrines or rules. It has the symbolic function of educating the bench and bar on the extent of protection given by constitutional guarantees. x x x. The mootness of the case in relation to the WMCP FTAA led the undersigned ponente to state in his dissent to the Decision that there was no more justiciable controversy and the plea to nullify the Mining Law has become a virtual petition for declaratory relief.[26] The entry of the Chamber of Mines of the Philippines, Inc., however, has put into focus the seriousness of the allegations of unconstitutionality of RA 7942 and DAO 96-40 which converts the case to one for prohibition[27] in the enforcement of the said law and regulations. Indeed, this CMP entry brings to fore that the real issue in this case is whether paragraph 4 of Section 2 of Article XII of the Constitution 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.[28] This ruling can be traced from Taada v. Angara,[29] in which the Court said: In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. xxx xxx xxx

Whether the Court Can Still Decide the Case, Even Assuming It Is Moot
All the protagonists are in agreement that the Court has jurisdiction to decide this controversy, even assuming it to be moot. Petitioners stress the following points. First, while a case becomes moot and academic when there is no more actual controversy between the parties or no useful purpose can be served in passing upon the merits,[18] what is at issue in the instant case is not only the validity of the WMCP FTAA, but also the constitutionality of RA 7942 and its Implementing Rules and Regulations. Second, the acts of private respondent cannot operate to cure the law of its alleged unconstitutionality or to divest this Court of its jurisdiction to decide. Third, the Constitution imposes upon the Supreme Court the duty to declare invalid any law that offends the Constitution. Petitioners also argue that no amendatory laws have been passed to make the Mining Act of 1995 conform to constitutional strictures (assuming that, at present, it does not); that public respondents will continue to implement and enforce the statute until this Court rules otherwise; and that the said law continues to be the source of legal authority in accepting, processing and approving numerous applications for mining rights. Indeed, it appears that as of June 30, 2002, some 43 FTAA applications had been filed with the Mines and Geosciences Bureau (MGB), with an aggregate area of 2,064,908.65 hectares -- spread over Luzon, the Visayas and Mindanao[19] -- applied for. It may be a bit farfetched to assert, as petitioners do, that each and every FTAA that was

As this Court has repeatedly and firmly emphasized in many cases, it will not shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government.[30]

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Additionally, the entry of CMP into this case has also effectively forestalled any possible objections arising from the standing or legal interest of the original parties. For all the foregoing reasons, we believe that the Court should proceed to a resolution of the constitutional issues in this case. Third Issue: First, verba legis, that is, wherever possible, the words used in the Constitution must be given their ordinary meaning except where technical terms are employed. x x x. xxx xxx xxx

The Proper Interpretation of the Constitutional Phrase Agreements Involving Either Technical or Financial Assistance
The constitutional provision at the nucleus of the controversy is paragraph 4 of Section 2 of Article XII of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced in full: Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays and lagoons. The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-

Second, where there is ambiguity, ratio legis est anima. The words of the Constitution should be interpreted in accordance with the intent of its framers. x x x. xxx xxx xxx

Finally, ut magis valeat quam pereat. The Constitution is to be interpreted as a whole.[34] For ease of reference and in consonance with verba legis, we reconstruct and stratify the aforequoted Section 2 as follows: 1. All natural resources are owned by the State. Except for agricultural lands, natural resources cannot be alienated by the State. 2. The exploration, development and utilization (EDU) of natural resources shall be under the full control and supervision of the State. 3. The State may undertake these EDU activities through either of the following: (a) By itself directly and solely (b) By (i) co-production; (ii) joint venture; or (iii) production sharing agreements with Filipino citizens or corporations, at least 60 percent of the capital of which is owned by such citizens 4. Small-scale utilization of natural resources may be allowed by law in favor of Filipino citizens. 5. For large-scale EDU of minerals, petroleum and other mineral oils, the President may enter into agreements with foreign-owned corporations involving either technical or financial assistance according to the general terms and conditions provided by law x x x. Note that in all the three foregoing mining activities -- exploration, development and utilization -- the State may undertake such EDU activities by itself or in tandem with Filipinos or Filipino corporations, except in two instances: first, in small-scale utilization of natural resources, which Filipinos may be allowed by law to undertake; and second, in large-scale EDU of minerals, petroleum and mineral oils, which may be undertaken by the State via agreements with foreign-owned corporations involving either technical or financial assistance as provided by law. Petitioners claim that the phrase agreements x x x involving either technical or financial assistance simply means technical assistance or financial assistance agreements, nothing more and nothing else. They insist that there is no ambiguity in the phrase, and that a plain reading of paragraph 4 quoted above leads to the inescapable conclusion that what a foreignowned corporation may enter into with the government is merely an agreement for either financial or technical assistance only, for the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils; such a limitation, they argue, excludes foreign management and operation of a mining enterprise.[35] This restrictive interpretation, petitioners believe, is in line with the general policy enunciated by the Constitution reserving to Filipino citizens and corporations the use and enjoyment of the countrys natural resources. They maintain that this Courts Decision[36] of January 27, 2004 correctly declared the WMCP FTAA, along with pertinent provisions of RA 7942, void for allowing a foreign contractor to have direct and exclusive management of a mining enterprise. Allowing such a privilege

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. The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.[31]

No Restriction of Meaning by a Verba Legis Interpretation


To interpret the foregoing provision, petitioners adamantly assert that the language of the Constitution should prevail; that the primary method of interpreting it is to seek the ordinary meaning of the words used in its provisions. They rely on rulings of this Court, such as the following: The fundamental principle in constitutional construction however is that the primary source from which to ascertain constitutional intent or purpose is the language of the provision itself. The presumption is that the words in which the constitutional provisions are couched express the objective sought to be attained. In other words, verba legis prevails. Only when the meaning of the words used is unclear and equivocal should resort be made to extraneous aids of construction and interpretation, such as the proceedings of the Constitutional Commission or Convention to shed light on and ascertain the true intent or purpose of the provision being construed.[32] Very recently, in Francisco v. The House of Representatives,[33] this Court indeed had the occasion to reiterate the well-settled principles of constitutional construction:

not only runs counter to the full control and supervision that the State is constitutionally mandated to exercise over the exploration, development and utilization of the countrys natural resources; doing so also vests in the foreign company beneficial ownership of our mineral resources. It will be recalled that the Decision of January 27, 2004 zeroed in on management or other forms of assistance or other activities associated with the service contracts of the martial law regime, since the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate. On the other hand, the intervenor[37] and public respondents argue that the FTAA allowed by paragraph 4 is not merely an agreement for supplying limited and specific financial or technical services to the State. Rather, such FTAA is a comprehensive agreement for the foreign-owned corporations integrated exploration, development and utilization of mineral, petroleum or other mineral oils on a large-scale basis. The agreement, therefore, authorizes the foreign contractors rendition of a whole range of integrated and comprehensive services, ranging from the discovery to the development, utilization and production of minerals or petroleum products. We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 could inexorably lead to the conclusions arrived at in the ponencia. First, the drafters choice of words -- their use of the phrase agreements x x x involving either technical or financial assistance -does not indicate the intent to exclude other modes of assistance. The drafters opted to use involving when they could have simply saidagreements for financial or technical assistance, if that was their intention to begin with. In this case, the limitation would be very clear and no further debate would ensue. In contrast, the use of the word involving signifies the possibility of the inclusion of other forms of assistance or activities having to do with, otherwise related to or compatible with financial or technical assistance. The word involving as used in this context has three connotations that can be differentiated thus: one, the sense of concerning, having to do with, or affecting; two, entailing, requiring, implying or necessitating; and three, including, containing or comprising.[38] Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word involving, when understood in the sense of including, as in including technical or financial assistance, necessarily implies that there are activities other than those that are being included. In other words, if an agreement includes technical or financial assistance, there is apart from such assistance -- something else already in, and covered or may be covered by, the said agreement. In short, it allows for the possibility that matters, other than those explicitly mentioned, could be made part of the agreement. Thus, we are now led to the conclusion that the use of the word involving implies that these agreements with foreign corporations are not limited to mere financial or technical assistance. The difference in sense becomes very apparent when we juxtapose agreements for technical or financial assistance against agreements including technical or financial assistance. This much is unalterably clear in a verba legis approach. Second, if the real intention of the drafters was to confine foreign corporations to financial or technical assistance and nothing more, their language would have certainly been so unmistakably restrictive and stringent as to leave no doubt in anyones mind about their true intent. For example, they would have used the sentence foreign corporations are absolutely prohibited from involvement in the management or operation of mining or similar ventures or words of similar import. A search for such stringent wording yields negative results. Thus, we come to the

Deletion of Service Contracts to Avoid Pitfalls of Previous Constitutions, Not to Ban Service Contracts Per Se

Third, we do not see how a verba legis approach leads to the conclusion that the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate. Nowhere in the abovequoted Section can be discerned the objective to keep out of foreign hands the management or operation of mining activities or the plan to eradicate service contracts as these were understood in the 1973 Constitution. Still, petitioners maintain that the deletion or omission from the 1987 Constitution of the term service contracts found in the 1973 Constitution sufficiently proves the drafters intent to exclude foreigners from the management of the affected enterprises. To our mind, however, such intent cannot be definitively and conclusively established from the mere failure to carry the same expression or term over to the new Constitution, absent a more specific, explicit and unequivocal statement to that effect. What petitioners seek (a complete ban on foreign participation in the management of mining operations, as previously allowed by the earlier Constitutions) is nothing short of bringing about a momentous sea change in the economic and developmental policies; and the fundamentally capitalist, free-enterprise philosophy of our government. We cannot imagine such a radical shift being undertaken by our government, to the great prejudice of the mining sector in particular and our economy in general, merely on the basis of the omission of the terms service contract from or the failure to carry them over to the new Constitution. There has to be a much more definite and even unarguable basis for such a drastic reversal of policies. Fourth, a literal and restrictive interpretation of paragraph 4, such as that proposed by petitioners, suffers from certain internal logical inconsistencies that generate ambiguities in the understanding of the provision. As the intervenor pointed out, there has never been any constitutional or statutory provision that reserved to Filipino citizens or corporations, at least 60 percent of which is Filipino-owned, the rendition of financial or technical assistance to companies engaged in mining or the development of any other natural resource. The taking out of foreigncurrency or peso-denominated loans or any other kind of financial assistance, as well as the rendition of technical assistance -- whether to the State or to any other entity in the Philippines -- has never been restricted in favor of Filipino citizens or corporations having a certain minimum percentage of Filipino equity. Such a restriction would certainly be preposterous and unnecessary. As a matter of fact, financial, and even technical assistance, regardless of the nationality of its source, would be welcomed in the mining industry anytime with open arms, on account of the dearth of local capital and the need to continually update technological know-how and improve technical skills. There was therefore no need for a constitutional provision specifically allowing foreign-owned corporations to render financial or technical assistance, whether in respect of mining or some other resource development or commercial activity in the Philippines. The last point needs to be emphasized: if merely financial or technical assistance agreements are allowed, there would be no need to limit them to large-scale mining operations, as there would be far greater need for them in the smaller-scale mining activities (and even in nonmining areas). Obviously, the provision in question was intended to refer to agreements other than those for mere financial or technical assistance. In like manner, there would be no need to require the President of the Republic to report to Congress, if only financial or technical assistance agreements are involved. Such agreements are in the nature of foreign loans that -- pursuant to Section 20 of Article VII[39] of the 1987 Constitution -- the President may contract or guarantee, merely with the prior concurrence of the Monetary Board. In turn, the Board is required to report to Congress within thirty days from the end of every quarter of the calendar year, not thirty days after the agreement is entered into. And if paragraph 4 permits only agreements for loans and other forms of financial, or technical assistance, what is the point of requiring

inevitable conclusion that there was a conscious and deliberate decision to avoid the use of restrictive wording that bespeaks an intent not to use the expression agreements x x x involving either technical or financial assistance in an exclusionary and limiting manner.

7
that they be based on real contributions to the economic growth and general welfare of the country? For instance, how is one to measure and assess the real contributions to the economic growth and general welfare of the country that may ensue from a foreign-currency loan agreement or a technical-assistance agreement for, say, the refurbishing of an existing power generating plant for a mining operation somewhere in Mindanao? Such a criterion would make more sense when applied to a major business investment in a principal sector of the industry. The conclusion is clear and inescapable -- a verba legis construction shows that paragraph 4 is not to be understood as one limited only to foreign loans (or other forms of financial support) and to technical assistance. There is definitely more to it than that. These are provisions permitting participation by foreign companies; requiring the Presidents report to Congress; and using, as yardstick, contributions based on economic growth and general welfare. These were neither accidentally inserted into the Constitution nor carelessly cobbled together by the drafters in lip service to shallow nationalism. The provisions patently have significance and usefulness in a context that allows agreements with foreign companies to include more than mere financial or technical assistance. Fifth, 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. This argument begs the question To whom or for whom would it be rendered? or Who is being assisted? If the answer is The State, then it necessarily implies that the State itself is the one directly and solely undertaking the large-scale exploration, development and utilization of a mineral resource, so it follows that the State must itself bear the liability and cost 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. Thus, government has had to resort to buildoperate-transfer and similar arrangements with the private sector, in order to get vital infrastructure projects built without any governmental outlay. The very recent brouhaha over the gargantuan fiscal crisis or budget deficit merely confirms what the ordinary citizen has suspected all along. After the reality check, one will have to admit the implausibility of a direct undertaking -- by the State itself -- of large-scale exploration, development and utilization of minerals, petroleum and other mineral oils. Such an undertaking entails not only humongous capital requirements, but also the attendant risk of never finding and developing economically viable quantities of minerals, petroleum and other mineral oils.[40] It is equally difficult to imagine that such a provision restricting foreign companies to the rendition of only financial or technical assistance to the government was deliberately crafted by the drafters of the Constitution, who were all well aware of the capital-intensive and technology-oriented nature of large-scale mineral or petroleum extraction and the countrys deficiency in precisely those areas.[41] To say so would be tantamount to asserting that the provision was purposely designed to ladle the large-scale development and utilization of mineral, petroleum and related resources with impossible conditions; and to remain forever and permanently reserved for future generations of Filipinos. financial assistance of the magnitude and type required for large-scale exploration, development and utilization of these resources. The drafters -- whose ranks included many academicians, economists, businessmen, lawyers, politicians and government officials -were not unfamiliar with the practices of foreign corporations and multinationals. Neither were they so nave as to believe that these entities would provide assistance without conditionalities or some quid pro quo. Definitely, 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, for instance, of day-today operations of the joint venture. They would demand the appointment of their own men as, for example, operations managers, technical experts, quality control heads, internal auditors or comptrollers. Furthermore, they would probably require seats on the Board of Directors -- all these to ensure the success of the enterprise and the repayment of the loans and other financial assistance and to make certain that the funding and the technology they supply would not go to waste. Ultimately, they would also want to protect their business reputation and bottom lines.[42] In short, 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. Thus, by specifying such agreements involving assistance, 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 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.

Petitioners Theory Deflated by the Absence of Closing-Out Rules or Guidelines


Seventh and final point regarding the plain-language approach, one of the practical difficulties that results from it is the fact that there is nothing by way of transitory provisions that would serve to confirm the theory that the omission of the term service contract from the 1987 Constitution signaled the demise of service contracts. The framers knew at the time they were deliberating that there were various service contracts extant and in force and effect, including those in the petroleum industry. Many of these service contracts were long-term (25 years) and had several more years to run. If they had meant to ban service contracts altogether, they would have had to provide for the termination or pretermination of the existing contracts. Accordingly, they would have supplied the specifics and the when and how of effecting the extinguishment of these existing contracts (or at least the mechanics for determining them); and of putting in place the means to address the just claims of the contractors for compensation for their investments, lost opportunities, and so on, if not for the recovery thereof. If the framers had intended to put an end to service contracts, they would have at least left specific instructions to Congress to deal with these closing-out issues, perhaps by way of general guidelines and a timeline within which to carry them out. The following are some extant examples of such transitory guidelines set forth in Article XVIII of our Constitution: Section 23. Advertising entities affected by paragraph (2), Section 11 of Article XVI of this Constitution shall have five years from its ratification to comply on a graduated and proportionate basis with the minimum Filipino ownership requirement therein. xxx xxx xxx

A More Reasonable Look at the Charters Plain Language


Sixth, we shall now look closer at the plain language of the Charter and examining the logical inferences. The drafters chose to emphasize and highlight agreements x x x involving either technical or financial assistance in relation to foreign corporations participation in large-scale EDU. The inclusion of this clause on technical or financial assistance recognizes the fact that foreign business entities and multinational corporations are the ones with the resources and know-how to provide technical and/or

Section 25. After the expiration in 1991 of the Agreement between the Republic of the Philippines and the United States of America concerning military bases, foreign

8
military bases, troops, or facilities shall not be allowed in the Philippines except under a treaty duly concurred in by the Senate and, when the Congress so requires, ratified by a majority of the votes cast by the people in a national referendum held for that purpose, and recognized as a treaty by the other contracting State. Section 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for not more than eighteen months after the ratification of this Constitution. However, in the national interest, as certified by the President, the Congress may extend such period. A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order and the list of the sequestered or frozen properties shall forthwith be registered with the proper court. For orders issued before the ratification of this Constitution, the corresponding judicial action or proceeding shall be filed within six months from its ratification. For those issued after such ratification, the judicial action or proceeding shall be commenced within six months from the issuance thereof. The sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is commenced as herein provided. [43] It is inconceivable that the drafters of the Constitution would leave such an important matter -- an expression of sovereignty as it were -indefinitely hanging in the air in a formless and ineffective state. Indeed, the complete absence of even a general framework only serves to further deflate petitioners theory, like a childs balloon losing its air. Under the circumstances, the logical inconsistencies resulting from petitioners literal and purely verba legis approach to paragraph 4 of Section 2 of Article XII compel a resort to other aids to interpretation. MR. SUAREZ. This particular portion of the section has reference to what was popularly known before as service contracts, among other things, is that correct? MR. JAMIR. Yes, Madam President. MR. SUAREZ. As it is formulated, the President may enter into service contracts but subject to the guidelines that may be promulgated by Congress? MR. JAMIR. That is correct. MR. SUAREZ. Therefore, that aspect of negotiation and consummation will fall on the President, not upon Congress? MR. JAMIR. That is also correct, Madam President. MR. SUAREZ. Except that all of these contracts, service or otherwise, must be made strictly in accordance with guidelines prescribed by Congress? MR. JAMIR. That is also correct. MR. SUAREZ. And the Gentleman is thinking in terms of a law that uniformly covers situations of the same nature? MR. JAMIR. That is 100 percent correct. MR. SUAREZ. I thank the Commissioner. MR. JAMIR. Thank you very much.[44] The following exchange leaves no doubt that the commissioners knew exactly what they were dealing with: service contracts. THE PRESIDENT. Commissioner Gascon is recognized. MR. GASCON. Commissioner Jamir had proposed an amendment with regard to special service contracts which was accepted by the Committee. Since the Committee has accepted it, I would like to ask some questions. THE PRESIDENT. Commissioner Gascon may proceed. MR. GASCON. As it is proposed now, such service contracts will be entered into by the President with the guidelines of a general law onservice contract to be enacted by Congress. Is that correct? MR. VILLEGAS. The Commissioner is right, Madam President. MR. GASCON. According to the original proposal, if the President were to enter into a particular agreement, he would need the concurrence of Congress. Now that it has been changed by the proposal of Commissioner Jamir in that Congress will set the general law to which the President shall comply, the President will, therefore, not need the concurrence of Congress every time he enters into service contracts. Is that correct? MR. VILLEGAS. That is right. MR. GASCON. The proposed amendment of Commissioner Jamir is in indirect contrast to my proposed amendment, so I would like to object and present my proposed amendment to the body. xxx xxx xxx

Petitioners Posture Also Negated by Ratio Legis Et Anima


Thus, in order to resolve the inconsistencies, incongruities and ambiguities encountered and to supply the deficiencies of the plain-language approach, there is a need for recourse to the proceedings of the 1986 Constitutional Commission. There is a need for ratio legis et anima.

Service Contracts Not Deconstitutionalized


Pertinent portions of the deliberations of the members of the Constitutional Commission (ConCom) conclusively show that they discussedagreements involving either technical or financial assistance in the same breadth as service contracts and used the terms interchangeably. The following exchange between Commissioner Jamir (sponsor of the provision) and Commissioner Suarez irrefutably proves that the agreements involving technical or financial assistance were none other than service contracts. THE PRESIDENT. Commissioner Jamir is recognized. We are still on Section 3. MR. JAMIR. Yes, Madam President. With respect to the second paragraph of Section 3, my amendment by substitution reads: THE PRESIDENT MAY ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR LARGE-SCALE EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES ACCORDING TO THE TERMS AND CONDITIONS PROVIDED BY LAW. MR. VILLEGAS. The Committee accepts the Commissioner Suarez will give the background. amendment.

MR. GASCON. Yes, it will be up to the body. I feel that the general law to be set by Congress as regard service contract agreements which the President will enter into might be too general or since we do not know the content yet of such a law, it might be that certain agreements will be detrimental to the interest of the Filipinos. This is in direct contrast to my proposal which provides that there be effective constraints in the implementation of service contracts.

MR. JAMIR. Thank you. THE PRESIDENT. Commissioner Suarez is recognized. MR. SUAREZ. Thank you, Madam President. Will Commissioner Jamir answer a few clarificatory questions? MR. JAMIR. Yes, Madam President.

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So instead of a general law to be passed by Congress to serve as a guideline to the President when entering into service contract agreements, I propose that every service contract entered into by the President would need the concurrence of Congress, so as to assure the Filipinos of their interests with regard to the issue in Section 3 on all lands of the public domain. My alternative amendment, which we will discuss later, reads: THAT THE PRESIDENT SHALL ENTER INTO SUCH AGREEMENTS ONLY WITH THE CONCURRENCE OF TWO-THIRDS VOTE OF ALL THE MEMBERS OF CONGRESS SITTING SEPARATELY. xxx xxx xxx MR. JAMIR. I will gladly do so, if it is still within my power. MR. VILLEGAS. Yes, the Committee accepts the amendment. xxx xxx xxx

SR. TAN. Madam President, may I ask a question? THE PRESIDENT. Commissioner Tan is recognized. SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the President? That is the only difference, is it not? MR. VILLEGAS. That is right. SR. TAN. So those are the safeguards. MR. VILLEGAS. Yes. There was no law at all governing service contracts before. SR. TAN. Thank you, Madam President.[45]

MR. BENGZON. The reason we made that shift is that we realized the original proposal could breed corruption. By the way, this is not just confined to service contracts but also to financial assistance. If we are going to make every single contract subject to the concurrence of Congress which, according to the Commissioners amendment is the concurrence of two-thirds of Congress voting separately then (1) there is a very great chance that each contract will be different from another; and (2) there is a great temptation that it would breed corruption because of the great lobbying that is going to happen. And we do not want to subject our legislature to that. Now, to answer the Commissioners apprehension, by general law, we do not mean statements of motherhood. Congress can build all the restrictions that it wishes into that general law so that every contract entered into by the President under that specific area will have to be uniform. The President has no choice but to follow all the guidelines that will be provided by law. MR. GASCON. But my basic problem is that we do not know as of yet the contents of such a general law as to how much constraints there will be in it. And to my mind, although the Committees contention that the regular concurrence from Congress would subject Congress to extensive lobbying, I think that is a risk we will have to take since Congress is a body of representatives of the people whose membership will be changing regularly as there will be changing circumstances every time certain agreements are made. It would be best then to keep in tab and attuned to the interest of the Filipino people, whenever the President enters into any agreement with regard to such an important matter as technical or financial assistance for large-scale exploration, development and utilization of natural resources or service contracts, the peoples elected representatives should be on top of it. xxx xxx xxx

More Than Mere Financial and Technical Assistance Entailed by the Agreements
The clear words of Commissioner Jose N. Nolledo quoted below explicitly and eloquently demonstrate that the drafters knew that the agreements with foreign corporations were going to entail not mere technical or financial assistance but, rather, foreign investment in and management of an enterprise involved in large-scale exploration, development and utilization of minerals, petroleum, and other mineral oils. THE PRESIDENT. Commissioner Nolledo is recognized. MR. NOLLEDO. Madam President, I have the permission of the Acting Floor Leader to speak for only two minutes in favor of the amendment of Commissioner Gascon. THE PRESIDENT. Commissioner Nolledo may proceed. MR. NOLLEDO. With due respect to the members of the Committee and Commissioner Jamir, I am in favor of the objection of Commissioner Gascon. Madam President, I was one of those who refused to sign the 1973 Constitution, and one of the reasons is that there were many provisions in the Transitory Provisions therein that favored aliens. I was shocked when I read a provision authorizing service contracts while we, in this Constitutional Commission, provided for Filipino control of the economy. We are, therefore, providing for exceptional instances where aliens may circumvent Filipino control of our economy. And one way of circumventing the rule in favor of Filipino control of the economy is to recognize service contracts. As far as I am concerned, if I should have my own way, I am for the complete deletion of this provision. However, we are presenting a compromise in the sense that we are requiring a two-thirds vote of all the Members of Congress as a safeguard. I think we should not mistrust the future Members of Congress by saying that the purpose of this provision is to avoid corruption. We cannot claim that they are less patriotic than we are. I think the Members of this Commission should know that entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation, and therefore, being an exception it should be subject, whenever possible, to stringent rules. It seems to me that we are liberalizing the rules in favor of aliens. I say these things with a heavy heart, Madam President. I do not claim to be a nationalist, but I love my country. Although we need investments, we must adopt safeguards that are truly reflective of the sentiments of

MR. OPLE. Madam President, we do not need to suspend the session. If Commissioner Gascon needs a few minutes, I can fill up the remaining time while he completes his proposed amendment. I just wanted to ask Commissioner Jamir whether he would entertain a minor amendment to his amendment, and it reads as follows: THE PRESIDENT SHALL SUBSEQUENTLY NOTIFY CONGRESS OF EVERYSERVICE CONTRACT ENTERED INTO IN ACCORDANCE WITH THE GENERAL LAW. I think the reason is, if I may state it briefly, as Commissioner Bengzon said, Congress can always change the general law later on to conform to new perceptions of standards that should be built into service contracts. But the only way Congress can do this is if there were a notification requirement from the Office of the President that such service contracts had been entered into, subject then to the scrutiny of the Members of Congress. This pertains to a situation where the service contracts are already entered into, and all that this amendment seeks is the reporting requirement from the Office of the President. Will Commissioner Jamir entertain that?

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the people and not mere cosmetic safeguards as they now appear in the Jamir amendment. (Applause) Thank you, Madam President.[46] Another excerpt, featuring then Commissioner (now Chief Justice) Hilario G. Davide Jr., indicates the limitations of the scope of such service contracts -- they are valid only in regard to minerals, petroleum and other mineral oils, not to all natural resources. THE PRESIDENT. Commissioner Davide is recognized. MR. DAVIDE. Thank you, Madam President. This is an amendment to the Jamir amendment and also to the Ople amendment. I propose to delete NATURAL RESOURCES and substitute it with the following: MINERALS, PETROLEUM AND OTHER MINERAL OILS. On the Ople amendment, I propose to add: THE NOTIFICATION TO CONGRESS SHALL BE WITHIN THIRTY DAYS FROM THE EXECUTION OF THE SERVICE CONTRACT. THE PRESIDENT. What does the Committee say with respect to the first amendment in lieu of NATURAL RESOURCES? MR. VILLEGAS. Could Commissioner Davide explain that? MR. DAVIDE. Madam President, with the use of NATURAL RESOURCES here, it would necessarily include all lands of the public domain, our marine resources, forests, parks and so on. So we would like to limit the scope of these service contracts to those areas really where these may be needed, the exploitation, development and exploration of minerals, petroleum and other mineral oils. And so, we believe that we should really, if we want to grant service contracts at all, limit the same to only those particular areas where Filipino capital may not be sufficient, and not to all natural resources. MR. SUAREZ. Just a point of clarification again, Madam President. When the Commissioner made those enumerations and specifications, I suppose he deliberately did not include agricultural land? MR. DAVIDE. That is precisely the reason we have to enumerate what these resources are into which service contracts may enter. So, beyond the reach of any service contract will be lands of the public domain, timberlands, forests, marine resources, fauna and flora, wildlife and national parks.[47] After the Jamir amendment was voted upon and approved by a vote of 21 to 10 with 2 abstentions, Commissioner Davide made the following statement, which is very relevant to our quest: THE PRESIDENT. Commissioner Davide is recognized. MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals, petroleum and mineral oils. The Commission has just approved the possible foreign entry into the development, exploration and utilization of these minerals, petroleum and other mineral oils by virtue of the Jamir amendment. I voted in favor of the Jamir amendment because it will eventually give way to vesting in exclusively Filipino citizens and corporations wholly owned by Filipino citizens the right to utilize the other natural resources. This means that as a matter of policy, natural resources should be utilized and exploited only by Filipino citizens or corporations wholly owned by such citizens. But by virtue of the Jamir amendment, since we feel that Filipino capital may not be enough for the development and utilization of minerals, petroleum and other mineral oils, the President can enter into service contracts with foreign corporations precisely for the development and utilization of such resources. And so, there is nothing to fear that we will stagnate in the development of minerals, petroleum and mineral oils because we now allow service contracts. x x x.[48] The foregoing are mere fragments of the framers lengthy discussions of the provision dealing with agreements x x x involving either technical or financial assistance, which ultimately became paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any doubt, the members of the ConCom were actually debating about the martial-lawera service contracts for which they were crafting appropriate safeguards. In the voting that led to the approval of Article XII by the ConCom, the explanations given by Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this provision on account of their objections to the constitutionalization of the service contract concept. Mr. Gascon said, I felt that if we would constitutionalize any provision on service contracts, this should always be with the concurrence of Congress and not guided only by a general law to be promulgated by Congress.[49] Mr. Garcia explained, Service contracts are given constitutional legitimization in Sec. 3, even when they have been proven to be inimical to the interests of the nation, providing, as they do, the legal loophole for the exploitation of our natural resources for the benefit of foreign interests.[50] Likewise, Mr. Tadeo cited inter alia the fact that service contracts continued to subsist, enabling foreign interests to benefit from our natural resources.[51] It was hardly likely that these gentlemen would have objected so strenuously, had the provision called for mere technical or financial assistance and nothing more. The deliberations of the ConCom and some commissioners explanation of their votes leave no room for doubt that the service contract concept precisely underpinned the commissioners understanding of the agreements involving either technical or financial assistance.

Summation of the Concom Deliberations


At this point, we sum up the matters established, based on a careful reading of the ConCom deliberations, as follows: In their deliberations on what was to become paragraph 4, the framers used the term service contracts in referring toagreements x x x involving either technical or financial assistance. They spoke of service contracts as the concept understood in the 1973 Constitution. was

It was obvious from their discussions that they were not about to ban or eradicate service contracts. Instead, they were plainly crafting provisions to put in place safeguards that would eliminate or minimize the abuses prevalent during the marital law regime. In brief, they were going to permit service contracts with foreign corporations as contractors, but with safety measures to prevent abuses, as an exception to the general norm established in the first paragraph of Section 2 of Article XII. This provision reserves or limits to Filipino citizens -- and corporations at least 60 percent of which is owned by such citizens -- the exploration, development and utilization of natural resources. This provision was prompted by the perceived insufficiency of Filipino capital and the felt need for foreign investments in the EDU of minerals and petroleum resources. The framers for the most part debated about the sort of safeguards that would be considered adequate and reasonable. But some of them, having more radical leanings, wanted to ban service contracts altogether; for them, the provision would permit aliens to exploit and benefit from the nations natural resources, which they felt should be reserved only for Filipinos. In the explanation of their votes, the individual commissioners were heard by the entire body. They sounded off their individual opinions, openly enunciated their philosophies, and supported or attacked the provisions with fervor. Everyones viewpoint was heard. In the final voting, the Article on the National Economy and Patrimony -- including paragraph 4 allowing service contracts

11
with foreign corporations as an exception to the general norm in paragraph 1 of Section 2 of the same article -- was resoundingly approved by a vote of 32 to 7, with 2 abstentions. individual explanations of votes are on record, and they show where each delegate stood on the issues. In sum, we cannot completely denigrate the value or usefulness of the record of the ConCom, simply because certain members chose not to speak out. It is contended that the deliberations therein did not necessarily reflect the thinking of the voting population that participated in the referendum and ratified the Constitution. Verily, whether we like it or not, it is a bit too much to assume that every one of those who voted to ratify the proposed Charter did so only after carefully reading and mulling over it, provision by provision. Likewise, it appears rather extravagant to assume that every one of those who did in fact bother to read the draft Charter actually understood the import of its provisions, much less analyzed it vis--vis the previous Constitutions. We believe that in reality, a good percentage of those who voted in favor of it did so more out of faith and trust. For them, it was the product of the hard work and careful deliberation of a group of intelligent, dedicated and trustworthy men and women of integrity and conviction, whose love of country and fidelity to duty could not be questioned. In short, a large proportion of the voters voted yes because the drafters, or a majority of them, endorsed the proposed Constitution. What this fact translates to is the inescapable conclusion that many of the voters in the referendum did not form their own isolated judgment about the draft Charter, much less about particular provisions therein. They only relied or fell back and acted upon the favorable endorsement or recommendation of the framers as a group. In other words, by voting yes, they may be deemed to have signified their voluntary adoption of the understanding and interpretation of the delegates with respect to the proposed Charter and its particular provisions. If its good enough for them, its good enough for me; or, in many instances, If its good enough for President Cory Aquino, its good enough for me. And even for those who voted based on their own individual assessment of the proposed Charter, there is no evidence available to indicate that their assessment or understanding of its provisions was in fact different from that of the drafters. This unwritten assumption seems to be petitioners as well. For all we know, this segment of voters must have read and understood the provisions of the Constitution in the same way the framers had, an assumption that would account for the favorable votes. Fundamentally speaking, in the process of rewriting the Charter, the members of the ConCom as a group were supposed to represent the entire Filipino people. Thus, we cannot but regard their views as being very much indicative of the thinking of the people with respect to the matters deliberated upon and to the Charter as a whole. It is therefore reasonable and unavoidable to make the following conclusion, based on the above arguments. As written by the framers and ratified and adopted by the people, the Constitution allows the continued use of service contracts with foreign corporations -- as contractors who would invest in and operate and manage extractive enterprises, subject to the full control and supervision of the State -- sans the abuses of the past regime. The purpose is clear: to develop and utilize our mineral, petroleum and other resources on a large scale for the immediate and tangible benefit of the Filipino people. In view of the foregoing discussion, we should reverse the Decision of January 27, 2004, and in fact now hold a view different from that of the Decision, which had these findings: (a) paragraph 4 of Section 2 of Article XII limits foreign involvement in the local mining industry to agreements strictly for either financial or technical assistance only; (b) the same paragraph precludes agreements that grant to foreign corporations the management of local mining operations, as such agreements are purportedly in the nature of service contracts as these were understood under the 1973 Constitution; (c) these service contracts were supposedly de-constitutionalized and proscribed by the omission of the term service contracts from the 1987 Constitution; (d) since the WMCP FTAA contains provisions permitting the foreign contractor to manage the concern, the

Agreements Involving Technical or Financial Assistance Are Service Contracts With Safeguards
From the foregoing, we are impelled to conclude that the phrase agreements involving either technical or financial assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the 1973 variety, the new ones are between foreign corporations acting as contractors on the one hand; and on the other, the government as principal or owner of the works. In the new service contracts, the foreign contractors provide capital, technology and technical know-how, and managerial expertise in the creation and operation of large-scale mining/extractive enterprises; and the government, through its agencies (DENR, MGB), actively exercises control and supervision over the entire operation. Such service contracts may be entered into only with respect to minerals, petroleum and other mineral oils. The grant thereof is subject to several safeguards, among which are these requirements: (1) The service contract shall be crafted in accordance with a general law that will set standard or uniform terms, conditions and requirements, presumably to attain a certain uniformity in provisions and avoid the possible insertion of terms disadvantageous to the country. (2) The President shall be the signatory for the government because, supposedly before an agreement is presented to the President for signature, it will have been vetted several times over at different levels to ensure that it conforms to law and can withstand public scrutiny. (3) Within thirty days of the executed agreement, the President shall report it to Congress to give that branch of government an opportunity to look over the agreement and interpose timely objections, if any.

Use of the Record of the ConCom to Ascertain Intent


At this juncture, we shall address, rather than gloss over, the use of the framers intent approach, and the criticism hurled by petitioners who quote a ruling of this Court: While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had only when other guides fail as said proceedings are powerless to vary the terms of the Constitution when the meaning is clear. Debates in the constitutional convention are of value as showing the views of the individual members, and as indicating the reason for their votes, but they give us no light as to the views of the large majority who did not talk, much less the mass of our fellow citizens whose votes at the polls gave that instrument the force of fundamental law. We think it safer to construe the constitution from what appears upon its face. The proper interpretation therefore depends more on how it was understood by the people adopting it than in the framers understanding thereof.[52] The notion that the deliberations reflect only the views of those members who spoke out and not the views of the majority who remained silent should be clarified. We must never forget that those who spoke out were heard by those who remained silent and did not react. If the latter were silent because they happened not to be present at the time, they are presumed to have read the minutes and kept abreast of the deliberations. By remaining silent, they are deemed to have signified their assent to and/or conformity with at least some of the views propounded or their lack of objections thereto. It was incumbent upon them, as representatives of the entire Filipino people, to follow the deliberations closely and to speak their minds on the matter if they did not see eye to eye with the proponents of the draft provisions. In any event, each and every one of the commissioners had the opportunity to speak out and to vote on the matter. Moreover, the

12
said FTAA is invalid for being a prohibited service contract; and (e) provisions of RA 7942 and DAO 96-40, which likewise grant managerial authority to the foreign contractor, are also invalid and unconstitutional. On the resolution of these questions will depend the validity and constitutionality of certain provisions of the Philippine Mining Act of 1995 (RA 7942) and its Implementing Rules and Regulations (DAO 9640), as well as the WMCP FTAA. Indeed, petitioners charge[54] that RA 7942, as well as its Implementing Rules and Regulations, makes it possible for FTAA contracts to cede full control and management of mining enterprises over to fully foreign-owned corporations, with the result that the State is allegedly reduced to a passive regulator dependent on submitted plans and reports, with weak review and audit powers. The State does not supposedly act as the owner of the natural resources for and on behalf of the Filipino people; it practically has little effective say in the decisions made by the enterprise. Petitioners then conclude that the law, the implementing regulations, and the WMCP FTAA cede beneficial ownership of the mineral resources to the foreign contractor. A careful scrutiny of the provisions of RA 7942 and its Implementing Rules belies petitioners claims. Paraphrasing the Constitution, Section 4 of the statute clearly affirms the States control thus: Sec. 4. Ownership of Mineral Resources. Mineral resources are owned by the State and the exploration, development, utilization and processing thereof shall be under its full control and supervision. The State may directly undertake such activities or it may enter into mineral agreements with contractors. The State shall recognize and protect the rights of the indigenous cultural communities to their ancestral lands as provided for by the Constitution. The aforequoted provision is substantively reiterated in Section 2 of DAO 96-40 as follows: Sec. 2. Declaration of Policy. All mineral resources in public and private lands within the territory and exclusive economic zone of the Republic of the Philippines are owned by the State. It shall be the responsibility of the State to promote their rational exploration, development, utilization and conservation through the combined efforts of the Government and private sector in order to enhance national growth in a way that effectively safeguards the environment and protects the rights of affected communities.

Ultimate Test: States Control Determinative of Constitutionality

But we are not yet at the end of our quest. Far from it. It seems that we are confronted with a possible collision of constitutional provisions. On the one hand, paragraph 1 of Section 2 of Article XII explicitly mandates the State to exercise full control and supervision over the exploration, development and utilization of natural resources. On the other hand, paragraph 4 permits safeguarded service contracts with foreign contractors. Normally, pursuant thereto, the contractors exercise management prerogatives over the mining operations and the enterprise as a whole. There is thus a legitimate ground to be concerned that either the States full control and supervision may rule out any exercise of management authority by the foreign contractor; or, the other way around, allowing the foreign contractor full management prerogatives may ultimately negate the States full control and supervision. Ut Magis Valeat Quam Pereat Under the third principle of constitutional construction laid down in Francisco -- ut magis valeat quam pereat -- every part of the Constitution is to be given effect, and the Constitution is to be read and understood as a harmonious whole. Thus, full control and supervision by the State must be understood as one that does not preclude the legitimate exercise of management prerogatives by the foreign contractor. Before any further discussion, we must stress the primacy and supremacy of the principle of sovereignty and State control and supervision over all aspects of exploration, development and utilization of the countrys natural resources, as mandated in the first paragraph of Section 2 of Article XII. But in the next breadth we have to point out that full control and supervision cannot be taken literally to mean that the State controls and supervises everything involved, down to the minutest details, and makes all decisions required in the mining operations. This strained concept of control and supervision over the mining enterprise would render impossible the legitimate exercise by the contractors of a reasonable degree of management prerogative and authority necessary and indispensable to their proper functioning. For one thing, such an interpretation would discourage foreign entry into large-scale exploration, development and utilization activities; and result in the unmitigated stagnation of this sector, to the detriment of our nations development. This scenario renders paragraph 4 inoperative and useless. And as respondents have correctly pointed out, the government does not have to micro-manage the mining operations and dip its hands into the day-to-day affairs of the enterprise in order for it to be considered as having full control and supervision. The concept of control[53] adopted in Section 2 of Article XII must be taken to mean less than dictatorial, all-encompassing control; but nevertheless sufficient to give the State the power to direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the State may be on a macro level, through the establishment of policies, guidelines, regulations, industry standards and similar measures that would enable the government to control the conduct of affairs in various enterprises and restrain activities deemed not desirable or beneficial. The end in view is ensuring that these enterprises contribute to the economic development and general welfare of the country, conserve the environment, and uplift the well-being of the affected local communities. Such a concept of control would be compatible with permitting the foreign contractor sufficient and reasonable management authority over the enterprise it invested in, in order to ensure that it is operating efficiently and profitably, to protect its investments and to enable it to succeed. The question to be answered, then, is whether RA 7942 and its Implementing Rules 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.

Sufficient Control Over Mining Operations Vested in the State by RA 7942 and DAO 96-40
RA 7942 provides for the States control and supervision over mining operations. The following provisions thereof establish the mechanism of inspection and visitorial rights over mining operations and institute reportorial requirements in this manner: 1. Sec. 8 which provides for the DENRs power of over-all supervision and periodic review for the conservation, management, development and proper use of the States mineral resources; Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the DENR to exercise direct charge in the administration and disposition of mineral resources, and empowers the MGB to monitor the compliance by the contractor of the terms and conditions of the mineral agreements, confiscate surety and performance bonds, and deputize whenever necessary any member or unit of the Phil. National Police, barangay, duly registered non-governmental organization (NGO) or any qualified person to police mining activities; Sec. 66 which vests in the Regional Director exclusive jurisdiction over safety inspections of all installations, whether surface or underground, utilized in mining operations. Sec. 35, which incorporates into all FTAAs the following terms, conditions and warranties:

2.

3.

4.

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(g) Mining operations shall be conducted in accordance with the provisions of the Act and its IRR. Work programs and minimum expenditures commitments. xxx xxx (k) xxx Declaration of Mining Project Feasibility has been approved by government (Section 24, RA 7942). The Declaration of Mining Project Feasibility filed by the contractor cannot be approved without submission of the following documents: 1. Approved mining project feasibility study (Section 53-d, DAO 96-40)

(h)

Requiring proponent to effectively use appropriate antipollution technology and facilities to protect the environment and restore or rehabilitate mined-out areas. The contractors shall furnish the Government records of geologic, accounting and other relevant data for its mining operation, and that books of accounts and records shall be open for inspection by the government. x x x. Requiring the proponent to dispose of the minerals at the highest price and more advantageous terms and conditions. xxx xxx xxx

2. Approved three-year work program (Section 53-a-4, DAO 96-40) 3. Environmental compliance certificate (Section 70, RA 7942) 4. 5. Approved environmental protection and enhancement program (Section 69, RA 7942) Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section 70, RA 7942; Section 27, RA 7160)

(l)

(m)

(n) (o)

6. Free and prior informed consent by the indigenous peoples concerned, including payment of royalties through a Memorandum of Agreement (Section 16, RA 7942; Section 59, RA 8371) The FTAA contractor is obliged to assist in the development of its mining community, promotion of the general welfare of its inhabitants, and development of science and mining technology (Section 57, RA 7942). The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or annual basis as the case may be; per Section 270, DAO 96-40), pertaining to the following: 1. Exploration 2. Drilling 3. Mineral resources and reserves 4. Energy consumption 5. Production 6. Sales and marketing 7. Employment 8. Payment of taxes, royalties, fees and other Government Shares 9. Mine safety, health and environment 10. Land use 11. Social development 12. Explosives consumption An FTAA pertaining to areas within government reservations cannot be granted without a written clearance from the government agencies concerned (Section 19, RA 7942; Section 54, DAO 96-40). An FTAA contractor is required to post a financial guarantee bond in favor of the government in an amount equivalent to its expenditures obligations for any particular year. This requirement is apart from the representations and warranties of the contractor that it has access to all the financing, managerial and technical expertise and technology necessary to carry out the objectives of the FTAA (Section 35-b, -e, and -f, RA 7942). Other reports to be submitted by the contractor, as required under DAO 96-40, are as follows: an environmental report on the rehabilitation of the mined-out area and/or mine waste/tailing covered area, and anti-pollution measures undertaken (Section 35-a-2); annual reports of the mining operations and records of geologic accounting (Section 56-m); annual progress reports and final report of exploration activities (Section 56-2).

Such other terms and conditions consistent with the Constitution and with this Act as the Secretary may deem to be for the best interest of the State and the welfare of the Filipino people.

The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40. Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the governments control over mining enterprises: The contractor is to relinquish to the government those portions of the contract area not needed for mining operations and not covered by any declaration of mining feasibility (Section 35-e, RA 7942; Section 60, DAO 96-40). The contractor must comply with the provisions pertaining to mine safety, health and environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 96-40). For violation of any of its terms and conditions, government may cancel an FTAA. (Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40). An FTAA contractor is obliged to open its books of accounts and records for inspection by the government (Section 56-m, DAO 96-40). An FTAA contractor has to dispose of the minerals and byproducts at the highest market price and register with the MGB a copy of the sales agreement (Section 56-n, DAO 96-40). MGB is mandated to monitor the contractors compliance with the terms and conditions of the FTAA; and to deputize, when necessary, any member or unit of the Philippine National Police, the barangay or a DENR-accredited nongovernmental organization to police mining activities (Section 7-d and -f, DAO 96-40). An FTAA cannot be transferred or assigned without prior approval by the President (Section 40, RA 7942; Section 66, DAO 96-40). A mining project under an FTAA cannot proceed to the construction/development/utilization stage, unless its

14
Other programs required to be submitted by the contractor, pursuant to DAO 96-40, are the following: a safety and health program (Section 144); an environmental work program (Section 168); an annual environmental protection and enhancement program (Section 171). The foregoing gamut of requirements, regulations, restrictions and limitations imposed upon the FTAA contractor by the statute and regulations easily overturns petitioners contention. The setup under RA 7942 and DAO 96-40 hardly relegates the State to the role of a passive regulator dependent on submitted plans and reports. On the contrary, the government agencies concerned are empowered to approve or disapprove -- hence, to influence, direct and change -- the various work programs and the corresponding minimum expenditure commitments for each of the exploration, development and utilization phases of the mining enterprise. Once these plans and reports are approved, the contractor is bound to comply with its commitments therein. Figures for mineral production and sales are regularly monitored and subjected to government review, in order to ensure that the products and by-products are disposed of at the best prices possible; even copies of sales agreements have to be submitted to and registered with MGB. And the contractor is mandated to open its books of accounts and records for scrutiny, so as to enable the State to determine if the government share has been fully paid. The State may likewise compel the contractors compliance with mandatory requirements on mine safety, health and environmental protection, and the use of anti-pollution technology and facilities. Moreover, the contractor is also obligated to assist in the development of the mining community and to pay royalties to the indigenous peoples concerned. Cancellation of the FTAA may be the penalty for violation of any of its terms and conditions and/or noncompliance with statutes or regulations. This general, all-around, multipurpose sanction is no trifling matter, especially to a contractor who may have yet to recover the tens or hundreds of millions of dollars sunk into a mining project. Overall, considering the provisions of the statute and the regulations just discussed, we believe that the State definitely possesses the means by which it can have the ultimate word in the operation of the enterprise, set directions and objectives, and detect deviations and noncompliance by the contractor; likewise, it has the capability to enforce compliance and to impose sanctions, should the occasion therefor arise. In other words, the FTAA contractor is not free to do whatever it pleases and get away with it; on the contrary, it will have to follow the government line if it wants to stay in the enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the government more than a sufficient degree of control and supervision over the conduct of mining operations. Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified person the right to conduct exploration for all minerals in specified areas. Such a permit does not amount to an authorization to extract and carry off the mineral resources that may be discovered. This phase involves nothing but expenditures for exploring the contract area and locating the mineral bodies. As no extraction is involved, there are no revenues or incomes to speak of. In short, the exploration permit is an authorization for the grantee to spend its own funds on exploration programs that are preapproved by the government, without any right to recover anything should no minerals in commercial quantities be discovered. The State risks nothing and loses nothing by granting these permits to local or foreign firms; in fact, it stands to gain in the form of data generated by the exploration activities. Pursuant to Section 24 of RA 7942, an exploration permit grantee who determines the commercial viability of a mining area may, within the term of the permit, file with the MGB a declaration of mining project feasibility accompanied by a work program for development. The approval of the mining project feasibility and compliance with other requirements of RA 7942 vests in the grantee the exclusive right to an MPSA or any other mineral agreement, or to an FTAA. Thus, the permit grantee may apply for an MPSA, a joint venture agreement, a co-production agreement, or an FTAA over the permit area, and the application shall be approved if the permit grantee meets the necessary qualifications and the terms and conditions of any such agreement. Therefore, the contractor will be in a position to extract minerals and earn revenues only when the MPSA or another mineral agreement, or an FTAA, is granted. At that point, the contractors rights and obligations will be covered by an FTAA or a mineral agreement. But prior to the issuance of such FTAA or mineral agreement, the exploration permit grantee (or prospective contractor) cannot yet be deemed to have entered into any contract or agreement with the State, and the grantee would definitely need to have some document or instrument as evidence of its right to conduct exploration works within the specified area. This need is met by the exploration permit issued pursuant to Sections 3(aq), 20 and 23 of RA 7942. In brief, the exploration permit serves a practical and legitimate purpose in that it protects the interests and preserves the rights of the exploration permit grantee (the would-be contractor) -foreign or local -- during the period of time that it is spending heavily on exploration works, without yet being able to earn revenues to recoup any of its investments and expenditures. Minus this permit and the protection it affords, the exploration works and expenditures may end up benefiting only claim-jumpers. Such a possibility tends to discourage investors and contractors. Thus, Section 3(aq) of RA 7942 may not be deemed unconstitutional.

The Terms of the WMCP FTAA A Deference to State Control


A perusal of the WMCP FTAA also reveals a slew of stipulations providing for State control and supervision: 1. 2. 3. 4. 5. The contractor is obligated to account for the value of production and sale of minerals (Clause 1.4). The contractors work program, activities and budgets must be approved by/on behalf of the State (Clause 2.1). The DENR secretary has the power to extend the exploration period (Clause 3.2-a). Approval by the State is necessary for incorporating lands into the FTAA contract area (Clause 4.3-c). The Bureau of Forest Development is vested with discretion in regard to approving the inclusion of forest reserves as part of the FTAA contract area (Clause 4.5). The contractor is obliged to relinquish periodically parts of the contract area not needed for exploration and development (Clause 4.6).

Section 3(aq) of RA 7942 Not Unconstitutional


An objection has been expressed that Section 3(aq)[55] of RA 7942 -which allows a foreign contractor to apply for and hold an exploration permit -- is unconstitutional. The reasoning is that Section 2 of Article XII of the Constitution does not allow foreign-owned corporations to undertake mining operations directly. They may act only as contractors of the State under an FTAA; and the State, as the party directly undertaking exploitation of its natural resources, must hold through the government all exploration permits and similar authorizations. Hence, Section 3(aq), in permitting foreign-owned corporations to hold exploration permits, is unconstitutional. The objection, however, is not well-founded. While the Constitution mandates the State to exercise full control and supervision over the exploitation of mineral resources, nowhere does it require the government to hold all exploration permits and similar authorizations. In fact, there is no prohibition at all against foreign or local corporations or contractors holding exploration permits. The reason is not hard to see.

6.

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7. 8. 9. A Declaration of Mining Feasibility must be submitted for approval by the State (Clause 4.6-b). The contractor is obligated to report to the State its exploration activities (Clause 4.9). The contractor is required to obtain State approval of its work programs for the succeeding two-year periods, containing the proposed work activities and expenditures budget related to exploration (Clause 5.1). The contractor is required to obtain State approval for its proposed expenditures for exploration activities (Clause 5.2). The contractor is required to submit an annual report on geological, geophysical, geochemical and other information relating to its explorations within the FTAA area (Clause 5.3a). DENR secretary for approval. The programs will detail the contractors proposed exploration activities and budget covering each subsequent period of two fiscal years. In other words, the concerned government officials will be informed beforehand of the proposed exploration activities and expenditures of the contractor for each succeeding two-year period, with the right to approve/disapprove them or require changes or adjustments therein if deemed necessary. Likewise, under Clause 5.2(a), the amount that the contractor was supposed to spend for exploration activities during the first contract year of the exploration period was fixed at not less than P24 million; and then for the succeeding years, the amount shall be as agreed between the DENR secretary and the contractor prior to the commencement of each subsequent fiscal year. If no such agreement is arrived upon, the previous years expenditure commitment shall apply. This provision alone grants the government through the DENR secretary a very big say in the exploration phase of the project. This fact is not something to be taken lightly, considering that the government has absolutely no contribution to the exploration expenditures or work activities and yet is given veto power over such a critical aspect of the project . We cannot but construe as very significant such a degree of control over the project and, resultantly, over the mining enterprise itself. Following its exploration activities or feasibility studies, if the contractor believes that any part of the contract area is likely to contain an economic mineral resource, it shall submit to the DENR secretary a declaration of mining feasibility (per Clause 5.4 of the FTAA), together with a technical description of the area delineated for development and production, a description of the proposed mining operations including the technology to be used, a work program for development, an environmental impact statement, and a description of the contributions to the economic and general welfare of the country to be generated by the mining operations (pursuant to Clause 5.5). The work program for development is subject to the approval of the DENR secretary. Upon its approval, the contractor must comply with it and complete the development of the mine, including the construction of production facilities and installation of machinery and equipment, within the period provided in the approved work program for development (per Clause 6.1). Thus, notably, the development phase of the project is likewise subject to the control and supervision of the government. It cannot be emphasized enough that the proper and timely construction and deployment of the production facilities and the development of the mine are of pivotal significance to the success of the mining venture. Any missteps here will potentially be very costly to remedy. Hence, the submission of the work program for development to the DENR secretary for approval is particularly noteworthy, considering that so many millions of dollars worth of investments -- courtesy of the contractor -- are made to depend on the States consideration and action. Throughout the operating period, the contractor is required to submit to the DENR secretary for approval, copy furnished the director of MGB, work programs covering each period of three fiscal years (per Clause 6.2). During the same period (per Clause 6.3), the contractor is mandated to submit various quarterly and annual reports to the DENR secretary, copy furnished the director of MGB, on the tonnages of production in terms of ores and concentrates, with corresponding grades, values and destinations; reports of sales; total ore reserves, total tonnage of ores, work accomplished and work in progress (installations and facilities related to mining operations), investments made or committed, and so on and so forth. Under Section VIII, during the period of mining operations, the contractor is also required to submit to the DENR secretary (copy furnished the director of MGB) the work program and corresponding budget for the contract area, describing the mining operations that are proposed to be carried out during the period covered. The secretary is, of course, entitled to grant or deny approval of any work program or budget

10. 11.

12. The contractor is to submit within six months after expiration of exploration period a final report on all its findings in the contract area (Clause 5.3-b). 13. The contractor, after conducting feasibility studies, shall submit a declaration of mining feasibility, along with a description of the area to be developed and mined, a description of the proposed mining operations and the technology to be employed, and a proposed work program for the development phase, for approval by the DENR secretary (Clause 5.4). 14. The contractor is obliged to complete the development of the mine, including construction of the production facilities, within the period stated in the approved work program (Clause 6.1). 15. The contractor is obligated to submit for approval of the DENR secretary a work program covering each period of three fiscal years (Clause 6.2).

16. The contractor is to submit reports to the DENR secretary on the production, ore reserves, work accomplished and work in progress, profile of its work force and management staff, and other technical information (Clause 6.3). 17. Any expansions, modifications, improvements and replacements of mining facilities shall be subject to the approval of the secretary (Clause 6.4).

18. The State has control with respect to the amount of funds that the contractor may borrow within the Philippines (Clause 7.2). 19. The State has supervisory power with respect to technical, financial and marketing issues (Clause 10.1-a).

20. The contractor is required to ensure 60 percent Filipino equity in the contractor, within ten years of recovering specified expenditures, unless not so required by subsequent legislation (Clause 10.1). 21. The State has the right to terminate the FTAA for the contractors unremedied substantial breach thereof (Cl ause 13.2);

22. The States approval is needed for any assignment of the FTAA by the contractor to an entity other than an affiliate (Clause 14.1). We should elaborate a little on the work programs and budgets, and what they mean with respect to the States ability to exercise full control and effective supervision over the enterprise. For instance, throughout the initial five-year exploration and feasibility phase of the project, the contractor is mandated by Clause 5.1 of the WMCP FTAA to submit a series of work programs (copy furnished the director of MGB) to the

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and/or propose revisions thereto. Once the program/budget has been approved, the contractor shall comply therewith. In sum, 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. the benefit of the State as well as the contractor. Second, who is to say that the work program or budget proposed by the contractor and deemed approved under Clause 8.3 would not be the better or more reasonable or more effective alternative? The contractor, being the insider, as it were, may be said to be in a better position than the State -- an outsider looking in -- to determine what work program or budget would be appropriate, more effective, or more suitable under the circumstances. All things considered, we take exception to the characterization of the DENR secretary as a subservient nonentity whom the contractor can overrule at will, on account of Clause 8.3. And neither is it true that under the same clause, the DENR secretary has no authority whatsoever to disapprove the work program. As Respondent WMCP reasoned in its Reply-Memorandum, the State -- despite Clause 8.3 -- still has control over the contract area and it may, as sovereign authority, prohibit work thereon until the dispute is resolved. And ultimately, the State may terminate the agreement, pursuant to Clause 13.2 of the same FTAA, citing substantial breach thereof. Hence, it clearly retains full and effective control of the exploitation of the mineral resources. On the other hand, Clause 8.5 is merely an acknowledgment of the parties need for flexibility, given that no one can accurately forecast under all circumstances, or predict how situations may change. Hence, while approved work programs and budgets are to be followed and complied with as far as practicable, there may be instances in which changes will have to be effected, and effected rapidly, since events may take shape and unfold with suddenness and urgency. Thus, Clause 8.5 allows the contractor to move ahead and make changes without the express or implicit approval of the DENR secretary. Such changes are, however, subject to certain conditions that will serve to limit or restrict the variance and prevent the contractor from straying very far from what has been approved. Clause 8.5 provides the contractor a certain amount of flexibility to meet unexpected situations, while still guaranteeing that the approved work programs and budgets are not abandoned altogether. Clause 8.5 does not constitute proof that the State has relinquished control. And ultimately, should there be disagreement with the actions taken by the contractor in this instance as well as under Clause 8.3 discussed above, the DENR secretary may resort to cancellation/termination of the FTAA as the ultimate sanction.

No Surrender of Control Under the WMCP FTAA


Petitioners, however, take aim at Clause 8.2, 8.3, and 8.5 of the WMCP FTAA which, they say, amount to a relinquishment of control by the State, since it cannot truly impose its own discretion in respect of the submitted work programs. 8.2. The Secretary shall be deemed to have approved any Work Programme or Budget or variation thereof submitted by the Contractor unless within sixty (60) days after submission by the Contractor the Secretary gives notice declining such approval or proposing a revision of certain features and specifying its reasons therefor (the Rejection Notice). If the Secretary gives a Rejection Notice, the Parties shall promptly meet and endeavor to agree on amendments to the Work Programme or Budget. If the Secretary and the Contractor fail to agree on the proposed revision within 30 days from delivery of the Rejection Notice then the Work Programme or Budget or variation thereof proposed by the Contractor shall be deemed approved, so as not to unnecessarily delay the performance of the Agreement. xxx xxx xxx

8.3.

8.4. 8.5.

So far as is practicable, the Contractor shall comply with any approved Work Programme and Budget. It is recognized by the Secretary and the Contractor that the details of any Work Programmes or Budgets may require changes in the light of changing circumstances. The Contractor may make such changes without approval of the Secretary provided they do not change the general objective of any Work Programme, nor entail a downward variance of more than twenty per centum (20percent) of the relevant Budget. All other variations to an approved Work Programme or Budget shall be submitted for approval of the Secretary.

Discretion to Select Contract Area Not an Abdication of Control


Next, petitioners complain that the contractor has full discretion to select -- and the government has no say whatsoever as to -- the parts of the contract area to be relinquished pursuant to Clause 4.6 of the WMCP FTAA.[56] This clause, however, does not constitute abdication of control. Rather, it is a mere acknowledgment of the fact that the contractor will have determined, after appropriate exploration works, which portions of the contract area do not contain minerals in commercial quantities sufficient to justify developing the same and ought therefore to be relinquished. The State cannot just substitute its judgment for that of the contractor and dictate upon the latter which areas to give up. Moreover, we can be certain that the contractors self-interest will propel proper and efficient relinquishment. According to private respondent,[57]a mining company tries to relinquish as much non-mineral areas as soon as possible, because the annual occupation fees paid to the government are based on the total hectarage of the contract area, net of the areas relinquished. Thus, the larger the remaining area, the heftier the amount of occupation fees to be paid by the contractor. Accordingly, relinquishment is not an issue, given that the contractor will not want to pay the annual occupation fees on the nonmineral parts of its contract area. Neither will it want to relinquish promising sites, which other contractors may subsequently pick up.

From the provisions quoted above, petitioners generalize by asserting that the government does not participate in making critical decisions regarding the operations of the mining firm. Furthermore, while the State can require the submission of work programs and budgets, the decision of the contractor will still prevail, if the parties have a difference of opinion with regard to matters affecting operations and management. We hold, however, that the foregoing provisions do not manifest a relinquishment of control. For instance, Clause 8.2 merely provides a mechanism for preventing the business or mining operations from grinding to a complete halt as a result of possibly over-long and unjustified delays in the governments handling, processing and approval of submitted work programs and budgets. Anyway, the provision does give the DENR secretary more than sufficient time (60 days) to react to submitted work programs and budgets. It cannot be supposed that proper grounds for objecting thereto, if any exist, cannot be discovered within a period of two months. On the other hand, Clause 8.3 seeks to provide a temporary, stopgap solution in the event a disagreement over the submitted work program or budget arises between the State and the contractor and results in a stalemate or impasse, in order that there will be no unreasonably long delays in the performance of the works. These temporary or stop-gap solutions are not necessarily evil or wrong. Neither does it follow that the government will inexorably be aggrieved if and when these temporary remedies come into play. First, avoidance of long delays in these situations will undoubtedly redound to

Government Not a Subcontractor

Petitioners further maintain that the contractor can compel the government to exercise its power of eminent domain to acquire surface areas within the contract area for the contractors use. Clause 10.2 (e) of the WMCP FTAA provides that the government agrees that the contractor shall (e) have the right to require the Government at the Contractors own cost, to purchase or acquire surface areas for and on behalf of the Contractor at

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such price and terms as may be acceptable to the contractor. At the termination of this Agreement such areas shall be sold by public auction or tender and the Contractor shall be entitled to reimbursement of the costs of acquisition and maintenance, adjusted for inflation, from the proceeds of sale. According to petitioners, government becomes a subcontractor to the contractor and may, on account of this provision, be compelled to make use of its power of eminent domain, not for public purposes but on behalf of a private party, i.e., the contractor. Moreover, the power of the courts to determine the amount corresponding to the constitutional requirement of just compensation has allegedly also been contracted away by the government, on account of the latters commitment that the acquisition shall be at such terms as may be acceptable to the contractor. However, private respondent has proffered a logical explanation for the provision.[58] Section 10.2(e) contemplates a situation applicable to foreign-owned corporations. WMCP, at the time of the execution of the FTAA, was a foreign-owned corporation and therefore not qualified to own land. As contractor, it has at some future date to construct the infrastructure -- the mine processing plant, the camp site, the tailings dam, and other infrastructure -- needed for the large-scale mining operations. It will then have to identify and pinpoint, within the FTAA contract area, the particular surface areas with favorable topography deemed ideal for such infrastructure and will need to acquire the surface rights. The State owns the mineral deposits in the earth, and is also qualified to own land. Section 10.2(e) sets forth the mechanism whereby the foreignowned contractor, disqualified to own land, identifies to the government the specific surface areas within the FTAA contract area to be acquired for the mine infrastructure. The government then acquires ownership of the surface land areas on behalf of the contractor, in order to enable the latter to proceed to fully implement the FTAA. The contractor, of course, shoulders the purchase price of the land. Hence, the provision allows it, after termination of the FTAA, to be reimbursed from proceeds of the sale of the surface areas, which the government will dispose of through public bidding. It should be noted that this provision will not be applicable to Sagittarius as the present FTAA contractor, since it is a Filipino corporation qualified to own and hold land. As such, it may therefore freely negotiate with the surface rights owners and acquire the surface property in its own right. Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being aware of the rationale for the said provision. That provision does not call for the exercise of the power of eminent domain -- and determination of just compensation is not an issue -- as much as it calls for a qualified party to acquire the surface rights on behalf of a foreign-owned contractor. Rather than having the foreign contractor act through a dummy corporation, having the State do the purchasing is a better alternative. This will at least cause the government to be aware of such transaction/s and foster transparency in the contractors dealings with the local property owners. The government, then, will not act as a subcontractor of the contractor; rather, it will facilitate the transaction and enable the parties to avoid a technical violation of the Anti-Dummy Law. (m) Requiring the proponent to dispose of the minerals at the highest price and more advantageous terms and conditions. For that matter, Section 56(n) of DAO 99-56 specifically obligates an FTAA contractor to dispose of the minerals and by-products at the highest market price and to register with the MGB a copy of the sales agreement. After all, the provisions of prevailing statutes as well as rules and regulations are deemed written into contracts.

Contractors Right to Mortgage Not Objectionable Per Se


Petitioners also question the absolute right of the contractor under Clause 10.2 (l) to mortgage and encumber not only its rights and interests in the FTAA and the infrastructure and improvements introduced, but also the mineral products extracted. Private respondents do not touch on this matter, but we believe that this provision may have to do with the conditions imposed by the creditor-banks of the then foreign contractor WMCP to secure the lendings made or to be made to the latter. Ordinarily, banks lend not only on the security of mortgages on fixed assets, but also on encumbrances of goods produced that can easily be sold and converted into cash that can be applied to the repayment of loans. Banks even lend on the security of accounts receivable that are collectible within 90 days.[59] It is not uncommon to find that a debtor corporation has executed deeds of assignment by way of security over the production for the next twelve months and/or the proceeds of the sale thereof -- or the corresponding accounts receivable, if sold on terms -- in favor of its creditor-banks. Such deeds may include authorizing the creditors to sell the products themselves and to collect the sales proceeds and/or the accounts receivable. Seen in this context, Clause 10.2(l) is not something out of the ordinary or objectionable. In any case, as will be explained below, even if it is allowed to mortgage or encumber the mineral end-products themselves, the contractor is not freed of its obligation to pay the government its basic and additional shares in the net mining revenue, which is the essential thing to consider. In brief, the alarum raised over the contractors right to mortgage the minerals is simply unwarranted. Just the same, the contractor must account for the value of mineral production and the sales proceeds therefrom. Likewise, under the WMCP FTAA, the government remains entitled to its sixty percent share in the net mining revenues of the contractor. The latters right to mortgage the minerals does not negate the States right to receive its share of net mining revenues.

Shareholders Free to Sell Their Stocks


Petitioners likewise criticize Clause 10.2(k), which gives the contractor authority to change its equity structure at any time. This provision may seem somewhat unusual, but considering that WMCP then was 100 percent foreign-owned, any change would mean that such percentage would either stay unaltered or be decreased in favor of Filipino ownership. Moreover, the foreign-held shares may change hands freely. Such eventuality is as it should be. We believe it is not necessary for government to attempt to limit or restrict the freedom of the shareholders in the contractor to freely transfer, dispose of or encumber their shareholdings, consonant with the unfettered exercise of their business judgment and discretion. Rather, what is critical is that, regardless of the identity, nationality and percentage ownership of the various shareholders of the contractor -- and regardless of whether these shareholders decide to take the company public, float bonds and other fixed-income instruments, or allow the creditor-banks to take an equity position in the company -- the foreign-owned contractor is always in a position to render the services required under the FTAA, under the direction and control of the government.

Absence of Provision Requiring Sale at Posted Prices Not Problematic


The supposed absence of any provision in the WMCP FTAA directly and explicitly requiring the contractor to sell the mineral products at posted or market prices is not a problem. Apart from Clause 1.4 of the FTAA obligating the contractor to account for the total value of mineral production and the sale of minerals, we can also look to Section 35 of RA 7942, which incorporates into all FTAAs certain terms, conditions and warranties, including the following: (l) The contractors shall furnish the Government records of geologic, accounting and other relevant data for its mining operation, and thatbooks of accounts and records shall be open for inspection by the government. x x x

Contractors Right to Ask For Amendment Not Absolute


With respect to Clauses 10.4(e) and (i), petitioners complain that these provisions bind government to allow amendments to the FTAA if required by banks and other financial institutions as part of the conditions for new lendings. However, we do not find anything wrong with Clause

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10.4(e), which only states that if the Contractor seeks to obtain financing contemplated herein from banks or other financial institutions, (the Government shall) cooperate with the Contractor in such efforts provided that such financing arrangements will in no event reduce the Contractors obligations or the Governments rights hereunder. The colatilla obviously safeguards the States interests; if breached, it will give the government cause to object to the proposed amendments. On the other hand, Clause 10.4(i) provides that the Government shall favourably consider any request from [the] Contractor for amendments of this Agreement which are necessary in order for the Contractor to successfully obtain the financing. Petitioners see in this provision a complete renunciation of control. We disagree. The proviso does not say that the government shall grant any request for amendment. Clause 10.4(i) only obliges the State to favorablyconsider any such request, which is not at all unreasonable, as it is not equivalent to saying that the government must automatically consent to it. This provision should be read together with the rest of the FTAA provisions instituting government control and supervision over the mining enterprise. The clause should not be given an interpretation that enables the contractor to wiggle out of the restrictions imposed upon it by merely suggesting that certain amendments are requested by the lenders. Rather, it is up to the contractor to prove to the government that the requested changes to the FTAA are indispensable, as they enable the contractor to obtain the needed financing; that without such contract changes, the funders would absolutely refuse to extend the loan; that there are no other sources of financing available to the contractor (a very unlikely scenario); and that without the needed financing, the execution of the work programs will not proceed. But the bottom line is, in the exercise of its power of control, the government has the final say on whether to approve or disapprove such requested amendments to the FTAA. In short, approval thereof is not mandatory on the part of the government. In fine, the foregoing evaluation and analysis of the aforementioned FTAA provisions sufficiently overturns petitioners litany of objections to and criticisms of the States alleged lack of control. As public respondents correctly point out, any interest the contractor may have in the proceeds of the mining operation is merely the equivalent of the consideration the government has undertaken to pay for its services. All lawful contracts require such mutual prestations, and the WMCP FTAA is no different. The contractor commits to perform certain services for the government in respect of the mining operation, and in turn it is to be compensated out of the net mining revenues generated from the sale of mineral products. What would be objectionable is a contractual provision that unduly benefits the contractor far in excess of the service rendered or value delivered, if any, in exchange therefor. A careful perusal of the statute itself and its implementing rules reveals that neither RA 7942 nor DAO 99-56 can be said to convey beneficial ownership of any mineral resource or product to any foreign FTAA contractor.

Equitable Sharing of Financial Benefits


On the contrary, DAO 99-56, entitled Guidelines Establishing the Fiscal Regime of Financial or Technical Assistance Agreements aims to ensure an equitable sharing of the benefits derived from mineral resources. These benefits are to be equitably shared among the government (national and local), the FTAA contractor, and the affected communities. The purpose is to ensure sustainable mineral resources development; and a fair, equitable, competitive and stable investment regime for the large-scale exploration, development and commercial utilization of minerals. The general framework or concept followed in crafting the fiscal regime of the FTAA is based on the principle that the government expects real contributions to the economic growth and general welfare of the country, while the contractor expects a reasonable return on its investments in the project.[63] Specifically, under the fiscal regime, the governments expectation is, inter alia, the receipt of its share from the taxes and fees normally paid by a mining enterprise. On the other hand, the FTAA contractor is granted by the government certain fiscal and non-fiscal incentives[64] to help support the formers cash flow during the most critical phase (cost recovery) and to make the Philippines competitive with other mineralproducing countries. After the contractor has recovered its initial investment, it will pay all the normal taxes and fees comprising the basic share of the government, plus an additional share for the government based on the options and formulae set forth in DAO 99-56. The said DAO spells out the financial benefits the government will receive from an FTAA, referred to as the Government Share, composed of a basic government share and an additional government share. The basic government share is comprised of all direct taxes, fees and royalties, as well as other payments made by the contractor during the term of the FTAA. These are amounts paid directly to (i) the national government (through the Bureau of Internal Revenue, Bureau of Customs, Mines & Geosciences Bureau and other national government agencies imposing taxes or fees), (ii) the local government units where the mining activity is conducted, and (iii) persons and communities directly affected by the mining project. The major taxes and other payments constituting the basic government share are enumerated below:[65] Payments to the National Government: Excise tax on minerals - 2 percent of the gross output of mining operations Contractor income tax - maximum of 32 percent of taxable income for corporations Customs duties and fees on imported capital equipment -the rate is set by the Tariff and Customs Code (3-7 percent for chemicals; 3-10 percent for explosives; 3-15 percent for mechanical and electrical equipment; and 3-10 percent for vehicles, aircraft and vessels VAT on imported equipment, goods and services 10 percent of value

Financial Benefits Not Surrendered to the Contractor


One of the main reasons certain provisions of RA 7942 were struck down was the finding mentioned in the Decision that beneficial ownership of the mineral resources had been conveyed to the contractor. This finding was based on the underlying assumption, common to the said provisions, that the foreign contractor manages the mineral resources in the same way that foreign contractors in service contracts used to. By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nations mineral resources to these contractors, leaving the State with nothing but bare title thereto.[60] As the WMCP FTAA contained similar provisions deemed by the ponente to be abhorrent to the Constitution, the Decision struck down the Contract as well. Beneficial ownership has been defined as ownership recognized by law and capable of being enforced in the courts at the suit of the beneficial owner.[61] Blacks Law Dictionary indicates that the term is used in two senses: first, to indicate the interest of a beneficiary in trust property (also called equitable ownership); and second, to refer to the power of a corporate shareholder to buy or sell the shares, though the shareholder is not registered in the corporations books as the owner.[62] Usually, beneficial ownership is distinguished from naked ownership, which is the enjoyment of all the benefits and privileges of ownership, as against possession of the bare title to property. An assiduous examination of the WMCP FTAA uncovers no indication that it confers upon WMCP ownership, beneficial or otherwise, of the mining property it is to develop, the minerals to be produced, or the proceeds of their sale, which can be legally asserted and enforced as against the State.

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Royalties due the government on minerals extracted from mineral reservations, if applicable 5 percent of the actual market value of the minerals produced Documentary stamp tax - the rate depends on the type of transaction Capital gains tax on traded stocks - 5 to 10 percent of the value of the shares Withholding tax on interest payments on foreign loans -15 percent of the amount of interest Withholding tax on dividend payments to foreign stockholders 15 percent of the dividend Wharfage and port fees Licensing fees (for example, radio permit, firearms permit, professional fees) Other national taxes and fees. Payments to Local Governments: Local business tax - a maximum of 2 percent of gross sales or receipts (the rate varies among local government units) Real property tax - 2 percent of the fair market value of the property, based on an assessment level set by the local government Special education levy - 1 percent of the basis used for the real property tax Occupation fees - PhP50 per hectare per year; PhP100 per hectare per year if located in a mineral reservation Community tax - maximum of PhP10,500 per year All other local government taxes, fees and imposts as of the effective date of the FTAA - the rate and the type depend on the local government Other Payments: Royalty to indigenous cultural communities, if any 1 percent of gross output from mining operations Special allowance - payment to claim owners and surface rights holders Apart from the basic share, an additional government share is also collected from the FTAA contractor in accordance with the second paragraph of Section 81 of RA 7942, which provides that the government share shall be comprised of, among other things, certain taxes, duties and fees. The subject proviso reads: The Government share in a financial or technical assistance agreement shall consist of, among other things, the contractors corporate income tax, excise tax, special allowance, withholding tax due from the contractors foreign stockholders arising from dividend or interest payments to the said foreign stockholder in case of a foreign national, and all such other taxes, duties and fees as provided for under existing laws. (Bold types supplied.) The government, through the DENR and the MGB, has interpreted the insertion of the phrase among other things as signifying that the government is entitled to an additional government share to be paid by the contractor apart from the basic share, in order to attain a fifty-fifty sharing of net benefits from mining. The additional government share is computed by using one of three options or schemes presented in DAO 99-56: (1) a fifty-fifty sharing in the cumulative present value of cash flows; (2) the share based on excess profits; and (3) the sharing based on the cumulative net mining revenue. The particular formula to be applied will be selected by the contractor, with a written notice to the government prior to the commencement of the development and construction phase of the mining project.[66] Proceeds from the government shares arising from an FTAA contract are distributed to and received by the different levels of government in the following proportions: National Government Provincial Government Municipal Government Affected Barangays 50 percent 10 percent 20 percent 20 percent

The portion of revenues remaining after the deduction of the basic and additional government shares is what goes to the contractor.

Governments Share in an FTAA Not Consisting Solely of Taxes, Duties and Fees
In connection with the foregoing discussion on the basic and additional government shares, it is pertinent at this juncture to mention the criticism leveled at the second paragraph of Section 81 of RA 7942, quoted earlier. The said proviso has been denounced, because, allegedly, the States share in FTAAs with foreign contractors has been limited to taxes, fees and duties only; in effect, the State has been deprived of ashare in the after-tax income of the enterprise. In the face of this allegation, one has to consider that the law does not define the term among other things; and the Office of the Solicitor General, in its Motion for Reconsideration, appears to have erroneously claimed that the phrase refers to indirect taxes. The law provides no definition of the term among other things, for the reason that Congress deliberately avoided setting unnecessary limitations as to what may constitute compensation to the State for the exploitation and use of mineral resources. But the inclusion of that phrase clearly and unmistakably reveals the legislative intent to have the State collect more than just the usual taxes, duties and fees. Certainly, there is nothing in that phrase -- or in the second paragraph of Section 81 -- that would suggest that such phrase should be interpreted as referring only to taxes, duties, fees and the like. Precisely for that reason, to fulfill the legislative intent behind the inclusion of the phrase among other things in the second paragraph of Section 81,[67] the DENR structured and formulated in DAO 99-56 the said additional government share. Such a share was to consist not of taxes, but of a share in the earnings or cash flows of the mining enterprise. The additional government share was to be paid by the contractor on top of the basic share, so as to achieve a fifty-fifty sharing -between the government and the contractor -- of net benefits from mining. In the Ramos-DeVera paper, the explanation of the three options or formulas[68] - presented in DAO 99-56 for the computation of the additional government share -serves to debunk the claim that the governments take from an FTAA consists solely of taxes, fees and duties. Unfortunately, the Office of the Solicitor General -- although in possession of the relevant data -- failed to fully replicate or echo the pertinent elucidation in the Ramos-DeVera paper regarding the three schemes or options for computing the additional government share presented in DAO 99-56. Had due care been taken by the OSG, the Court would have been duly apprised of the real nature and particulars of the additional share. But, perhaps, on account of the esoteric discussion in the RamosDeVera paper, and the even more abstruse mathematical jargon employed in DAO 99-56, the OSG omitted any mention of the three options. Instead, the OSG skipped to a side discussion of the effect ofindirect taxes, which had nothing at all to do with the additional government share, to begin with. Unfortunately, this move created the wrong impression, pointed out in Justice Antonio T. Carpios Opinion, that the OSG had taken the position that the additional government share consisted of indirect taxes.

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In any event, what is quite evident is the fact that the additional government share, as formulated, has nothing to do with taxes -- direct or indirect -- or with duties, fees or charges. To repeat, it is over and above the basic government share composed of taxes and duties. Simply put, the additional share may be (a) an amount that will result in a 50-50 sharing of the cumulative present value of the cash flows[69] of the enterprise; (b) an amount equivalent to 25 percent of the additional or excess profits of the enterprise, reckoned against a benchmark return on investments; or (c) an amount that will result in a fifty-fifty sharing of the cumulative net mining revenue from the end of the recovery period up to the taxable year in question. The contractor is required to select one of the three options or formulae for computing the additional share, an option it will apply to all of its mining operations. As used above, net mining revenue is defined as the gross output from mining operations for a calendar year, less deductible expenses (inclusive of taxes, duties and fees). Such revenue would roughly be equivalent to taxable income or income before income tax. Definitely, as compared with, say, calculating the additional government share on the basis of net income (after income tax), the net mining revenue is a better and much more reasonable basis for such computation, as it gives a truer picture of the profitability of the company. To demonstrate that the three options or formulations will operate as intended, Messrs. Ramos and de Vera also performed some quantifications of the government share via a financial modeling of each of the three options discussed above. They found that the government would get the highest share from the option that is based on the net mining revenue, as compared with the other two options, considering only the basic and the additional shares; and that, even though production rate decreases, the government share will actually increase when the net mining revenue and the additional profit-based options are used. Furthermore, it should be noted that the three options or formulae do not yet take into account the indirect taxes[70] and other financial contributions[71] of mining projects. These indirect taxes and other contributions are real and actual benefits enjoyed by the Filipino people and/or government. Now, if some of the quantifiable items are taken into account in the computations, the financial modeling would show that the total government share increases to 60 percent or higher -- in one instance, as much as 77 percent and even 89 percent -- of the net present value of total benefits from the project. As noted in the Ramos-DeVera paper, these results are not at all shabby, considering that the contractor puts in all the capital requirements and assumes all the risks, without the government having to contribute or risk anything. Despite the foregoing explanation, Justice Carpio still insisted during the Courts deliberations that the phrase among other things refers only to taxes, duties and fees. We are bewildered by his position. On the one hand, he condemns the Mining Law for allegedly limiting the governments benefits only to taxes, duties and fees; and on the other, he refuses to allow the State to benefit from the correct and proper interpretation of the DENR/MGB. To remove all doubts then, we hold that the States share is not limited to taxes, duties and fees only and that the DENR/MGB interpretation of the phrase among other things is correct. Definitely, this DENR/MGB interpretation is not only legally sound, but also greatly advantageous to the government. One last point on the subject. The legislature acted judiciously in not defining the terms among other things and, instead, leaving it to the agencies concerned to devise and develop the various modes of arriving at a reasonable and fair amount for the additional government share. As can be seen from DAO 99-56, the agencies concerned did an admirable job of conceiving and developing not just one formula, but three different formulae for arriving at the additional government share. Each of these options is quite fair and reasonable; and, as Messrs. Ramos and De Vera stated, other alternatives or schemes for a possible improvement of the fiscal regime for FTAAs are also being studied by the government. Besides, not locking into a fixed definition of the term among other things will ultimately be more beneficial to the government, as it will have that innate flexibility to adjust to and cope with rapidly changing circumstances, particularly those in the international markets. Such flexibility is especially significant for the government in terms of helping our mining enterprises remain competitive in world markets despite challenging and shifting economic scenarios. In conclusion, we stress that we do not share the view that in FTAAs with foreign contractors under RA 7942, the governments share is limited to taxes, fees and duties. Consequently, we find the attacks on the second paragraph of Section 81 of RA 7942 totally unwarranted.

Collections Not Made Uncertain by the Third Paragraph of Section 81


The third or last paragraph of Section 81[72] provides that the government share in FTAAs shall be collected when the contractor shall have recovered its pre-operating expenses and exploration and development expenditures. The objection has been advanced that, on account of the proviso, the collection of the States share is not even certain, as there is no time limit in RA 7942 for this grace period or recovery period. We believe that Congress did not set any time limit for the grace period, preferring to leave it to the concerned agencies, which are, on account of their technical expertise and training, in a better position to determine the appropriate durations for such recovery periods. After all, these recovery periods are determined, to a great extent, by technical and technological factors peculiar to the mining industry. Besides, with developments and advances in technology and in the geosciences, we cannot discount the possibility of shorter recovery periods. At any rate, the concerned agencies have not been remiss in this area. The 1995 and 1996 Implementing Rules and Regulations of RA 7942 specify that the period of recovery, reckoned from the date of commercial operation, shall be for a period not exceeding five years, or until the date of actualrecovery, whichever comes earlier.

Approval of Pre-Operating Expenses Required by RA 7942


Still, RA 7942 is criticized for allegedly not requiring government approval of pre-operating, exploration and development expenses of the foreign contractors, who are in effect given unfettered discretion to determine the amounts of such expenses. Supposedly, nothing prevents the contractors from recording such expenses in amounts equal to the mining revenues anticipated for the first 10 or 15 years of commercial production, with the result that the share of the State will be zero for the first 10 or 15 years. Moreover, under the circumstances, the government would be unable to say when it would start to receive its share under the FTAA. We believe that the argument is based on incorrect information as well as speculation. Obviously, certain crucial provisions in the Mining Law were overlooked. Section 23, dealing with the rights and obligations of the exploration permit grantee, states: The permittee shall undertake exploration work on the area as specified by its permit based on an approved work program. The next proviso reads: Any expenditure in excess of the yearly budget of the approved work program may be carried forward and credited to the succeeding years covering the duration of the permit. x x x. (underscoring supplied) Clearly, even at the stage of application for an exploration permit, the applicant is required to submit -- for approval by the government -- a proposed work program for exploration, containing a yearly budget of proposed expenditures. The State has the opportunity to pass upon (and approve or reject) such proposed expenditures, with the foreknowledge that -- if approved -- these will subsequently be recorded as pre-operating expenses that the contractor will have to recoup over the grace period. That is not all. Under Section 24, an exploration permit holder who determines the commercial viability of a project covering a mining area may, within the term of the permit, file with the Mines and Geosciences Bureau a declaration of mining project feasibility. This declaration is to be accompanied by a work program for development for the Bureaus approval, the necessary

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prelude for entering into an FTAA, a mineral production sharing agreement (MPSA), or some other mineral agreement. At this stage, too, the government obviously has the opportunity to approve or reject the proposed work program and budgeted expenditures for development works on the project. Such expenditures will ultimately become the preoperating and development costs that will have to be recovered by the contractor. Naturally, with the submission of approved work programs and budgets for the exploration and the development/construction phases, the government will be able to scrutinize and approve or reject such expenditures. It will be well-informed as to the amounts of pre-operating and other expenses that the contractor may legitimately recover and the approximate period of time needed to effect such a recovery. There is therefore no way the contractor can just randomly post any amount of pre-operating expenses and expect to recover the same. The aforecited provisions on approved work programs and budgets have counterparts in Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. The said provision requires certain terms and conditions to be incorporated into FTAAs; among them, a firm commitment x x x of an amount corresponding to the expenditure obligation that will be invested in the contract area andrepresentations and warranties x x x to timely deploy these [financing, managerial and technical expertise and technological] resources under its supervision pursuant to the periodic work programs and related budgets x x x, as well as work programs and minimum expenditures commitments. (underscoring supplied) Unarguably, given the provisions of Section 35, the State has every opportunity to pass upon the proposed expenditures under an FTAA andapprove or reject them. It has access to all the information it may need in order to determine in advance the amounts of pre-operating and developmental expenses that will have to be recovered by the contractor and the amount of time needed for such recovery. In summary, we cannot agree that the third or last paragraph of Section 81 of RA 7942 is in any manner unconstitutional. provision is construed as signifying that the 2 percent excise tax which, pursuant to Section 80, comprises the government share in MPSAs shall now also constitute the government share in FTAAs -- as well as in coproduction agreements and joint venture agreements -- to the exclusion of revenues of any other nature or from any other source. Apart from the fact that Section 112 likewise does not come within the issues delineated by this Court during the Oral Argument, and was never touched upon by the parties in their pleadings, it must also be noted that the criticism hurled against this Section is rooted in unwarranted conclusions made without considering other relevant provisions in the statute. Whether Section 112 may properly apply to co-production or joint venture agreements, the fact of the matter is that it cannot be made to apply to FTAAs. First, Section 112 does not specifically mention or refer to FTAAs; the only reason it is being applied to them at all is the fact that it happens to use the word contractor. Hence, it is a bit of a stretch to insist that it covers FTAAs as well. Second, mineral agreements, of which there are three types -- MPSAs, co-production agreements, and joint venture agreements -- are covered by Chapter V of RA 7942. On the other hand, FTAAs are covered by and in fact are the subject of Chapter VI, an entirely different chapter altogether. The law obviously intends to treat them as a breed apart from mineral agreements, since Section 35 (found in Chapter VI) creates a long list of specific terms, conditions, commitments, representations and warranties -- which have not been made applicable to mineral agreements -- to be incorporated into FTAAs. Third, under Section 39, the FTAA contractor is given the option to downgrade -- to convert the FTAA into a mineral agreement at any time during the term if the economic viability of the contract area is inadequate to sustain large-scale mining operations. Thus, there is no reason to think that the law through Section 112 intends to exact from FTAA contractors merely the same government share (a 2 percent excise tax) that it apparently demands from contractors under the three forms of mineral agreements. In brief, Section 112 does not apply to FTAAs. Notwithstanding the foregoing explanation, Justices Carpio and Morales maintain that the Court must rule now on the constitutionality of Sections 80, 84 and 112, allegedly because the WMCP FTAA contains a provision which grants the contractor unbridled and automatic authority to convert the FTAA into an MPSA; and should such conversion happen, the State would be prejudiced since its share would be limited to the 2 percent excise tax. Justice Carpio adds that there are five MPSAs already signed just awaiting the judgment of this Court on respondents and intervenors Motions for Reconsideration. We hold however that, at this point, this argument is based on pure speculation. The Court cannot rule on mere surmises and hypothetical assumptions, without firm factual anchor. We repeat: basic due process requires that we hear the parties who have a real legal interest in the MPSAs (i.e. the parties who executed them) before these MPSAs can be reviewed, or worse, struck down by the Court. Anything less than that requirement would be arbitrary and capricious. In any event, the conversion of the present FTAA into an MPSA is problematic. First, the contractor must comply with the law, particularly Section 39 of RA 7942; inter alia, it must convincingly show that the economic viability of the contract is found to be inadequate to justify large-scale mining operations; second, it must contend with the Presidents exercise of the power of State control over the EDU of natural resources; and third, it will have to risk a possible declaration of the unconstitutionality (in a proper case) of Sections 80, 84 and 112. The first requirement is not as simple as it looks. Section 39 contemplates a situation in which an FTAA has already been executed and entered into, and is presumably being implemented, when the contractor discovers that the mineral ore reserves in the contract area are not sufficient to justify large-scale mining, and thus the contractor requests the conversion of the FTAA into an MPSA. The contractor in effect needs to explain why, despite its exploration activities, including the conduct of various geologic and other scientific tests and procedures in the contract area, it was unable to determine correctly the mineral ore reserves and the

No Deprivation of Beneficial Rights


It is also claimed that aside from the second and the third paragraphs of Section 81 (discussed above), Sections 80, 84 and 112 of RA 7942 also operate to deprive the State of beneficial rights of ownership over mineral resources; and give them away for free to private business enterprises (including foreign owned corporations). Likewise, the said provisions have been construed as constituting, together with Section 81, an ingenious attempt to resurrect the old and discredited system of license, concession or lease. Specifically, Section 80 is condemned for limiting the States share in a mineral production-sharing agreement (MPSA) to just the excise tax on the mineral product. Under Section 151(A) of the Tax Code, such tax is only 2 percent of the market value of the gross output of the minerals. The colatilla in Section 84, the portion considered offensive to the Constitution, reiterates the same limitation made in Section 80.[73] It should be pointed out that Section 80 and the colatilla in Section 84 pertain only to MPSAs and have no application to FTAAs . These particular statutory provisions do not come within the issues that were defined and delineated by this Court during the Oral Argument -- particularly the third issue, which pertained exclusively to FTAAs. Neither did the parties argue upon them in their pleadings. Hence, this Court cannot make any pronouncement in this case regarding the constitutionality of Sections 80 and 84 without violating the fundamental rules of due process. Indeed, the two provisos will have to await another case specifically placing them in issue. On the other hand, Section 112[74] is disparaged for allegedly reverting FTAAs and all mineral agreements to the old and discredited license, concession or lease system. This Section states in relevant part that the provisions of Chapter XIV [which includes Sections 80 to 82]on government share in mineral production-sharing agreement x x x shall immediately govern and apply to a mining lessee or contractor.(underscoring supplied) This

economic viability of the area. The contractor must explain why, after conducting such exploration activities, it decided to file a declaration of mining feasibility, and to apply for an FTAA, thereby leading the State to believe that the area could sustain large-scale mining. The contractor must justify fully why its earlier findings, based on scientific procedures, tests and data, turned out to be wrong, or were way off. It must likewise prove that its new findings, also based on scientific tests and procedures, are correct. Right away, this puts the contractors technical capabilities and expertise into serious doubt. We wonder if anyone would relish being in this situation. The State could even question and challenge the contractors qualification and competence to continue the activity under an MPSA. All in all, while there may be cogent grounds to assail the aforecited Sections, this Court -- on considerations of due process -cannot rule upon them here. Anyway, if later on these Sections are declared unconstitutional, such declaration will not affect the other portions since they are clearly separable from the rest.

All Businesses Entitled to Cost Recovery

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Let it be put on record that not only foreign contractors, but all businessmen and all business entities in general, have to recoup their investments and costs. That is one of the first things a student learns in business school. Regardless of its nationality, and whether or not a business entity has a five-year cost recovery period, it will -- must -- have to recoup its investments, one way or another. This is just common business sense. Recovery of investments is absolutely indispensable for business survival; and business survival ensures soundness of the economy, which is critical and contributory to the general welfare of the people. Even government corporations must recoup their investments in order to survive and continue in operation. And, as the preceding discussion has shown, there is no business that gets ahead or earns profits without any cost to it. It must also be stressed that, though the State owns vast mineral wealth, such wealth is not readily accessible or transformable into usable and negotiable currency without the intervention of the credible mining companies. Those untapped mineral resources, hidden beneath tons of earth and rock, may as well not be there for all the good they do us right now. They have first to be extracted and converted into marketable form, and the country needs the foreign contractors funds, technology and know-how for that. After about eleven years of pre-operation and another five years for cost recovery, the foreign contractors will have just broken even. Is it likely that they would at that point stop their operations and leave? Certainly not. They have yet to make profits. Thus, for the remainder of the contract term, they must strive to maintain profitability. During this period, they pay the whole of the basic government share and the additional government share which, taken together with indirect taxes and other contributions, amount to approximately 60 percent or more of the entire financial benefits generated by the mining venture. In sum, we can hardly talk about foreign contractors taking our mineral resources for free. It takes a lot of hard cash to even begin to do what they do. And what they do in this country ultimately benefits the local economy, grows businesses, generates employment, and creates infrastructure, as discussed above. Hence, we definitely disagree with the sweeping claim that no FTAA under Section 81 will ever make any real contribution to the growth of the economy or to the general welfare of the country. This is not a plea for foreign contractors. Rather, this is a question of focusing the judicial spotlight squarely on all the pertinent facts as they bear upon the issue at hand, in order to avoid leaping precipitately to ill-conceived conclusions not solidly grounded upon fact.

Our Mineral Resources Not Given Away for Free by RA 7942


Nevertheless, if only to disabuse our minds, we should address the contention that our mineral resources are effectively given away for free by the law (RA 7942) in general and by Sections 80, 81, 84 and 112 in particular. Foreign contractors do not just waltz into town one day and leave the next, taking away mineral resources without paying anything. In order to get at the minerals, they have to invest huge sums of money (tens or hundreds of millions of dollars) in exploration works first. If the exploration proves unsuccessful, all the cash spent thereon will not be returned to the foreign investors; rather, those funds will have been infused into the local economy, to remain there permanently. The benefits therefrom cannot be simply ignored. And assuming that the foreign contractors are successful in finding ore bodies that are viable for commercial exploitation, they do not just pluck out the minerals and cart them off. They have first to build camp sites and roadways; dig mine shafts and connecting tunnels; prepare tailing ponds, storage areas and vehicle depots; install their machinery and equipment, generator sets, pumps, water tanks and sewer systems, and so on. In short, they need to expend a great deal more of their funds for facilities, equipment and supplies, fuel, salaries of local labor and technical staff, and other operating expenses. In the meantime, they also have to pay taxes,[75] duties, fees, and royalties. All told, the exploration, prefeasibility, feasibility, development and construction phases together add up to as many as eleven years.[76] The contractors have to continually shell out funds for the duration of over a decade, before they can commence commercial production from which they would eventually derive revenues. All that money translates into a lot of pump-priming for the local economy. Granted that the contractors are allowed subsequently to recover their pre-operating expenses, still, that eventuality will happen only after they shall have first put out the cash and fueled the economy. Moreover, in the process of recouping their investments and costs, the foreign contractors do not actually pull out the money from the economy. Rather, they recover or recoup their investments out of actual commercial production by not paying a portion of the basic government share corresponding to national taxes, along with the additional government share, for a period of not more than five years[77] counted from the commencement of commercial production. It must be noted that there can be no recovery without commencing actual commercial production. In the meantime that the contractors are recouping costs, they need to continue operating; in order to do so, they have to disburse money to meet their various needs. In short, money is continually infused into the economy. The foregoing discussion should serve to rid us of the mistaken belief that, since the foreign contractors are allowed to recover their investments and costs, the end result is that they practically get the minerals for free, which leaves the Filipino people none the better for it.

Repatriation of After-Tax Income


Another objection points to the alleged failure of the Mining Law to ensure real contributions to the economic growth and general welfare of the country, as mandated by Section 2 of Article XII of the Constitution. Pursuant to Section 81 of the law, the entire after-tax income arising from the exploitation of mineral resources owned by the State supposedly belongs to the foreign contractors, which will naturally repatriate the said after-tax income to their home countries, thereby resulting in no real contribution to the economic growth of this country. Clearly, this contention is premised on erroneous assumptions. First, as already discussed in detail hereinabove, the concerned agencies have correctly interpreted the second paragraph of Section 81 of RA 7942 to mean that the government is entitled to an additional share, to be computed based on any one of the following factors: net mining revenues, the present value of the cash flows, or excess profits reckoned against a benchmark rate of return on investments. So it is not correct to say that all of the after-tax income will accrue to the foreign FTAA contractor, as the government effectively receives a significant portion thereof. Second, the foreign contractors can hardly repatriate the entire after-tax income to their home countries. Even a bit of knowledge of corporate finance will show that it will be impossible to maintain a business as a going concern if the entire net profit earned in any particular year will be taken out and repatriated. The net income figure reflected in the bottom line is a mere accounting figure not necessarily corresponding to cash in the bank, or other quick assets. In order to produce and set aside

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cash in an amount equivalent to the bottom line figure, one may need to sell off assets or immediately collect receivables or liquidate short-term investments; but doing so may very likely disrupt normal business operations. In terms of cash flows, the funds corresponding to the net income as of a particular point in time are actually in use in the normal course of business operations. Pulling out such net income disrupts the cash flows and cash position of the enterprise and, depending on the amount being taken out, could seriously cripple or endanger the normal operations and financial health of the business enterprise. In short, no sane business person, concerned with maintaining the mining enterprise as a going concern and keeping a foothold in its market, can afford to repatriate the entire after-tax income to the home country. be the fact that in petroleum operations, the bulk of expenditures is in exploration, but once the contractor has found and tapped into the deposit, subsequent investments and expenditures are relatively minimal. The crude (or gas) keeps gushing out, and the work entailed is just a matter of piping, transporting and storing. Not so in mineral mining. The ore body does not pop out on its own. Even after it has been located, the contractor must continually invest in machineries and expend funds to dig and build tunnels in order to access and extract the minerals from underneath hundreds of tons of earth and rock. As already stated, the numerous intrinsic differences involved in their respective operations and requirements, cost structures and investment needs render it highly inappropriate to use petroleum operations FTAAs as benchmarks for mining FTAAs. Verily, we cannot just ignore the realities of the distinctly different situations and stubbornly insist on the minimum 60 percent.

The States Receipt of Sixty Percent of an FTAA Contractors AfterTax Income Not Mandatory
We now come to the next objection which runs this way: In FTAAs with a foreign contractor, the State must receive at least 60 percent of the after-tax income from the exploitation of its mineral resources. This share is the equivalent of the constitutional requirement that at least 60 percent of the capital, and hence 60 percent of the income, of mining companies should remain in Filipino hands. First, we fail to see how we can properly conclude that the Constitution mandates the State to extract at least 60 percent of the aftertax income from a mining company run by a foreign contractor. The argument is that the Charter requires the States partner in a co -production agreement, joint venture agreement or MPSA to be a Filipino corporation (at least 60 percent owned by Filipino citizens). We question the logic of this reasoning, premised on a supposedly parallel or analogous situation. We are, after all, dealing with an essentially different equation, one that involves different elements. The Charter did not intend to fix an iron-clad rule on the 60 percent share, applicable to all situations at all times and in all circumstances. If ever such was the intention of the framers, they would have spelt it out in black and white. Verba legis will serve to dispel unwarranted and untenable conclusions. Second, if we would bother to do the math, we might better appreciate the impact (and reasonableness) of what we are demanding of the foreign contractor. Let us use a simplified illustration. Let us base it on gross revenues of, say, P500. After deducting operating expenses, but prior to income tax, suppose a mining firm makes a taxable income of P100. A corporate income tax of 32 percent results in P32 of taxable income going to the government, leaving the mining firm with P68. Government then takes 60 percent thereof, equivalent to P40.80, leaving onlyP27.20 for the mining firm. At this point the government has pocketed P32.00 plus P40.80, or a total of P72.80 for every P100 of taxable income, leaving the mining firm with only P27.20. But that is not all. The government has also taken 2 percent excise tax off the top, equivalent to another P10. Under the minimum 60 percent proposal, the government nets around P82.80 (not counting other taxes, duties, fees and charges) from a taxable income ofP100 (assuming gross revenues of P500, for purposes of illustration). On the other hand, the foreign contractor, which provided all the capital, equipment and labor, and took all the entrepreneurial risks -- receives P27.20. One cannot but wonder whether such a distribution is even remotely equitable and reasonable, considering the nature of the mining business. The amount of P82.80 out of P100.00 is really a lot it does not matter that we call part of it excise tax or income tax, and another portion thereof income from exploitation of mineral resources. Some might think it wonderful to be able to take the lions share of the benefits. But we have to ask ourselves if we are really serious in attracting the investments that are the indispensable and key element in generating the monetary benefits of which we wish to take the lions share. Fairness is a credo not only in law, but also in business. Third, the 60 percent rule in the petroleum industry cannot be insisted upon at all times in the mining business. The reason happens to

The Mining and the Oil Industries Different From Each Other
To stress, there 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 . There is no showing, for instance, that mining companies can readily cope with a 60 percent government share in the same way petroleum companies apparently can. What we have is a suggestion to enforce the 60 percent quota on the basis of a disjointed analogy. The only factor common to the two disparate situations is the extraction of natural resources. Indeed, we should take note of the fact that Congress made a distinction between mining firms and petroleum companies. In Republic Act No. 7729 -- An Act Reducing the Excise Tax Rates on Metallic and Non Metallic Minerals and Quarry Resources, Amending for the Purpose Section 151(a) of the National Internal Revenue Code, as amended -- the lawmakers fixed the excise tax rate on metallic and non-metallic minerals at two percent of the actual market value of the annual gross output at the time of removal. However, in the case of petroleum, the lawmakers set the excise tax rate for the first taxable sale at fifteen percent of the fair international market price thereof. There must have been a very sound reason that impelled Congress to impose two very dissimilar excise tax rate. We cannot assume, without proof, that our honorable legislators acted arbitrarily, capriciously and whimsically in this instance. We cannot just ignore the reality of two distinctly different situations and stubbornly insist on going minimum 60 percent. To repeat, the mere fact that gas and oil exploration contracts grant the State 60 percent of the net revenues does not necessarily imply that mining contracts should likewise yield a minimum of 60 percent for the State. Jumping to that erroneous conclusion is like comparing apples with oranges. The exploration, development and utilization of gas and oil are simply different from those of mineral resources. To stress again, the main risk in gas and oil is in the exploration. But once oil in commercial quantities is struck and the wells are put in place, the risk is relatively over and black gold simply flows out continuously with comparatively less need for fresh investments and technology. On the other hand, even if minerals are found in viable quantities, there is still need for continuous fresh capital and expertise to dig the mineral ores from the mines. Just because deposits of mineral ores are found in one area is no guarantee that an equal amount can be found in the adjacent areas. There are simply continuing risks and need for more capital, expertise and industry all the time.

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Note, however, that the indirect benefits -- apart from the cash revenues -- are much more in the mineral industry. As mines are explored and extracted, vast employment is created, roads and other infrastructure are built, and other multiplier effects arise. On the other hand, once oil wells start producing, there is less need for employment. Roads and other public works need not be constructed continuously. In fine, there is no basis for saying that government revenues from the oil industry and from the mineral industries are to be identical all the time. Fourth, to our mind, the proffered minimum 60 percent suggestion tends to limit the flexibility and tie the hands of government, ultimately hampering the countrys competitiveness in the international market, to the detriment of the Filipino people. This you-have-to-give-us-60percent-of-after-tax-income-or-we-dont-do- business-with-you approach is quite perilous. True, this situation may not seem too unpalatable to the foreign contractor during good years, when international market prices are up and the mining firm manages to keep its costs in check. However, under unfavorable economic and business conditions, with costs spiraling skywards and minerals prices plummeting, a mining firm may consider itself lucky to make just minimal profits. The inflexible, carved-in-granite demand for a 60 percent government share may spell the end of the mining venture, scare away potential investors, and thereby further worsen the already dismal economic scenario. Moreover, such an unbending or unyielding policy prevents the government from responding appropriately to changing economic conditions and shifting market forces. This inflexibility further renders our country less attractive as an investment option compared with other countries. And fifth, for this Court to decree imperiously that the governments share should be not less than 60 percent of the after-tax income of FTAA contractors at all times is nothing short of dictating upon the government. The result, ironically, is that the State ends up losing control. To avoid compromising the States full control and supervision over the exploitation of mineral resources, this Court must back off from insisting upon a minimum 60 percent rule. It is sufficient that the State has the power and means, should it so decide, to get a 60 percent share (or more) in the contractors net mining revenues or after-tax income, or whatever other basis the government may decide to use in reckoning its share. It is not necessary for it to do so in every case, regardless of circumstances . In fact, the government must be trusted, must be accorded the liberty and the utmost flexibility to deal, negotiate and transact with contractors and third parties as it sees fit; and upon terms that it ascertains to be most favorable or most acceptable under the circumstances, even if it means agreeing to less than 60 percent. Nothing must prevent the State from agreeing to a share less than that, should it be deemed fit; otherwise the State will be deprived of full control over mineral exploitation that the Charter has vested in it. To stress again, there is simply no constitutional or legal provision fixing the minimum share of the government in an FTAA at 60 percent of the net profit. For this Court to decree such minimum is to wade into judicial legislation, and thereby inordinately impinge on thecontrol power of the State. Let it be clear: the Court is not against the grant of more benefits to the State; in fact, the more the better. If during the FTAA negotiations, the President can secure 60 percent,[78] or even 90 percent, then all the better for our people. But, if under the peculiar circumstances of a specific contract, the President could secure only 50 percent or 55 percent, so be it. Needless to say, the President will have to report (and be responsible for) the specific FTAA to Congress, and eventually to the people. Finally, if it should later be found that the share agreed to is grossly disadvantageous to the government, the officials responsible for entering into such a contract on its behalf will have to answer to the courts for their malfeasance. And the contract provision voided. But this Court would abuse its own authority should it force the governments hand to adopt the 60 percent demand of some of our esteemed colleagues. Here, we will repeat what has not been emphasized and appreciated enough: the fact that the contractor in an FTAA provides all the needed capital, technical and managerial expertise, and technology required to undertake the project. In regard to the WMCP FTAA, the then foreign-owned WMCP as contractor committed, at the very outset, to make capital investments of up to US$50 million in that single mining project. WMCP claims to have already poured in well over P800 million into the country as of February 1998, with more in the pipeline. These resources, valued in the tens or hundreds of millions of dollars, are invested in a mining project that provides no assurance whatsoever that any part of the investment will be ultimately recouped. At the same time, the contractor must comply with legally imposed environmental standards and the social obligations, for which it also commits to make significant expenditures of funds. Throughout, the contractor assumes all the risks[79] of the business, as mentioned earlier. 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. And even in the worst possible scenario -- an absence of commercial quantities of minerals to justify development -- the contractor would already have spent several million pesos for exploration works, before arriving at the point in which it can make that determination and decide to cut its losses. In fact, during the first year alone of the exploration period, the contractor was already committed to spend not less than P24 million. The FTAA therefore clearly ensures benefits for the local economy, courtesy of the contractor. All in all, this setup cannot be regarded as disadvantageous to the State or the Filipino people; it certainly cannot be said to convey beneficial ownership of our mineral resources to foreign contractors.

Deductions Allowed by the WMCP FTAA Reasonable


Petitioners question whether the States weak control might render the sharing arrangements ineffective. They cite the so-called suspicious deductions allowed by the WMCP FTAA in arriving at the net mining revenue, which is the basis for computing the government share. The WMCP FTAA, for instance, allows expenditures for development within and outside the Contract Area relating to the Mining Operations,[80] consulting fees incurred both inside and outside the Philippines for work related directly to the Mining Operations,[81] and the establishment and administration of field offices including administrative overheads incurred within and outside the Philippines which are properly allocatable to the Mining Operations and reasonably related to the performance of the Contractors obligations and exercise of its rights under this Agreement.[82] It is quite well known, however, that mining companies do perform some marketing activities abroad in respect of selling their mineral products and by-products. Hence, it would not be improper to allow the deduction of reasonable consulting fees incurred abroad, as well as administrative expenses and overheads related to marketing offices also located abroad -- provided that these deductions are directly related or properly allocatable to the mining operations and reasonably related to the performance of the contractors obligations and exercise of its rights. In any event, more facts are needed. Until we see how these provisions actually operate, mere suspicions will not suffice to propel this Court into taking action.

Capital and Expertise Provided, Yet All Risks Assumed by Contractor

Section 7.9 of the WMCP FTAA Invalid and Disadvantageous


Having defended the WMCP FTAA, we shall now turn to two defective provisos. Let us start with Section 7.9 of the WMCP FTAA.

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While Section 7.7 gives the government a 60 percent share in the net mining revenues of WMCP from the commencement of commercial production, Section 7.9 deprives the government of part or all of the said 60 percent. Under the latter provision, should WMCPs foreign shareholders -- who originally owned 100 percent of the equity -- sell 60 percent or more of its outstanding capital stock to a Filipino citizen or corporation, the State loses its right to receive its 60 percent share in net mining revenues under Section 7.7. Section 7.9 provides: The percentage of Net Mining Revenues payable to the Government pursuant to Clause 7.7 shall be reduced by 1percent of Net Mining Revenues for every 1percent ownership interest in the Contractor (i.e., WMCP) held by a Qualified Entity .[83] Evidently, what Section 7.7 grants to the State is taken away in the next breath by Section 7.9 without any offsetting compensation to the State. Thus, in reality, the State has no vested right to receive any income from the FTAA for the exploitation of its mineral resources. Worse, it would seem that what is given to the State in Section 7.7 is by mere tolerance of WMCPs foreign stockholders, who can at any time cut off the governments entire 60 percent share. They can do so by simply selling 60 percent of WMCPs outstanding capital stock to a Philippine citizen or corporation. Moreover, the proceeds of such sale will of course accrue to the foreign stockholders of WMCP, not to the State. The sale of 60 percent of WMCPs outstanding equity t o a corporation that is 60 percent Filipino-owned and 40 percent foreignowned will still trigger the operation of Section 7.9. Effectively, the State will lose its right to receive all 60 percent of the net mining revenues of WMCP; andforeign stockholders will own beneficially up to 64 percent of WMCP , consisting of the remaining 40 percent foreign equity therein, plus the 24 percent pro-rata share in the buyer-corporation.[84] In fact, the January 23, 2001 sale by WMCPs foreign stockholder of the entire outstanding equity in WMCP to Sagittarius Mines, Inc. -- a domestic corporation at least 60 percent Filipino owned -- may be deemed to have automatically triggered the operation of Section 7.9, without need of further action by any party, and removed the States right to receive the 60 percent share in net mining revenues. At bottom, Section 7.9 has the effect of depriving the State of its 60 percent share in the net mining revenues of WMCP without any offset or compensation whatsoever. It is possible that the inclusion of the offending provision was initially prompted by the desire to provide some form of incentive for the principal foreign stockholder in WMCP to eventually reduce its equity position and ultimately divest in favor of Filipino citizens and corporations. However, as finally structured, Section 7.9 has the deleterious effect of depriving government of the entire 60 percent share in WMCPs net mining revenues, without any form of compensation whatsoever. Such an outcome is completely unacceptable. The whole point of developing the nations natural resources is to benefit the Filipino people, future generations included. And the State as sovereign and custodian of the nations natural wealth is mandated to protect, conserve, preserve and develop that part of the national patrimony for their benefit. Hence, the Charter lays great emphasis on real contributions to the economic growth and general welfare of the country[85] as essential guiding principles to be kept in mind when negotiating the terms and conditions of FTAAs. Earlier, we held (1) that the State must be accorded the liberty and the utmost flexibility to deal, negotiate and transact with contractors and third parties as it sees fit, and upon terms that it ascertains to be most favorable or most acceptable under the circumstances, even if that should mean agreeing to less than 60 percent; (2) that it is not necessary for the State to extract a 60 percent share in every case and regardless of circumstances; and (3) that should the State be prevented from agreeing to a share less than 60 percent as it deems fit, it will be deprived of the full control over mineral exploitation that the Charter has vested in it. That full control is obviously not an end in itself; it exists and subsists precisely because of the need to serve and protect the national interest. In this instance, national interest finds particular application in the protection of the national patrimony and the development and exploitation of the countrys mineral resources for the benefit of the Filipino people and the enhancement of economic growth and the general welfare of the country. Undoubtedly, such full control can be misused and abused, as we now witness. Section 7.9 of the WMCP FTAA effectively gives away the States share of net mining revenues (provided for in Section 7.7) without anything in exchange. Moreover, this outcome constitutes unjust enrichment on the part of the local and foreign stockholders of WMCP. By their mere divestment of up to 60 percent equity in WMCP in favor of Filipino citizens and/or corporations, the local and foreign stockholders get a windfall. Their share in the net mining revenues of WMCP is automatically increased, without their having to pay the government anything for it. In short, the provision in question is without a doubt grossly disadvantageous to the government, detrimental to the interests of the Filipino people, and violative of public policy. Moreover, it has been reiterated in numerous decisions[86] that the parties to a contract may establish any agreements, terms and conditions that they deem convenient; but these should not be contrary to law, morals, good customs, public order or public policy.[87] Being precisely violative of anti-graft provisions and contrary to public policy, Section 7.9 must therefore be stricken off as invalid. Whether the government officials concerned acceded to that provision by sheer mistake or with full awareness of the ill consequences, is of no moment. It is hornbook doctrine that the principle of estoppel does not operate against the government for the act of its agents,[88] and that it is never estopped by any mistake or error on their part.[89] It is therefore possible and proper to rectify the situation at this time. Moreover, we may also say that the FTAA in question does not involve mere contractual rights; being impressed as it is with public interest, the contractual provisions and stipulations must yield to the common good and the national interest. Since the offending provision is very much separable[90] from Section 7.7 and the rest of the FTAA, the deletion of Section 7.9 can be done without affecting or requiring the invalidation of the WMCP FTAA itself. Such a deletion will preserve for the government its due share of the benefits. This way, the mandates of the Constitution are complied with and the interests of the government fully protected, while the business operations of the contractor are not needlessly disrupted.

Section 7.8(e) of Disadvantageous


thus:

the

WMCP

FTAA

Also

Invalid

and

Section 7.8(e) of the WMCP FTAA is likewise invalid. It provides

7.8 The Government Share shall be deemed to include all of the following sums: (a) all Government taxes, fees, levies, costs, imposts, duties and royalties including excise tax, corporate income tax, customs duty, sales tax, value added tax, occupation and regulatory fees, Government controlled price stabilization schemes, any other form of Government backed schemes, any tax on dividend payments by the Contractor or its Affiliates in respect of revenues from the Mining Operations and any tax on interest on domestic and foreign loans or other financial arrangements or accommodations, including loans extended to the Contractor by its stockholders; any payments to local and regional government, including taxes, fees, levies, costs, imposts, duties, royalties, occupation and regulatory fees and infrastructure contributions; any payments to landowners, surface rights holders, occupiers, indigenous people or Claimowners;

(b)

(c)

26
(d) costs and expenses of fulfilling the Contractors obligations to contribute to national development in accordance with Clause 10.1(i) (1) and 10.1(i) (2); an amount equivalent to whatever benefits that may be extended in the future by the Government to the Contractor or to financial or technical assistance agreement contractors in general; all of the foregoing items which have not previously been offset against the Government Share in an earlier Fiscal Year, adjusted for inflation. (underscoring supplied) Section 3.3 of the WMCP FTAA is assailed for violating supposed constitutional restrictions on the term of FTAAs. The provision in question reads: 3.3 This Agreement shall be renewed by the Government for a further period of twenty-five (25) years under the same terms and conditions provided that the Contractor lodges a request for renewal with the Government not less than sixty (60) days prior to the expiry of the initial term of this Agreement and provided that the Contractor is not in breach of any of the requirements of this Agreement. Allegedly, the above provision runs afoul of Section 2 of Article XII of the 1987 Constitution, which states: Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not

(e)

(f)

Section 7.8(e) is out of place in the FTAA. It makes no sense why, for instance, money spent by the government for the benefit of the contractor in building roads leading to the mine site should still be deductible from the States share in net mining revenues. Allowing this deduction results in benefiting the contractor twice over. It constitutes unjust enrichment on the part of the contractor at the expense of the government, since the latter is effectively being made to pay twice for the same item.[91] For being grossly disadvantageous and prejudicial to the government and contrary to public policy, Section 7.8(e) is undoubtedly invalid and must be declared to be without effect. Fortunately, this provision can also easily be stricken off without affecting the rest of the FTAA.

Nothing Left Over After Deductions?


In connection with Section 7.8, an objection has been raised: Specified in Section 7.8 are numerous items of deduction from the States 60 percent share. After taking these into account, will the State ever receive anything for its ownership of the mineral resources? We are confident that under normal circumstances, the answer will be yes. If we examine the various items of deduction listed in Section 7.8 of the WMCP FTAA, we will find that they correspond closely to the components or elements of the basic government share established in DAO 99-56, as discussed in the earlier part of this Opinion. Likewise, the balance of the governments 60 percent share -- after netting out the items of deduction listed in Section 7.8 --corresponds closely to the additional government share provided for in DAO 99-56 which, we once again stress, has nothing at all to do with indirect taxes. The Ramos-DeVera paper[92] concisely presents the fiscal contribution of an FTAA under DAO 99-56 in this equation: Receipts from an FTAA = basic govt share + addl govt share Transposed into a similar equation, the fiscal payments system from the WMCP FTAA assumes the following formulation: Governments 60 percent share in net mining revenues of WMCP = items listed in Sec. 7.8 of the FTAA + balance of Govt share, payable 4 months from the end of the fiscal year It should become apparent that the fiscal arrangement under the WMCP FTAA is very similar to that under DAO 99-56, with the balance of government share payable 4 months from end of fiscal year being the equivalent of the additional government share computed in accordance with the net-mining-revenue-based option under DAO 99-56, as discussed above. As we have emphasized earlier, we find each of the three options for computing the additional government share -- as presented in DAO 99-56 -- to be sound and reasonable. We therefore conclude that there is nothing inherently wrong in the fiscal regime of the WMCP FTAA, and certainly nothing to warrant the invalidation of the FTAA in its entirety.

exceeding twenty-five years, renewable for not more than twentyfive years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial
uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays and lagoons.

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. The President shall notify the Congress of every contract en tered into in accordance with this provision, within thirty days from its execution.[93] We hold that the term limitation of twenty-five years does not apply to FTAAs. The reason is that the above provision is found within paragraph 1 of Section 2 of Article XII, which refers to mineral agreements -- co-production agreements, joint venture agreements and mineral production-sharing agreements -- which the government may enter into with Filipino citizens and corporations, at least 60 percent owned by Filipino citizens. The word such clearly refers to these three mineral agreements -- CPAs, JVAs and MPSAs -- not to FTAAs. Specifically, FTAAs are covered by paragraphs 4 and 5 of Section 2 of Article XII of the Constitution. It will be noted that there are no term limitations provided for in the said paragraphs dealing with FTAAs. This shows that FTAAs are sui generis, in a class of their own. 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.

Section 3.3 of the WMCP FTAA Constitutional

Note also that, as previously stated, the exploratory phrases of an FTAA lasts up to eleven years. Thereafter, a few more years would be gobbled up in start-up operations. It may take fifteen years before an FTAA contractor can start earning profits. And thus, the period of 25 years may really be short for an FTAA. Consider too that in this kind of agreement, the contractor assumes all entrepreneurial risks. If no commercial quantities of minerals are found, the contractor bears all financial losses. To compensate for this long gestation period and extra business risks, it would not be totally unreasonable to allow it to continue EDU activities for another twenty five years. In any event, the complaint is that, in essence, Section 3.3 gives the contractor the power to compel the government to renew the WMCP FTAA for another 25 years and deprives the State of any say on whether to renew the contract. While we agree that Section 3.3 could have been worded so as to prevent it from favoring the contractor, this provision does not violate any constitutional limits, since the said term limitation does not apply at all to FTAAs. Neither can the provision be deemed in any manner to be illegal, as no law is being violated thereby. It is certainly not illegal for the government to waive its option to refuse the renewal of a commercial contract. Verily, the government did not have to agree to Section 3.3. It could have said No to the stipulation, but it did not. It appears that, in the process of negotiations, the other contracting party was able to convince the government to agree to the renewal terms. Under the circumstances, it does not seem proper for this Court to intervene and step in to undo what might have perhaps been a possible miscalculation on the part of the State. If government believes that it is or will be aggrieved by the effects of Section 3.3, the remedy is the renegotiation of the provision in order to provide the State the option to not renew the FTAA.

FTAA More Advantageous Than Other Schemes Like CPA, JVA and MPSA

27

A final point on the subject of beneficial interest. We believe the FTAA is a more advantageous proposition for the government as compared with other agreements permitted by the Constitution. In a CPA that the government enters into with one or more contractors, the government shall provide inputs to the mining operations other than the mineral resource itself.[94] In a JVA, a JV company is organized by the government and the contractor, with both parties having equity shares (investments); and the contractor is granted the exclusive right to conduct mining operations and to extract minerals found in the area.[95] On the other hand, in an MPSA, the government grants the contractor the exclusive right to conduct mining operations within the contract area and shares in the gross output; and the contractor provides the necessary financing, technology, management and manpower. The point being made here is that, in two of the three types of agreements under consideration, the government has to ante up some risk capital for the enterprise. In other words, government funds (public moneys) are withdrawn from other possible uses, put to work in the venture and placed at risk in case the venture fails. This notwithstanding, management and control of the operations of the enterprise are -- in all three arrangements - in the hands of the contractor, with the government being mainly a silent partner. The three types of agreement mentioned above apply to any natural resource, without limitation and regardless of the size or magnitude of the project or operations. In contrast to the foregoing arrangements, and pursuant to paragraph 4 of Section 2 of Article XII, the FTAA is limited to large-scale projects and only for minerals, petroleum and other mineral oils. Here, the Constitution removes the 40 percent cap on foreign ownership and allows the foreign corporation to own up to 100 percent of the equity. Filipino capital may not be sufficient on account of the size of the project, so the foreign entity may have to ante up all the risk capital. Correlatively, the foreign stakeholder bears up to 100 percent of the risk of loss if the project fails. In respect of the particular FTAA granted to it, WMCP (then 100 percent foreign owned) was responsible, as contractor, for providing the entire equity, including all the inputs for the project. It was to bear 100 percent of the risk of loss if the project failed, but its maximum potential beneficial interest consisted only of 40 percent of the net beneficial interest, because the other 60 percent is the share of the government, which will never be exposed to any risk of loss whatsoever. In consonance with the degree of risk assumed, the FTAA vested in WMCP the day-to-day management of the mining operations. Still such management is subject to the overall control and supervision of the State in terms of regular reporting, approvals of work programs and budgets, and so on. So, one needs to consider in relative terms, the costs of inputs for, degree of risk attendant to, and benefits derived or to be derived from a CPA, a JVA or an MPSA vis--vis those pertaining to an FTAA. It may not be realistically asserted that the foreign grantee of an FTAA is being unduly favored or benefited as compared with a foreign stakeholder in a corporation holding a CPA, a JVA or an MPSA. Seen the other way around, the government is definitely better off with an FTAA than a CPA, a JVA or an MPSA.

Financial Benefits for Foreigners Not Forbidden by the Constitution


Before leaving this subject matter, we find it necessary for us to rid ourselves of the false belief that the Constitution somehow forbids foreign-owned corporations from deriving financial benefits from the development of our natural or mineral resources. The Constitution has never prohibited foreign corporations from acquiring and enjoying beneficial interest in the development of Philippine natural resources. The State itself need not directly undertake exploration, development, and utilization activities. Alternatively, the Constitution authorizes the government to enter into joint venture agreements (JVAs), co-production agreements (CPAs) and mineral production sharing agreements (MPSAs) with contractors who are Filipino citizens or corporations that are at least 60 percent Filipino-owned. They may do the actual dirty work -- the mining operations. In the case of a 60 percent Filipino-owned corporation, the 40 percent individual and/or corporate non-Filipino stakeholders obviously participate in the beneficial interest derived from the development and utilization of our natural resources. They may receive by way of dividends, up to 40 percent of the contractors earnings from the mining project. Likewise, they may have a say in the decisions of the board of directors, since they are entitled to representation therein to the extent of their equity participation, which the Constitution permits to be up to 40 percent of the contractors equity. Hence, the non-Filipino stakeholders may in that manner also participate in the management of the contractors natural resource development work. All of this is permitted by our Constitution, for any natural resource, and without limitation even in regard to the magnitude of the mining project or operations (see paragraph 1 of Section 2 of Article XII). It is clear, then, that there is nothing inherently wrong with or constitutionally objectionable about the idea of foreign individuals and entities having or enjoying beneficial interest in -- and participating in the management of operations relative to -- the exploration, development and utilization of our natural resources.

Developmental Policy on the Mining Industry


During the Oral Argument and in their Final Memorandum, petitioners repeatedly urged the Court to consider whether mining as an industry and economic activity deserved to be accorded priority, preference and government support as against, say, agriculture and other activities in which Filipinos and the Philippines may have an economic advantage. For instance, a recent US study[96] reportedly examined the economic performance of all local US counties that were

28
dependent on mining and 20 percent of whose labor earnings between 1970 and 2000 came from mining enterprises. The study -- covering 100 US counties in 25 states dependent on mining -- showed that per capita income grew about 30 percent less in mining-dependent communities in the 1980s and 25 percent less for the entire period 1980 to 2000; the level of per capita income was also lower. Therefore, given the slower rate of growth, the gap between these and other local counties increased. Petitioners invite attention to the OXFAM America Reports warning to developing nations that mining brings with it serious economic problems, including increased regional inequality, unemployment and poverty. They also cite the final report[97] of the Extractive Industries Review project commissioned by the World Bank (the WB-EIR Report), which warns of environmental degradation, social disruption, conflict, and uneven sharing of benefits with local communities that bear the negative social and environmental impact. The Report suggests that countries need to decide on the best way to exploit their natural resources, in order to maximize the value added from the development of their resources and ensure that they are on the path to sustainable development once the resources run out. Whatever priority or preference may be given to mining vis--vis other economic or non-economic activities is a question of policy that the President and Congress will have to address; it is not for this Court to decide. This Court declares what the Constitution and the laws say, interprets only when necessary, and refrains from delving into matters of policy. Suffice it to say that the State control accorded by the Constitution over mining activities assures a proper balancing of interests. More pointedly, such control will enable the President to demand the best mining practices and the use of the best available technologies to protect the environment and to rehabilitate mined-out areas. Indeed, under the Mining Law, the government can ensure the protection of the environment during and after mining. It can likewise provide for the mechanisms to protect the rights of indigenous communities, and thereby mold a more socially-responsive, culturally-sensitive and sustainable mining industry. Early on during the launching of the Presidential Mineral Industry Environmental Awards on February 6, 1997, then President Fidel V. Ramos captured the essence of balanced and sustainable mining in these words: Long term, high profit mining translates into higher revenues for government, more decent jobs for the population, more raw materials to feed the engines of downstream and allied industries, and improved chances of human resource and countryside development by creating self-reliant communities away from urban centers. xxx xxx xxx 1. Justice Morales introduced us to Hugh Morgan, former president and chief executive officer of Western Mining Corporation (WMC) and former president of the Australian Mining Industry Council, who spearheaded the vociferous opposition to the filing by aboriginal peoples of native title claims against mining companies in Australia in the aftermath of the landmark Mabo decision by the Australian High Court. According to sources quoted by our esteemed colleague, Morgan was also a racist and a bigot. In the course of protesting Mabo, Morgan allegedly uttered derogatory remarks belittling the aboriginal culture and race. An unwritten caveat of this introduction is that this Court should be careful not to permit the entry of the likes of Hugh Morgan and his hordes of alleged racist-bigots at WMC. With all due respect, such scare tactics should have no place in the discussion of this case. We are deliberating on the constitutionality of RA 7942, DAO 96-40 and the FTAA originally granted to WMCP, which had been transferred to Sagittarius Mining, a Filipino corporation. We are not discussing the apparition of white Anglo-Saxon racists/bigots massing at our gates. 2. On the proper interpretation of the phrase agreements involving either technical or financial assistance, Justice Morales points out that at times we conveniently omitted the use of the disjunctive eitheror, which according to her denotes restriction; hence the phrase must be deemed to connote restriction and limitation. But, as Justice Carpio himself pointed out during the Oral Argument, the disjunctive phrase either technical or financial assistance would, strictly speaking, literally mean that a foreign contractor may provide only one or the other, but not both. And if both technical and financial assistance were required for a project, the State would have to deal with at least two different foreign contractors -- one for financial and the other for technical assistance. And following on that, a foreign contractor, though very much qualified to provide both kinds of assistance, would nevertheless be prohibited from providing one kind as soon as it shall have agreed to provide the other. But if the Court should follow this restrictive and literal construction, can we really find two (or more) contractors who are willing to participate in one single project -- one to provide the financial assistance only and the other the technical assistance exclusively; it would be excellent if these two or more contractors happen to be willing and are able to cooperate and work closely together on the same project (even if they are otherwise competitors). And it would be superb if no conflicts would arise between or among them in the entire course of the contract. But what are the chances things will turn out this way in the real world? To think that the framers deliberately imposed this kind of restriction is to say that they were either exceedingly optimistic, or incredibly nave. This begs the question -- What laudable objective or purpose could possibly be served by such strict and restrictive literal interpretation? 3. Citing Oposa v. Factoran Jr., Justice Morales claims that a service contract is not a contract or property right which merits protection by the due process clause of the Constitution, but merely a license or privilege which may be validly revoked, rescinded or withdrawn by executive action whenever dictated by public interest or public welfare. Oposa cites Tan v. Director of Forestry and Ysmael v. Deputy Executive Secretary as authority. The latter cases dealt specifically withtimber licenses only. Oposa allegedly reiterated that a license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract between the authority, federal, state or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation. Thus this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights. Should Oposa be deemed applicable to the case at bar, on the argument that natural resources are also involved in this situation? We do not think so. A grantee of a timber license, permit or license agreement gets to cut the timber already growing on the surface; it need not dig up tons of earth to get at the logs. In a logging concession, the investment of the licensee is not as substantial as the investment of a large-scale mining contractor. If a timber license were revoked, the licensee packs up its gear

Against a fragile and finite environment, it is sustainability that holds the key. In sustainable mining, we take a middle ground where both production and protection goals are balanced, and where parties-in-interest come to terms. Neither has the present leadership been remiss in addressing the concerns of sustainable mining operations. Recently, on January 16, 2004 and April 20, 2004, President Gloria Macapagal Arroyo issued Executive Orders Nos. 270 and 270-A, respectively, to promoteresponsible mineral resources exploration, development and utilization, in order to enhance economic growth, in a manner that adheres to the principles of sustainable development and with due regard for justice and equity, sensitivity to the culture of the Filipino people and respect for Philippine sovereignty.[98] REFUTATION OF DISSENTS The Court will now take up a number of other specific points raised in the dissents of Justices Carpio and Morales.

29
and moves to a new area applied for, and starts over; what it leaves behind are mainly the trails leading to the logging site. In contrast, the mining contractor will have sunk a great deal of money (tens of millions of dollars) into the ground, so to speak, for exploration activities, for development of the mine site and infrastructure, and for the actual excavation and extraction of minerals, including the extensive tunneling work to reach the ore body. The cancellation of the mining contract will utterly deprive the contractor of its investments (i.e., prevent recovery of investments), most of which cannot be pulled out. To say that an FTAA is just like a mere timber license or permit and does not involve contract or property rights which merit protection by the due process clause of the Constitution, and may therefore be revoked or cancelled in the blink of an eye, is to adopt a well-nigh confiscatory stance; at the very least, it is downright dismissive of the property rights of businesspersons and corporate entities that have investments in the mining industry, whose investments, operations and expenditures do contribute to the general welfare of the people, the coffers of government, and the strength of the economy. Such a pronouncement will surely discourage investments (local and foreign) which are critically needed to fuel the engine of economic growth and move this country out of the rut of poverty. In sum, Oposa is not applicable. 4. Justice Morales adverts to the supposedly clear intention of the framers of the Constitution to reserve our natural resources exclusively for the Filipino people. She then quoted from the records of the ConCom deliberations a passage in which then Commissioner Davide explained his vote, arguing in the process that aliens ought not be allowed to participate in the enjoyment of our natural resources. One passage does not suffice to capture the tenor or substance of the entire extensive deliberations of the commissioners, or to reveal the clear intention of the framers as a group. A re-reading of the entire deliberations (quoted here earlier) is necessary if we are to understand the true intent of the framers. 5. Since 1935, the Filipino people, through their Constitution, have decided that the retardation or delay in the exploration, development or utilization of the nations natural resources is merely secondary to the protection and preservation of their ownership of the natural resources, so says Justice Morales, citing Aruego. If it is true that the framers of the 1987 Constitution did not care much about alleviating the retardation or delay in the development and utilization of our natural resources, why did they bother to write paragraph 4 at all? Were they merely paying lip service to large-scale exploration, development and utilization? They could have just completely ignored the subject matter and left it to be dealt with through a future constitutional amendment. But we have to harmonize every part of the Constitution and to interpret each provision in a manner that would give life and meaning to it and to the rest of the provisions. It is obvious that a literal interpretation of paragraph 4 will render it utterly inutile and inoperative. 6. According to Justice Morales, the deliberations of the Constitutional Commission do not support our contention that the framers, by specifying such agreements involving financial or technical assistance, necessarily gave implied assent to everything that these agreements implicitly entailed, or that could reasonably be deemed necessary to make them tenable and effective, including management authority in the day-to-day operations. As proof thereof, she quotes one single passage from the ConCom deliberations, consisting of an exchange among Commissioners Tingson, Garcia and Monsod. However, the quoted exchange does not serve to contradict our argument; it even bolsters it. Comm. Christian Monsod was quoted as saying: xxx I think we have to make a distinction that it is not really realistic to say that we will borrow on our own terms. Maybe we can say that we inherited unjust loans, and we would like to repay these on terms that are not prejudicial to our own growth. But the general statement that we should only borrow on our own terms is a bit unrealistic. Comm. Monsod is one who knew whereof he spoke. 7. Justice Morales also declares that the optimal time for the conversion of an FTAA into an MPSA is after completion of the exploration phase and just before undertaking the development and construction phase, on account of the fact that the requirement for a minimum investment of $50 million is applicable only during the development, construction and utilization phase, but not during the exploration phase, when the foreign contractor need merely comply with minimum ground expenditures. Thus by converting, the foreign contractor maximizes its profits by avoiding its obligation to make the minimum investment of $50 million. This argument forgets that the foreign contractor is in the game precisely to make money. In order to come anywhere near profitability, the contractor must first extract and sell the mineral ore. In order to do that, it must also develop and construct the mining facilities, set up its machineries and equipment and dig the tunnels to get to the deposit. The contractor is thus compelled to expend funds in order to make profits. If it decides to cut back on investments and expenditures, it will necessarily sacrifice the pace of development and utilization; it will necessarily sacrifice the amount of profits it can make from the mining operations. In fact, at certain less-than-optimal levels of operation, the stream of revenues generated may not even be enough to cover variable expenses, let alone overhead expenses; this is a dismal situation anyone would want to avoid. In order to make money, one has to spend money. This truism applies to the mining industry as well. 8. Mortgaging the minerals to secure a foreign FTAA contractors obligations is anomalous, according to Justice Morales since the contractor was from the beginning obliged to provide all financing needed for the mining operations. However, the mortgaging of minerals by the contractor does not necessarily signify that the contractor is unable to provide all financing required for the project, or that it does not have the financial capability to undertake large-scale operations. Mortgaging of mineral products, just like the assignment (by way of security) of manufactured goods and goods in inventory, and the assignment of receivables, is an ordinary requirement of banks, even in the case of clients with more than sufficient financial resources. And nowadays, even the richest and best managed corporations make use of bank credit facilities -it does not necessarily signify that they do not have the financial resources or are unable to provide the financing on their own; it is just a manner of maximizing the use of their funds. 9. Does the contractor in reality acquire the surface rights for free, by virtue of the fact that it is entitled to reimbursement for the costs of acquisition and maintenance, adjusted for inflation? We think not. The reimbursement is possible only at the end of the term of the contract, when the surface rights will no longer be needed, and the land previously acquired will have to be disposed of, in which case the contractor gets reimbursement from the sales proceeds. The contractor has to pay out the acquisition price for the land. That money will belong to the seller of the land. Only if and when the land is finally sold off will the contractor get any reimbursement. In other words, the contractor will have been cashout for the entire duration of the term of the contract -- 25 or 50 years, depending. If we calculate the cost of money at say 12 percent per annum, that is the cost or opportunity loss to the contractor, in addition to the amount of the acquisition price. 12 percent per annum for 50 years is 600 percent; this, without any compounding yet. The cost of money is therefore at least 600 percent of the original acquisition cost; it is in addition to the acquisition cost. For free? Not by a long shot. 10. The contractor will acquire and hold up to 5,000 hectares? We doubt it. The acquisition by the State of land for the contractor is just to enable the contractor to establish its mine site, build its facilities, establish a tailings pond, set up its machinery and equipment, and dig mine shafts and tunnels, etc. It is impossible that the surface requirement will aggregate 5,000 hectares. Much of the operations will consist of the tunneling and digging underground, which will not require possessing or using any land surface. 5,000 hectares is way too much for the needs of a mining operator. It simply will not spend its cash to acquire property that it will not need; the cash may be better employed for the actual mining operations, to yield a profit. 11. Justice Carpio claims that the phrase among other things (found in the second paragraph of Section 81 of the Mining Act) is being incorrectly treated as a delegation of legislative power to the DENR secretary to issue DAO 99-56 and prescribe the formulae therein on the States share from

mining operations. He adds that the phrase among other things was not intended as a delegation of legislative power to the DENR secretary, much less could it be deemed a valid delegation of legislative power, since there is nothing in the second paragraph of Section 81 which can be said to grant any delegated legislative power to the DENR secretary. And even if there were, such delegation would be void, for lack of any standards by which the delegated power shall be exercised. While there is nothing in the second paragraph of Section 81 which can directly be construed as a delegation of legislative power to the DENR secretary, it does not mean that DAO 99-56 is invalid per se, or that the secretary acted without any authority or jurisdiction in issuing DAO 9956. As we stated earlier in our Prologue, Who or what organ of government actually exercises this power of control on behalf of the State? The Constitution is crystal clear: the President. Indeed, the Chief Executive is the official constitutionally mandated to enter into agreements with foreign owned corporations. On the other hand, Congress may review the action of the President once it is notified of every contract entered into in accordance with this [constitutional] provision within thirty days from its execution. It is the President who is constitutionally mandated to enter into FTAAs with foreign corporations, and in doing so, it is within the Presidents prerogative to specify certain terms and conditions of the FTAAs, for example, the fiscal regime of FTAAs -- i.e., the sharing of the net mining revenues between the contractor and the State. Being the Presidents alter ego with respect to the control and supervision of the mining industry, the DENR secretary, acting for the President, is necessarily clothed with the requisite authority and power to draw up guidelines delineating certain terms and conditions, and specifying therein the terms of sharing of benefits from mining, to be applicable to FTAAs in general. It is important to remember that DAO 99-56 has been in existence for almost six years, and has not been amended or revoked by the President. The issuance of DAO 99-56 did not involve the exercise of delegated legislative power. The legislature did not delegate the power to determine the nature, extent and composition of the items that would come under the phrase among other things. The legislatures power pertains to the imposition of taxes, duties and fees. This power was not delegated to the DENR secretary. But the power to negotiate and enter into FTAAs was withheld from Congress, and reserved for the President. In determining the sharing of mining benefits, i.e., in specifying what the phrase among other things include, the President (through the secretary acting in his/her behalf) was not determining the amount or rate of taxes, duties and fees, but rather the amount of INCOME to be derived from minerals to be extracted and sold, income which belongs to the State as owner of the mineral resources. We may say that, in the second paragraph of Section 81, the legislature in a sense intruded partially into the Presidents sphere of authority when the former provided that The Government share in financial or technical assistance agreement shall consist of, among other things, the contractors corporate income tax, excise tax, special allowance, withholding tax due from the contractors foreign stockholders arising from dividend or interest payments to the said foreign stockholder in case of a foreign national and all such other taxes, duties and fees as provided for under existing laws. (Italics supplied) But it did not usurp the Presidents authority since the provision merely included the enumerated items as part of the government share, without foreclosing or in any way preventing (as in fact Congress could not validly prevent) the President from determining what constitutes the States compensation derived from FTAAs. In this case, the President in effect directed the inclusion or addition of other things, viz., INCOME for the owner of the resources, in the governments share, while adopting the items enumerated by Congress as part of the government share also. 12. Justice Carpios insistence on applying the ejusdem generis rule of statutory construction to the phrase among other things is therefore useless, and must fall by the wayside. There is no point trying to construe that phrase in relation to the enumeration of taxes, duties and fees found in paragraph 2 of Section 81, precisely because the constitutional power

to prescribe the sharing of mining income between the State and mining companies, to quote Justice Carpio pursuant to an FTAA

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is constitutionally lodged with the President, not with Congress. It thus makes no sense to persist in giving the phrase among other things a restricted meaning referring only to taxes, duties and fees. 13. Strangely, Justice Carpio claims that the DENR secretary can change the formulae in DAO 99-56 any time even without the approval of the President, and the secretary is the sole authority to determine the amount of consideration that the State shall receive in an FTAA, because Section 5 of the DAO states that xxx any amendment of an FTAA other than the provision on fiscal regime shall require the negotiation with the Negotiation Panel and the recommendation of the Secretary for approval of the President xxx . Allegedly, because of that provision, if an amendment in the FTAA involves non-fiscal matters, the amendment requires approval of the President, but if the amendment involves a change in the fiscal regime, the DENR secretary has the final authority, and approval of the President may be dispensed with; hence the secretary is more powerful than the President. We believe there is some distortion resulting from the quoted provision being taken out of context. Section 5 of DAO 99-56 reads as follows: Section 5. Status of Existing FTAAs. All FTAAs approved prior to the effectivity of this Administrative Order shall remain valid and be recognized by the Government: Provided, That should a Contractor desire to amend its FTAA, it shall do so by filing a Letter of Intent (LOI) to the Secretary thru the Director. Provided, further, That if the Contractor desires to amend the fiscal regime of its FTAA, it may do so by seeking for the amendment of its FTAAs whole fiscal regime by adopting the fiscal regime provided hereof: Provided, finally, That any amendment of an FTAA other than the provision on fiscal regime shall require the negotiation with the Negotiating Panel and the recommendation of the Secretary for approval of the President of the Republic of the Philippines. (underscoring supplied) It looks like another case of misapprehension. The proviso being objected to by Justice Carpio is actually preceded by a phrase that requires a contractor desiring to amend the fiscal regime of its FTAA, to amend the same by adopting the fiscal regime prescribed in DAO 99-56 -- i.e., solely in that manner, and in no other. Obviously, since DAO 99-56 was issued by the secretary under the authority and with the presumed approval of the President, the amendment of an FTAA by merely adopting the fiscal regime prescribed in said DAO 99-56 (and nothing more) need not have the express clearance of the President anymore. It is as if the same had been pre-approved. We cannot fathom the complaint that that makes the secretary more powerful than the President, or that the former is trying to hide things from the President or Congress. 14. Based on the first sentence of Section 5 of DAO 99-56, which states [A]ll FTAAs approved prior to the effectivity of this Administrative Order shall remain valid and be recognized by the Government, Justice Carpio concludes that said Administrative Order allegedly exemptsFTAAs approved prior to its effectivity -- like the WMCP FTAA -- from having to pay the State any share from their mining income, apart from taxes, duties and fees. We disagree. What we see in black and white is the statement that the FTAAs approved before the DAO came into effect are to continue to be valid and will be recognized by the State. Nothing is said about their fiscal regimes. Certainly, there is no basis to claim that the contractors under said FTAAs were being exempted from paying the government a share in their mining incomes. For the record, the WMCP FTAA is NOT and has never been exempt from paying the government share. The WMCP FTAA has its own fiscal regime -- Section 7.7 -- which gives the government a 60 percent share in the net mining revenues of WMCP from the commencement of commercial production.

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For that very reason, we have never said that DAO 99-56 is the basis for claiming that the WMCP FTAA has a consideration. Hence, we find quite out of place Justice Carpios statement that ironically, DAO 9956, the very authority cited to support the claim that the WMCP FTAA has a consideration, does not apply to the WMCP FTAA. By its own express terms, DAO 99-56 does not apply to FTAAs executed before the issuance of DAO 99-56, like the WMCP FTAA. The majoritys position has allegedly no leg to stand on since even DAO 99-56, assuming it is valid, cannot save the WMCP FTAA from want of consideration. Even assuming arguendo that DAO 99-56 does not apply to the WMCP FTAA, nevertheless, the WMCP FTAA has its own fiscal regime, found in Section 7.7 thereof. Hence, there is no such thing as want of consideration here. Still more startling is this claim: The majority supposedly agrees that the provisions of the WMCP FTAA, which grant a sham consideration to the State, are void. Since the majority agrees that the WMCP FTAA has a sham consideration, the WMCP FTAA thus lacks the third element of a valid contract. The Decision should declare the WMCP FTAA void for want of consideration unless it treats the contract as an MPSA under Section 80. Indeed the only recourse of WMCP to save the validity of its contract is to convert it into an MPSA. To clarify, we said that Sections 7.9 and 7.8(e) of the WMCP FTAA are provisions grossly disadvantageous to government and detrimental to the interests of the Filipino people, as well as violative of public policy, and must therefore be stricken off as invalid. Since the offending provisions are very much separable from Section 7.7 and the rest of the FTAA, the deletion of Sections 7.9 and 7.8(e) can be done without affecting or requiring the invalidation of the WMCP FTAA itself, and such deletion will preserve for government its due share of the 60 percent benefits. Therefore, the WMCP FTAA is NOT bereft of a valid consideration (assuming for the nonce that indeed this is the consideration of the FTAA). SUMMATION order. To conclude, a summary of the key points discussed above is now in Resort to the deliberations of the Constitutional Commission is therefore unavoidable, and a careful scrutiny thereof conclusively shows that the ConCom members discussed agreements involving either technical or financial assistance in the same sense as service contracts and used the terms interchangeably. The drafters in fact knew that the agreements with foreign corporations were going to entail not mere technical or financial assistance but, rather, foreign investment in and management of an enterprise for large-scale exploration, development and utilization of minerals. The framers spoke about service contracts as the concept was understood in the 1973 Constitution. It is obvious from their discussions that they did not intend to ban or eradicate service contracts. Instead, they were intent on crafting provisions to put in place safeguards that would eliminate or minimize the abuses prevalent during the martial law regime. In brief, they were going to permit service contracts with foreign corporations as contractors, but with safety measures to prevent abuses, as an exception to the general norm established in the first paragraph of Section 2 of Article XII, which reserves or limits to Filipino citizens and corporations at least 60 percent owned by such citizens the exploration, development and utilization of mineral or petroleum resources. This was prompted by the perceived insufficiency of Filipino capital and the felt need for foreign expertise in the EDU of mineral resources. Despite strong opposition from some ConCom members during the final voting, the Article on the National Economy and Patrimony -including paragraph 4 allowing service contracts with foreign corporations as an exception to the general norm in paragraph 1 of Section 2 of the same Article -- was resoundingly and overwhelmingly approved. The drafters, many of whom were economists, academicians, lawyers, businesspersons and politicians knew that foreign entities will not enter into agreements involving assistance without requiring measures of protection to ensure the success of the venture and repayment of their investments, loans and other financial assistance, and ultimately to protect the business reputation of the foreign corporations. The drafters, by specifying such agreements involving assistance, necessarily gave implied assent to everything that these agreements 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 measures for the protection of the interests of the foreign corporation, at least to the extent that they are consistent with Philippine sovereignty over natural resources, the constitutional requirement of State control, and beneficial ownership of natural resources remaining vested in the State. From the foregoing, it is clear that agreements involving either technical or financial assistance referred to in paragraph 4 are in factservice contracts, but such new service contracts are between foreign corporations acting as contractors on the one hand, and on the other hand government as principal or owner (of the works), whereby the foreign contractor provides the capital, technology and technical know-how, and managerial expertise in the creation and operation of the large-scale mining/extractive enterprise, and government through its agencies (DENR, MGB) actively exercises full control and supervision over the entire enterprise. Such service contracts may be entered into only with respect to minerals, petroleum and other mineral oils. The grant of such service contracts is subject to several safeguards, among them: (1) that the service contract be crafted in accordance with a general law setting standard or uniform terms, conditions and requirements; (2) the President be the signatory for the government; and (3) the President report the executed agreement to Congress within thirty days.

The Meaning of Agreements Involving Either Technical or Financial Assistance


Applying familiar principles of constitutional construction to the phrase agreements involving either technical or financial assistance, the framers choice of words does not indicate the intent to exclude other modes of assistance, but rather implies that there are other things being included or possibly being made part of the agreement, apart from financial or technical assistance. The drafters avoided the use of restrictive and stringent phraseology; a verba legis scrutiny of Section 2 of Article XII of the Constitution discloses not even a hint of a desire to prohibitforeign involvement in the management or operation of mining activities, or to eradicate service contracts. Such moves would necessarily imply an underlying drastic shift in fundamental economic and developmental policies of the State. That change requires a much more definite and irrefutable basis than mere omission of the words service contract from the new Constitution. Furthermore, a literal and restrictive interpretation of this paragraph leads to logical inconsistencies. A constitutional provision specifically allowing foreignowned corporations to render financial or technical assistance in respect of mining or any other commercial activity was clearly unnecessary; the provision was meant to refer to more than mere financial or technical assistance. Also, if paragraph 4 permits only agreements for financial or technical assistance, there would be no point in requiring that they be based on real contributions to the economic growth and general welfare of the country. And considering that there were various long-term service contracts still in force and effect at the time the new Charter was being drafted, the absence of any transitory provisions to govern the termination and closing-out of the then existing service contracts strongly militates against the theory that the mere omission of service contracts signaled their prohibition by the new Constitution.

Ultimate Test: Full State Control


To repeat, the primacy of the principle of the States sovereign ownership of all mineral resources, and its full control and supervision over all aspects of exploration, development and utilization of natural resources must be upheld. But full control and supervision cannot be taken literally to mean that the State controls and supervises everything down to the minutest details and makes all required actions, as this would render impossible the legitimate exercise by the contractor of a reasonable degree

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of management prerogative and authority, indispensable to the proper functioning of the mining enterprise. Also, government need not micromanage mining operations and day-to-day affairs of the enterprise in order to be considered as exercising full control and supervision. Control, as utilized in Section 2 of Article XII, must be taken to mean a degree of control sufficient to enable the State to direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the State may be on a macro level, through the establishment of policies, guidelines, regulations, industry standards and similar measures that would enable government to regulate the conduct of affairs in various enterprises, and restrain activities deemed not desirable or beneficial, with the end in view of ensuring that these enterprises contribute to the economic development and general welfare of the country, conserve the environment, and uplift the well-being of the local affected communities. Such a degree of control would be compatible with permitting the foreign contractor sufficient and reasonable management authority over the enterprise it has invested in, to ensure efficient and profitable operation. contractor) is spending and investing heavily in exploration activities without yet being able to extract minerals and generate revenues. The exploration permit issued under Sections 3(aq), 20 and 23 of RA 7942, which allows exploration but not extraction, serves to protect the interests and rights of the exploration permit grantee (and would-be contractor), foreign or local. Otherwise, the exploration works already conducted, and expenditures already made, may end up only benefiting claim-jumpers. Thus, Section 3(aq) of RA 7942 is not unconstitutional.

WMCP FTAA Likewise Gives the State Full Control and Supervision
The WMCP FTAA obligates the contractor to account for the value of production and sale of minerals (Clause 1.4); requires that the contractors work program, activities and budgets be approved by the State (Clause 2.1); gives the DENR secretary power to extend the exploration period (Clause 3.2-a); requires approval by the State for incorporation of lands into the contract area (Clause 4.3-c); requires Bureau of Forest Development approval for inclusion of forest reserves as part of the FTAA contract area (Clause 4.5); obligates the contractor to periodically relinquish parts of the contract area not needed for exploration and development (Clause 4.6); requires submission of a declaration of mining feasibility for approval by the State (Clause 4.6-b); obligates the contractor to report to the State the results of its exploration activities (Clause 4.9); requires the contractor to obtain State approval for its work programs for the succeeding two year periods, containing the proposed work activities and expenditures budget related to exploration (Clause 5.1); requires the contractor to obtain State approval for its proposed expenditures for exploration activities (Clause 5.2); requires the contractor to submit an annual report on geological, geophysical, geochemical and other information relating to its explorations within the FTAA area (Clause 5.3-a); requires the contractor to submit within six months after expiration of exploration period a final report on all its findings in the contract area (Clause 5.3-b); requires the contractor after conducting feasibility studies to submit a declaration of mining feasibility, along with a description of the area to be developed and mined, a description of the proposed mining operations and the technology to be employed, and the proposed work program for the development phase, for approval by the DENR secretary (Clause 5.4); obligates the contractor to complete the development of the mine, including construction of the production facilities, within the period stated in the approved work program (Clause 6.1); requires the contractor to submit for approval a work program covering each period of three fiscal years (Clause 6.2); requires the contractor to submit reports to the secretary on the production, ore reserves, work accomplished and work in progress, profile of its work force and management staff, and other technical information (Clause 6.3); subjects any expansions, modifications, improvements and replacements of mining facilities to the approval of the secretary (Clause 6.4); subjects to State control the amount of funds that the contractor may borrow within the Philippines (Clause 7.2); subjects to State supervisory power any technical, financial and marketing issues (Clause 10.1-a); obligates the contractor to ensure 60 percent Filipino equity in the contractor within ten years of recovering specified expenditures unless not so required by subsequent legislation (Clause 10.1); gives the State the right to terminate the FTAA for unremedied substantial breach thereof by the contractor (Clause 13.2); requires State approval for any assignment of the FTAA by the contractor to an entity other than an affiliate (Clause 14.1). In short, the aforementioned provisions of the WMCP FTAA, far from constituting a surrender of control and a grant of beneficial ownership of mineral resources to the contractor in question, vest the State with control and supervision over practically all aspects of the operations of the FTAA contractor, including the charging of preoperating and operating expenses, and the disposition of mineral products. There is likewise no relinquishment of control on account of specific provisions of the WMCP FTAA. Clause 8.2 provides a mechanism to prevent the mining operations from grinding to a complete halt as a result of possible delays of more than 60 days in the governments processing and approval of submitted work programs and budgets. Clause 8.3 seeks to provide a temporary, stop-gap solution in case a disagreement between the State and the contractor (over the proposed work program or budget submitted by the contractor) should result in a deadlock or

Government Granted Full Control by RA 7942 and DAO 96-40


Baseless are petitioners sweeping claims that RA 7942 and its Implementing Rules and Regulations make it possible for FTAA contracts to cede full control and management of mining enterprises over to fully foreign owned corporations. Equally wobbly is the assertion that the State is reduced to a passive regulator dependent on submitted plans and reports, with weak review and audit powers and little say in the decisionmaking of the enterprise, for which reasons beneficial ownership of the mineral resources is allegedly ceded to the foreign contractor. As discussed hereinabove, the States full control and supervision over mining operations are ensured through the following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e), (f), (g), (h), (k), (l), (m) and (o)], 40, 57, 66, 69, 70, and Chapters XI and XVII; as well as the following provisions of DAO 96-40: Sections7[(d) and (f)], 35(a-2), 53[(a-4) and (d)], 54, 56[(g), (h), (l), (m) and (n)], 56(2), 60, 66, 144, 168, 171 and 270, and also Chapters XV, XVI and XXIV. Through the foregoing provisions, the government agencies concerned are empowered to approve or disapprove -- hence, in a position to influence, direct, and change -- the various work programs and the corresponding minimum expenditure commitments for each of the exploration, development and utilization phases of the enterprise. Once they have been approved, the contractors compliance with its commitments therein will be monitored. Figures for mineral production and sales are regularly monitored and subjected to government review, to ensure that the products and by-products are disposed of at the best prices; copies of sales agreements have to be submitted to and registered with MGB. The contractor is mandated to open its books of accounts and records for scrutiny, to enable the State to determine that the government share has been fully paid. The State may likewise compel compliance by the contractor with mandatory requirements on mine safety, health and environmental protection, and the use of anti-pollution technology and facilities. The contractor is also obligated to assist the development of the mining community, and pay royalties to the indigenous peoples concerned. And violation of any of the FTAAs terms and conditions, and/or non-compliance with statutes or regulations, may be penalized by cancellation of the FTAA. Such sanction is significant to a contractor who may have yet to recover the tens or hundreds of millions of dollars sunk into a mining project. Overall, the State definitely has a pivotal say in the operation of the individual enterprises, and can set directions and objectives, detect deviations and non-compliances by the contractor, and enforce compliance and impose sanctions should the occasion arise. Hence, RA 7942 and DAO 96-40 vest in government more than a sufficient degree of control and supervision over the conduct of mining operations. Section 3(aq) of RA 7942 was objected to as being unconstitutional for allowing a foreign contractor to apply for and hold an exploration permit. During the exploration phase, the permit grantee (and prospective

impasse, to avoid unreasonably long delays in the performance of the works. The State, despite Clause 8.3, still has control over the contract area, and it may, as sovereign authority, prohibit work thereon until the dispute is resolved, or it may terminate the FTAA, citing substantial breach thereof. Hence, the State clearly retains full and effective control. Clause 8.5, which allows the contractor to make changes to approved work programs and budgets without the prior approval of the DENR secretary, subject to certain limitations with respect to the variance/s, merely provides the contractor a certain amount of flexibility to meet unexpected situations, while still guaranteeing that the approved work programs and budgets are not abandoned altogether. And if the secretary disagrees with the actions taken by the contractor in this instance, he may also resort to cancellation/termination of the FTAA as the ultimate sanction. Clause 4.6 of the WMCP FTAA gives the contractor discretion to select parts of the contract area to be relinquished. The State is not in a position to substitute its judgment for that of the contractor, who knows exactly which portions of the contract area do not contain minerals in commercial quantities and should be relinquished. Also, since the annual occupation fees paid to government are based on the total hectarage of the contract area, net of the areas relinquished, the c ontractors self-interest will assure proper and efficient relinquishment. Clause 10.2(e) of the WMCP FTAA does not mean that the contractor can compel government to use its power of eminent domain. It contemplates a situation in which the contractor is a foreign-owned corporation, hence, not qualified to own land. The contractor identifies the surface areas needed for it to construct the infrastructure for mining operations, and the State then acquires the surface rights on behalf of the former. The provision does not call for the exercise of the power of eminent domain (or determination of just compensation); it seeks to avoid a violation of the anti-dummy law. Clause 10.2(l) of the WMCP FTAA giving the contractor the right to mortgage and encumber the mineral products extracted may have been a result of conditions imposed by creditor-banks to secure the loan obligations of WMCP. Banks lend also upon the security of encumbrances on goods produced, which can be easily sold and converted into cash and applied to the repayment of loans. Thus, Clause 10.2(l) is not something out of the ordinary. Neither is it objectionable, because even though the contractor is allowed to mortgage or encumber the mineral end-products themselves, the contractor is not thereby relieved of its obligation to pay the government its basic and additional shares in the net mining revenue. The contractors ability to mortgage the minerals does not negate the States right to receive its share of net mining revenues. Clause 10.2(k) which gives the contractor authority to change its equity structure at any time, means that WMCP, which was then 100 percent foreign owned, could permit Filipino equity ownership. Moreover, what is important is that the contractor, regardless of its ownership, is always in a position to render the services required under the FTAA, under the direction and control of the government. Clauses 10.4(e) and (i) bind government to allow amendments to the FTAA if required by banks and other financial institutions as part of the conditions of new lendings. There is nothing objectionable here, since Clause 10.4(e) also provides that such financing arrangements should in no event reduce the contractors obligations or the governments rights under the FTAA. Clause 10.4(i) provides that government shall favourably consider any request for amendments of this agreement necessary for the contractor to successfully obtain financing. There is no renunciation of control, as the proviso does not say that government shall automatically grant any such request. Also, it is up to the contractor to prove the need for the requested changes. The government always has the final say on whether to approve or disapprove such requests. In fine, the FTAA provisions do not reduce or abdicate State control.

No Surrender of Financial Benefits

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The second paragraph of Section 81 of RA 7942 has been denounced for allegedly limiting the States share in FTAAs with foreign contractors to just taxes, fees and duties, and depriving the State of a share in the after-tax income of the enterprise. However, the inclusion of the phrase among other things in the second paragraph of Section 81 clearly and unmistakably reveals the legislative intent to have the State collect more than just the usual taxes, duties and fees. Thus, DAO 99-56, the Guidelines Establishing the Fiscal Regime of Financial or Technical Assistance Agreements, spells out the financial benefits government will receive from an FTAA, as consisting of not only a basic government share, comprised of all direct taxes, fees and royalties, as well as other payments made by the contractor during the term of the FTAA, but also an additional government share, being a share in the earnings or cash flows of the mining enterprise, so as to achieve a fifty-fifty sharing of net benefits from miningbetween the government and the contractor. The additional government share is computed using one of three (3) options or schemes detailed in DAO 99-56, viz., (1) the fifty-fifty sharing of cumulative present value of cash flows; (2) the excess profitrelated additional government share; and (3) the additional sharing based on the cumulative net mining revenue. Whichever option or computation is used, the additional government share has nothing to do with taxes, duties, fees or charges. The portion of revenues remaining after the deduction of the basic and additional government shares is what goes to the contractor. The basic government share and the additional government share do not yet take into account the indirect taxes and other financial contributions of mining projects, which are real and actual benefits enjoyed by the Filipino people; if these are taken into account, total government share increases to 60 percent or higher (as much as 77 percent, and 89 percent in one instance) of the net present value of total benefits from the project. The third or last paragraph of Section 81 of RA 7942 is slammed for deferring the payment of the government share in FTAAs until after the contractor shall have recovered its pre-operating expenses, exploration and development expenditures. Allegedly, the collection of the States share is rendered uncertain, as there is no time limit in RA 7942 for this grace period or recovery period. But although RA 7942 did not limit the grace period, the concerned agencies (DENR and MGB) in formulating the 1995 and 1996 Implementing Rules and Regulations provided that the period of recovery, reckoned from the date of commercial operation, shall be for a period not exceeding five years, or until the date of actual recovery, whichever comes earlier. And since RA 7942 allegedly does not require government approval for the pre-operating, exploration and development expenses of the foreign contractors, it is feared that such expenses could be bloated to wipe out mining revenues anticipated for 10 years, with the result that the States share is zero for the first 10 years. However, the argument is based on incorrect information. Under Section 23 of RA 7942, the applicant for exploration permit is required to submit a proposed work program for exploration, containing a yearly budget of proposed expenditures, which the State passes upon and either approves or rejects; if approved, the same will subsequently be recorded as pre-operating expenses that the contractor will have to recoup over the grace period. Under Section 24, when an exploration permittee files with the MGB a declaration of mining project feasibility, it must submit a work program for development, with corresponding budget, for approval by the Bureau, before government may grant an FTAA or MPSA or other mineral agreements; again, government has the opportunity to approve or reject the proposed work program and budgeted expenditures fordevelopment works, which will become the pre-operating and development costs that will have to be recovered. Government is able to know ahead of time the amounts of pre-operating and other expenses to

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be recovered, and the approximate period of time needed therefor. The aforecited provisions have counterparts in Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. In sum, the third or last paragraph of Section 81 of RA 7942 cannot be deemed defective. Section 80 of RA 7942 allegedly limits the States share in a mineral production-sharing agreement (MPSA) to just the excise tax on the mineral product, i.e., only 2 percent of market value of the minerals. The colatilla in Section 84 reiterates the same limitation in Section 80. However, these two provisions pertain only to MPSAs, and have no application to FTAAs. These particular provisions do not come within the issues defined by this Court. Hence, on due process grounds, no pronouncement can be made in this case in respect of the constitutionality of Sections 80 and 84. Section 112 is disparaged for reverting FTAAs and all mineral agreements to the old license, concession or lease system, because it allegedly effectively reduces the government share in FTAAs to just the 2 percent excise tax which pursuant to Section 80 comprises the government share in MPSAs. However, Section 112 likewise does not come within the issues delineated by this Court, and was never touched upon by the parties in their pleadings. Moreover, Section 112 may not properly apply to FTAAs. The mining law obviously meant to treat FTAAs as a breed apart from mineral agreements. There is absolutely no basis to believe that the law intends to exact from FTAA contractors merely the same government share (i.e., the 2 percent excise tax) that it apparently demands from contractors under the three forms of mineral agreements. While there is ground to believe that Sections 80, 84 and 112 are indeed unconstitutional, they cannot be ruled upon here. In any event, they are separable; thus, a later finding of nullity will not affect the rest of RA 7942. In fine, the challenged provisions of RA 7942 cannot be said to surrender financial benefits from an FTAA to the foreign contractors. Moreover, there is no concrete basis for the view that, in FTAAs with a foreign contractor, the State must receive at least 60 percent of the after-tax income from the exploitation of its mineral resources, and that such share is the equivalent of the constitutional requirement that at least 60 percent of the capital, and hence 60 percent of the income, of mining companies should remain in Filipino hands. Even if the State is entitled to a 60 percent share from other mineral agreements (CPA, JVA and MPSA), that would not create a parallel or analogous situation for FTAAs. We are dealing with an essentially different equation. Here we have the old apples and oranges syndrome. The Charter did not intend to fix an iron-clad rule of 60 percent share, applicable to all situations, regardless of circumstances. There is no indication of such an intention on the part of the framers. Moreover, the terms and conditions of petroleum FTAAs cannot serve as standards for mineral mining FTAAs, because the technical and operational requirements, cost structures and investment needs of off-shore petroleum exploration and drilling companies do not have the remotest resemblance to those of on-shore mining companies. To take the position that governments share must be not less than 60 percent of after-tax income of FTAA contractors is nothing short of this Court dictating upon the government. The State resultantly ends up losing control. To avoid compromising the States full control and supervision over the exploitation of mineral resources, there must be no attempt to impose a minimum 60 percent rule. It is sufficient that the State has the power and means, should it so decide, to get a 60 percent share (or greater); and it is not necessary that the State does so inevery case. revenues under Section 7.7, without any offsetting compensation to the State. And what is given to the State in Section 7.7 is by mere tolerance of WMCPs foreign stockholders, who can at any time cut off the governments entire share by simply selling 60 percent of WMCPs equity to a Philippine citizen or corporation. In fact, the sale by WMCPs foreign stockholder on January 23, 2001 of the entire outstanding equity in WMCP to Sagittarius Mines, Inc., a domestic corporation at least 60 percent Filipino owned, can be deemed to have automatically triggered the operation of Section 7.9 and removed the States right to receive its 60 percent share. Section 7.9 of the WMCP FTAA has effectively given away the States share without anything in exchange. Moreover, it constitutes unjust enrichment on the part of the local and foreign stockholders in WMCP, because by the mere act of divestment, the local and foreign stockholders get a windfall, as their share in the net mining revenues of WMCP is automatically increased, without having to pay anything for it. Being grossly disadvantageous to government and detrimental to the Filipino people, as well as violative of public policy, Section 7.9 must therefore be stricken off as invalid. The FTAA in question does not involve mere contractual rights but, being impressed as it is with public interest, the contractual provisions and stipulations must yield to the common good and the national interest. Since the offending provision is very much separable from the rest of the FTAA, the deletion of Section 7.9 can be done without affecting or requiring the invalidation of the entire WMCP FTAA itself. Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent by government for the benefit of the contractor to be deductible from the States share in net mining revenues, it results in benefiting the contractor twice over. This constitutes unjust enrichment on the part of the contractor, at the expense of government. For being grossly disadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e) must also be declared without effect. It may likewise be stricken off without affecting the rest of the FTAA. EPILOGUE AFTER ALL IS SAID AND DONE, it is clear that there is unanimous agreement in the Court upon the key principle that the State must exercise full control and supervision over the exploration, development and utilization of mineral resources. The crux of the controversy is the amount of discretion to be accorded the Executive Department, particularly the President of the Republic, in respect of negotiations over the terms of FTAAs, particularly when it comes to the government share of financial benefits from FTAAs. The Court believes that it is not unconstitutional to allow a wide degree of discretion to the Chief Executive, given the nature and complexity of such agreements, the humongous amounts of capital and financing required for large-scale mining operations, the complicated technology needed, and the intricacies of international trade, coupled with the States need to maintain flexibility in its dealings, in order to preserve and enhance our countrys competitiveness in world markets. We are all, in one way or another, sorely affected by the recently reported scandals involving corruption in high places, duplicity in the negotiation of multi-billion peso government contracts, huge payoffs to government officials, and other malfeasances; and perhaps, there is the desire to see some measures put in place to prevent further abuse. However, dictating upon the President what minimum share to get from an FTAA is not the solution. It sets a bad precedent since such a move institutionalizes the very reduction if not deprivation of the States control. The remedy may be worse than the problem it was meant to address. In any event, provisions in such future agreements which may be suspected to be grossly disadvantageous or detrimental to government may be challenged in court, and the culprits haled before the bar of justice. Verily, under the doctrine of separation of powers and due respect for co-equal and coordinate branches of government, this Court must

Invalid Provisions of the WMCP FTAA


Section 7.9 of the WMCP FTAA clearly renders illusory the States 60 percent share of WMCPs revenues. Under Section 7.9, should WMCPs foreign stockholders (who originally owned 100 percent of the equity) sell 60 percent or more of their equity to a Filipino citizen or corporation, the State loses its right to receive its share in net mining

35
restrain itself from intruding into policy matters and must allow the President and Congress maximum discretion in using the resources of our country and in securing the assistance of foreign groups to eradicate the grinding poverty of our people and answer their cry for viable employment opportunities in the country. The judiciary is loath to interfere with the due exercise by coequal branches of government of their official functions.[99] As aptly spelled out seven decades ago by Justice George Malcolm, Just as the Supreme Court, as the guardian of constitutional rights, should not sanction usurpations by any other department of government, so should it as strictly confine its own sphere of influence to the powers expressly or by implication conferred on it by the Organic Act .[100] Let the development of the mining industry be the responsibility of the political branches of government. And let not this Court interfere inordinately and unnecessarily. The Constitution of the Philippines is the supreme law of the land. It is the repository of all the aspirations and hopes of all the people. We fully sympathize with the plight of Petitioner La Bugal Blaan and other tribal groups, and commend their efforts to uplift their communities. However, we cannot justify the invalidation of an otherwise constitutional statute along with its implementing rules, or the nullification of an otherwise legal and binding FTAA contract. We must never forget that it is not only our less privileged brethren in tribal and cultural communities who deserve the attention of this Court; rather, all parties concerned -- including the State itself, the contractor (whether Filipino or foreign), and the vast majority of our citizens -equally deserve the protection of the law and of this Court. To stress, the benefits to be derived by the State from mining activities must ultimately serve the great majority of our fellow citizens. They have as much right and interest in the proper and well-ordered development and utilization of the countrys mineral resources as the petitioners. Whether we consider the near term or take the longer view, we cannot overemphasize the need for an appropriate balancing of interests and needs -- the need to develop our stagnating mining industry and extract what NEDA Secretary Romulo Neri estimates is some US$840 billion (approx. PhP47.04 trillion) worth of mineral wealth lying hidden in the ground, in order to jumpstart our floundering economy on the one hand, and on the other, the need to enhance our nationalistic aspirations, protect our indigenous communities, and prevent irreversible ecological damage. This Court cannot but be mindful that any decision rendered in this case will ultimately impact not only the cultural communities which lodged the instant Petition, and not only the larger community of the Filipino people now struggling to survive amidst a fiscal/budgetary deficit, ever increasing prices of fuel, food, and essential commodities and services, the shrinking value of the local currency, and a government hamstrung in its delivery of basic services by a severe lack of resources, but also countless future generations of Filipinos. For this latter group of Filipinos yet to be born, their eventual access to education, health care and basic services, their overall level of wellbeing, the very shape of their lives are even now being determined and affected partly by the policies and directions being adopted and implemented by government today. And in part by the this Resolution rendered by this Court today. Verily, the mineral wealth and natural resources of this country are meant to benefit not merely a select group of people living in the areas locally affected by mining activities, but the entire Filipino nation, present and future, to whom the mineral wealth really belong. This Court has therefore weighed carefully the rights and interests of all concerned, and decided for the greater good of the greatest number. JUSTICE FOR ALL, not just for some; JUSTICE FOR THE PRESENT AND THE FUTURE, not just for the here and now. WHEREFORE, the Court RESOLVES to GRANT the respondents and the intervenors Motions for Reconsideration; to REVERSE andSET ASIDE this Courts January 27, 2004 Decision; to DISMISS the Petition; and to issue this new judgment declaring CONSTITUTIONAL (1) Republic Act No. 7942 (the Philippine Mining Law), (2) its Implementing Rules and Regulations contained in DENR Administrative Order (DAO) No. 9640 -- insofar as they relate to financial and technical assistance agreements referred to in paragraph 4 of Section 2 of Article XII of the Constitution; and (3) the Financial and Technical Assistance Agreement (FTAA) dated March 30, 1995 executed by the government and Western Mining Corporation Philippines Inc. (WMCP), except Sections 7.8 and 7.9 of the subject FTAA which are hereby INVALIDATED for being contrary to public policy and for being grossly disadvantageous to the government. SO ORDERED.

WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as taxpayers;

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NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, LIKASKAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental organizations, petitioners, vs. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as members of the Philippine Senate who concurred in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as Executive Secretary,respondents. DECISION PANGANIBAN, J.: The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast majority of countries has revolutionized international business and economic relations amongst states. It has irreversibly propelled the world towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the third-millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere historical relics the heretofore traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas, quantitative restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific industries in a marketdriven and export-oriented global scenario are replacing age-old beggarthy-neighbor policies that unilaterally protect weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known management guru, Increased participation in the world economy has become the key to domestic economic growth and prosperity. Brief Historical Background To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of three multilateral institutions -- inspired by that grand political body, the United Nations -were discussed at Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and later developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems; and the third, the International Trade Organization (ITO), which was to foster order and predictability in world trade and to minimize unilateral protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons, including its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained was only GATT -- the General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the economies of treaty adherents with no institutionalized body administering the agreements or dependable system of dispute settlement. After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally gave birth to that administering body -- the World Trade Organization -- with the signing of the Final Act in Marrakesh, Morocco and the ratification of the WTO Agreement by its members.[1] Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of improving Philippine access to foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products. The President also saw in the WTO the opening of new opportunities for the services sector x x x, (the reduction of) costs and uncertainty associated with exporting x x x, and (the attraction of) more investments into the country. Although the Chief Executive did not expressly mention it in his letter, the Philippines - - and this is of special interest to the legal profession - - will benefit from the WTO system of dispute settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a disadvantage. The Petition in Brief Arguing mainly (1) that the WTO requires the Philippines to place nationals and products of member-countries on the same footing as Filipinos and local products and (2) that the WTO intrudes, limits and/or impairs the constitutional powers of both Congress and the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the mandate of the 1987 Constitution to develop a self-reliant and independent national economy effectively controlled by Filipinos x x x (to) give preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and locally produced goods. Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and economic globalization? Does it prescribe Philippine integration into a global economy that is liberalized, deregulated and privatized? These are the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of public officials and employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994. The Facts On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the Department of Trade and Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity). By signing the Final Act,[2] Secretary Navarro on behalf of the Republic of the Philippines, agreed:

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(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities, with a view to seeking approval of the Agreement in accordance with their procedures; and (b) to adopt the Ministerial Declarations and Decisions. On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the President of the Philippines,[3]stating among others that the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution. On August 13, 1994, the members of the Philippine Senate received another letter from the President of the Philippines[4] likewise dated August 11, 1994, which stated among others that the Uruguay Round Final Act, the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution. On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S. 1083, a resolution entitled Concurring in the Ratification of the Agreement Establishing the World Trade Organization.[5] On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization.[6] The text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay Round of Multilateral Trade Negotiations and includes various agreements and associated legal instruments (identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade Agreements, for brevity) as follows: ANNEX 1 Annex 1A: Multilateral Agreement on Trade in Goods Agreement on Subsidies and Coordinating Measures Agreement on Safeguards Annex 1B: General Agreement on Trade in Services and Annexes

Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights ANNEX 2 Understanding on Rules and Procedures Governing the Settlement of Disputes ANNEX 3 Trade Policy Review Mechanism On December 16, 1994, the President of the Philippines signed[7] the Instrument of Ratification, declaring: NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after having seen and considered the aforementioned Agreement Establishing the World Trade Organization and the agreements and associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the same and every Article and Clause thereof. To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement Proper and the associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof. On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its integral annexes aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the Understanding on Commitments in Financial Services. In his Memorandum dated May 13, 1996,[8] the Solicitor General describes these two latter documents as follows: The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of matters, such as measures in favor of least developed countries, notification procedures, relationship of WTO with the International Monetary Fund (IMF), and agreements on technical barriers to trade and on dispute settlement. The Understanding on Commitments in Financial Services dwell on, among other things, standstill or limitations and qualifications of commitments to existing non-conforming measures, market access, national treatment, and definitions of non-resident supplier of financial services, commercial presence and new financial service.

General Agreement on Tariffs and Trade 1994 Agreement on Agriculture Agreement on the Application of Sanitary and Phytosanitary Measures Agreement on Textiles and Clothing Agreement on Technical Barriers to Trade Agreement on Trade-Related Investment Measures Agreement on Implementation of Article VI of the Agreement on Tariffs and Trade 1994 General

Agreement on Implementation of Article VII of the General on Tariffs and Trade 1994 Agreement on Pre-Shipment Inspection Agreement on Rules of Origin Agreement on Imports Licensing Procedures

On December 29, 1994, the present petition was filed. After careful deliberation on respondents comment and petitioners reply thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the parties thereafter filed their respective memoranda. The Court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as Bautista Paper,[9] for brevity, (1) providing a historical background of and (2) summarizing the said agreements. During the Oral Argument held on August 27, 1996, the Court directed:

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(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the transcript of proceedings/hearings in the Senate; and (b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to the Philippine adherence to the WTO Agreement, which derogate from Philippine sovereignty and (2) copies of the multi-volume WTO Agreement and other documents mentioned in the Final Act, as soon as possible. After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a Compliance dated September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume Uruguay Round of Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996, he listed the various bilateral or multilateral treaties or international instruments involving derogation of Philippine sovereignty. Petitioners, on the other hand, submitted their Compliance dated January 28, 1997, on January 30, 1997. The Issues In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows: A. Whether the petition presents a political question or is otherwise not justiciable. B. Whether the petitioner members of the Senate who participated in the deliberations and voting leading to the concurrence are estopped from impugning the validity of the Agreement Establishing the World Trade Organization or of the validity of the concurrence. C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene the provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution. D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is vested in the Congress of the Philippines; E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the exercise of judicial power. F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when they voted for concurrence in the ratification of the constitutionally-infirm Agreement Establishing the World Trade Organization. G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when they concurred only in the ratification of the Agreement Establishing the World Trade Organization, and not with the Presidential submission which included the Final Act, Ministerial Declaration and Decisions, and the Understanding on Commitments in Financial Services. On the other hand, the Solicitor General as counsel for respondents synthesized the several issues raised by petitioners into the following:[10] 1. Whether or not the provisions of the Agreement Establishing the World Trade Organization and the Agreements and Associated Legal Instruments included in Annexes one (1), two (2) and three (3) of that agreement cited by petitioners directly contravene or undermine the letter, spirit and intent of Section 19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution. 2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of legislative power by Congress. 3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this Honorable Court in promulgating the rules of evidence. 4. Whether or not the concurrence of the Senate in the ratification by the President of the Philippines of the Agreement establishing the World Trade Organization implied rejection of the treaty embodied in the Final Act. By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has effectively ignored three, namely: (1) whether the petition presents a political question or is otherwise not justiciable; (2) whether petitioner-members of the Senate (Wigberto E. Taada and Anna Dominique Coseteng) are estopped from joining this suit; and (3) whether the respondent-members of the Senate acted in grave abuse of discretion when they voted for concurrence in the ratification of the WTO Agreement. The foregoing notwithstanding, this Court resolved to deal with these three issues thus: (1) The political question issue -- being very fundamental and vital, and being a matter that probes into the very jurisdiction of this Court to hear and decide this case -- was deliberated upon by the Court and will thus be ruled upon as the first issue; (2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived it by not pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents favor, will not cause the petitions dismissal as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and (3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an integral part of the disposition of the four issues raised by the Solicitor General. During its deliberations on the case, the Court noted that the respondents did not question the locus standi of petitioners. Hence, they are also deemed to have waived the benefit of such issue. They probably realized that grave constitutional issues, expenditures of public funds and serious international commitments of the nation are involved here, and that transcendental public interest requires that the substantive issues be met head on and decided on the merits, rather than skirted or deflected by procedural matters.[11] To recapitulate, the issues that will be ruled upon shortly are: (1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION? (2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION? (3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR

39
IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS? (4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE? (5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES? The First Issue: Does the Court Have Jurisdiction Over the Controversy? In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld.[12] Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide.[13] The jurisdiction of this Court to adjudicate the matters[14] raised in the petition is clearly set out in the 1987 Constitution,[15] as follows: Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government. The foregoing text emphasizes the judicial departments duty and power to strike down grave abuse of discretion on the part of any branch or instrumentality of government including Congress. It is an innovation in our political law.[16] As explained by former Chief Justice Roberto Concepcion,[17] the judiciary is the final arbiter on the question of whether or not a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature. As this Court has repeatedly and firmly emphasized in many cases,[18] it will not shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government. As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in the ordinary course of law, we have no hesitation at all in holding that this petition should be given due course and the vital questions raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we have no equivocation. We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of the decision of the President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade liberalization as a policy espoused by said international body. Neither will it rule on the propriety of the governments economic policy of reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will only exercise its constitutional duty to determine whether or not there had been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Senate in ratifying the WTO Agreement and its three annexes. Second Issue: The WTO Agreement and Economic Nationalism This is the lis mota, the main issue, raised by the petition. Petitioners vigorously argue that the letter, spirit and intent of the Constitution mandating economic nationalism are violated by the socalled parity provisions and national treatment clauses scattered in various parts not only of the WTO Agreement and its annexes but also in the Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial Services. Specifically, the flagship constitutional provisions referred to are Sec. 19, Article II, and Secs. 10 and 12, Article XII, of the Constitution, which are worded as follows: Article II DECLARATION OF PRINCIPLES AND STATE POLICIES xx xx xx xx

Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. xx Article XII NATIONAL ECONOMY AND PATRIMONY xx xx xx xx xx xx xx

Sec. 10. x x x. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. xx xx xx xx

Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive. Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in their memorandum:[19] a) In the area of investment measures related to trade in goods (TRIMS, for brevity): Article 2 National Treatment and Quantitative Restrictions. 1. Without prejudice to other rights and obligations under GATT 1994. no Member shall apply any TRIM that is

40
inconsistent with the provisions of Article III or Article XI of GATT 1994. 2. An Illustrative list of TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph I of Article XI of GATT 1994 is contained in the Annex to this Agreement. (Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p.22121, emphasis supplied). The Annex referred to reads as follows: ANNEX Illustrative List 1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of GATT 1994 include those which are mandatory or enforceable under domestic law or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which require: (a) the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of proportion of volume or value of its local production; or (b) that an enterprises purchases or use of imported products be limited to an amount related to the volume or value of local products that it exports. 2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those which are mandatory or enforceable under domestic laws or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which restrict: (a) the importation by an enterprise of products used in or related to the local production that it exports; (b) the importation by an enterprise of products used in or related to its local production by restricting its access to foreign exchange inflows attributable to the enterprise; or (c) the exportation or sale for export specified in terms of particular products, in terms of volume or value of products, or in terms of a preparation of volume or value of its local production. (Annex to the Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round Legal Documents, p.22125, emphasis supplied). The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows: The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. the provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product. (Article III, GATT 1947, as amended by the Protocol Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments p.177, emphasis supplied). b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity): Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property... (par. 1, Article 3, Agreement on Trade-Related Aspect of Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments, p.25432 (emphasis supplied) (c) In the area of the General Agreement on Trade in Services: National Treatment 1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than it accords to its own like services and service suppliers. 2. A Member may meet the requirement of paragraph I by according to services and service suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers. 3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of completion in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member. (Article XVII, General Agreement on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p.22610 emphasis supplied). It is petitioners position that the foregoing national treatment and parity provisions of the WTO Agreement place nationals and products of member countries on the same footing as Filipinos and local products, in contravention of the Filipino First policy of the Constitution. They allegedly render meaningless the phrase effectively controlled by Filipinos. The constitutional conflict becomes more manifest when viewed in the context of the clear duty imposed on the Philippines as a WTO member to ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed agreements.[20] Petitioners further argue that these provisions contravene constitutional limitations on the role exports play in national development and negate the preferential treatment accorded to Filipino labor, domestic materials and locally produced goods. On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not self-executing and merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should not be read in isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO Agreement contains sufficient provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization. We shall now discuss and rule on these arguments. Declaration of Principles Not Self-Executing

41
By its very title, Article II of the Constitution is a declaration of principles and state policies. The counterpart of this article in the 1935 Constitution[21] is called the basic political creed of the nation by Dean Vicente Sinco.[22] These principles in Article II are not intended to be selfexecuting principles ready for enforcement through the courts.[23] They are used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato,[24]the principles and state policies enumerated in Article II and some sections of Article XII are not self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation. In the same light, we held in Basco vs. Pagcor[25] that broad constitutional principles need legislative enactments to implement them, thus: On petitioners allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are merely statements of principles and policies. As such, they are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate such principles. In general, therefore, the 1935 provisions were not intended to be selfexecuting principles ready for enforcement through the courts. They were rather directives addressed to the executive and to the legislature. If the executive and the legislature failed to heed the directives of the article, the available remedy was not judicial but political. The electorate could express their displeasure with the failure of the executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2). The reasons for denying a cause of action to an alleged infringement of broad constitutional principles are sourced from basic considerations of due process and the lack of judicial authority to wade into the uncharted ocean of social and economic policy making. Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa vs. Factoran, Jr.,[26] explained these reasons as follows: My suggestion is simply that petitioners must, before the trial court, show a more specific legal right -- a right cast in language of a significantly lower order of generality than Article II (15) of the Constitution -- that is or may be violated by the actions, or failures to act, imputed to the public respondent by petitioners so that the trial court can validly render judgment granting all or part of the relief prayed for. To my mind, the court should be understood as simply saying that such a more specific legal right or rights may well exist in our corpus of law, considering the general policy principles found in the Constitution and the existence of the Philippine Environment Code, and that the trial court should have given petitioners an effective opportunity so to demonstrate, instead of aborting the proceedings on a motion to dismiss. It seems to me important that the legal right which is an essential component of a cause of action be a specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to have been violated or disregarded is given specification in operational terms, defendants may well be unable to defend themselves intelligently and effectively; in other words, there are due process dimensions to this matter. The second is a broader-gauge consideration -- where a specific violation of law or applicable regulation is not alleged or proved, petitioners can be expected to fall back on the expanded conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution which reads: Section 1. xxx Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphases supplied) When substantive standards as general as the right to a balanced and healthy ecology and the right to health are combined with remedial standards as broad ranging as a grave abuse of discretion amounting to lack or excess of jurisdiction, the result will be, it is respectfully submitted, to propel courts into the uncharted ocean of social and economic policy making. At least in respect of the vast area of environmental protection and management, our courts have no claim to special technical competence and experience and professional qualification. Where no specific, operable norms and standards are shown to exist, then the policy making departments -- the legislative and executive departments -- must be given a real and effective opportunity to fashion and promulgate those norms and standards, and to implement them before the courts should intervene. Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain Balanced Development of Economy On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to the national economy and patrimony, should be read and understood in relation to the other sections in said article, especially Secs. 1 and 13 thereof which read: Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged. The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices. In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. x x x xx xx xx xx

Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity. As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as follows: 1. A more equitable distribution of opportunities, income and wealth; 2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the people; and 3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged. With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing preference in favor of qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and patrimony[27] and in the use of Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt measures that help make them competitive;[28] and (3) by requiring the State to develop a self-reliant and independent national

42
economy effectively controlled by Filipinos.[29] In similar language, the Constitution takes into account the realities of the outside world as it requires the pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity;[30] and speaks of industries which are competitive in both domestic and foreign markets as well as of the protection of Filipino enterprises against unfair foreign competition and trade practices. It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al.,[31] this Court held that Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement. From its very words the provision does not require any legislation to put it in operation. It isper se judicially enforceable. However, as the constitutional provision itself states, it is enforceable only in regard to the grants of rights, privileges and concessions covering national economy and patrimony and not to every aspect of trade and commerce. It refers to exceptions rather than the rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule, there are enough balancing provisions in the Constitution to allow the Senate to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are. All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair.[32] In other words, the Constitution did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine economy. While the Constitution does not encourage the unlimited entry of foreign goods, services and investments into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair. WTO Recognizes Need to Protect Weak Economies Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak and developing economies, which comprise the vast majority of its members. Unlike in the UN where major states have permanent seats and veto powers in the Security Council, in the WTO, decisions are made on the basis of sovereign equality, with each members vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council. WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference and the General Council shall be taken by the majority of the votes cast, except in cases of interpretation of the Agreement or waiver of the obligation of a member which would require three fourths vote. Amendments would require two thirds vote in general. Amendments to MFN provisions and the Amendments provision will require assent of all members. Any member may withdraw from the Agreement upon the expiration of six months from the date of notice of withdrawals.[33] Hence, poor countries can protect their common interests more effectively through the WTO than through one-on-one negotiations with developed countries. Within the WTO, developing countries can form powerful blocs to push their economic agenda more decisively than outside the Organization. This is not merely a matter of practical alliances but a negotiating strategy rooted in law. Thus, the basic principles underlying the WTO Agreement recognize the need of developing countries like the Philippines to share in the growth in international tradecommensurate with the needs of their economic development. These basic principles are found in the preamble[34] of the WTO Agreement as follows: The Parties to this Agreement, Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the worlds resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development, Recognizing further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development, Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations, Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade, the results of past trade liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations, Determined to preserve the basic principles and to further the objectives underlying this multilateral trading system, x x x. (underscoring supplied.) Specific WTO Provisos Protect Developing Countries So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic principles, the WTO Agreement grants developing countries a more lenient treatment, giving their domestic industries some protection from the rush of foreign competition. Thus, with respect to tariffs in general, preferential treatment is given to developing countries in terms of the amount of tariff reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to be effected within a period of six (6) years while developing countries -- including the Philippines -- are required to effect an average tariff reduction of only 24% within ten (10) years. In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural products by 20% over six (6) years, as compared to only 13% for developing countries to be effected within ten (10) years. In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their budgetary outlays for export subsidyby 36% and export volumes receiving export subsidy by 21% within a period of six (6) years. For developing countries, however, the reduction rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10) years within which to effect such reduction. Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic

43
liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization as an economic policy. It will only perform its constitutional duty of determining whether the Senate committed grave abuse of discretion. Constitution Does Not Rule Out Foreign Competition Furthermore, the constitutional policy of a self-reliant and independent national economy[35] does not necessarily rule out the entry of foreign investments, goods and services. It contemplates neither economic seclusion nor mendicancy in the international community. As explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional policy: Economic self-reliance is a primary objective of a developing country that is keenly aware of overdependence on external assistance for even its most basic needs. It does not mean autarky or economic seclusion; rather, it means avoiding mendicancy in the international community. Independence refers to the freedom from undue foreign control of the national economy, especially in such strategic industries as in the development of natural resources and public utilities.[36] The WTO reliance on most favored nation, national treatment, and trade without discrimination cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on equality and reciprocity,[37] the fundamental law encourages industries that are competitive in both domestic and foreign markets, thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire. Constitution Favors Consumers, Not Industries or Enterprises The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any specific pronouncement that Filipino companies should be pampered with a total proscription of foreign competition. On the other hand, respondents claim that WTO/GATT aims to make available to the Filipino consumer the best goods and services obtainable anywhere in the world at the most reasonable prices. Consequently, the question boils down to whether WTO/GATT will favor the general welfare of the public at large. Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality? Will WTO/GATT succeed in promoting the Filipinos general welfare because it will -- as promised by its promoters -- expand the countrys exports and generate more employment? Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates to the Filipino public? The responses to these questions involve judgment calls by our policy makers, for which they are answerable to our people during appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial pronouncements based on grave abuse of discretion. Constitution Designed to Meet Future Events and Contingencies No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987. That does not mean however that the Charter is necessarily flawed in the sense that its framers might not have anticipated the advent of a borderless world of business. By the same token, the United Nations was not yet in existence when the 1935 Constitution became effective. Did that necessarily mean that the then Constitution might not have contemplated a diminution of the absoluteness of sovereignty when the Philippines signed the UN Charter, thereby effectively surrendering part of its control over its foreign relations to the decisions of various UN organs like the Security Council? It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of contemporary events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change necessitated by unfolding events. As one eminent political law writer and respected jurist[38] explains: The Constitution must be quintessential rather than superficial, the root and not the blossom, the base and framework only of the edifice that is yet to rise. It is but the core of the dream that must take shape, not in a twinkling by mandate of our delegates, but slowly in the crucible of Filipino minds and hearts, where it will in time develop its sinews and gradually gather its strength and finally achieve its substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown from the brow of the Constitutional Convention, nor can it conjure by mere fiat an instant Utopia. It must grow with the society it seeks to re-structure and march apace with the progress of the race, drawing from the vicissitudes of history the dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing, living law attuned to the heartbeat of the nation. Third Issue: The WTO Agreement and Legislative Power The WTO Agreement provides that (e)ach Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements. [39] Petitioners maintain that this undertaking unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines because this means that Congress could not pass legislation that will be good for our national interest and general welfare if such legislation will not conform with the WTO Agreement, which not only relates to the trade in goods x x x but also to the flow of investments and money x x x as well as to a whole slew of agreements on socio-cultural matters x x x.[40] More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the Congress.[41] And while the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts, such authority is subject to specified limits and x x x such limitations and restrictions as Congress may provide,[42] as in fact it did under Sec. 401 of the Tariff and Customs Code. Sovereignty Limited by International Law and Treaties This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments on this issue. However, while sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country from the rest of the world. In its Declaration of Principles and State Policies, the Constitution adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations."[43] By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws.[44] One of the oldest and most fundamental rules in international law is pacta sunt servanda -- international agreements must be performed in good faith. A treaty engagement is not a mere moral obligation but creates a legally binding obligation on the parties x x x. A

44
state which has contracted valid international obligations is bound to make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken.[45] By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States concerning such widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the regulation of conduct of hostilities, the formation of alliances,the regulation of commercial relations, the settling of claims, the laying down of rules governing conduct in peace and the establishment of international organizations.[46] The sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of membership in the family of nations and (2) limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, Today, no nation can build its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here.[47] UN Charter and Other Treaties Limit Sovereignty Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights under the concept of sovereignty as auto-limitation.47-A Under Article 2 of the UN Charter, (a)ll members shall give the United Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any state against which the United Nations is taking preventive or enforcement action. Such assistance includes payment of its corresponding share not merely in administrative expenses but also in expenditures for the peace-keeping operations of the organization. In its advisory opinion of July 20, 1961, the International Court of Justice held that money used by the United Nations Emergency Force in the Middle East and in the Congo were expenses of the United Nations under Article 17, paragraph 2, of the UN Charter. Hence, all its members must bear their corresponding share in such expenses. In this sense, the Philippine Congress is restricted in its power to appropriate. It is compelled to appropriate funds whether it agrees with such peacekeeping expenses or not. So too, under Article 105 of the said Charter, the UN and its representatives enjoy diplomatic privileges and immunities, thereby limiting again the exercise of sovereignty of members within their own territory. Another example: although sovereign equality and domestic jurisdiction of all members are set forth as underlying principles in the UN Charter, such provisos are however subject to enforcement measures decided by the Security Council for the maintenance of international peace and security under Chapter VII of the Charter. A final example: under Article 103, (i)n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligation under the present charter shall prevail, thus unquestionably denying the Philippines -- as a member -- the sovereign power to make a choice as to which of conflicting obligations, if any, to honor. Apart from the UN Treaty, the Philippines has entered into many other international pacts -- both bilateral and multilateral -- that involve limitations on Philippine sovereignty. These are enumerated by the Solicitor General in his Compliance dated October 24, 1996, as follows: (a) Bilateral convention with the United States regarding taxes on income, where the Philippines agreed, among others, to exempt from tax, income received in the Philippines by, among others, the Federal Reserve Bank of the United States, the Export/Import Bank of the United States, the Overseas Private Investment Corporation of the United States. Likewise, in said convention, wages, salaries and similar remunerations paid by the United States to its citizens for labor and personal services performed by them as employees or officials of the United States are exempt from income tax by the Philippines. (b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation with respect to taxes on income. (c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation. Bilateral convention with the French Republic for the avoidance of double taxation. Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all customs duties, inspection fees and other duties or taxes aircrafts of South Korea and the regular equipment, spare parts and supplies arriving with said aircrafts. Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs duties, excise taxes, inspection fees and other similar duties, taxes or charges fuel, lubricating oils, spare parts, regular equipment, stores on board Japanese aircrafts while on Philippine soil. Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the same privileges as those granted to Japanese and Korean air carriers under separate air service agreements.

(d)

(e)

(f)

(g)

(h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines exempted Israeli nationals from the requirement of obtaining transit or visitor visas for a sojourn in the Philippines not exceeding 59 days. (I) Bilateral agreement with France exempting French nationals from the requirement of obtaining transit and visitor visa for a sojourn not exceeding 59 days. Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special Missions in the Philippines are inviolable and its agents can not enter said premises without consent of the Head of Mission concerned. Special Missions are also exempted from customs duties, taxes and related charges.

(j)

(k) Multilateral Convention on the Law of Treaties. In this convention, the Philippines agreed to be governed by the Vienna Convention on the Law of Treaties. (l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the International Court of Justice. The International Court of Justice has jurisdiction in all legal disputes concerning the interpretation of a treaty, any question of international law, the existence of any fact which, if established, would constitute a breach of international obligation.

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT.

45
International treaties, whether relating to nuclear disarmament, human rights, the environment, the law of the sea, or trade, constrain domestic political sovereignty through the assumption of external obligations. But unless anarchy in international relations is preferred as an alternative, in most cases we accept that the benefits of the reciprocal obligations involved outweigh the costs associated with any loss of political sovereignty. (T)rade treaties that structure relations by reference to durable, well-defined substantive norms and objective dispute resolution procedures reduce the risks of larger countries exploiting raw economic power to bully smaller countries, by subjecting power relations to some form of legal ordering. In addition, smaller countries typically stand to gain disproportionately from trade liberalization. This is due to the simple fact that liberalization will provide access to a larger set of potential new trading relationship than in case of the larger country gaining enhanced success to the smaller countrys market.[48] The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the Constitution, based on the rationale that the Philippines adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of x x x cooperation and amity with all nations. Fourth Issue: The WTO Agreement and Judicial Power Petitioners aver Provisions and Basic Aspects of Intellectual of the Supreme Court and procedures.[50] that paragraph 1, Article 34 of the General Principles of the Agreement on Trade-Related Property Rights (TRIPS)[49] intrudes on the power to promulgate rules concerning pleading, practice the (illegal) use of the said patented process, (1) where such product obtained by the patented product is new, or (2) wher e there is substantial likelihood that the identical product was made with the use of the said patented process but the owner of the patent could not determine the exact process used in obtaining such identical product. Hence, the burden of proof contemplated by Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such presumption. Such burden, properly understood, actually refers to the burden of evidence (burden of going forward) placed on the producer of the identical (or fake) product to show that his product was produced without the use of the patented process. The foregoing notwithstanding, the patent owner still has the burden of proof since, regardless of the presumption provided under paragraph 1 of Article 34, such owner still has to introduce evidence of the existence of the alleged identical product, the fact that it is identical to the genuine one produced by the patented process and the fact of newness of the genuine product or the fact of substantial likelihood that the identical product was made by the patented process. The foregoing should really present no problem in changing the rules of evidence as the present law on the subject, Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar presumption in cases of infringement of patented design or utility model, thus: SEC. 60. Infringement. - Infringement of a design patent or of a patent for utility model shall consist in unauthorized copying of the patented design or utility model for the purpose of trade or industry in the article or product and in the making, using or selling of the article or product copying the patented design or utility model. Identity or substantial identity with the patented design or utility model shall constitute evidence of copying. (underscoring supplied) Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only if (1) the product obtained by the patented process is NEW or (2) there is a substantial likelihood that the identical product was made by the process and the process owner has not been able through reasonable effort to determine the process used. Where either of these two provisos does not obtain, members shall be free to determine the appropriate method of implementing the provisions of TRIPS within their own internal systems and processes. By and large, the arguments adduced in connection with our disposition of the third issue -- derogation of legislative power - will apply to this fourth issue also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due process and the concept of adversarial dispute settlement inherent in our judicial system. So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, the adjustment in legislation and rules of procedure will not be substantial.[52] Fifth Issue: Concurrence Only in the WTO Agreement and Not in

To understand the scope and meaning of Article 34, TRIPS,[51] it will be fruitful to restate its full text as follows: Article 34 Process Patents: Burden of Proof 1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1(b) of Article 28, if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process. Therefore, Members shall provide, in at least one of the following circumstances, that any identical product when produced without the consent of the patent owner shall, in the absence of proof to the contrary, be deemed to have been obtained by the patented process: (a) if the product obtained by the patented process is new;

(b) if there is a substantial likelihood that the identical product was made by the process and the owner of the patent has been unable through reasonable efforts to determine the process actually used. 2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on the alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the condition referred to in subparagraph (b) is fulfilled. 3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their manufacturing and business secrets shall be taken into account. From the above, a WTO Member is required to provide a rule of disputable (note the words in the absence of proof to the contrary) presumption that a product shown to be identical to one produced with the use of a patented process shall be deemed to have been obtained by

Other Documents Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes -- but not in the other documents referred to in the Final Act, namely the Ministerial Declaration and Decisions and the Understanding on Commitments in Financial Services -- is defective and insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the WTO Agreement alone is flawed because it is in effect a rejection of the Final Act, which in turn was the document signed by Secretary Navarro, in representation of the Republic upon authority of the President. They contend that the second letter of the President to the Senate[53] which enumerated what constitutes the Final Act should have been the subject of concurrence of the Senate. A final act, sometimes called protocol de clture, is an instrument which records the winding up of the proceedings of a

46
diplomatic conference and usually includes a reproduction of the texts of treaties, conventions, recommendations and other acts agreed upon and signed by the plenipotentiaries attending the conference.[54] It is not the treaty itself. It is rather a summary of the proceedings of a protracted conference which may have taken place over several years. The text of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations is contained in just one page[55] in Vol. I of the 36volume Uruguay Round of Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of the Republic of the Philippines undertook: "(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures; and (b) to adopt the Ministerial Declarations and Decisions." The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its signatories, namely, concurrence of the Senate in the WTO Agreement. The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet to give effect to those provisions of this Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering the objectives of this Agreement.[56] The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the Philippines. It applies only to those 27 Members which have indicated in their respective schedules of commitments on standstill, elimination of monopoly, expansion of operation of existing financial service suppliers, temporary entry of personnel, free transfer and processing of information, and national treatment with respect to access to payment, clearing systems and refinancing available in the normal course of business.[57] On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as its integral parts,[58] as follows: Article II Scope of the WTO 1. The WTO shall provide the common institutional framework for the conduct of trade relations among its Members in matters to the agreements and associated legal instruments included in the Annexes to this Agreement. 2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3 (hereinafter referred to as Multilateral Agreements) are integral parts of this Agreement, binding on all Members. 3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as Plurilateral Trade Agreements) are also part of this Agreement for those Members that have accepted them, and are binding on those Members. The Plurilateral Trade Agreements do not create either obligation or rights for Members that have not accepted them. 4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred to as GATT 1994) is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act adopted at the conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, as subsequently rectified, amended or modified (hereinafter referred to as GATT 1947). It should be added that the Senate was well-aware of what it was concurring in as shown by the members deliberation on August 25, 1994. After reading the letter of President Ramos dated August 11, 1994,[59] the senators of the Republic minutely dissected what the Senate was concurring in, as follows: [60] THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day hearing of this Committee yesterday. Was the observation made by Senator Taada that what was submitted to the Senate was not the agreement on establishing the World Trade Organization by the final act of the Uruguay Round which is not the same as the agreement establishing the World Trade Organization? And on that basis, Senator Tolentino raised a point of order which, however, he agreed to withdraw upon understanding that his suggestion for an alternative solution at that time was acceptable. That suggestion was to treat the proceedings of the Committee as being in the nature of briefings for Senators until the question of the submission could be clarified. And so, Secretary Romulo, in effect, is the President submitting a new... is he making a new submission which improves on the clarity of the first submission? MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no misunderstanding, it was his intention to clarify all matters by giving this letter. THE CHAIRMAN: Thank you. Can this Committee hear from Senator Taada and later on Senator Tolentino since they were the ones that raised this question yesterday? Senator Taada, please. SEN. TAADA: Thank you, Mr. Chairman. Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted to the Senate for ratification is not the Final Act of the Uruguay Round, but rather the Agreement on the World Trade Organization as well as the Ministerial Declarations and Decisions, and the Understanding and Commitments in Financial Services. I am now satisfied with the wording of the new submission of President Ramos. SEN. TAADA. . . . of President Ramos, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino? And after him Senator Neptali Gonzales and Senator Lina. SEN TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but I saw the draft of his earlier, and I think it now complies with the provisions of the Constitution, and with the Final Act itself. The Constitution does not require us to ratify the Final Act. It requires us to ratify the Agreement which is now being submitted. The Final Act itself specifies what is going to be submitted to with the governments of the participants. In paragraph 2 of the Final Act, we read and I quote:

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By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO Agreement for the consideration of the respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures. In other words, it is not the Final Act that was agreed to be submitted to the governments for ratification or acceptance as whatever their constitutional procedures may provide but it is the World Trade Organization Agreement. And if that is the one that is being submitted now, I think it satisfies both the Constitution and the Final Act itself. Thank you, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales. SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they had been adequately reflected in the journal of yesterdays session and I dont see any need for repeating the same. Now, I would consider the new submission as an act ex abudante cautela. THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment on this? SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales out of the abundance of question. Then the new submission is, I believe, stating the obvious and therefore I have no further comment to make. Epilogue In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this Courts constitutionally imposed duty to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Senate in giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is amply shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction.[61] Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.[62] Failure on the part of the petitioner to show grave abuse of discretion will result in the dismissal of the petition.[63] In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a constitutional body independent and coordinate, and thus its actions are presumed regular and done in good faith. Unless convincing proof and persuasive arguments are presented to overthrow such presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted definition of grave abuse of discretion and the presumption of regularity in the Senates processes, this Court cannot find any cogent reason to impute grave abuse of discretion to the Senates exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution.[64] It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an independent national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally produced goods. But it is equally true that such principles -- while serving as judicial and legislative guides -- are not in themselves sources of causes of action. Moreover, there are other equally fundamental constitutional principles relied upon by the Senate which mandate the pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity and the promotion of industries which are competitive in both domestic and foreign markets, thereby justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced by the adoption of the generally accepted principles of international law as part of the law of the land and the adherence of the Constitution to the policy of cooperation and amity with all nations. That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement thereby making it a part of the law of the land is a legitimate exercise of its sovereign duty and power. We find no patent and gross arbitrariness or despotism by reason of passion or personal hostility in such exercise. It is not impossible to surmise that this Court, or at least some of its members, may even agree with petitioners that it is more advantageous to the national interest to strike down Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate did was a valid exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of judicial inquiry and review. That is a matter between the elected policy makers and the people. As to whether the nation should join the worldwide march toward trade liberalization and economic globalization is a matter that our people should determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of membership, should this be the political desire of a member. The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance[65] where the East will become the dominant region of the world economically, politically and culturally in the next century. He refers to the free market espoused by WTO as the catalyst in this coming Asian ascendancy. There are at present about 31 countries including China, Russia and Saudi Arabia negotiating for membership in the WTO. Notwithstanding objections against possible limitations on national sovereignty, the WTO remains as the only viable structure for multilateral trading and the veritable forum for the development of international trade law. The alternative to WTO is isolation, stagnation, if not economic self-destruction. Duly enriched with original membership, keenly aware of the advantages and disadvantages of globalization with its on-line experience, and endowed with a vision of the future, the Philippines now straddles the crossroads of an international strategy for economic prosperity and stability in the new millennium. Let the people, through their duly authorized elected officers, make their free choice. WHEREFORE, the petition is DISMISSED for lack of merit. SO ORDERED.

G.R. No. 183591

October 14, 2008

THE PROVINCE OF NORTH COTABATO, duly represented by GOVERNOR JESUS SACDALAN and/or VICE-GOVERNOR EMMANUEL PIOL, for and in his own behalf, petitioners, vs. THE GOVERNMENT OF THE REPUBLIC OF THE

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PHILIPPINES PEACE PANEL ON ANCESTRAL DOMAIN (GRP), represented by SEC. RODOLFO GARCIA, ATTY. LEAH ARMAMENTO, ATTY. SEDFREY CANDELARIA, MARK RYAN SULLIVAN and/or GEN. HERMOGENES ESPERON, JR., the latter in his capacity as the present and duly-appointed Presidential Adviser on the Peace Process (OPAPP) or the so-called Office of the Presidential Adviser on the Peace Process, respondents. x--------------------------------------------x G.R. No. 183752 October 14, 2008 CITY GOVERNMENT OF ZAMBOANGA, as represented by HON. CELSO L. LOBREGAT, City Mayor of Zamboanga, and in his personal capacity as resident of the City of Zamboanga, Rep. MA. ISABELLE G. CLIMACO, District 1, and Rep. ERICO BASILIO A. FABIAN, District 2, City of Zamboanga, petitioners, vs. THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL (GRP), as represented by RODOLFO C. GARCIA, LEAH ARMAMENTO, SEDFREY CANDELARIA, MARK RYAN SULLIVAN and HERMOGENES ESPERON, in his capacity as the Presidential Adviser on Peace Process,respondents. x--------------------------------------------x G.R. No. 183893 October 14, 2008 THE CITY OF ILIGAN, duly represented by CITY MAYOR LAWRENCE LLUCH CRUZ, petitioner, vs. THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE PANEL ON ANCESTRAL DOMAIN (GRP), represented by SEC. RODOLFO GARCIA, ATTY. LEAH ARMAMENTO, ATTY. SEDFREY CANDELARIA, MARK RYAN SULLIVAN; GEN. HERMOGENES ESPERON, JR., in his capacity as the present and duly appointed Presidential Adviser on the Peace Process; and/or SEC. EDUARDO ERMITA, in his capacity as Executive Secretary. respondents. x--------------------------------------------x G.R. No. 183951 October 14, 2008 THE PROVINCIAL GOVERNMENT OF ZAMBOANGA DEL NORTE, as represented by HON. ROLANDO E. YEBES, in his capacity as Provincial Governor, HON. FRANCIS H. OLVIS, in his capacity as Vice-Governor and Presiding Officer of the Sangguniang Panlalawigan, HON. CECILIA JALOSJOS CARREON, Congresswoman, 1st Congressional District, HON. CESAR G. JALOSJOS, Congressman, 3rdCongressional District, and Members of the Sangguniang Panlalawigan of the Province of Zamboanga del Norte, namely, HON. SETH FREDERICK P. JALOSJOS, HON. FERNANDO R. CABIGON, JR., HON. ULDARICO M. MEJORADA II, HON. EDIONAR M. ZAMORAS, HON. EDGAR J. BAGUIO, HON. CEDRIC L. ADRIATICO, HON. FELIXBERTO C. BOLANDO, HON. JOSEPH BRENDO C. AJERO, HON. NORBIDEIRI B. EDDING, HON. ANECITO S. DARUNDAY, HON. ANGELICA J. CARREON and HON. LUZVIMINDA E. TORRINO,petitioners, vs. THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL [GRP], as represented by HON. RODOLFO C. GARCIA and HON. HERMOGENES ESPERON, in his capacity as the Presidential Adviser of Peace Process, respondents. x--------------------------------------------x G.R. No. 183962 October 14, 2008 ERNESTO M. MACEDA, JEJOMAR C. BINAY, and AQUILINO L. PIMENTEL III, petitioners, vs. THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL, represented by its Chairman RODOLFO C. GARCIA, and the MORO ISLAMIC LIBERATION FRONT PEACE NEGOTIATING PANEL, represented by its Chairman MOHAGHER IQBAL, respondents. x--------------------------------------------x FRANKLIN M. DRILON and ADEL ABBAS TAMANO, petitioners-in-intervention. x--------------------------------------------x SEN. MANUEL A. ROXAS, petitioners-in-intervention. x--------------------------------------------x MUNICIPALITY OF LINAMON duly represented by its Municipal Mayor NOEL N. DEANO, petitioners-in-intervention, x--------------------------------------------x THE CITY OF ISABELA, BASILAN PROVINCE, represented by MAYOR CHERRYLYN P. SANTOS-AKBAR,petitioners-inintervention. x--------------------------------------------x THE PROVINCE OF SULTAN KUDARAT, rep. by HON. SUHARTO T. MANGUDADATU, in his capacity as Provincial Governor and a resident of the Province of Sultan Kudarat, petitionerin-intervention. x-------------------------------------------x RUY ELIAS LOPEZ, for and in his own behalf and on behalf of Indigenous Peoples in Mindanao Not Belonging to the MILF, petitioner-in-intervention. x--------------------------------------------x CARLO B. GOMEZ, GERARDO S. DILIG, NESARIO G. AWAT, JOSELITO C. ALISUAG and RICHALEX G. JAGMIS, as citizens and residents of Palawan, petitioners-in-intervention. x--------------------------------------------x MARINO RIDAO and KISIN BUXANI, petitioners-in-intervention. x--------------------------------------------x MUSLIM LEGAL ASSISTANCE FOUNDATION, INC (MUSLAF), respondent-in-intervention. x--------------------------------------------x MUSLIM MULTI-SECTORAL MOVEMENT FOR PEACE & DEVELOPMENT (MMMPD), respondent-in-intervention. x--------------------------------------------x DECISION CARPIO MORALES, J.: Subject of these consolidated cases is the extent of the powers of the President in pursuing the peace process.While the facts surrounding this controversy center on the armed conflict in Mindanao between the government and the Moro Islamic Liberation Front (MILF), the legal issue involved has a bearing on all areas in the country where there has been a long-standing armed conflict. Yet again, the Court is tasked to perform a delicate balancing act. It must uncompromisingly delineate the bounds within which the President may lawfully exercise her discretion, but it must do so in strict adherence to the Constitution, lest its ruling unduly restricts the freedom of action vested by that same Constitution in the Chief Executive precisely to enable her to pursue the peace process effectively. I. FACTUAL ANTECEDENTS OF THE PETITIONS On August 5, 2008, the Government of the Republic of the Philippines (GRP) and the MILF, through the Chairpersons of their respective peace negotiating panels, were scheduled to sign a Memorandum of Agreement on the Ancestral Domain (MOA-AD) Aspect of the GRP-MILF Tripoli Agreement on Peace of 2001 in Kuala Lumpur, Malaysia. The MILF is a rebel group which was established in March 1984 when, under the leadership of the late Salamat Hashim, it splintered from the Moro National Liberation Front (MNLF) then headed by Nur Misuari, on the ground, among others, of what Salamat perceived to be the manipulation of the MNLF away from an Islamic basis towards MarxistMaoist orientations.1 The signing of the MOA-AD between the GRP and the MILF was not to materialize, however, for upon motion of petitioners, specifically those who filed their cases before the scheduled signing of the MOA-AD, this

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Court issued a Temporary Restraining Order enjoining the GRP from signing the same. The MOA-AD was preceded by a long process of negotiation and the concluding of several prior agreements between the two parties beginning in 1996, when the GRP-MILF peace negotiations began. On July 18, 1997, the GRP and MILF Peace Panels signed the Agreement on General Cessation of Hostilities. The following year, they signed the General Framework of Agreement of Intent on August 27, 1998. The Solicitor General, who represents respondents, summarizes the MOA-AD by stating that the same contained, among others, the commitment of the parties to pursue peace negotiations, protect and respect human rights, negotiate with sincerity in the resolution and pacific settlement of the conflict, and refrain from the use of threat or force to attain undue advantage while the peace negotiations on the substantive agenda are on-going.2 Early on, however, it was evident that there was not going to be any smooth sailing in the GRP-MILF peace process. Towards the end of 1999 up to early 2000, the MILF attacked a number of municipalities in Central Mindanao and, in March 2000, it took control of the town hall of Kauswagan, Lanao del Norte.3 In response, then President Joseph Estrada declared and carried out an "all-out-war" against the MILF. When President Gloria Macapagal-Arroyo assumed office, the military offensive against the MILF was suspended and the government sought a resumption of the peace talks. The MILF, according to a leading MILF member, initially responded with deep reservation, but when President Arroyo asked the Government of Malaysia through Prime Minister Mahathir Mohammad to help convince the MILF to return to the negotiating table, the MILF convened its Central Committee to seriously discuss the matter and, eventually, decided to meet with the GRP.4 The parties met in Kuala Lumpur on March 24, 2001, with the talks being facilitated by the Malaysian government, the parties signing on the same date the Agreement on the General Framework for the Resumption of Peace Talks Between the GRP and the MILF. The MILF thereafter suspended all its military actions.5 Formal peace talks between the parties were held in Tripoli, Libya from June 20-22, 2001, the outcome of which was the GRP-MILF Tripoli Agreement on Peace (Tripoli Agreement 2001) containing the basic principles and agenda on the following aspects of the negotiation: Security Aspect, Rehabilitation Aspect, and Ancestral Domain Aspect. With regard to the Ancestral Domain Aspect, the parties in Tripoli Agreement 2001 simply agreed "that the same be discussed further by the Parties in their next meeting." A second round of peace talks was held in Cyberjaya, Malaysia on August 5-7, 2001 which ended with the signing of the Implementing Guidelines on the Security Aspect of the Tripoli Agreement 2001 leading to a ceasefire status between the parties. This was followed by the Implementing Guidelines on the Humanitarian Rehabilitation and Development Aspects of the Tripoli Agreement 2001, which was signed on May 7, 2002 at Putrajaya, Malaysia. Nonetheless, there were many incidence of violence between government forces and the MILF from 2002 to 2003. Meanwhile, then MILF Chairman Salamat Hashim passed away on July 13, 2003 and he was replaced by Al Haj Murad, who was then the chief peace negotiator of the MILF. Murad's position as chief peace negotiator was taken over by Mohagher Iqbal.6 In 2005, several exploratory talks were held between the parties in Kuala Lumpur, eventually leading to the crafting of the draft MOA-AD in its final form, which, as mentioned, was set to be signed last August 5, 2008. II. STATEMENT OF THE PROCEEDINGS Before the Court is what is perhaps the most contentious "consensus" ever embodied in an instrument - the MOA-AD which is assailed principally by the present petitions bearing docket numbers 183591, 183752, 183893, 183951 and 183962. Commonly impleaded as respondents are the GRP Peace Panel on Ancestral Domain7 and the Presidential Adviser on the Peace Process (PAPP) Hermogenes Esperon, Jr. On July 23, 2008, the Province of North Cotabato 8 and Vice-Governor Emmanuel Piol filed a petition, docketed as G.R. No. 183591, for Mandamus and Prohibition with Prayer for the Issuance of Writ of Preliminary Injunction and Temporary Restraining Order.9 Invoking the right to information on matters of public concern, petitioners seek to compel respondents to disclose and furnish them the complete and official copies of the MOA-AD including its attachments, and to prohibit the slated signing of the MOA-AD, pending the disclosure of the contents of the MOA-AD and the holding of a public consultation thereon. Supplementarily, petitioners pray that the MOA-AD be declared unconstitutional.10 This initial petition was followed by another one, docketed as G.R. No. 183752, also for Mandamus and Prohibition11 filed by the City of Zamboanga,12 Mayor Celso Lobregat, Rep. Ma. Isabelle Climaco and Rep. Erico Basilio Fabian who likewise pray for similar injunctive reliefs. Petitioners herein moreover pray that the City of Zamboanga be excluded from the Bangsamoro Homeland and/or Bangsamoro Juridical Entity and, in the alternative, that the MOA-AD be declared null and void. By Resolution of August 4, 2008, the Court issued a Temporary Restraining Order commanding and directing public respondents and their agents to cease and desist from formally signing the MOA-AD.13 The Court also required the Solicitor General to submit to the Court and petitioners the official copy of the final draft of the MOA-AD,14 to which she complied.15 Meanwhile, the City of Iligan16 filed a petition for Injunction and/or Declaratory Relief, docketed as G.R. No. 183893, praying that respondents be enjoined from signing the MOA-AD or, if the same had already been signed, from implementing the same, and that the MOA-AD be declared unconstitutional. Petitioners herein additionally implead Executive Secretary Eduardo Ermita as respondent. The Province of Zamboanga del Norte,17 Governor Rolando Yebes, ViceGovernor Francis Olvis, Rep. Cecilia Jalosjos-Carreon, Rep. Cesar Jalosjos, and the members18 of the Sangguniang Panlalawigan of Zamboanga del Norte filed on August 15, 2008 a petition for Certiorari, Mandamus and Prohibition,19 docketed as G.R. No. 183951. They pray, inter alia, that the MOA-AD be declared null and void and without operative effect, and that respondents be enjoined from executing the MOA-AD. On August 19, 2008, Ernesto Maceda, Jejomar Binay, and Aquilino Pimentel III filed a petition for Prohibition,20docketed as G.R. No. 183962, praying for a judgment prohibiting and permanently enjoining respondents from formally signing and executing the MOA-AD and or any other agreement derived therefrom or similar thereto, and nullifying the MOA-AD for being unconstitutional and illegal. Petitioners herein additionally implead as respondent the MILF Peace Negotiating Panel represented by its Chairman Mohagher Iqbal. Various parties moved to intervene and were granted leave of court to file their petitions-/comments-in-intervention. Petitioners-in-Intervention include Senator Manuel A. Roxas, former Senate President Franklin Drilon and Atty. Adel Tamano, the City of Isabela 21 and Mayor Cherrylyn

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Santos-Akbar, the Province of Sultan Kudarat22and Gov. Suharto Mangudadatu, the Municipality of Linamon in Lanao del Norte, 23 Ruy Elias Lopez of Davao City and of the Bagobo tribe, Sangguniang Panlungsod member Marino Ridao and businessman Kisin Buxani, both of Cotabato City; and lawyers Carlo Gomez, Gerardo Dilig, Nesario Awat, Joselito Alisuag, Richalex Jagmis, all of Palawan City. The Muslim Legal Assistance Foundation, Inc. (Muslaf) and the Muslim Multi-Sectoral Movement for Peace and Development (MMMPD) filed their respective Comments-in-Intervention. By subsequent Resolutions, the Court ordered the consolidation of the petitions. Respondents filed Comments on the petitions, while some of petitioners submitted their respective Replies. Respondents, by Manifestation and Motion of August 19, 2008, stated that the Executive Department shall thoroughly review the MOA-AD and pursue further negotiations to address the issues hurled against it, and thus moved to dismiss the cases. In the succeeding exchange of pleadings, respondents' motion was met with vigorous opposition from petitioners. The cases were heard on oral argument on August 15, 22 and 29, 2008 that tackled the following principal issues: 1. Whether the petitions have become moot and academic (i) insofar as the mandamus aspect is concerned, in view of the disclosure of official copies of the final draft of the Memorandum of Agreement (MOA); and (ii) insofar as the prohibition aspect involving the Local Government Units is concerned, if it is considered that consultation has become fait accompli with the finalization of the draft; 2. Whether the constitutionality and the legality of the MOA is ripe for adjudication; 3. Whether respondent Government of the Republic of the Philippines Peace Panel committed grave abuse of discretion amounting to lack or excess of jurisdiction when it negotiated and initiated the MOA vis--vis ISSUES Nos. 4 and 5; 4. Whether there is a violation of the people's right to information on matters of public concern (1987 Constitution, Article III, Sec. 7) under a state policy of full disclosure of all its transactions involving public interest (1987 Constitution, Article II, Sec. 28) including public consultation under Republic Act No. 7160 (LOCAL GOVERNMENT CODE OF 1991)[;] If it is in the affirmative, whether prohibition under Rule 65 of the 1997 Rules of Civil Procedure is an appropriate remedy; 5. Whether by signing the MOA, the Government of the Republic of the Philippines would be BINDING itself a) to create and recognize the Bangsamoro Juridical Entity (BJE) as a separate state, or a juridical, territorial or political subdivision not recognized by law; b) to revise or amend the Constitution and existing laws to conform to the MOA; c) to concede to or recognize the claim of the Moro Islamic Liberation Front for ancestral domain in violation of Republic Act No. 8371 (THE INDIGENOUS PEOPLES RIGHTS ACT OF 1997), particularly Section 3(g) & Chapter VII (DELINEATION, RECOGNITION OF ANCESTRAL DOMAINS)[;] If in the affirmative, whether the Executive Branch has the authority to so bind the Government of the Republic of the Philippines; 6. Whether the inclusion/exclusion of the Province of North Cotabato, Cities of Zamboanga, Iligan and Isabela, and the Municipality of Linamon, Lanao del Norte in/from the areas covered by the projected Bangsamoro Homeland is a justiciable question; and 7. Whether desistance from signing the MOA derogates any prior valid commitments of the Government of the Republic of the Philippines.24 The Court, thereafter, ordered the parties to submit their respective Memoranda. Most of the parties submitted their memoranda on time. III. OVERVIEW OF THE MOA-AD As a necessary backdrop to the consideration of the objections raised in the subject five petitions and six petitions-in-intervention against the MOA-AD, as well as the two comments-in-intervention in favor of the MOA-AD, the Court takes an overview of the MOA. The MOA-AD identifies the Parties to it as the GRP and the MILF. Under the heading "Terms of Reference" (TOR), the MOA-AD includes not only four earlier agreements between the GRP and MILF, but also two agreements between the GRP and the MNLF: the 1976 Tripoli Agreement, and the Final Peace Agreement on the Implementation of the 1976 Tripoli Agreement, signed on September 2, 1996 during the administration of President Fidel Ramos. The MOA-AD also identifies as TOR two local statutes - the organic act for the Autonomous Region in Muslim Mindanao (ARMM)25 and the Indigenous Peoples Rights Act (IPRA),26 and several international law instruments - the ILO Convention No. 169 Concerning Indigenous and Tribal Peoples in Independent Countries in relation to the UN Declaration on the Rights of the Indigenous Peoples, and the UN Charter, among others. The MOA-AD includes as a final TOR the generic category of "compact rights entrenchment emanating from the regime of dar-ul-mua'hada (or territory under compact) and dar-ul-sulh (or territory under peace agreement) that partakes the nature of a treaty device." During the height of the Muslim Empire, early Muslim jurists tended to see the world through a simple dichotomy: there was the dar-ul-Islam (the Abode of Islam) and dar-ul-harb (the Abode of War). The first referred to those lands where Islamic laws held sway, while the second denoted those lands where Muslims were persecuted or where Muslim laws were outlawed or ineffective.27 This way of viewing the world, however, became more complex through the centuries as the Islamic world became part of the international community of nations. As Muslim States entered into treaties with their neighbors, even with distant States and inter-governmental organizations, the classical division of the world into dar-ul-Islam and dar-ul-harb eventually lost its meaning. New terms were drawn up to describe novel ways of perceiving nonMuslim territories. For instance, areas like dar-ul-mua'hada (land of compact) and dar-ul-sulh (land of treaty) referred to countries which, though under a secular regime, maintained peaceful and cooperative relations with Muslim States, having been bound to each other by treaty or

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agreement. Dar-ul-aman (land of order), on the other hand, referred to countries which, though not bound by treaty with Muslim States, maintained freedom of religion for Muslims.28 It thus appears that the "compact rights entrenchment" emanating from the regime of dar-ul-mua'hada and dar-ul-sulh simply refers to all other agreements between the MILF and the Philippine government - the Philippines being the land of compact and peace agreement - that partake of the nature of a treaty device, "treaty" being broadly defined as "any solemn agreement in writing that sets out understandings, obligations, and benefits for both parties which provides for a framework that elaborates the principles declared in the [MOA-AD]."29 The MOA-AD states that the Parties "HAVE AGREED AND ACKNOWLEDGED AS FOLLOWS," and starts with its main body. The main body of the MOA-AD is divided into four strands, namely, Concepts and Principles, Territory, Resources, and Governance. A. CONCEPTS AND PRINCIPLES This strand begins with the statement that it is "the birthright of all Moros and all Indigenous peoples of Mindanao to identify themselves and be accepted as Bangsamoros.'" It defines "Bangsamoro people" as the natives or original inhabitants of Mindanao and its adjacent islands including Palawan and the Sulu archipelago at the time of conquest or colonization, and their descendants whether mixed or of full blood, including their spouses.30 Thus, the concept of "Bangsamoro," as defined in this strand of the MOA-AD, includes not only "Moros" as traditionally understood even by Muslims,31 but all indigenous peoples of Mindanao and its adjacent islands. The MOA-AD adds that the freedom of choice of indigenous peoples shall be respected. What this freedom of choice consists in has not been specifically defined. The MOA-AD proceeds to refer to the "Bangsamoro homeland," the ownership of which is vested exclusively in the Bangsamoro people by virtue of their prior rights of occupation.32 Both parties to the MOA-AD acknowledge that ancestral domain does not form part of the public domain.33 The Bangsamoro people are acknowledged as having the right to selfgovernance, which right is said to be rooted on ancestral territoriality exercised originally under the suzerain authority of their sultanates and the Pat a Pangampong ku Ranaw. The sultanates were described as states or "karajaan/kadatuan" resembling a body politic endowed with all the elements of a nation-state in the modern sense.34 The MOA-AD thus grounds the right to self-governance of the Bangsamoro people on the past suzerain authority of the sultanates. As gathered, the territory defined as the Bangsamoro homeland was ruled by several sultanates and, specifically in the case of the Maranao, by the Pat a Pangampong ku Ranaw, a confederation of independent principalities (pangampong) each ruled by datus and sultans, none of whom was supreme over the others.35 The MOA-AD goes on to describe the Bangsamoro people as "the First Nation' with defined territory and with a system of government having entered into treaties of amity and commerce with foreign nations." The term "First Nation" is of Canadian origin referring to the indigenous peoples of that territory, particularly those known as Indians. In Canada, each of these indigenous peoples is equally entitled to be called "First Nation," hence, all of them are usually described collectively by the plural "First Nations."36 To that extent, the MOA-AD, by identifying the Bangsamoro people as "the First Nation" - suggesting its exclusive entitlement to that designation - departs from the Canadian usage of the term. The MOA-AD then mentions for the first time the "Bangsamoro Juridical Entity" (BJE) to which it grants the authority and jurisdiction over the Ancestral Domain and Ancestral Lands of the Bangsamoro.37 B. TERRITORY The territory of the Bangsamoro homeland is described as the land mass as well as the maritime, terrestrial, fluvial and alluvial domains, including the aerial domain and the atmospheric space above it, embracing the Mindanao-Sulu-Palawan geographic region.38 More specifically, the core of the BJE is defined as the present geographic area of the ARMM - thus constituting the following areas: Lanao del Sur, Maguindanao, Sulu, Tawi-Tawi, Basilan, and Marawi City. Significantly, this core also includes certain municipalities of Lanao del Norte that voted for inclusion in the ARMM in the 2001 plebiscite.39 Outside of this core, the BJE is to cover other provinces, cities, municipalities and barangays, which are grouped into two categories, Category A and Category B. Each of these areas is to be subjected to a plebiscite to be held on different dates, years apart from each other. Thus, Category A areas are to be subjected to a plebiscite not later than twelve (12) months following the signing of the MOA-AD.40 Category B areas, also called "Special Intervention Areas," on the other hand, are to be subjected to a plebiscite twenty-five (25) years from the signing of a separate agreement - the Comprehensive Compact.41 The Parties to the MOA-AD stipulate that the BJE shall have jurisdiction over all natural resources within its "internal waters," defined as extending fifteen (15) kilometers from the coastline of the BJE area;42 that the BJE shall also have "territorial waters," which shall stretch beyond the BJE internal waters up to the baselines of the Republic of the Philippines (RP) south east and south west of mainland Mindanao; and that within these territorialwaters, the BJE and the "Central Government" (used interchangeably with RP) shall exercise joint jurisdiction, authority and management over all natural resources.43 Notably, the jurisdiction over the internal waters is not similarly described as "joint." The MOA-AD further provides for the sharing of minerals on the territorial waters between the Central Government and the BJE, in favor of the latter, through production sharing and economic cooperation agreement.44 The activities which the Parties are allowed to conduct on the territorial waters are enumerated, among which are the exploration and utilization of natural resources, regulation of shipping and fishing activities, and the enforcement of police and safety measures.45 There is no similar provision on the sharing of minerals and allowed activities with respect to the internal waters of the BJE. C. RESOURCES The MOA-AD states that the BJE is free to enter into any economic cooperation and trade relations with foreign countries and shall have the option to establish trade missions in those countries. Such relationships and understandings, however, are not to include aggression against the GRP. The BJE may also enter into environmental cooperation agreements.46 The external defense of the BJE is to remain the duty and obligation of the Central Government. The Central Government is also bound to "take necessary steps to ensure the BJE's participation in international meetings and events" like those of the ASEAN and the specialized agencies of the UN. The BJE is to be entitled to participate in Philippine official missions and delegations for the negotiation of border agreements or protocols for

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environmental protection and equitable sharing of incomes and revenues involving the bodies of water adjacent to or between the islands forming part of the ancestral domain.47 With regard to the right of exploring for, producing, and obtaining all potential sources of energy, petroleum, fossil fuel, mineral oil and natural gas, the jurisdiction and control thereon is to be vested in the BJE "as the party having control within its territorial jurisdiction." This right carries the proviso that, "in times of national emergency, when public interest so requires," the Central Government may, for a fixed period and under reasonable terms as may be agreed upon by both Parties, assume or direct the operation of such resources.48 The sharing between the Central Government and the BJE of total production pertaining to natural resources is to be 75:25 in favor of the BJE.49 The MOA-AD provides that legitimate grievances of the Bangsamoro people arising from any unjust dispossession of their territorial and proprietary rights, customary land tenures, or their marginalization shall be acknowledged. Whenever restoration is no longer possible, reparation is to be in such form as mutually determined by the Parties.50 The BJE may modify or cancel the forest concessions, timber licenses, contracts or agreements, mining concessions, Mineral Production and Sharing Agreements (MPSA), Industrial Forest Management Agreements (IFMA), and other land tenure instruments granted by the Philippine Government, including those issued by the present ARMM.51 D. GOVERNANCE The MOA-AD binds the Parties to invite a multinational third-party to observe and monitor the implementation of the Comprehensive Compact. This compact is to embody the "details for the effective enforcement" and "the mechanisms and modalities for the actual implementation" of the MOA-AD. The MOA-AD explicitly provides that the participation of the third party shall not in any way affect the status of the relationship between the Central Government and the BJE.52 The between and the BJE "associative" the Central relationship Government penultimate paragraph of the MOA-AD identifies the signatories as "the representatives of the Parties," meaning the GRP and MILF themselves, and not merely of the negotiating panels.53 In addition, the signature page of the MOAAD states that it is "WITNESSED BY" Datuk Othman Bin Abd Razak, Special Adviser to the Prime Minister of Malaysia, "ENDORSED BY" Ambassador Sayed Elmasry, Adviser to Organization of the Islamic Conference (OIC) Secretary General and Special Envoy for Peace Process in Southern Philippines, and SIGNED "IN THE PRESENCE OF" Dr. Albert G. Romulo, Secretary of Foreign Affairs of RP and Dato' Seri Utama Dr. Rais Bin Yatim, Minister of Foreign Affairs, Malaysia, all of whom were scheduled to sign the Agreement last August 5, 2008. Annexed to the MOA-AD are two documents containing the respective lists cum maps of the provinces, municipalities, and barangays under Categories A and B earlier mentioned in the discussion on the strand on TERRITORY. IV. PROCEDURAL ISSUES A. RIPENESS The power of judicial review is limited to actual cases or controversies.54 Courts decline to issue advisory opinions or to resolve hypothetical or feigned problems, or mere academic questions.55 The limitation of the power of judicial review to actual cases and controversies defines the role assigned to the judiciary in a tripartite allocation of power, to assure that the courts will not intrude into areas committed to the other branches of government.56 An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial resolution as distinguished from a hypothetical or abstract difference or dispute. There must be a contrariety of legal rights that can be interpreted and enforced on the basis of existing law and jurisprudence.57The Court can decide the constitutionality of an act or treaty only when a proper case between opposing parties is submitted for judicial determination.58 Related to the requirement of an actual case or controversy is the requirement of ripeness. A question is ripe for adjudication when the act being challenged has had a direct adverse effect on the individual challenging it.59 For a case to be considered ripe for adjudication, it is a prerequisite that something had then been accomplished or performed by either branch before a court may come into the picture,60 and the petitioner must allege the existence of an immediate or threatened injury to itself as a result of the challenged action.61 He must show that he has sustained or is immediately in danger of sustaining some direct injury as a result of the act complained of.62 The Solicitor General argues that there is no justiciable controversy that is ripe for judicial review in the present petitions, reasoning that The unsigned MOA-AD is simply a list of consensus points subject to further negotiations and legislative enactments as well as constitutional processes aimed at attaining a final peaceful agreement. Simply put, the MOA-AD remains to be a proposal that does not automatically create legally demandable rights and obligations until the list of operative acts required have been duly complied with. x x x xxxx In the cases at bar, it is respectfully submitted that this Honorable Court has no authority to pass upon issues based on hypothetical or feigned constitutional problems or interests with no concrete bases. Considering the preliminary character of the MOA-AD, there are no concrete acts that could possibly violate petitioners' and intervenors' rights since the acts complained of are mere contemplated steps toward the formulation of a final peace agreement. Plainly,

The MOA-AD describes the relationship of the Central Government and the BJE as "associative," characterized by shared authority and responsibility. And it states that the structure of governance is to be based on executive, legislative, judicial, and administrative institutions with defined powers and functions in the Comprehensive Compact. The MOA-AD provides that its provisions requiring "amendments to the existing legal framework" shall take effect upon signing of the Comprehensive Compact and upon effecting the aforesaid amendments, with due regard to the non-derogation of prior agreements and within the stipulated timeframe to be contained in the Comprehensive Compact. As will be discussed later, much of the present controversy hangs on the legality of this provision. The BJE is granted the power to build, develop and maintain its own institutions inclusive of civil service, electoral, financial and banking, education, legislation, legal, economic, police and internal security force, judicial system and correctional institutions, the details of which shall be discussed in the negotiation of the comprehensive compact. As stated early on, the MOA-AD was set to be signed on August 5, 2008 by Rodolfo Garcia and Mohagher Iqbal, Chairpersons of the Peace Negotiating Panels of the GRP and the MILF, respectively. Notably, the

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petitioners and intervenors' perceived injury, if at all, is merely imaginary and illusory apart from being unfounded and based on mere conjectures. (Underscoring supplied) The Solicitor General cites63 the following provisions of the MOA-AD: TERRITORY xxxx 2. Toward this end, the Parties enter into the following stipulations: xxxx d. Without derogating from the requirements of prior agreements, the Government stipulates to conduct and deliver, using all possible legal measures, within twelve (12) months following the signing of the MOA-AD, a plebiscite covering the areas as enumerated in the list and depicted in the map as Category A attached herein (the "Annex"). The Annex constitutes an integral part of this framework agreement. Toward this end, the Parties shall endeavor to complete the negotiations and resolve all outstanding issues on the Comprehensive Compact within fifteen (15) months from the signing of the MOA-AD. xxxx GOVERNANCE xxxx 7. The Parties agree that mechanisms and modalities for the actual implementation of this MOA-AD shall be spelt out in the Comprehensive Compact to mutually take such steps to enable it to occur effectively. Any provisions of the MOA-AD requiring amendments to the existing legal framework shall come into forceupon the signing of a Comprehensive Compact and upon effecting the necessary changes to the legal framework with due regard to non-derogation of prior agreements and within the stipulated timeframe to be contained in the Comprehensive Compact.64 (Underscoring supplied) The Solicitor General's arguments fail to persuade. Concrete acts under the MOA-AD are not necessary to render the present controversy ripe. In Pimentel, Jr. v. Aguirre,65 this Court held: x x x [B]y 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. Indeed, even a singular violation of the Constitution and/or the law is enough to awaken judicial duty. xxxx By the same token, when an act of the President, who in our constitutional scheme is a coequal of Congress, is seriously alleged to have infringed the Constitution and the laws x x x settling the dispute becomes the duty and the responsibility of the courts.66 In Santa Fe Independent School District v. Doe,67 the United States Supreme Court held that the challenge to the constitutionality of the school's policy allowing student-led prayers and speeches before games was ripe for The present petitions pray for Certiorari,71 Prohibition, and Mandamus. Certiorari and Prohibition are remedies granted by law when any tribunal, board or officer has acted, in the case of certiorari, or is proceeding, in the case of prohibition, without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.72 Mandamus is a remedy granted by law when any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use or enjoyment of a right or office to which such other is entitled.73 Certiorari, Mandamus and Prohibition are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials.74 The authority of the GRP Negotiating Panel is defined by Executive Order No. 3 (E.O. No. 3), issued on February 28, 2001.75 The said executive order requires that "[t]he government's policy framework for peace, including the systematic approach and the administrative structure for carrying out the comprehensive peace process x x x be governed by this Executive Order."76 The present petitions allege that respondents GRP Panel and PAPP Esperon drafted the terms of the MOA-AD without consulting the local government units or communities affected, nor informing them of the proceedings. As will be discussed in greater detail later, such omission, by itself, constitutes a departure by respondents from their mandate under E.O. No. 3. Furthermore, the petitions allege that the provisions of the MOAAD violate the Constitution. The MOA-AD provides that "any provisions of the MOA-AD requiring amendments to the existing legal framework shall come into force upon the signing of a Comprehensive Compact and upon effecting the necessary changes to the legal framework," implying an amendment of the Constitution to accommodate the MOA-AD. This stipulation, in effect,guaranteed to the MILF the amendment of the Constitution. Such act constitutes another violation of its authority. Again, these points will be discussed in more detail later. As the petitions allege acts or omissions on the part of respondent that exceed their authority, by violating their duties under E.O. No. 3 and the provisions of the Constitution and statutes, the petitions make a prima facie case for Certiorari, Prohibition, and Mandamus, and an actual case or controversy ripe for adjudication exists. When an act of a branch of government is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute.77 B. LOCUS STANDI For a party to have locus standi, one must allege "such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."78 adjudication, even if no public prayer had yet been led under the policy, because the policy was being challenged as unconstitutional on its face.68 That the law or act in question is not yet effective does not negate ripeness. For example, in New York v. United States,69 decided in 1992, the United States Supreme Court held that the action by the State of New York challenging the provisions of the Low-Level Radioactive Waste Policy Act was ripe for adjudication even if the questioned provision was not to take effect until January 1, 1996, because the parties agreed that New York had to take immediate action to avoid the provision's consequences.70

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Because constitutional cases are often public actions in which the relief sought is likely to affect other persons, a preliminary question frequently arises as to this interest in the constitutional question raised.79 When suing as a citizen, the person complaining must allege that he has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.80 When the issue concerns a public right, it is sufficient that the petitioner is a citizen and has an interest in the execution of the laws.81 For a taxpayer, one is allowed to sue where there is an assertion that public funds are illegally disbursed or deflected to an illegal purpose, or that there is a wastage of public funds through the enforcement of an invalid or unconstitutional law.82 The Court retains discretion whether or not to allow a taxpayer's suit.83 In the case of a legislator or member of Congress, an act of the Executive that injures the institution of Congress causes a derivative but nonetheless substantial injury that can be questioned by legislators. A member of the House of Representatives has standing to maintain inviolate the prerogatives, powers and privileges vested by the Constitution in his office.84 An organization may be granted standing to assert the rights of its members,85 but the mere invocation by theIntegrated Bar of the Philippines or any member of the legal profession of the duty to preserve the rule of law does not suffice to clothe it with standing.86 As regards a local government unit (LGU), it can seek relief in order to protect or vindicate an interest of its own, and of the other LGUs.87 Intervenors, meanwhile, may be given legal standing upon showing of facts that satisfy the requirements of the law authorizing intervention,88 such as a legal interest in the matter in litigation, or in the success of either of the parties. In any case, the Court has discretion to relax the procedural technicality on locus standi, given the liberal attitude it has exercised, highlighted in the case of David v. Macapagal-Arroyo,89 where technicalities of procedure were brushed aside, the constitutional issues raised being of paramount public interest or of transcendental importance deserving the attention of the Court in view of their seriousness, novelty and weight as precedents.90 The Court's forbearing stance on locus standi on issues involving constitutional issues has for its purpose the protection of fundamental rights. In not a few cases, the Court, in keeping with its duty under the Constitution to determine whether the other branches of government have kept themselves within the limits of the Constitution and the laws and have not abused the discretion given them, has brushed aside technical rules of procedure.91 In the petitions at bar, petitioners Province of North Cotabato (G.R. No. 183591) Province of Zamboanga del Norte (G.R. No. 183951), City of Iligan (G.R. No. 183893) and City of Zamboanga (G.R. No. 183752) and petitioners-in-intervention Province of Sultan Kudarat, City of Isabela and Municipality of Linamon havelocus standi in view of the direct and substantial injury that they, as LGUs, would suffer as their territories, whether in whole or in part, are to be included in the intended domain of the BJE. These petitioners allege that they did not vote for their inclusion in the ARMM which would be expanded to form the BJE territory. Petitioners' legal standing is thus beyond doubt. In G.R. No. 183962, petitioners Ernesto Maceda, Jejomar Binay and Aquilino Pimentel III would have no standing as citizens and taxpayers for their failure to specify that they would be denied some right or privilege or there would be wastage of public funds. The fact that they are a former Senator, an incumbent mayor of Makati City, and a resident of Cagayan de Oro, respectively, is of no consequence. Considering their invocation of the transcendental importance of the issues at hand, however, the Court grants them standing. Intervenors Franklin Drilon and Adel Tamano, in alleging their standing as taxpayers, assert that government funds would be expended for the conduct of an illegal and unconstitutional plebiscite to delineate the BJE territory. On that score alone, they can be given legal standing. Their allegation that the issues involved in these petitions are of "undeniable transcendental importance" clothes them with added basis for their personality to intervene in these petitions. With regard to Senator Manuel Roxas, his standing is premised on his being a member of the Senate and a citizen to enforce compliance by respondents of the public's constitutional right to be informed of the MOA-AD, as well as on a genuine legal interest in the matter in litigation, or in the success or failure of either of the parties. He thus possesses the requisite standing as an intervenor. With respect to Intervenors Ruy Elias Lopez, as a former congressman of the 3rd district of Davao City, a taxpayer and a member of the Bagobo tribe; Carlo B. Gomez, et al., as members of the IBP Palawan chapter, citizens and taxpayers; Marino Ridao, as taxpayer, resident and member of the Sangguniang Panlungsod of Cotabato City; and Kisin Buxani, as taxpayer, they failed to allege any proper legal interest in the present petitions. Just the same, the Court exercises its discretion to relax the procedural technicality on locus standi given the paramount public interest in the issues at hand. Intervening respondents Muslim Multi-Sectoral Movement for Peace and Development, an advocacy group for justice and the attainment of peace and prosperity in Muslim Mindanao; and Muslim Legal Assistance Foundation Inc., a non-government organization of Muslim lawyers, allege that they stand to be benefited or prejudiced, as the case may be, in the resolution of the petitions concerning the MOA-AD, and prays for the denial of the petitions on the grounds therein stated. Such legal interest suffices to clothe them with standing. B. MOOTNESS Respondents insist that the present petitions have been rendered moot with the satisfaction of all the reliefs prayed for by petitioners and the subsequent pronouncement of the Executive Secretary that "[n]o matter what the Supreme Court ultimately decides[,] the government will not sign the MOA."92 In lending credence to this policy decision, the Solicitor General points out that the President had already disbanded the GRP Peace Panel.93 In David v. Macapagal-Arroyo,94 this Court held that the "moot and academic" principle not being a magical formula that automatically dissuades courts in resolving a case, it will decide cases, otherwise moot and academic, if it finds that (a) there is a grave violation of the Constitution;95 (b) the situation is of exceptional character and paramount public interest is involved;96 (c) the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public;97 and (d) the case is capable of repetition yet evading review.98 Another exclusionary circumstance that may be considered is where there is a voluntary cessation of the activity complained of by the defendant or doer. Thus, once a suit is filed and the doer voluntarily ceases the challenged conduct, it does not automatically deprive the tribunal of power to hear and determine the case and does not render the case moot especially when the plaintiff seeks damages or prays for injunctive relief against the possible recurrence of the violation.99

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The present petitions fall squarely into these exceptions to thus thrust them into the domain of judicial review. The grounds cited above in David are just as applicable in the present cases as they were, not only in David, but also in Province of Batangas v. Romulo100 and Manalo v. Calderon101 where the Court similarly decided them on the merits, supervening events that would ordinarily have rendered the same moot notwithstanding. Petitions not mooted Contrary then to the asseverations of respondents, the non-signing of the MOA-AD and the eventual dissolution of the GRP Peace Panel did not moot the present petitions. It bears emphasis that the signing of the MOA-AD did not push through due to the Court's issuance of a Temporary Restraining Order. Contrary too to respondents' position, the MOA-AD cannot be considered a mere "list of consensus points," especially given its nomenclature, the need to have it signed or initialed by all the parties concerned on August 5, 2008, and the far-reaching Constitutional implications of these "consensus points," foremost of which is the creation of the BJE. In fact, as what will, in the main, be discussed, there is a commitment on the part of respondents to amend and effect necessary changes to the existing legal framework for certain provisions of the MOA-AD to take effect. Consequently, the present petitions are not confined to the terms and provisions of the MOA-AD, but to other ongoing and future negotiations and agreements necessary for its realization. The petitions have not, therefore, been rendered moot and academic simply by the public disclosure of the MOA-AD,102 the manifestation that it will not be signed as well as the disbanding of the GRP Panel not withstanding. Petitions are imbued with paramount public interest There is no gainsaying that the petitions are imbued with paramount public interest, involving a significant part of the country's territory and the wide-ranging political modifications of affected LGUs. The assertion that the MOA-AD is subject to further legal enactments including possible Constitutional amendments more than ever provides impetus for the Court to formulate controlling principles to guide the bench, the bar, the public and, in this case, the government and its negotiating entity. Respondents cite Suplico v. NEDA, et al.103 where the Court did not "pontificat[e] on issues which no longer legitimately constitute an actual case or controversy [as this] will do more harm than good to the nation as a whole." The present petitions must be differentiated from Suplico. Primarily, in Suplico, what was assailed and eventually cancelled was a stand-alone government procurement contract for a national broadband network involving a one-time contractual relation between two parties-the government and a private foreign corporation. As the issues therein involved specific government procurement policies and standard principles on contracts, the majority opinion in Suplico found nothing exceptional therein, the factual circumstances being peculiar only to the transactions and parties involved in the controversy. The MOA-AD is part of a series of agreements In the present controversy, the MOA-AD is a significant part of a series of agreements necessary to carry out the Tripoli Agreement 2001. The MOA-AD which dwells on the Ancestral Domain Aspect of said Tripoli Agreement is the third such component to be undertaken following the implementation of the Security Aspect in August 2001 and the Humanitarian, Rehabilitation and Development Aspect in May 2002. Accordingly, even if the Executive Secretary, in his Memorandum of August 28, 2008 to the Solicitor General, has stated that "no matter what the Supreme Court ultimately decides[,] the government will not sign the MOA[-AD],"mootness will not set in in light of the terms of the Tripoli Agreement 2001. Need to formulate principles-guidelines Surely, the present MOA-AD can be renegotiated or another one will be drawn up to carry out the Ancestral Domain Aspect of the Tripoli Agreement 2001, in another or in any form, which could contain similar or significantly drastic provisions. While the Court notes the word of the Executive Secretary that the government "is committed to securing an agreement that is both constitutional and equitable because that is the only way that long-lasting peace can be assured," it is minded to render a decision on the merits in the present petitions toformulate controlling principles to guide the bench, the bar, the public and, most especially, the government in negotiating with the MILF regarding Ancestral Domain. Respondents invite the Court's attention to the separate opinion of then Chief Justice Artemio Panganiban inSanlakas v. Reyes104 in which he stated that the doctrine of "capable of repetition yet evading review" can override mootness, "provided the party raising it in a proper case has been and/or continue to be prejudiced or damaged as a direct result of their issuance." They contend that the Court must have jurisdiction over the subject matter for the doctrine to be invoked. The present petitions all contain prayers for Prohibition over which this Court exercises original jurisdiction. While G.R. No. 183893 (City of Iligan v. GRP) is a petition for Injunction and Declaratory Relief, the Court will treat it as one for Prohibition as it has far reaching implications and raises questions that need to be resolved.105 At all events, the Court has jurisdiction over most if not the rest of the petitions. Indeed, the present petitions afford a proper venue for the Court to again apply the doctrine immediately referred to as what it had done in a number of landmark cases.106 There is a reasonable expectation that petitioners, particularly the Provinces of North Cotabato, Zamboanga del Norte and Sultan Kudarat, the Cities of Zamboanga, Iligan and Isabela, and the Municipality of Linamon, will again be subjected to the same problem in the future as respondents' actions are capable of repetition, in another or any form. It is with respect to the prayers for Mandamus that the petitions have become moot, respondents having, by Compliance of August 7, 2008, provided this Court and petitioners with official copies of the final draft of the MOA-AD and its annexes. Too, intervenors have been furnished, or have procured for themselves, copies of the MOA-AD. V. SUBSTANTIVE ISSUES As culled from the Petitions and Petitions-in-Intervention, there are basically two SUBSTANTIVE issues to be resolved, one relating to the manner in which the MOA-AD was negotiated and finalized, the other relating to its provisions, viz: 1. Did respondents violate constitutional and statutory provisions on public consultation and the right to information when they negotiated and later initialed the MOA-AD? 2. Do the contents of the MOA-AD violate the Constitution and the laws? ON THE FIRST SUBSTANTIVE ISSUE

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Petitioners invoke their constitutional right to information on matters of public concern, as provided in Section 7, Article III on the Bill of Rights: Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.107 As early as 1948, in Subido v. Ozaeta,108 the Court has recognized the statutory right to examine and inspect public records, a right which was eventually accorded constitutional status. The right of access to public documents, as enshrined in both the 1973 Constitution and the 1987 Constitution, has been recognized as a selfexecutory constitutional right.109 In the 1976 case of Baldoza v. Hon. Judge Dimaano,110 the Court ruled that access to public records is predicated on the right of the people to acquire information on matters of public concern since, undoubtedly, in a democracy, the pubic has a legitimate interest in matters of social and political significance. x x x The incorporation of this right in the Constitution is a recognition of the fundamental role of free exchange of information in a democracy. There can be no realistic perception by the public of the nation's problems, nor a meaningful democratic decision-making if they are denied access to information of general interest. Information is needed to enable the members of society to cope with the exigencies of the times. As has been aptly observed: "Maintaining the flow of such information depends on protection for both its acquisition and its dissemination since, if either process is interrupted, the flow inevitably ceases." x x x111 In the same way that free discussion enables members of society to cope with the exigencies of their time, access to information of general interest aids the people in democratic decision-making by giving them a better perspective of the vital issues confronting the nation112 so that they may be able to criticize and participate in the affairs of the government in a responsible, reasonable and effective manner. It is by ensuring an unfettered and uninhibited exchange of ideas among a well-informed public that a government remains responsive to the changes desired by the people.113 The MOA-AD is a matter of public concern That the subject of the information sought in the present cases is a matter of public concern114 faces no serious challenge. In fact, respondents admit that the MOA-AD is indeed of public concern.115 In previous cases, the Court found that the regularity of real estate transactions entered in the Register of Deeds,116 the need for adequate notice to the public of the various laws,117 the civil service eligibility of a public employee,118 the proper management of GSIS funds allegedly used to grant loans to public officials,119 the recovery of the Marcoses' alleged ill-gotten wealth,120 and the identity of party-list nominees,121 among others, are matters of public concern. Undoubtedly, the MOA-AD subject of the present cases is of public concern, involving as it does thesovereignty and territorial integrity of the State, which directly affects the lives of the public at large. Matters of public concern covered by the right to information include steps and negotiations leading to the consummation of the contract. In not distinguishing as to the executory nature or commercial character of agreements, the Court has categorically ruled: x x x [T]he right to information "contemplates inclusion of negotiations leading to the consummation of the transaction." Certainly, a consummated contract is not a requirement for the exercise of the right to information. Otherwise, the people can never exercise the right if no contract is consummated, and if one is consummated, it may be too late for the public to expose its defects. Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous to the government or even illegal, becomes fait accompli. This negates the State policy of full transparency on matters of public concern, a situation which the framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from participating in the public discussion of any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its transactions involving public interest."122 (Emphasis and italics in the original) Intended as a "splendid symmetry"123 to the right to information under the Bill of Rights is the policy of public disclosure under Section 28, Article II of the Constitution reading: Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest.124 The policy of full public disclosure enunciated in above-quoted Section 28 complements the right of access to information on matters of public concern found in the Bill of Rights. The right to information guarantees the right of the people to demand information, while Section 28 recognizes the duty of officialdom to give information even if nobody demands.125 The policy of public disclosure establishes a concrete ethical principle for the conduct of public affairs in a genuinely open democracy, with the people's right to know as the centerpiece. It is a mandate of the State to be accountable by following such policy.126 These provisions are vital to the exercise of the freedom of expression and essential to hold public officials at all times accountable to the people.127 Whether Section 28 is self-executory, the records of the deliberations of the Constitutional Commission so disclose: MR. SUAREZ. And since this is not self-executory, this policy will not be enunciated or will not be in force and effect until after Congress shall have provided it. MR. OPLE. I expect it to influence the climate of public ethics immediately but, of course, the implementing law will have to be enacted by Congress, Mr. Presiding Officer.128 The following discourse, after Commissioner Hilario Davide, Jr., sought clarification on the issue, is enlightening. MR. DAVIDE. I would like to get some clarifications on this. Mr. Presiding Officer, did I get the Gentleman correctly as having said that this is not a self-executing provision? It would require a legislation by Congress to implement? MR. OPLE. Yes. Originally, it was going to be self-executing, but I accepted an amendment from Commissioner Regalado, so that the safeguards on national interest are modified by the clause "as may be provided by law" MR. DAVIDE. But as worded, does it not mean that this will immediately take effect and Congress may provide for reasonable safeguards on the sole ground national interest?

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MR. OPLE. Yes. I think so, Mr. Presiding Officer, I said earlier that it should immediately influence the climate of the conduct of public affairs but, of course, Congress here may no longer pass a law revoking it, or if this is approved, revoking this principle, which is inconsistent with this policy.129 (Emphasis supplied) Indubitably, the effectivity of the policy of public disclosure need not await the passing of a statute. As Congress cannot revoke this principle, it is merely directed to provide for "reasonable safeguards." The complete and effective exercise of the right to information necessitates that its complementary provision on public disclosure derive the same selfexecutory nature. Since both provisions go hand-in-hand, it is absurd to say that the broader130 right to information on matters of public concern is already enforceable while the correlative duty of the State to disclose its transactions involving public interest is not enforceable until there is an enabling law.Respondents cannot thus point to the absence of an implementing legislation as an excuse in not effecting such policy. An essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the people's will.131Envisioned to be corollary to the twin rights to information and disclosure is the design for feedback mechanisms. MS. ROSARIO BRAID. Yes. And lastly, Mr. Presiding Officer, will the people be able to participate? Will the government provide feedback mechanisms so that the people can participate and can react where the existing media facilities are not able to provide full feedback mechanisms to the government? I suppose this will be part of the government implementing operational mechanisms. MR. OPLE. Yes. I think through their elected representatives and that is how these courses take place. There is a message and a feedback, both ways. xxxx MS. ROSARIO BRAID. Mr. Presiding Officer, may I just make one last sentence? I think when we talk about the feedback network, we are not talking about public officials but also network of private business o[r] community-based organizations that will be reacting. As a matter of fact, we will put more credence or credibility on the private network of volunteers and voluntary community-based organizations. So I do not think we are afraid that there will be another OMA in the making.132 (Emphasis supplied) The imperative of a public consultation, as a species of the right to information, is evident in the "marching orders" to respondents. The mechanics for the duty to disclose information and to conduct public consultation regarding the peace agenda and process is manifestly provided by E.O. No. 3.133 The preambulatory clause of E.O. No. 3 declares that there is a need to further enhance the contribution of civil society to the comprehensive peace process by institutionalizing the people's participation. One of the three underlying principles of the comprehensive peace process is that it "should be community-based, reflecting the sentiments, values and principles important to all Filipinos" and "shall be defined not by the government alone, nor by the different contending groups only, but by all Filipinos as one community."134 Included as a component of the comprehensive peace process is consensus-building and empowerment for peace, which includes "continuing consultations on both national and local levels to build consensus for a peace agenda and process, and the mobilization and facilitation of people's participation in the peace process."135 Clearly, E.O. No. 3 contemplates not just the conduct of a plebiscite to effectuate "continuing" consultations, contrary to respondents' position that plebiscite is "more than sufficient consultation."136 Further, E.O. No. 3 enumerates the functions and responsibilities of the PAPP, one of which is to "[c]onductregular dialogues with the National Peace Forum (NPF) and other peace partners to seek relevant information, comments, recommendations as well as to render appropriate and timely reports on the progress of the comprehensive peace process."137 E.O. No. 3 mandates the establishment of the NPF to be "the principal forumfor the PAPP to consult with and seek advi[c]e from the peace advocates, peace partners and concerned sectors of society on both national and local levels, on the implementation of the comprehensive peace process, as well as for government[-]civil society dialogue and consensus-building on peace agenda and initiatives."138 In fine, E.O. No. 3 establishes petitioners' right to be consulted on the peace agenda, as a corollary to the constitutional right to information and disclosure. PAPP Esperon committed grave abuse of discretion The PAPP committed grave abuse of discretion when he failed to carry out the pertinent consultation. The furtive process by which the MOA-AD was designed and crafted runs contrary to and in excess of the legal authority, and amounts to a whimsical, capricious, oppressive, arbitrary and despotic exercise thereof. The Court may not, of course, require the PAPP to conduct the consultation in a particular way or manner. It may, however, require him to comply with the law and discharge the functions within the authority granted by the President.139 Petitioners are not claiming a seat at the negotiating table, contrary to respondents' retort in justifying the denial of petitioners' right to be consulted. Respondents' stance manifests the manner by which they treat the salient provisions of E.O. No. 3 on people's participation. Such disregard of the express mandate of the President is not much different from superficial conduct toward token provisos that border on classic lip service.140 It illustrates a gross evasion of positive duty and a virtual refusal to perform the duty enjoined. As for respondents' invocation of the doctrine of executive privilege, it is not tenable under the premises. The argument defies sound reason when contrasted with E.O. No. 3's explicit provisions on continuing consultation and dialogue on both national and local levels. The executive order even recognizes the exercise of the public's right even before the GRP makes its official recommendations or before the government proffers its definite propositions.141 It bear emphasis that E.O. No. 3 seeks to elicit relevant advice, information, comments and recommendations from the people through dialogue. AT ALL EVENTS, respondents effectively waived the defense of executive privilege in view of their unqualified disclosure of the official copies of the final draft of the MOA-AD. By unconditionally complying with the Court's August 4, 2008 Resolution, without a prayer for the document's disclosure in camera, or without a manifestation that it was complying therewith ex abundante ad cautelam. Petitioners' assertion that the Local Government Code (LGC) of 1991 declares it a State policy to "require all national agencies and offices to conduct periodic consultations with appropriate local government units, non-governmental and people's organizations, and other concerned

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sectors of the community before any project or program is implemented in their respective jurisdictions"142 is well-taken. The LGC chapter on intergovernmental relations puts flesh into this avowed policy: Prior Consultations Required. - No project or program shall be implemented by government authoritiesunless the consultations mentioned in Sections 2 (c) and 26 hereof are complied with, and prior approval of the sanggunian concerned is obtained: Provided, That occupants in areas where such projects are to be implemented shall not be evicted unless appropriate relocation sites have been provided, in accordance with the provisions of the Constitution.143 (Italics and underscoring supplied) In Lina, Jr. v. Hon. Pao,144 the Court held that the above-stated policy and above-quoted provision of the LGU apply only to national programs or projects which are to be implemented in a particular local community. Among the programs and projects covered are those that are critical to the environment and human ecology including those that may call for the eviction of a particular group of people residing in the locality where these will be implemented.145 The MOA-AD is one peculiar program that unequivocally and unilaterally vests ownership of a vast territory to the Bangsamoro people,146 which could pervasively and drastically result to the diaspora or displacement of a great number of inhabitants from their total environment. With respect to the indigenous cultural communities/indigenous peoples (ICCs/IPs), whose interests are represented herein by petitioner Lopez and are adversely affected by the MOA-AD, the ICCs/IPs have, under the IPRA, the right to participate fully at all levels of decision-making in matters which may affect their rights, lives and destinies.147 The MOAAD, an instrument recognizing ancestral domain, failed to justify its noncompliance with the clear-cut mechanisms ordained in said Act,148 which entails, among other things, the observance of the free and prior informed consent of the ICCs/IPs. Notably, the IPRA does not grant the Executive Department or any government agency the power to delineate and recognize an ancestral domain claim by mere agreement or compromise. The recognition of the ancestral domain is the raison d'etre of the MOA-AD, without which all other stipulations or "consensus points" necessarily must fail. In proceeding to make a sweeping declaration on ancestral domain, without complying with the IPRA, which is cited as one of the TOR of the MOAAD, respondents clearly transcended the boundaries of their authority. As it seems, even the heart of the MOA-AD is still subject to necessary changes to the legal framework. While paragraph 7 on Governance suspends the effectivity of all provisions requiring changes to the legal framework, such clause is itself invalid, as will be discussed in the following section. Indeed, ours is an open society, with all the acts of the government subject to public scrutiny and available always to public cognizance. This has to be so if the country is to remain democratic, with sovereignty residing in the people and all government authority emanating from them.149 ON THE SECOND SUBSTANTIVE ISSUE With regard to the provisions of the MOA-AD, there can be no question that they cannot all be accommodated under the present Constitution and laws. Respondents have admitted as much in the oral arguments before this Court, and the MOA-AD itself recognizes the need to amend the existing legal framework to render effective at least some of its provisions. Respondents, nonetheless, counter that the MOA-AD is free of any legal infirmity because any provisions therein which are inconsistent with the present legal framework will not be effective until the necessary changes to that framework are made. The validity of this argument will be considered later. For now, the Court shall pass upon how The MOA-AD is inconsistent with the Constitution and laws as presently worded. In general, the objections against the MOA-AD center on the extent of the powers conceded therein to the BJE. Petitioners assert that the powers granted to the BJE exceed those granted to any local government under present laws, and even go beyond those of the present ARMM. Before assessing some of the specific powers that would have been vested in the BJE, however, it would be useful to turn first to a general idea that serves as a unifying link to the different provisions of the MOA-AD, namely, the international law concept of association. Significantly, the MOA-AD explicitly alludes to this concept, indicating that the Parties actually framed its provisions with it in mind.

Association is referred to in paragraph 3 on TERRITORY, paragraph 11

on RESOURCES, and paragraph 4 on GOVERNANCE. It is in the last mentioned provision, however, that the MOA-AD most clearly uses it to describe theenvisioned relationship between the BJE and the Central Government. 4. The relationship between the Central Government and the Bangsamoro juridical entity shall beassociative characterized by shared authority and responsibility with a structure of governance based on executive, legislative, judicial and administrative institutions with defined powers and functions in the comprehensive compact. A period of transition shall be established in a comprehensive peace compact specifying the relationship between the Central Government and the BJE. (Emphasis and underscoring supplied) The nature of the "associative" relationship may have been intended to be defined more precisely in the still to be forged Comprehensive Compact. Nonetheless, given that there is a concept of "association" in international law, and the MOA-AD - by its inclusion of international law instruments in its TOR- placed itself in an international legal context, that concept of association may be brought to bear in understanding the use of the term "associative" in the MOA-AD. Keitner and Reisman state that [a]n association is formed when two states of unequal power voluntarily establish durable links. In the basic model, one state, the associate, delegates certain responsibilities to the other, the principal, while maintaining its international status as a state. Free associations represent a middle ground between integration and independence. x x x150 (Emphasis and underscoring supplied) For purposes of illustration, the Republic of the Marshall Islands and the Federated States of Micronesia (FSM), formerly part of the U.S.administered Trust Territory of the Pacific Islands,151 are associated states of the U.S. pursuant to a Compact of Free Association. The currency in these countries is the U.S. dollar, indicating their very close ties with the U.S., yet they issue their own travel documents, which is a mark of their statehood. Their international legal status as states was confirmed by the UN Security Council and by their admission to UN membership. According to their compacts of free association, the Marshall Islands and the FSM generally have the capacity to conduct foreign affairs in their own name and right, such capacity extending to matters such as the law of the sea, marine resources, trade, banking, postal, civil aviation, and cultural relations. The U.S. government, when conducting its foreign affairs, is obligated to consult with the governments of the Marshall Islands or the FSM on matters which it (U.S. government) regards as relating to or affecting either government.

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In the event of attacks or threats against the Marshall Islands or the FSM, the U.S. government has the authority and obligation to defend them as if they were part of U.S. territory. The U.S. government, moreover, has the option of establishing and using military areas and facilities within these associated states and has the right to bar the military personnel of any third country from having access to these territories for military purposes. It bears noting that in U.S. constitutional and international practice, free association is understood as an international association between sovereigns. The Compact of Free Association is a treaty which is subordinate to the associated nation's national constitution, and each party may terminate the association consistent with the right of independence. It has been said that, with the admission of the U.S.-associated states to the UN in 1990, the UN recognized that the American model of free association is actually based on an underlying status of independence.152 In international practice, the "associated state" arrangement has usually been used as a transitional device of former colonies on their way to full independence. Examples of states that have passed through the status of associated states as a transitional phase are Antigua, St. Kitts-NevisAnguilla, Dominica, St. Lucia, St. Vincent and Grenada. All have since become independent states.153 Back to the MOA-AD, it contains many provisions which are consistent with the international legal concept ofassociation, specifically the following: the BJE's capacity to enter into economic and trade relations with foreign countries, the commitment of the Central Government to ensure the BJE's participation in meetings and events in the ASEAN and the specialized UN agencies, and the continuing responsibility of the Central Government over external defense. Moreover, the BJE's right to participate in Philippine official missions bearing on negotiation of border agreements, environmental protection, and sharing of revenues pertaining to the bodies of water adjacent to or between the islands forming part of the ancestral domain, resembles the right of the governments of FSM and the Marshall Islands to be consulted by the U.S. government on any foreign affairs matter affecting them. These provisions of the MOA indicate, among other things, that the Parties aimed to vest in the BJE the status of an associated state or, at any rate, a status closely approximating it. The concept of association is not recognized under the present Constitution No province, city, or municipality, not even the ARMM, is recognized under our laws as having an "associative" relationship with the national government. Indeed, the concept implies powers that go beyond anything ever granted by the Constitution to any local or regional government. It also implies the recognition of the associated entity as a state. The Constitution, however, does not contemplate any state in this jurisdiction other than the Philippine State, much less does it provide for a transitory status that aims to prepare any part of Philippine territory for independence. Even the mere concept animating many of the MOA-AD's provisions, therefore, already requires for its validity the amendment of constitutional provisions, specifically the following provisions of Article X: SECTION 1. The territorial and Republic of the Philippines municipalities, and barangays. regions in Muslim Mindanao and provided. political subdivisions of the are the provinces, cities, There shall be autonomous the Cordilleras as hereinafter distinctive historical and cultural heritage, economic and social structures, and other relevant characteristics within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines. The BJE is a entity than the recognized in the Constitution far more autonomous powerful region

It is not merely an expanded version of the ARMM, the status of its relationship with the national government being fundamentally different from that of the ARMM. Indeed, BJE is a state in all but name as it meets the criteria of a state laid down in the Montevideo Convention,154 namely, a permanent population, a defined territory, a government, and a capacity to enter into relations with other states. Even assuming arguendo that the MOA-AD would not necessarily sever any portion of Philippine territory, the spirit animating it - which has betrayed itself by its use of the concept of association - runs counter to the national sovereignty and territorial integrity of the Republic. The defining concept underlying the relationship between the national government and the BJE being itself contrary to the present Constitution, it is not surprising that many of the specific provisions of the MOA-AD on the formation and powers of the BJE are in conflict with the Constitution and the laws. Article X, Section 18 of the Constitution provides that "[t]he creation of the autonomous region shall be effective when approved by a majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and geographic areas voting favorably in such plebiscite shall be included in the autonomous region." (Emphasis supplied) As reflected above, the BJE is more of a state than an autonomous region. But even assuming that it is covered by the term "autonomous region" in the constitutional provision just quoted, the MOA-AD would still be in conflict with it. Under paragraph 2(c) on TERRITORY in relation to 2(d) and 2(e), the present geographic area of the ARMM and, in addition, the municipalities of Lanao del Norte which voted for inclusion in the ARMM during the 2001 plebiscite - Baloi, Munai, Nunungan, Pantar, Tagoloan and Tangkal - are automatically part of the BJE without need of another plebiscite, in contrast to the areas under Categories A and B mentioned earlier in the overview. That the present components of the ARMM and the above-mentioned municipalities voted for inclusion therein in 2001, however, does not render another plebiscite unnecessary under the Constitution, precisely because what these areas voted for then was their inclusion in the ARMM, not the BJE. The MOA-AD, moreover, comply with Article X, the Constitution would Section 20 not of

since that provision defines the powers of autonomous regions as follows: SECTION 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the organic act of autonomous regions shall provide for legislative powers over: (1) Administrative organization; (2) Creation of sources of revenues; (3) Ancestral domain and natural resources; (4) Personal, family, and property relations;

SECTION 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing common and

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(5) Regional urban and rural planning development; (6) Economic, social, and tourism development; (7) Educational policies; (8) Preservation and development of the cultural heritage; and (9) Such other matters as may be authorized by law for the promotion of the general welfare of the people of the region. (Underscoring supplied) Again on the premise that the BJE may be regarded as an autonomous region, the MOA-AD would require an amendment that would expand the above-quoted provision. The mere passage of new legislation pursuant to sub-paragraph No. 9 of said constitutional provision would not suffice, since any new law that might vest in the BJE the powers found in the MOA-AD must, itself, comply with other provisions of the Constitution. It would not do, for instance, to merely pass legislation vesting the BJE with treaty-making power in order to accommodate paragraph 4 of the strand on RESOURCES which states: "The BJE is free to enter into any economic cooperation and trade relations with foreign countries: provided, however, that such relationships and understandings do not include aggression against the Government of the Republic of the Philippines x x x." Under our constitutional system, it is only the President who has that power. Pimentel v. Executive Secretary155 instructs: In our system of government, the President, being the head of state, is regarded as the sole organ and authority in external relations and is the country's sole representative with foreign nations. As the chief architect of foreign policy, the President acts as the country's mouthpiece with respect to international affairs. Hence, the President is vested with the authority to deal with foreign states and governments, extend or withhold recognition, maintain diplomatic relations, enter into treaties, and otherwise transact the business of foreign relations. In the realm of treaty-making, the President has the sole authority to negotiate with other states. (Emphasis and underscoring supplied) Article II, Section 22 of the Constitution must also be amended if the scheme envisioned in the MOA-AD is to be effected. That constitutional provision states: "The State recognizes and promotes the rights ofindigenous cultural communities within the framework of national unity and development." (Underscoring supplied)An associative arrangement does not uphold national unity. While there may be a semblance of unity because of the associative ties between the BJE and the national government, the act of placing a portion of Philippine territory in a status which, in international practice, has generally been a preparation for independence, is certainly not conducive to national unity. Besides being irreconcilable with the Constitution, the MOA-AD is also inconsistent with prevailing statutory law, among which are R.A. No. 9054156 or the Organic Act of the ARMM, and the IPRA.157 Article X, Section 3 of the Organic Act of the ARMM is a bar to the adoption of the definition of "Bangsamoro people" used in the MOAAD. Paragraph 1 on Concepts and Principles states: 1. It is the birthright of all Moros and all Indigenous peoples of Mindanao to identify themselves and be accepted as "Bangsamoros". The Bangsamoro people refers to those who are natives or original inhabitants of Mindanao and its adjacent islands including Palawan and the Sulu archipelago at the time of conquest or colonization of its descendants whether mixed or of full blood. Spouses and their descendants are classified as Bangsamoro. The freedom of choice of the Indigenous people shall be underscoring supplied) respected. (Emphasis and

This use of the term Bangsamoro sharply contrasts with that found in the Article X, Section 3 of the Organic Act, which, rather than lumping together the identities of the Bangsamoro and other indigenous peoples living in Mindanao, clearly distinguishes between Bangsamoro people and Tribal peoples, as follows: "As used in this Organic Act, the phrase "indigenous cultural community" refers to Filipino citizens residing in the autonomous region who are: (a) Tribal peoples. These are citizens whose social, cultural and economic conditions distinguish them from other sectors of the national community; and (b) Bangsa Moro people. These are citizens who are believers in Islam and who have retained some or all of their own social, economic, cultural, and political institutions." Respecting the IPRA, it lays down the prevailing procedure for the delineation and recognition of ancestral domains. The MOA-AD's manner of delineating the ancestral domain of the Bangsamoro people is a clear departure from that procedure. By paragraph 1 of Territory, the Parties simply agree that, subject to the delimitations in the agreed Schedules, "[t]he Bangsamoro homeland and historic territory refer to the land mass as well as the maritime, terrestrial, fluvial and alluvial domains, and the aerial domain, the atmospheric space above it, embracing the MindanaoSulu-Palawan geographic region." Chapter VIII of the IPRA, on the other hand, lays down a detailed procedure, as illustrated in the following provisions thereof: SECTION 52. Delineation Process. - The identification and delineation of ancestral domains shall be done in accordance with the following procedures: xxxx b) Petition for Delineation. - The process of delineating a specific perimeter may be initiated by the NCIP with the consent of the ICC/IP concerned, or through a Petition for Delineation filed with the NCIP, by a majority of the members of the ICCs/IPs; c) Delineation Proper. - The official delineation of ancestral domain boundaries including census of all community members therein, shall be immediately undertaken by the Ancestral Domains Office upon filing of the application by the ICCs/IPs concerned. Delineation will be done in coordination with the community concerned and shall at all times include genuine involvement and participation by the members of the communities concerned; d) Proof Required. - Proof of Ancestral Domain Claims shall include the testimony of elders or community under oath, and other documents directly or indirectly attesting to the possession or occupation of the area since time immemorial by such ICCs/IPs in the concept of owners which shall be any one (1) of the following authentic documents: 1) Written accounts of the ICCs/IPs customs and traditions; 2) Written accounts of the ICCs/IPs political structure and institution;

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3) Pictures showing long term occupation such as those of old improvements, burial grounds, sacred places and old villages; 4) Historical accounts, including pacts and agreements concerning boundaries entered into by the ICCs/IPs concerned with other ICCs/IPs; 5) Survey plans and sketch maps; 6) Anthropological data; 7) Genealogical surveys; 8) Pictures and descriptive histories of traditional communal forests and hunting grounds; 9) Pictures and descriptive histories of traditional landmarks such as mountains, rivers, creeks, ridges, hills, terraces and the like; and 10) Write-ups of names and places derived from the native dialect of the community. e) Preparation of Maps. - On the basis of such investigation and the findings of fact based thereon, the Ancestral Domains Office of the NCIP shall prepare a perimeter map, complete with technical descriptions, and a description of the natural features and landmarks embraced therein; f) Report of Investigation and Other Documents. - A complete copy of the preliminary census and a report of investigation, shall be prepared by the Ancestral Domains Office of the NCIP; g) Notice and Publication. - A copy of each document, including a translation in the native language of the ICCs/IPs concerned shall be posted in a prominent place therein for at least fifteen (15) days. A copy of the document shall also be posted at the local, provincial and regional offices of the NCIP, and shall be published in a newspaper of general circulation once a week for two (2) consecutive weeks to allow other claimants to file opposition thereto within fifteen (15) days from date of such publication: Provided, That in areas where no such newspaper exists, broadcasting in a radio station will be a valid substitute: Provided, further, That mere posting shall be deemed sufficient if both newspaper and radio station are not available; h) Endorsement to NCIP. - Within fifteen (15) days from publication, and of the inspection process, the Ancestral Domains Office shall prepare a report to the NCIP endorsing a favorable action upon a claim that is deemed to have sufficient proof. However, if the proof is deemed insufficient, the Ancestral Domains Office shall require the submission of additional evidence: Provided, That the Ancestral Domains Office shall reject any claim that is deemed patently false or fraudulent after inspection and verification: Provided, further, That in case of rejection, the Ancestral Domains Office shall give the applicant due notice, copy furnished all concerned, containing the grounds for denial. The denial shall be appealable to the NCIP: Provided, furthermore, That in cases where there are conflicting claims among ICCs/IPs on the boundaries of ancestral domain claims, the Ancestral Domains Office shall cause the contending parties to meet and assist them in coming up with a preliminary resolution of the conflict, without prejudice to its full adjudication according to the section below. xxxx Applying this provision of the Constitution, the Court, in Mejoff v. Director of Prisons,158 held that the Universal Declaration of Human Rights is part of the law of the land on account of which it ordered the release on bail of a detained alien of Russian descent whose deportation order had not been executed even after two years. Similarly, the Court in Agustin v. Edu159 applied the aforesaid constitutional provision to the 1968 Vienna Convention on Road Signs and Signals. International law has long recognized the right to self-determination of "peoples," understood not merely as the entire population of a State but also a portion thereof. In considering the question of whether the people of Quebec had a right to unilaterally secede from Canada, the Canadian Supreme Court in REFERENCE RE SECESSION OF QUEBEC160 had occasion to acknowledge that "the right of a people to self-determination is now so widely recognized in international conventions that the principle has acquired a status beyond convention' and is considered a general principle of international law." Among the conventions referred to are the International Covenant on Civil and Political Rights161 and the International Covenant on Economic, Social and Cultural Rights162 which state, in Article 1 of both covenants, that all peoples, by virtue of the right of self-determination, "freely determine their political status and freely pursue their economic, social, and cultural development." The people's right to self-determination should not, however, be understood as extending to a unilateral right of secession. A distinction should be made between the right of internal and external selfdetermination. REFERENCE RE SECESSION OF QUEBEC is again instructive: "(ii) Scope of the Right to Self-determination 126. The recognized sources of international law establish that the right to self-determination of a people is normally fulfilled through internal self-determination - a people's pursuit of its political, economic, social and cultural development within the framework of an existing state. A right toexternal selfdetermination (which in this case potentially takes the form of the assertion of a right to unilateral secession) arises in only the most extreme of cases and, even then, under carefully defined circumstances. x x x To remove all doubts about the irreconcilability of the MOA-AD with the present legal system, a discussion of not only the Constitution and domestic statutes, but also of international law is in order, for Article II, Section 2 of the Constitution states that the Philippines "adopts the generally accepted principles of international law as part of the law of the land."

External self-determination can be defined as in the following statement from the Declaration on Friendly Relations, supra, as
The establishment of a sovereign and independent State, the free association or integration with an independent State or the emergence into any other political status freely determined by apeople constitute modes of implementing the right of selfdetermination by that people. (Emphasis added) 127. The international law principle of self-determination has evolved within a framework of respect for the territorial integrity of existing states. The various international documents that support the existence of a people's right to selfdetermination also contain parallel statements supportive of the conclusion that the exercise of such a right must be sufficiently

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limited to prevent threats to an existing state's territorial integrity or the stability of relations between sovereign states. x x x x (Emphasis, italics and underscoring supplied) The Canadian Court went on to discuss the exceptional cases in which the right to external self-determination can arise, namely, where a people is under colonial rule, is subject to foreign domination or exploitation outside a colonial context, and - less definitely but asserted by a number of commentators - is blocked from the meaningful exercise of its right to internal self-determination. The Court ultimately held that the population of Quebec had no right to secession, as the same is not under colonial rule or foreign domination, nor is it being deprived of the freedom to make political choices and pursue economic, social and cultural development, citing that Quebec is equitably represented in legislative, executive and judicial institutions within Canada, even occupying prominent positions therein. The exceptional nature of the right of secession is further exemplified in the REPORT OF THE INTERNATIONAL COMMITTEE OF JURISTS ON THE LEGAL ASPECTS OF THE AALAND ISLANDS QUESTION.163 There, Sweden presented to the Council of the League of Nations the question of whether the inhabitants of the Aaland Islands should be authorized to determine by plebiscite if the archipelago should remain under Finnish sovereignty or be incorporated in the kingdom of Sweden. The Council, before resolving the question, appointed an International Committee composed of three jurists to submit an opinion on the preliminary issue of whether the dispute should, based on international law, be entirely left to the domestic jurisdiction of Finland. The Committee stated the rule as follows: x x x [I]n the absence of express provisions in international treaties, the right of disposing of national territory is essentially an attribute of the sovereignty of every State. Positive International Law does not recognize the right of national groups, as such, to separate themselves from the State of which they form part by the simple expression of a wish, any more than it recognizes the right of other States to claim such a separation. Generally speaking, the grant or refusal of the right to a portion of its population of determining its own political fate by plebiscite or by some other method, is, exclusively, an attribute of the sovereignty of every State which is definitively constituted. A dispute between two States concerning such a question, under normal conditions therefore, bears upon a question which International Law leaves entirely to the domestic jurisdiction of one of the States concerned. Any other solution would amount to an infringement of sovereign rights of a State and would involve the risk of creating difficulties and a lack of stability which would not only be contrary to the very idea embodied in term "State," but would also endanger the interests of the international community. If this right is not possessed by a large or small section of a nation, neither can it be held by the State to which the national group wishes to be attached, nor by any other State. (Emphasis and underscoring supplied) The Committee held that the dispute concerning the Aaland Islands did not refer to a question which is left by international law to the domestic jurisdiction of Finland, thereby applying the exception rather than the rule elucidated above. Its ground for departing from the general rule, however, was a very narrow one, namely, the Aaland Islands agitation originated at a time when Finland was undergoing drastic political transformation. The internal situation of Finland was, according to the Committee, so abnormal that, for a considerable time, the conditions required for the formation of a sovereign State did not exist. In the midst of revolution, anarchy, and civil war, the legitimacy of the Finnish national government was disputed by a large section of the people, and it had, in fact, been chased from the capital and forcibly prevented from carrying out its duties. The armed camps and the police were divided into two opposing forces. In light of these circumstances, Finland was not, during the relevant time period, a "definitively constituted" sovereign state. The Committee, therefore, found that Finland did not possess the right to withhold from a portion of its population the option to separate itself - a right which sovereign nations generally have with respect to their own populations. Turning now to the more specific category of indigenous peoples, this term has been used, in scholarship as well as international, regional, and state practices, to refer to groups with distinct cultures, histories, and connections to land (spiritual and otherwise) that have been forcibly incorporated into a larger governing society. These groups are regarded as "indigenous" since they are the living descendants of pre-invasion inhabitants of lands now dominated by others. Otherwise stated, indigenous peoples, nations, or communities are culturally distinctive groups that find themselves engulfed by settler societies born of the forces of empire and conquest.164 Examples of groups who have been regarded as indigenous peoples are the Maori of New Zealand and the aboriginal peoples of Canada. As with the broader category of "peoples," indigenous peoples situated within states do not have a general right to independence or secession from those states under international law,165 but they do have rights amounting to what was discussed above as the right to internal selfdetermination. In a historic development last September 13, 2007, the UN General Assembly adopted the United Nations Declaration on the Rights of Indigenous Peoples (UN DRIP) through General Assembly Resolution 61/295. The vote was 143 to 4, the Philippines being included among those in favor, and the four voting against being Australia, Canada, New Zealand, and the U.S. The Declaration clearly recognized the right of indigenous peoples to self-determination, encompassing the right to autonomy or self-government, to wit: Article 3 Indigenous peoples have the right to self-determination. By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development. Article 4 Indigenous peoples, in exercising their right to self-determination, have the right to autonomy or self-government in matters relating to their internal and local affairs, as well as ways and means for financing their autonomous functions. Article 5 Indigenous peoples have the right to maintain and strengthen their distinct political, legal, economic, social and cultural institutions, while retaining their right to participate fully, if they so choose, in the political, economic, social and cultural life of the State. Self-government, as used in international legal discourse pertaining to indigenous peoples, has been understood as equivalent to "internal selfdetermination."166 The extent of self-determination provided for in the UN DRIP is more particularly defined in its subsequent articles, some of which are quoted hereunder: Article 8 1. Indigenous peoples and individuals have the right not to be subjected to forced assimilation or destruction of their culture. 2. States shall provide effective mechanisms for prevention of, and redress for:

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(a) Any action which has the aim or effect of depriving them of their integrity as distinct peoples, or of their cultural values or ethnic identities; (b) Any action which has the aim or effect of dispossessing them of their lands, territories or resources; (c) Any form of forced population transfer which has the aim or effect of violating or undermining any of their rights; (d) Any form of forced assimilation or integration; (e) Any form of propaganda designed to promote or incite racial or ethnic discrimination directed against them. Article 21 1. Indigenous peoples have the right, without discrimination, to the improvement of their economic and social conditions, including, inter alia, in the areas of education, employment, vocational training and retraining, housing, sanitation, health and social security. 2. States shall take effective measures and, where appropriate, special measures to ensure continuing improvement of their economic and social conditions. Particular attention shall be paid to the rights and special needs of indigenous elders, women, youth, children and persons with disabilities. Article 26 1. Indigenous peoples have the right to the lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired. 2. Indigenous peoples have the right to own, use, develop and control the lands, territories and resources that they possess by reason of traditional ownership or other traditional occupation or use, as well as those which they have otherwise acquired. 3. States shall give legal recognition and protection to these lands, territories and resources. Such recognition shall be conducted with due respect to the customs, traditions and land tenure systems of the indigenous peoples concerned. Article 30 1. Military activities shall not take place in the lands or territories of indigenous peoples, unless justified by a relevant public interest or otherwise freely agreed with or requested by the indigenous peoples concerned. 2. States shall undertake effective consultations with the indigenous peoples concerned, through appropriate procedures and in particular through their representative institutions, prior to using their lands or territories for military activities. Article 32 1. Indigenous peoples have the right to determine and develop priorities and strategies for the development or use of their lands or territories and other resources. 2. States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources. 3. States shall provide effective mechanisms for just and fair redress for any such activities, and appropriate measures shall be taken to mitigate adverse environmental, economic, social, cultural or spiritual impact. Article 37 1. Indigenous peoples have the right to the recognition, observance and enforcement of treaties, agreements and other constructive arrangements concluded with States or their successors and to have States honour and respect such treaties, agreements and other constructive arrangements. 2. Nothing in this Declaration may be interpreted as diminishing or eliminating the rights of indigenous peoples contained in treaties, agreements and other constructive arrangements. Article 38 States in consultation and cooperation with indigenous peoples, shall take the appropriate measures, including legislative measures, to achieve the ends of this Declaration. Assuming that the UN DRIP, like the Universal Declaration on Human Rights, must now be regarded as embodying customary international law a question which the Court need not definitively resolve here - the obligations enumerated therein do not strictly require the Republic to grant the Bangsamoro people, through the instrumentality of the BJE, the particular rights and powers provided for in the MOA-AD. Even the more specific provisions of the UN DRIP are general in scope, allowing for flexibility in its application by the different States. There is, for instance, no requirement in the UN DRIP that States now guarantee indigenous peoples their own police and internal security force. Indeed, Article 8 presupposes that it is the State which will provide protection for indigenous peoples against acts like the forced dispossession of their lands - a function that is normally performed by police officers. If the protection of a right so essential to indigenous people's identity is acknowledged to be the responsibility of the State, then surely the protection of rights less significant to them as such peoples would also be the duty of States. Nor is there in the UN DRIP an acknowledgement of the right of indigenous peoples to the aerial domain and atmospheric space. What it upholds, in Article 26 thereof, is the right of indigenous peoples to the lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired. Moreover, the UN DRIP, while upholding the right of indigenous peoples to autonomy, does not obligate States to grant indigenous peoples the near-independent status of an associated state. All the rights recognized in that document are qualified in Article 46 as follows: 1. Nothing in this Declaration may be interpreted as implying for any State, people, group or person any right to engage in any activity or to perform any act contrary to the Charter of the United Nations orconstrued as authorizing or encouraging any action which would dismember or impair, totally or in part, the territorial integrity or political unity of sovereign and independent States. Even if the UN DRIP were considered as part of the law of the land pursuant to Article II, Section 2 of the Constitution, it would not suffice

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to uphold the validity of the MOA-AD so as to render its compliance with other laws unnecessary. It is, therefore, clear that the MOA-AD contains numerous provisions that cannot be reconciled with the Constitution and the laws as presently worded. Respondents proffer, however, that the signing of the MOA-AD alone would not have entailed any violation of law or grave abuse of discretion on their part, precisely because it stipulates that the provisions thereof inconsistent with the laws shall not take effect until these laws are amended. They cite paragraph 7 of the MOA-AD strand on GOVERNANCE quoted earlier, but which is reproduced below for convenience: 7. The Parties agree that the mechanisms and modalities for the actual implementation of this MOA-AD shall be spelt out in the Comprehensive Compact to mutually take such steps to enable it to occur effectively. Any provisions of the MOA-AD requiring amendments to the existing legal framework shall come into force upon signing of a Comprehensive Compact and upon effecting the necessary changes to the legal framework with due regard to non derogation of prior agreements and within the stipulated timeframe to be contained in the Comprehensive Compact. Indeed, the foregoing stipulation keeps many controversial provisions of the MOA-AD from coming into force until the necessary changes to the legal framework are effected. While the word "Constitution" is not mentioned in the provision now under consideration or anywhere else in the MOA-AD, the term "legal framework" is certainly broad enough to include the Constitution. Notwithstanding the suspensive clause, however, respondents, by their mere act of incorporating in the MOA-AD the provisions thereof regarding the associative relationship between the BJE and the Central Government, have already violated the Memorandum of Instructions From The President dated March 1, 2001, which states that the "negotiations shall be conducted in accordance with x x x the principles of the sovereignty and territorial integrity of the Republic of the Philippines." (Emphasis supplied) Establishing an associative relationship between the BJE and the Central Government is, for the reasons already discussed, a preparation for independence, or worse, an implicit acknowledgment of an independent status already prevailing. Even apart from the above-mentioned Memorandum, however, the MOA-AD is defective because the suspensive clause is invalid, as discussed below. The authority of the GRP Peace Negotiating Panel to negotiate with the MILF is founded on E.O. No. 3, Section 5(c), which states that there shall be established Government Peace Negotiating Panels for negotiations with different rebel groups to be "appointed by the President as her official emissaries to conduct negotiations, dialogues, and face-to-face discussions with rebel groups." These negotiating panels are to report to the President, through the PAPP on the conduct and progress of the negotiations. It bears noting that the GRP Peace Panel, in exploring lasting solutions to the Moro Problem through its negotiations with the MILF, was not restricted by E.O. No. 3 only to those options available under the laws as they presently stand. One of the components of a comprehensive peace process, which E.O. No. 3 collectively refers to as the "Paths to Peace," is the pursuit of social, economic, and political reforms which may require new legislation or even constitutional amendments. Sec. 4(a) of E.O. No. 3, which reiterates Section 3(a), of E.O. No. 125,167states: SECTION 4. The Six Paths to Peace. - The components of the comprehensive peace process comprise the processes known as the "Paths to Peace". These component processes are interrelated and not mutually exclusive, and must therefore be pursued simultaneously in a coordinated and integrated fashion. They shall include, but may not be limited to, the following: a. PURSUIT OF SOCIAL, ECONOMIC AND POLITICAL REFORMS. This component involves the vigorous implementation of various policies, reforms, programs and projects aimed at addressing the root causes of internal armed conflicts and social unrest. This may require administrative action, new legislation or even constitutional amendments. x x x x (Emphasis supplied) The MOA-AD, therefore, may reasonably be perceived as an attempt of respondents to address, pursuant to this provision of E.O. No. 3, the root causes of the armed conflict in Mindanao. The E.O. authorized them to "think outside the box," so to speak. Hence, they negotiated and were set on signing the MOA-AD that included various social, economic, and political reforms which cannot, however, all be accommodated within the present legal framework, and which thus would require new legislation and constitutional amendments. The inquiry on the legality of the "suspensive clause," however, cannot stop here, because it must be askedwhether the President herself may exercise the power delegated to the GRP Peace Panel under E.O. No. 3, Sec. 4(a). The President cannot delegate a power that she herself does not possess. May the President, in the course of peace negotiations, agree to pursue reforms that would require new legislation and constitutional amendments, or should the reforms be restricted only to those solutions which the present laws allow? The answer to this question requires a discussion of the extent of the President's power to conduct peace negotiations. That the authority of the President to conduct peace negotiations with rebel groups is not explicitly mentioned in the Constitution does not mean that she has no such authority. In Sanlakas v. Executive Secretary,168 in issue was the authority of the President to declare a state of rebellion - an authority which is not expressly provided for in the Constitution. The Court held thus: "In her ponencia in Marcos v. Manglapus, Justice Cortes put her thesis into jurisprudence. There, the Court, by a slim 8-7 margin, upheld the President's power to forbid the return of her exiled predecessor. The rationale for the majority's ruling rested on the President's . . . unstated residual powers which are implied from the grant of executive power and which are necessary for her to comply with her duties under the Constitution. The powers of the President are not limited to what are expressly enumerated in the article on the Executive Department and in scattered provisions of the Constitution. This is so, notwithstanding the avowed intent of the members of the Constitutional Commission of 1986 to limit the powers of the President as a reaction to the abuses under the regime of Mr. Marcos, for the result was a limitation of specific powers of the President, particularly those relating to the commander-in-chief clause, but not a diminution of the general grant of executive power. Thus, the President's authority to declare a state of rebellion springs in the main from her powers as chief executive and, at the same time, draws strength from her

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Commander-in-Chief underscoring supplied) powers. x x x (Emphasis and The constitutional provisions on autonomy and the statutes enacted pursuant to them have, to the credit of their drafters, been partly successful. Nonetheless, the Filipino people are still faced with the reality of an on-going conflict between the Government and the MILF. If the President is to be expected to find means for bringing this conflict to an end and to achieve lasting peace in Mindanao, then she must be given the leeway to explore, in the course of peace negotiations, solutions that may require changes to the Constitution for their implementation. Being uniquely vested with the power to conduct peace negotiations with rebel groups, the President is in a singular position to know the precise nature of their grievances which, if resolved, may bring an end to hostilities. The President may not, of course, unilaterally implement the solutions that she considers viable, but she may not be prevented from submitting them as recommendations to Congress, which could then, if it is minded, act upon them pursuant to the legal procedures for constitutional amendment and revision. In particular, Congress would have the option, pursuant to Article XVII, Sections 1 and 3 of the Constitution, to propose the recommended amendments or revision to the people, call a constitutional convention, or submit to the electorate the question of calling such a convention. While the President does not possess constituent powers - as those powers may be exercised only by Congress, a Constitutional Convention, or the people through initiative and referendum - she may submit proposals for constitutional change to Congress in a manner that does not involve the arrogation of constituent powers. In Sanidad v. COMELEC,174 in issue was the legality of then President Marcos' act of directly submitting proposals for constitutional amendments to a referendum, bypassing the interim National Assembly which was the body vested by the 1973 Constitution with the power to propose such amendments. President Marcos, it will be recalled, never convened the interim National Assembly. The majority upheld the President's act, holding that "the urges of absolute necessity" compelled the President as the agent of the people to act as he did, there being no interim National Assembly to propose constitutional amendments. Against this ruling, Justices Teehankee and Muoz Palma vigorously dissented. The Court's concern at present, however, is not with regard to the point on which it was then divided in that controversial case, but on that which was not disputed by either side. Justice Teehankee's dissent,175 in particular, bears noting. While he disagreed that the President may directly submit proposed constitutional amendments to a referendum, implicit in his opinion is a recognition that he would have upheld the President's action along with the majority had the President convened the interim National Assembly and coursed his proposals through it. Thus Justice Teehankee opined: "Since the Constitution provides for the organization of the essential departments of government, defines and delimits the powers of each and prescribes the manner of the exercise of such powers, and the constituent power has not been granted to but has been withheld from the President or Prime Minister, it follows that the President's questioned decrees proposing and submitting constitutional amendments directly to the people (without the intervention of the interim National Assembly in whom the power is expressly vested) are devoid of constitutional and legal basis."176 (Emphasis supplied) From the foregoing discussion, the principle may be inferred that the President - in the course of conducting peace negotiations - may validly consider implementing even those policies that require changes to the Constitution, but she may not unilaterally implement them without the intervention of Congress, or act in any way as if the assent of that body were assumed as a certainty.

Similarly, the President's power to conduct peace negotiations is implicitly included in her powers as Chief Executive and Commander-in-Chief. As Chief Executive, the President has the general responsibility to promote public peace, and as Commander-in-Chief, she has the more specific duty to prevent and suppress rebellion and lawless violence.169 As the experience of nations which have similarly gone through internal armed conflict will show, however, peace is rarely attained by simply pursuing a military solution. Oftentimes, changes as far-reaching as a fundamental reconfiguration of the nation's constitutional structure is required. The observations of Dr. Kirsti Samuels are enlightening, to wit: x x x [T]he fact remains that a successful political and governance transition must form the core of any post-conflict peace-building mission. As we have observed in Liberia and Haiti over the last ten years, conflict cessation without modification of the political environment, even where state-building is undertaken through technical electoral assistance and institution- or capacity-building, is unlikely to succeed. On average, more than 50 percent of states emerging from conflict return to conflict. Moreover, a substantial proportion of transitions have resulted in weak or limited democracies. The design of a constitution and its constitution-making process can play an important role in the political and governance transition. Constitution-making after conflict is an opportunity to create a common vision of the future of a state and a road map on how to get there. The constitution can be partly a peace agreement and partly a framework setting up the rules by which the new democracy will operate.170 In the same vein, Professor Christine Bell, in her article on the nature and legal status of peace agreements, observed that the typical way that peace agreements establish or confirm mechanisms for demilitarization and demobilization is by linking them to new constitutional structures addressing governance, elections, and legal and human rights institutions.171 In the Philippine experience, the link between peace agreements and constitution-making has been recognized by no less than the framers of the Constitution. Behind the provisions of the Constitution on autonomous regions172is the framers' intention to implement a particular peace agreement, namely, the Tripoli Agreement of 1976 between the GRP and the MNLF, signed by then Undersecretary of National Defense Carmelo Z. Barbero and then MNLF Chairman Nur Misuari. MR. ROMULO. There are other speakers; so, although I have some more questions, I will reserve my right to ask them if they are not covered by the other speakers. I have only two questions. I heard one of the Commissioners say that local autonomy already exists in the Muslim region; it is working very well; it has, in fact, diminished a great deal of the problems. So, my question is: since that already exists, why do we have to go into something new? MR. OPLE. May I answer that on behalf of Chairman Nolledo. Commissioner Yusup Abubakar is right thatcertain definite steps have been taken to implement the provisions of the Tripoli Agreement with respect to an autonomous region in Mindanao. This is a good first step, but there is no question that this is merely a partial response to the Tripoli Agreement itself and to the fuller standard of regional autonomy contemplated in that agreement, and now by state policy.173(Emphasis supplied)

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Since, under the present Constitution, the people also have the power to directly propose amendments through initiative and referendum, the President may also submit her recommendations to the people, not as a formal proposal to be voted on in a plebiscite similar to what President Marcos did in Sanidad, but for their independent consideration of whether these recommendations merit being formally proposed through initiative. These recommendations, however, may amount to nothing more than the President's suggestions to the people, for any further involvement in the process of initiative by the Chief Executive may vitiate its character as a genuine "people's initiative." The only initiative recognized by the Constitution is that which truly proceeds from the people. As the Court stated in Lambino v. COMELEC:177 "The Lambino Group claims that their initiative is the people's voice.' However, the Lambino Group unabashedly states in ULAP Resolution No. 2006-02, in the verification of their petition with the COMELEC, that ULAP maintains its unqualified support to the agenda of Her Excellency President Gloria Macapagal-Arroyo for constitutional reforms.' The Lambino Group thus admits that their people's' initiative is an unqualified support to the agenda' of the incumbent President to change the Constitution. This forewarns the Court to be wary of incantations of people's voice' or sovereign will' in the present initiative." It will be observed that the President has authority, as stated in her oath of office,178 only to preserve and defend the Constitution. Such presidential power does not, however, extend to allowing her to change the Constitution, but simply to recommend proposed amendments or revision. As long as she limits herself to recommending these changes and submits to the proper procedure for constitutional amendments and revision, her mere recommendation need not be construed as an unconstitutional act. The foregoing discussion focused on the President's authority to propose constitutional amendments, since her authority to propose new legislation is not in controversy. It has been an accepted practice for Presidents in this jurisdiction to propose new legislation. One of the more prominent instances the practice is usually done is in the yearly State of the Nation Address of the President to Congress. Moreover, the annual general appropriations bill has always been based on the budget prepared by the President, which - for all intents and purposes - is a proposal for new legislation coming from the President.179 The "suspensive clause" in the MOA-AD viewed in light of the above-discussed standards Given the limited nature of the President's authority to propose constitutional amendments, she cannot guarantee to any third party that the required amendments will eventually be put in place, nor even be submitted to a plebiscite. The most she could do is submit these proposals as recommendations either to Congress or the people, in whom constituent powers are vested. Paragraph 7 on Governance of the MOA-AD states, however, that all provisions thereof which cannot be reconciled with the present Constitution and laws "shall come into force upon signing of a Comprehensive Compact and upon effecting the necessary changes to the legal framework." This stipulation does not bear the marks of a suspensive condition - defined in civil law as a future and uncertain event - but of a term. It is not a question of whether the necessary changes to the legal framework will be effected, but when. That there is no uncertainty being contemplated is plain from what follows, for the paragraph goes on to state that the contemplated changes shall be "with due regard to non derogation of prior agreements and within the stipulated timeframe to be contained in the Comprehensive Compact." Pursuant to this stipulation, therefore, it is mandatory for the GRP to effect the changes to the legal framework contemplated in the MOA-AD which changes would include constitutional amendments, as discussed earlier. It bears noting that, By the time these changes are put in place, the MOA-AD itself would be counted among the "prior agreements" from which there could be no derogation. What remains for discussion in the Comprehensive Compact would merely be the implementing details for these "consensus points" and, notably, the deadline for effecting the contemplated changes to the legal framework. Plainly, stipulation-paragraph 7 on GOVERNANCE is inconsistent with the limits of the President's authority to propose constitutional amendments, it being a virtual guarantee that the Constitution and the laws of the Republic of the Philippines will certainly be adjusted to conform to all the "consensus points" found in the MOA-AD.Hence, it must be struck down as unconstitutional. A comparison between the "suspensive clause" of the MOA-AD with a similar provision appearing in the 1996 final peace agreement between the MNLF and the GRP is most instructive. As a backdrop, the parties to the 1996 Agreement stipulated that it would be implemented in two phases. Phase Icovered a three-year transitional period involving the putting up of new administrative structures through Executive Order, such as the Special Zone of Peace and Development (SZOPAD) and the Southern Philippines Council for Peace and Development (SPCPD), while Phase II covered the establishment of the new regional autonomous government through amendment or repeal of R.A. No. 6734, which was then the Organic Act of the ARMM. The stipulations on Phase II consisted of specific agreements on the structure of the expanded autonomous region envisioned by the parties. To that extent, they are similar to the provisions of the MOA-AD. There is, however, a crucial difference between the two agreements. While the MOA-AD virtually guarantees that the "necessary changes to the legal framework" will be put in place, the GRP-MNLF final peace agreement states thus: "Accordingly, these provisions [on Phase II] shall be recommended by the GRP to Congress for incorporation in the amendatory or repealing law." Concerns have been raised that the MOA-AD would have given rise to a binding international law obligation on the part of the Philippines to change its Constitution in conformity thereto, on the ground that it may be considered either as a binding agreement under international law, or a unilateral declaration of the Philippine government to the international community that it would grant to the Bangsamoro people all the concessions therein stated. Neither ground finds sufficient support in international law, however. The MOA-AD, as earlier mentioned in the overview thereof, would have included foreign dignitaries as signatories. In addition, representatives of other nations were invited to witness its signing in Kuala Lumpur. These circumstances readily lead one to surmise that the MOA-AD would have had the status of a binding international agreement had it been signed. An examination of the prevailing principles in international law, however, leads to the contrary conclusion. The Decision on Challenge to Jurisdiction: Lom Accord Amnesty180 (the Lom Accord case) of the Special Court of Sierra Leone is enlightening. The Lom Accord was a peace agreement signed on July 7, 1999 between the Government of Sierra Leone and the Revolutionary United Front (RUF), a rebel group with which the Sierra Leone Government had been in armed conflict for around eight years at the time of signing. There were

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non-contracting signatories to the agreement, among which were the Government of the Togolese Republic, the Economic Community of West African States, and the UN. On January 16, 2002, after a successful negotiation between the UN Secretary-General and the Sierra Leone Government, another agreement was entered into by the UN and that Government whereby the Special Court of Sierra Leone was established. The sole purpose of the Special Court, an international court, was to try persons who bore the greatest responsibility for serious violations of international humanitarian law and Sierra Leonean law committed in the territory of Sierra Leone since November 30, 1996. Among the stipulations of the Lom Accord was a provision for the full pardon of the members of the RUF with respect to anything done by them in pursuit of their objectives as members of that organization since the conflict began. In the Lom Accord case, the Defence argued that the Accord created an internationally binding obligation not to prosecute the beneficiaries of the amnesty provided therein, citing, among other things, the participation of foreign dignitaries and international organizations in the finalization of that agreement. The Special Court, however, rejected this argument, ruling that the Lome Accord is not a treaty and that it can only create binding obligations and rights between the parties in municipal law, not in international law. Hence, the Special Court held, it is ineffective in depriving an international court like it of jurisdiction. "37. In regard to the nature of a negotiated settlement of an internal armed conflict it is easy to assume and to argue with some degree of plausibility, as Defence counsel for the defendants seem to have done, that the mere fact that in addition to the parties to the conflict, the document formalizing the settlement is signed by foreign heads of state or their representatives and representatives of international organizations, means the agreement of the parties is internationalized so as to create obligations in international law. xxxx 40. Almost every conflict resolution will involve the parties to the conflict and the mediator or facilitator of the settlement, or persons or bodies under whose auspices the settlement took place but who are not at all parties to the conflict, are not contracting parties and who do not claim any obligation from the contracting parties or incur any obligation from the settlement. 41. In this case, the parties to the conflict are the lawful authority of the State and the RUF which has no status of statehood and is to all intents and purposes a faction within the state. The non-contracting signatories of the Lom Agreement were moral guarantors of the principle that, in the terms of Article XXXIV of the Agreement, "this peace agreement is implemented with integrity and in good faith by both parties". The moral guarantors assumed no legal obligation. It is recalled that the UN by its representative appended, presumably for avoidance of doubt, an understanding of the extent of the agreement to be implemented as not including certain international crimes. 42. An international agreement in the nature of a treaty must create rights and obligations regulated by international law so that a breach of its terms will be a breach determined under international law which will also provide principle means of enforcement. The Lom Agreement created neither rights nor obligations capable of being regulated by international law. An agreement such as the Lom Agreement which brings to an end an internal armed conflict no doubt creates a factual situation of restoration of peace that the international community acting through the Security Council may take note of. That, however, will not convert it to an international agreement which creates an obligation enforceable in international, as distinguished from municipal, law. A breach of the terms of such a peace agreement resulting in resumption of internal armed conflict or creating a threat to peace in the determination of the Security Council may indicate a reversal of the factual situation of peace to be visited with possible legal consequences arising from the new situation of conflict created. Such consequences such as action by the Security Council pursuant to Chapter VII arise from the situation and not from the agreement, nor from the obligation imposed by it. Such action cannot be regarded as a remedy for the breach. A peace agreement which settles an internal armed conflict cannot be ascribed the same status as one which settles an international armed conflict which, essentially, must be between two or more warring States. The Lom Agreement cannot be characterised as an international instrument. x x x" (Emphasis, italics and underscoring supplied) Similarly, that the MOA-AD would have been signed by representatives of States and international organizations not parties to the Agreement would not have sufficed to vest in it a binding character under international law. In another vein, concern has been raised that the MOA-AD would amount to a unilateral declaration of the Philippine State, binding under international law, that it would comply with all the stipulations stated therein, with the result that it would have to amend its Constitution accordingly regardless of the true will of the people. Cited as authority for this view is Australia v. France,181 also known as the Nuclear Tests Case, decided by the International Court of Justice (ICJ). In the Nuclear Tests Case, Australia challenged before the ICJ the legality of France's nuclear tests in the South Pacific. France refused to appear in the case, but public statements from its President, and similar statements from other French officials including its Minister of Defence, that its 1974 series of atmospheric tests would be its last, persuaded the ICJ to dismiss the case.182 Those statements, the ICJ held, amounted to a legal undertaking addressed to the international community, which required no acceptance from other States for it to become effective. Essential to the ICJ ruling is its finding that the French government intended to be bound to the international community in issuing its public statements, viz: 43. It is well recognized that declarations made by way of unilateral acts, concerning legal or factual situations, may have the effect of creating legal obligations. Declarations of this kind may be, and often are, very specific. When it is the intention of the State making the declaration that it should become bound according to its terms, that intention confers on the declaration the character of a legal undertaking, the State being thenceforth legally required to follow a course of conduct consistent with the declaration. An undertaking of this kind, if given publicly, and with an intent to be bound, even though not made within the context of international negotiations, is binding. In these circumstances, nothing in the nature of a quid pro quo nor any subsequent acceptance of the declaration, nor even any reply or reaction from other States, is required for the declaration to take effect, since such a requirement would be inconsistent with the strictly unilateral nature of the juridical act by which the pronouncement by the State was made. 44. Of course, not all unilateral acts imply obligation; but a State may choose to take up a certain position in relation to a particular matter with the intention of being bound-the intention is to be ascertained by interpretation of the act. When

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States make statements by which their freedom of action is to be limited, a restrictive interpretation is called for. xxxx 51. In announcing that the 1974 series of atmospheric tests would be the last, the French Government conveyed to the world at large, including the Applicant, its intention effectively to terminate these tests. It was bound to assume that other States might take note of these statements and rely on their being effective. The validity of these statements and their legal consequences must be considered within the general framework of the security of international intercourse, and the confidence and trust which are so essential in the relations among States. It is from the actual substance of these statements, and from the circumstances attending their making, that the legal implications of the unilateral act must be deduced. The objects of these statements are clear and they were addressed to the international community as a whole, and the Court holds that they constitute an undertaking possessing legal effect. The Court considers *270 that the President of the Republic, in deciding upon the effective cessation of atmospheric tests, gave an undertaking to the international community to which his words were addressed. x x x (Emphasis and underscoring supplied) As gathered from the above-quoted ruling of the ICJ, public statements of a state representative may be construed as a unilateral declaration only when the following conditions are present: the statements were clearly addressed to the international community, the state intended to be bound to that community by its statements, and that not to give legal effect to those statements would be detrimental to the security of international intercourse. Plainly, unilateral declarations arise only in peculiar circumstances. The limited applicability of the Nuclear Tests Case ruling was recognized in a later case decided by the ICJ entitledBurkina Faso v. Mali,183 also known as the Case Concerning the Frontier Dispute. The public declaration subject of that case was a statement made by the President of Mali, in an interview by a foreign press agency, that Mali would abide by the decision to be issued by a commission of the Organization of African Unity on a frontier dispute then pending between Mali and Burkina Faso. Unlike in the Nuclear Tests Case, the ICJ held that the statement of Mali's President was not a unilateral act with legal implications. It clarified that its ruling in the Nuclear Tests case rested on the peculiar circumstances surrounding the French declaration subject thereof, to wit: 40. In order to assess the intentions of the author of a unilateral act, account must be taken of all the factual circumstances in which the act occurred. For example, in the Nuclear Tests cases, the Court took the view that since the applicant States were not the only ones concerned at the possible continuance of atmospheric testing by the French Government, that Government's unilateral declarations had conveyed to the world at large, including the Applicant, its intention effectively to terminate these tests (I.C.J. Reports 1974, p. 269, para. 51; p. 474, para. 53). In the particular circumstances of those cases, the French Government could not express an intention to be bound otherwise than by unilateral declarations. It is difficult to see how it could have accepted the terms of a negotiated solution with each of the applicants without thereby jeopardizing its contention that its conduct was lawful. The circumstances of the present case are radically different. Here, there was nothing to hinder the Parties from manifesting an intention to accept the binding character of the conclusions of the Organization of African Unity Mediation Commission by the normal method: a formal agreement on the basis of reciprocity. Since no agreement of this kind was concluded between the Parties, the Chamber finds that there are no grounds to interpret the declaration made by Mali's head of State on 11 April 1975 as a unilateral act with legal implications in regard to the present case. (Emphasis and underscoring supplied) Assessing the MOA-AD in light of the above criteria, it would not have amounted to a unilateral declaration on the part of the Philippine State to the international community. The Philippine panel did not draft the same with the clear intention of being bound thereby to the international community as a whole or to any State, but only to the MILF. While there were States and international organizations involved, one way or another, in the negotiation and projected signing of the MOA-AD, they participated merely as witnesses or, in the case of Malaysia, as facilitator. As held in the Lom Accord case, the mere fact that in addition to the parties to the conflict, the peace settlement is signed by representatives of states and international organizations does not mean that the agreement is internationalized so as to create obligations in international law. Since the commitments in the MOA-AD were not addressed to States, not to give legal effect to such commitments would not be detrimental to the security of international intercourse - to the trust and confidence essential in the relations among States. In one important respect, the circumstances surrounding the MOA-AD are closer to that of Burkina Faso wherein, as already discussed, the Mali President's statement was not held to be a binding unilateral declaration by the ICJ. As in that case, there was also nothing to hinder the Philippine panel, had it really been its intention to be bound to other States, to manifest that intention by formal agreement. Here, that formal agreement would have come about by the inclusion in the MOA-AD of a clear commitment to be legally bound to the international community, not just the MILF, and by an equally clear indication that the signatures of the participating states-representatives would constitute an acceptance of that commitment. Entering into such a formal agreement would not have resulted in a loss of face for the Philippine government before the international community, which was one of the difficulties that prevented the French Government from entering into a formal agreement with other countries. That the Philippine panel did not enter into such a formal agreement suggests that it had no intention to be bound to the international community. On that ground, the MOA-AD may not be considered a unilateral declaration under international law. The MOA-AD not being a document that can bind the Philippines under international law notwithstanding, respondents' almost consummated act of guaranteeing amendments to the legal framework is, by itself, sufficient to constitute grave abuse of discretion. The grave abuse lies not in the fact that they considered, as a solution to the Moro Problem, the creation of a state within a state, but in their brazen willingness toguarantee that Congress and the sovereign Filipino people would give their imprimatur to their solution. Upholding such an act would amount to authorizing a usurpation of the constituent powers vested only in Congress, a Constitutional Convention, or the people themselves through the process of initiative, for the only way that the Executive can ensure the outcome of the amendment process is through an undue influence or interference with that process. The sovereign people may, if it so desired, go to the extent of giving up a portion of its own territory to the Moros for the sake of peace, for it can change the Constitution in any it wants, so long as the change is not inconsistent with what, in international law, is known as Jus Cogens.184 Respondents, however, may not preempt it in that decision. SUMMARY The petitions are ripe for adjudication. The failure of respondents to consult the local government units or communities affected constitutes a departure by respondents from their mandate under E.O. No. 3. Moreover, respondents exceeded their authority by the mere act of

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guaranteeing amendments to the Constitution. Any alleged violation of the Constitution by any branch of government is a proper matter for judicial review. As the petitions involve constitutional issues which are of paramount public interest or of transcendental importance, the Court grants the petitioners, petitioners-in-intervention and intervening respondents the requisitelocus standi in keeping with the liberal stance adopted in David v. Macapagal-Arroyo. Contrary to the assertion of respondents that the non-signing of the MOA-AD and the eventual dissolution of the GRP Peace Panel mooted the present petitions, the Court finds that the present petitions provide an exception to the "moot and academic" principle in view of (a) the grave violation of the Constitution involved; (b) the exceptional character of the situation and paramount public interest; (c) the need to formulate controlling principles to guide the bench, the bar, and the public; and (d) the fact that the case is capable of repetition yet evading review. The MOA-AD is a significant part of a series of agreements necessary to carry out the GRP-MILF Tripoli Agreement on Peace signed by the government and the MILF back in June 2001. Hence, the present MOAAD can be renegotiated or another one drawn up that could contain similar or significantly dissimilar provisions compared to the original. The Court, however, finds that the prayers for mandamus have been rendered moot in view of the respondents' action in providing the Court and the petitioners with the official copy of the final draft of the MOAAD and its annexes. The people's right to information on matters of public concern under Sec. 7, Article III of the Constitution is insplendid symmetry with the state policy of full public disclosure of all its transactions involving public interest under Sec. 28, Article II of the Constitution. The right to information guarantees the right of the people to demand information, while Section 28 recognizes the duty of officialdom to give information even if nobody demands. The complete and effective exercise of the right to information necessitates that its complementary provision on public disclosure derive the same self-executory nature, subject only to reasonable safeguards or limitations as may be provided by law. The contents of the MOA-AD is a matter of paramount public concern involving public interest in the highest order. In declaring that the right to information contemplates steps and negotiations leading to the consummation of the contract, jurisprudence finds no distinction as to the executory nature or commercial character of the agreement. An essential element of these twin freedoms is to keep a continuing dialogue or process of communication between the government and the people. Corollary to these twin rights is the design for feedback mechanisms. The right to public consultation was envisioned to be a species of these public rights. At least three pertinent laws animate these constitutional imperatives and justify the exercise of the people's right to be consulted on relevant matters relating to the peace agenda. One, E.O. No. 3 itself is replete with mechanics for continuing consultations on both national and local levels and for a principal forum for consensus-building. In fact, it is the duty of the Presidential Adviser on the Peace Process to conduct regular dialogues to seek relevant information, comments, advice, and recommendations from peace partners and concerned sectors of society. Two, Republic Act No. 7160 or the Local Government Code of 1991 requires all national offices to conduct consultations before any project or program critical to the environment and human ecology including those that may call for the eviction of a particular group of people residing in such locality, is implemented therein. The MOA-AD is one peculiar program that unequivocally and unilaterally vests ownership of a vast territory to the Bangsamoro people, which could pervasively and drastically result to the diaspora or displacement of a great number of inhabitants from their total environment. Three, Republic Act No. 8371 or the Indigenous Peoples Rights Act of 1997 provides for clear-cut procedure for the recognition and delineation of ancestral domain, which entails, among other things, the observance of the free and prior informed consent of the Indigenous Cultural Communities/Indigenous Peoples. Notably, the statute does not grant the Executive Department or any government agency the power to delineate and recognize an ancestral domain claim by mere agreement or compromise. The invocation of the doctrine of executive privilege as a defense to the general right to information or the specific right to consultation is untenable. The various explicit legal provisions fly in the face of executive secrecy. In any event, respondents effectively waived such defense after it unconditionally disclosed the official copies of the final draft of the MOAAD, for judicial compliance and public scrutiny. In sum, the Presidential Adviser on the Peace Process committed grave abuse of discretion when he failed to carry out the pertinent consultation process, as mandated by E.O. No. 3, Republic Act No. 7160, and Republic Act No. 8371. The furtive process by which the MOA-AD was designed and crafted runs contrary to and in excess of the legal authority, and amounts to a whimsical, capricious, oppressive, arbitrary and despotic exercise thereof. It illustrates a gross evasion of positive duty and a virtual refusal to perform the duty enjoined. The MOA-AD cannot be reconciled with the present Constitution and laws. Not only its specific provisions but the very concept underlying them, namely, the associative relationship envisioned between the GRP and the BJE, areunconstitutional, for the concept presupposes that the associated entity is a state and implies that the same is on its way to independence. While there is a clause in the MOA-AD stating that the provisions thereof inconsistent with the present legal framework will not be effective until that framework is amended, the same does not cure its defect. The inclusion of provisions in the MOA-AD establishing an associative relationship between the BJE and the Central Government is, itself, a violation of the Memorandum of Instructions From The President dated March 1, 2001, addressed to the government peace panel. Moreover, as the clause is worded, it virtually guarantees that the necessary amendments to the Constitution and the laws will eventually be put in place. Neither the GRP Peace Panel nor the President herself is authorized to make such a guarantee. Upholding such an act would amount to authorizing a usurpation of the constituent powers vested only in Congress, a Constitutional Convention, or the people themselves through the process of initiative, for the only way that the Executive can ensure the outcome of the amendment process is through an undue influence or interference with that process. While the MOA-AD would not amount to an international agreement or unilateral declaration binding on the Philippines under international law, respondents' act of guaranteeing amendments is, by itself, already a constitutional violation that renders the MOA-AD fatally defective. WHEREFORE, respondents' motion to dismiss is DENIED. The main and intervening petitions are GIVEN DUE COURSE and hereby GRANTED. The Memorandum of Agreement on the Ancestral Domain Aspect of the GRP-MILF Tripoli Agreement on Peace of 2001 is declared contrary to law and the Constitution.

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SO ORDERED.

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G.R. No. 139465 January 18, 2000 (p. 14, Rollo.) On the same day, petitioner issued Department Order No. 249 designating and authorizing a panel of attorneys to take charge of and to handle the case pursuant to Section 5(1) of Presidential Decree No. 1069. Accordingly, the panel began with the "technical evaluation and assessment" of the extradition request and the documents in support thereof. The panel found that the "official English translation of some documents in Spanish were not attached to the request and that there are some other matters that needed to be addressed" (p. 15, Rollo). Pending evaluation of the aforestated extradition documents, private respondent, through counsel, wrote a letter dated July 1, 1999 addressed to petitioner requesting copies of the official extradition request from the U.S. Government, as well as all documents and papers submitted therewith; and that he be given ample time to comment on the request after he shall have received copies of the requested papers. Private respondent also requested that the proceedings on the matter be held in abeyance in the meantime. Later, private respondent requested that preliminary, he be given at least a copy of, or access to, the request of the United States Government, and after receiving a copy of the Diplomatic Note, a period of time to amplify on his request. In response to private respondent's July 1, 1999 letter, petitioner, in a reply-letter dated July 13, 1999 (but received by private respondent only on August 4, 1999), denied the foregoing requests for the following reasons: 1. We find it premature to furnish you with copies of the extradition request and supporting documents from the United States Government, pending evaluation by this Department of the sufficiency of the extradition documents submitted in accordance with the provisions of the extradition treaty and our extradition law. Article 7 of the Extradition Treaty between the Philippines and the United States enumerates the documentary requirements and establishes the procedures under which the documents submitted shall be received and admitted as evidence. Evidentiary requirements under our domestic law are also set forth in Section 4 of P.D. No. 1069. Evaluation by this Department of the aforementioned documents is not a preliminary investigation nor akin to preliminary investigation of criminal cases. We merely determine whether the procedures and requirements under the relevant law and treaty have been complied with by the Requesting Government. The constitutionally guaranteed rights of the accused in all criminal prosecutions are therefore not available. It is only after the filing of the petition for extradition when the person sought to be extradited will be furnished by the court with copies of the petition, request and extradition documents and this Department will not pose any objection to a request for ample time to evaluate said documents. 2. The formal request for extradition of the United States contains grand jury information and documents obtained through grand jury process covered by strict secrecy rules under United States law. The United States had to secure orders from the concerned District Courts authorizing the United States to disclose certain grand jury information to Philippine government and law enforcement personnel for the purpose of extradition of Mr. Jimenez. Any further disclosure of the said information is not authorized by the United States District Courts. In this particular extradition request the United States Government requested the Philippine Government to prevent unauthorized disclosure of the subject information. This Department's denial of your request is consistent with Article 7 of the RP-US Extradition Treaty which provides that the Philippine Government must represent the interests of the United States in any proceedings arising out of a request for extradition. The Department of Justice under P.D. No. 1069 is the counsel of the foreign governments in all extradition requests. SECRETARY OF JUSTICE, petitioner, vs. HON. RALPH C. LANTION, Presiding Judge, Regional Trial Court of Manila, Branch 25, and MARK B. JIMENEZ, respondents. MELO, J.: The individual citizen is but a speck of particle or molecule vis--vis the vast and overwhelming powers of government. His only guarantee against oppression and tyranny are his fundamental liberties under the Bill of Rights which shield him in times of need. The Court is now called to decide whether to uphold a citizen's basic due process rights, or the government's ironclad duties under a treaty. The bugle sounds and this Court must once again act as the faithful guardian of the fundamental writ. The petition at our doorstep is cast against the following factual backdrop: On January 13, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1069 "Prescribing the Procedure for the Extradition of Persons Who Have Committed Crimes in a Foreign Country". The Decree is founded on: the doctrine of incorporation under the Constitution; the mutual concern for the suppression of crime both in the state where it was committed and the state where the criminal may have escaped; the extradition treaty with the Republic of Indonesia and the intention of the Philippines to enter into similar treaties with other interested countries; and the need for rules to guide the executive department and the courts in the proper implementation of said treaties. On November 13, 1994, then Secretary of Justice Franklin M. Drilon, representing the Government of the Republic of the Philippines, signed in Manila the "Extradition Treaty Between the Government of the Republic of the Philippines and the Government of the United States of America" (hereinafter referred to as the RP-US Extradition Treaty). The Senate, by way of Resolution No. 11, expressed its concurrence in the ratification of said treaty. It also expressed its concurrence in the Diplomatic Notes correcting Paragraph (5)(a), Article 7 thereof (on the admissibility of the documents accompanying an extradition request upon certification by the principal diplomatic or consular officer of the requested state resident in the Requesting State). On June 18, 1999, the Department of Justice received from the Department of Foreign Affairs U.S. Note Verbale No. 0522 containing a request for the extradition of private respondent Mark Jimenez to the United States. Attached to the Note Verbale were the Grand Jury Indictment, the warrant of arrest issued by the U.S. District Court, Southern District of Florida, and other supporting documents for said extradition. Based on the papers submitted, private respondent appears to be charged in the United States with violation of the following provisions of the United States Code (USC): A) 18 USC 371 (Conspiracy to commit offense or to defraud the United States; two [2] counts; Maximum Penalty 5 years on each count); B) 26 USC 7201 (Attempt to evade or defeat tax; four [4] counts; Maximum Penalty 5 years on each count); C) 18 USC 1343 (Fraud by wire, radio, or television; two [2] counts; Maximum Penalty 5 years on each count); D) 18 USC 1001 (False statement or entries; six [6] counts; Maximum Penalty 5 years on each count); E) 2 USC 441f (Election contributions in name of another; thirty-three [33] counts; Maximum Penalty less than one year).

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3. This Department is not in a position to hold in abeyance proceedings in connection with an extradition request. Article 26 of the Vienna Convention on the Law of Treaties, to which we are a party provides that "[E]very treaty in force is binding upon the parties to it and must be performed by them in good faith". Extradition is a tool of criminal law enforcement and to be effective, requests for extradition or surrender of accused or convicted persons must be processed expeditiously. (pp. 77-78, Rollo.) Such was the state of affairs when, on August 6, 1999, private respondent filed with the Regional Trial Court of the National Capital Judicial Region a petition against the Secretary of Justice, the Secretary of Foreign Affairs, and the Director of the National Bureau of Investigation, for mandamus (to compel herein petitioner to furnish private respondent the extradition documents, to give him access thereto, and to afford him an opportunity to comment on, or oppose, the extradition request, and thereafter to evaluate the request impartially, fairly and objectively); certiorari (to set aside herein petitioner's letter dated July 13, 1999); and prohibition (to restrain petitioner from considering the extradition request and from filing an extradition petition in court; and to enjoin the Secretary of Foreign Affairs and the Director of the NBI from performing any act directed to the extradition of private respondent to the United States), with an application for the issuance of a temporary restraining order and a writ of preliminary injunction (pp. 104-105, Rollo). The aforementioned petition was docketed as Civil Case No. 99-94684 and thereafter raffled to Branch 25 of said regional trial court stationed in Manila which is presided over by the Honorable Ralph C. Lantion. After due notice to the parties, the case was heard on August 9, 1999. Petitioner, who appeared in his own behalf, moved that he be given ample time to file a memorandum, but the same was denied. On August 10, 1999, respondent judge issued an order dated the previous day, disposing: WHEREFORE, this Court hereby Orders the respondents, namely: the Secretary of Justice, the Secretary of Foreign Affairs and the Director of the National Bureau of Investigation, their agents and/or representatives to maintain the status quo by refraining from committing the acts complained of; from conducting further proceedings in connection with the request of the United States Government for the extradition of the petitioner; from filing the corresponding Petition with a Regional Trial court; and from performing any act directed to the extradition of the petitioner to the United States, for a period of twenty (20) days from service on respondents of this Order, pursuant to Section 5, Rule 58 of the 1997 Rules of Court. The hearing as to whether or not this Court shall issue the preliminary injunction, as agreed upon by the counsels for the parties herein, is set on August 17, 1999 at 9:00 o'clock in the morning. The respondents are, likewise, ordered to file their written comment and/or opposition to the issuance of a Preliminary Injunction on or before said date. SO ORDERED. (pp. 110-111, Rollo.) Forthwith, petitioner initiated the instant proceedings, arguing that: PUBLIC RESPONDENT ACTED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING THE TEMPORARY RESTRAINING ORDER BECAUSE: I. BY ORDERING HEREIN PETITIONER TO REFRAIN FROM COMMITTING THE ACTS COMPLAINED OF, I.E., TO DESIST FROM REFUSING PRIVATE RESPONDENT ACCESS TO THE OFFICIAL EXTRADITION REQUEST AND DOCUMENTS AND FROM DENYING PRIVATE RESPONDENT AN OPPORTUNITY TO FILE A COMMENT ON, OR OPPOSITION TO, THE REQUEST, THE MAIN PRAYER FOR A WRIT OF MANDAMUSIN THE PETITION FOR MANDAMUS, CERTIORARI AND PROHIBITION WAS, IN EFFECT, GRANTED SO AS TO CONSTITUTE AN ADJUDICATION ON THE MERITS OF THE MANDAMUS ISSUES; II. PETITIONER WAS UNQUALIFIEDLY PREVENTED FROM PERFORMING LEGAL DUTIES UNDER THE EXTRADITION TREATY AND THE PHILIPPINE EXTRADITION LAW; III. THE PETITION FOR (MANDAMUS), CERTIORARI AND PROHIBITION IS, ON ITS FACE, FORMALLY AND SUBSTANTIALLY DEFICIENT; AND IV. PRIVATE RESPONDENT HAS NO RIGHT IN ESSE THAT NEEDS PROTECTION AND ENFORCEMENT, AND WILL NOT SUFFER ANY IRREPARABLE INJURY. (pp. 19-20, Rollo.) On August 17, 1999, the Court required private respondent to file his comment. Also issued, as prayed for, was a temporary restraining order (TRO) providing: NOW, THEREFORE, effective immediately and continuing until further orders from this Court, You, Respondent Judge Ralph C. Lantion, your agents, representatives or any person or persons acting in your place or stead are hereby ORDERED to CEASE and DESIST from enforcing the assailed order dated August 9, 1999 issued by public respondent in Civil Case No. 99-94684. GIVEN by the Honorable HILARIO G. DAVIDE, JR., Chief Justice, Supreme Court of the Philippines, this 17th day of August 1999. (pp. 120-121, Rollo.) The case was heard on oral argument on August 31, 1999, after which the parties, as directed, filed their respective memoranda. From the pleadings of the opposing parties, both procedural and substantive issues are patent. However, a review of these issues as well as the extensive arguments of both parties, compel us to delineate the focal point raised by the pleadings: During the evaluation stage of the extradition proceedings, is private respondent entitled to the two basic due process rights of notice and hearing? An affirmative answer would necessarily render the proceedings at the trial court, moot and academic (the issues of which are substantially the same as those before us now), while a negative resolution would call for the immediate lifting of the TRO issued by this Court dated August 24, 1999, thus allowing petitioner to fast-track the process leading to the filing of the extradition petition with the proper regional trial court. Corollarily, in the event that private

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respondent is adjudged entitled to basic due process rights at the evaluation stage of the extradition proceedings, would this entitlement constitute a breach of the legal commitments and obligations of the Philippine Government under the RP-US Extradition Treaty? And assuming that the result would indeed be a breach, is there any conflict between private respondent's basic due process rights and the provisions of the RP-US Extradition Treaty? The issues having transcendental importance, the Court has elected to go directly into the substantive merits of the case, brushing aside peripheral procedural matters which concern the proceedings in Civil Case No. 9994684, particularly the propriety of the filing of the petition therein, and of the issuance of the TRO of August 17, 1999 by the trial court. To be sure, the issues call for a review of the extradition procedure. The RP-US Extradition Treaty which was executed only on November 13, 1994, ushered into force the implementing provisions of Presidential Decree No. 1069, also called as the Philippine Extradition Law. Section 2(a) thereof defines extradition as "the removal of an accused from the Philippines with the object of placing him at the disposal of foreign authorities to enable the requesting state or government to hold him in connection with any criminal investigation directed against him or the execution of a penalty imposed on him under the penal or criminal law of the requesting state or government." The portions of the Decree relevant to the instant case which involves a charged and not convicted individual, are abstracted as follows: The Extradition Request The request is made by the Foreign Diplomat of the Requesting State, addressed to the Secretary of Foreign Affairs, and shall be accompanied by: 1. The original or an authentic copy of the criminal charge and the warrant of arrest issued by the authority of the Requesting State having jurisdiction over the matter, or some other instruments having equivalent legal force; 2. A recital of the acts for which extradition is requested, with the fullest particulars as to the name and identity of the accused, his whereabouts in the Philippines, if known, the acts or omissions complained of, and the time and place of the commission of these acts; 3. The text of the applicable law or a statement of the contents of said law, and the designation or description of the offense by the law, sufficient for evaluation of the request; and 4. Such other documents or information in support of the request. (Sec. 4. Presidential Decree No. 1069.) Sec. 5 of the Presidential Decree, which sets forth the duty of the Secretary of Foreign Affairs, pertinently provides: . . . (1) Unless it appears to the Secretary of Foreign Affairs that the request fails to meet the requirements of this law and the relevant treaty or convention, he shall forward the request together with the related documents to the Secretary of Justice, who shall immediately designate and authorize an attorney in his office to take charge of the case. The above provision shows only too clearly that the executive authority given the task of evaluating the sufficiency of the request and the supporting documents is the Secretary of Foreign Affairs. What then is the coverage of this task? In accordance with Paragraphs 2 and 3, Article 7 of the RP-US Extradition Treaty, the executive authority must ascertain whether or not the request is supported by: 1. Documents, statements, or other types of information which describe the identity and probable location of the person sought; 2. A statement of the facts of the offense and the procedural history of the case; 3. A statement of the provisions of the law describing the essential elements of the offense for which extradition is requested; 4. A statement of the provisions of law describing the punishment for the offense; 5. A statement of the provisions of the law describing any time limit on the prosecution or the execution of punishment for the offense; 6. Documents, statements, or other types of information specified in paragraph 3 or paragraph 4 of said Article, as applicable. (Paragraph 2, Article 7, Presidential Decree No. 1069.) 7. Such evidence as, according to the law of the Requested State, would provide probable cause for his arrest and committal for trial if the offense had been committed there; 8. A copy of the warrant or order of arrest issued by a judge or other competent authority; and 9. A copy of the charging document. (Paragraph 3, ibid.) The executive authority (Secretary of Foreign Affairs) must also see to it that the accompanying documents received in support of the request had been certified by the principal diplomatic or consular officer of the Requested State resident in the Requesting State (Embassy Note No. 052 from U. S. Embassy; Embassy Note No. 951309 from the Department of Foreign Affairs). In this light, Paragraph 3, Article 3 of the Treaty provides that "[e]xtradition shall not be granted if the executive authority of the Requested State determines that the request is politically motivated, or that the offense is a military offense which is not punishable under nonmilitary penal legislation." The Extradition Petition Upon a finding made by the Secretary of Foreign Affairs that the extradition request and its supporting documents are sufficient and complete in form and substance, he shall deliver the same to the Secretary of Justice, who shall immediately designate and authorize an attorney in his office to take charge of the case (Paragraph [1], Section 5, P.D. No. 1069). The lawyer designated shall then file a written petition with the proper regional trial court of the province or city, with a prayer that the court take the extradition request under consideration (Paragraph [2], ibid.). The presiding judge of the regional trial court, upon receipt of the petition for extradition, shall, as soon as practicable, issue an order summoning the prospective extraditee to appear and to answer the petition on the day and hour fixed in the order. The judge may issue a warrant of arrest if it appears that the immediate arrest and temporary detention of the accused will best serve the ends of justice (Paragraph [1], Section 6, ibid.), particularly to prevent the flight of the prospective extraditee.

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The Extradition Hearing The Extradition Law does not specifically indicate whether the extradition proceeding is criminal, civil, or a special proceeding. Nevertheless, Paragraph [1], Section 9 thereof provides that in the hearing of the extradition petition, the provisions of the Rules of Court, insofar as practicable and not inconsistent with the summary nature of the proceedings, shall apply. During the hearing, Section 8 of the Decree provides that the attorney having charge of the case may, upon application by the Requesting State, represent the latter throughout the proceedings. Upon conclusion of the hearing, the court shall render a decision granting the extradition and giving the reasons therefor upon a showing of the existence of a prima facie case, or dismiss the petition (Section 10, ibid.). Said decision is appealable to the Court of Appeals, whose decision shall be final and immediately executory (Section 12, ibid.). The provisions of the Rules of Court governing appeal in criminal cases in the Court of Appeals shall apply in the aforementioned appeal, except for the required 15-day period to file brief (Section 13, ibid.). The trial court determines whether or not the offense mentioned in the petition is extraditable based on the application of the dual criminality rule and other conditions mentioned in Article 2 of the RP-US Extradition Treaty. The trial court also determines whether or not the offense for which extradition is requested is a political one (Paragraph [1], Article 3, RP-US Extradition Treaty).1wphi1.nt With the foregoing abstract of the extradition proceedings as backdrop, the following query presents itself: What is the nature of the role of the Department of Justice at the evaluation stage of the extradition proceedings? A strict observance of the Extradition Law indicates that the only duty of the Secretary of Justice is to file the extradition petition after the request and all the supporting papers are forwarded to him by the Secretary of Foreign Affairs. It is the latter official who is authorized to evaluate the extradition papers, to assure their sufficiency, and under Paragraph [3], Article 3 of the Treaty, to determine whether or not the request is politically motivated, or that the offense is a military offense which is not punishable under non-military penal legislation. Ipso facto, as expressly provided in Paragraph [1], Section 5 of the Extradition Law, the Secretary of Justice has the ministerial duty of filing the extradition papers. However, looking at the factual milieu of the case before us, it would appear that there was failure to abide by the provisions of Presidential Decree No. 1069. For while it is true that the extradition request was delivered to the Department of Foreign Affairs on June 17, 1999, the following day or less than 24 hours later, the Department of Justice received the request, apparently without the Department of Foreign Affairs discharging its duty of thoroughly evaluating the same and its accompanying documents. The statement of an assistant secretary at the Department of Foreign Affairs that his Department, in this regard, is merely acting as a post office, for which reason he simply forwarded the request to the Department of Justice, indicates the magnitude of the error of the Department of Foreign Affairs in taking lightly its responsibilities. Thereafter, the Department of Justice took it upon itself to determine the completeness of the documents and to evaluate the same to find out whether they comply with the requirements laid down in the Extradition Law and the RP-US Extradition Treaty. Petitioner ratiocinates in this connection that although the Department of Justice had no obligation to evaluate the extradition documents, the Department also had to go over them so as to be able to prepare an extradition petition (tsn, August 31, 1999, pp. 24-25). Notably, it was also at this stage where private respondent insisted on the following; (1) the right to be furnished the request and the supporting papers; (2) the right to be heard which consists in having a reasonable period of time to oppose the request, and to present evidence in support of the opposition; and (3) that the evaluation proceedings be held in abeyance pending the filing of private respondent's opposition to the request. The two Departments seem to have misread the scope of their duties and authority, one abdicating its powers and the other enlarging its commission. The Department of Foreign Affairs, moreover, has, through the Solicitor General, filed a manifestation that it is adopting the instant petition as its own, indirectly conveying the message that if it were to evaluate the extradition request, it would not allow private respondent to participate in the process of evaluation. Plainly then, the record cannot support the presumption of regularity that the Department of Foreign Affairs thoroughly reviewed the extradition request and supporting documents and that it arrived at a well-founded judgment that the request and its annexed documents satisfy the requirements of law. The Secretary of Justice, eminent as he is in the field of law, could not privately review the papers all by himself. He had to officially constitute a panel of attorneys. How then could the DFA Secretary or his undersecretary, in less than one day, make the more authoritative determination? The evaluation process, just like the extradition proceedings proper, belongs to a class by itself. It is sui generis. It is not a criminal investigation, but it is also erroneous to say that it is purely an exercise of ministerial functions. At such stage, the executive authority has the power: (a) to make a technical assessment of the completeness and sufficiency of the extradition papers; (b) to outrightly deny the request if on its face and on the face of the supporting documents the crimes indicated are not extraditable; and (c) to make a determination whether or not the request is politically motivated, or that the offense is a military one which is not punishable under non-military penal legislation (tsn, August 31, 1999, pp. 28-29; Article 2 & and Paragraph [3], Article 3, RP-US Extradition Treaty). Hence, said process may be characterized as an investigative or inquisitorial process in contrast to a proceeding conducted in the exercise of an administrative body's quasi-judicial power. In administrative law, a quasi-judicial proceeding involves: (a) taking and evaluation of evidence; (b) determining facts based upon the evidence presented; and (c) rendering an order or decision supported by the facts proved (De Leon, Administrative Law: Text and Cases, 1993 ed., p. 198, citing Morgan vs. United States, 304 U.S. 1). Inquisitorial power, which is also known as examining or investigatory power, is one or the determinative powers of an administrative body which better enables it to exercise its quasi-judicial authority (Cruz, Phil. Administrative Law, 1996 ed., p. 26). This power allows the administrative body to inspect the records and premises, and investigate the activities, of persons or entities coming under its jurisdiction (Ibid., p. 27), or to require disclosure of information by means or accounts, records, reports, testimony of witnesses, production of documents, or otherwise (De Leon, op. cit., p. 64). The power of investigation consists in gathering, organizing, and analyzing evidence, which is a useful aid or tool in an administrative agency's performance of its rule-making or quasi-judicial functions. Notably, investigation is indispensable to prosecution. In Ruperto v. Torres (100 Phil. 1098 [1957], unreported), the Court had occasion to rule on the functions of an investigatory body with the sole power of investigation. It does not exercise judicial functions and its power is limited to investigating the facts and making findings in respect thereto. The Court laid down the test of determining whether an administrative body is exercising judicial functions or merely investigatory functions: Adjudication signifies the exercise of power and authority to adjudicate upon the rights and obligations of the parties before it. Hence, if the only purpose for investigation is to evaluate evidence submitted before it based on the facts and circumstances presented to it, and if the agency is not authorized to make a final pronouncement affecting the parties, then there is an absence of judicial discretion and judgment.

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The above description in Ruperto applies to an administrative body authorized to evaluate extradition documents. The body has no power to adjudicate in regard to the rights and obligations of both the Requesting State and the prospective extraditee. Its only power is to determine whether the papers comply with the requirements of the law and the treaty and, therefore, sufficient to be the basis of an extradition petition. Such finding is thus merely initial and not final. The body has no power to determine whether or not the extradition should be effected. That is the role of the court. The body's power is limited to an initial finding of whether or not the extradition petition can be filed in court. It is to be noted, however, that in contrast to ordinary investigations, the evaluation procedure is characterized by certain peculiarities. Primarily, it sets into motion the wheels of the extradition process. Ultimately, it may result in the deprivation of liberty of the prospective extraditee. This deprivation can be effected at two stages: First, the provisional arrest of the prospective extraditee pending the submission of the request. This is so because the Treaty provides that in case of urgency, a contracting party may request the provisional arrest of the person sought pending presentation of the request (Paragraph [1], Article 9, RP-US Extradition Treaty), but he shall be automatically discharged after 60 days if no request is submitted (Paragraph 4). Presidential Decree No. 1069 provides for a shorter period of 20 days after which the arrested person could be discharged (Section 20[d]). Logically, although the Extradition Law is silent on this respect, the provisions only mean that once a request is forwarded to the Requested State, the prospective extraditee may be continuously detained, or if not, subsequently rearrested (Paragraph [5], Article 9, RPUS Extradition Treaty), for he will only be discharged if no request is submitted. Practically, the purpose of this detention is to prevent his possible flight from the Requested State. Second, the temporary arrest of the prospective extraditee during the pendency of the extradition petition in court (Section 6, Presidential Decree No. 1069). Clearly, there is an impending threat to a prospective extraditee's liberty as early as during the evaluation stage. It is not only an imagined threat to his liberty, but a very imminent one. Because of these possible consequences, we conclude that the evaluation process is akin to an administrative agency conducting an investigative proceeding, the consequences of which are essentially criminal since such technical assessment sets off or commences the procedure for, and ultimately, the deprivation of liberty of a prospective extraditee. As described by petitioner himself, this is a "tool" for criminal law enforcement (p. 78,Rollo). In essence, therefore, the evaluation process partakes of the nature of a criminal investigation. In a number of cases, we had occasion to make available to a respondent in an administrative case or investigation certain constitutional rights that are ordinarily available only in criminal prosecutions. Further, as pointed out by Mr. Justice Mendoza during the oral arguments, there are rights formerly available only at the trial stage that had been advanced to an earlier stage in the proceedings, such as the right to counsel and the right against selfincrimination (tsn, August 31, 1999, p. 135; Escobedo vs. Illinois, 378 U.S. 478; Gideon vs. Wainwright, 372 U.S. 335; Miranda vs. Arizona, 384 U.S. 436). In Pascual v. Board of Medical Examiners (28 SCRA 344 [1969]), we held that the right against self-incrimination under Section 17, Article III of the 1987 Constitution which is ordinarily available only in criminal prosecutions, extends to administrative proceedings which possess a criminal or penal aspect, such as an administrative investigation of a licensed physician who is charged with immorality, which could result in his loss of the privilege to practice medicine if found guilty. The Court, citing the earlier case of Cabal vs. Kapunan (6 SCRA 1059 [1962]), pointed out that the revocation of one's license as a medical practitioner, is an even greater deprivation than forfeiture of property. Cabal vs. Kapunan (supra) involved an administrative charge of unexplained wealth against a respondent which was filed under Republic Act No. 1379, or the Anti-Graft Law. Again, we therein ruled that since the investigation may result in forfeiture of property, the administrative proceedings are deemed criminal or penal, and such forfeiture partakes the nature of a penalty. There is also the earlier case of Almeda, Sr. vs. Perez (5 SCRA 970 [1962]), where the Court, citing American jurisprudence, laid down the test to determine whether a proceeding is civil or criminal: If the proceeding is under a statute such that if an indictment is presented the forfeiture can be included in the criminal case, such proceeding is criminal in nature, although it may be civil in form; and where it must be gathered from the statute that the action is meant to be criminal in its nature, it cannot be considered as civil. If, however, the proceeding does not involve the conviction of the wrongdoer for the offense charged, the proceeding is civil in nature. The cases mentioned above refer to an impending threat of deprivation of one's property or property right. No less is this true, but even more so in the case before us, involving as it does the possible deprivation of liberty, which, based on the hierarchy of constitutionally protected rights, is placed second only to life itself and enjoys precedence over property, for while forfeited property can be returned or replaced, the time spent in incarceration is irretrievable and beyond recompense. By comparison, a favorable action in an extradition request exposes a person to eventual extradition to a foreign country, thus saliently exhibiting the criminal or penal aspect of the process. In this sense, the evaluation procedure is akin to a preliminary investigation since both procedures may have the same result the arrest and imprisonment of the respondent or the person charged. Similar to the evaluation stage of extradition proceedings, a preliminary investigation, which may result in the filing of an information against the respondent, can possibly lead to his arrest, and to the deprivation of his liberty. Petitioner's reliance on Wright vs. Court of Appeals (235 SCRA 241 [1992]) (p. 8, petitioner's Memorandum) that the extradition treaty is neither a piece of criminal legislation nor a criminal procedural statute is not welltaken.Wright is not authority for petitioner's conclusion that his preliminary processing is not akin to a preliminary investigation. The characterization of a treaty in Wright was in reference to the applicability of the prohibition against an ex post facto law. It had nothing to do with the denial of the right to notice, information, and hearing. As early as 1884, the United States Supreme Court ruled that "any legal proceeding enforced by public authority, whether sanctioned by age or custom, or newly devised in the discretion of the legislative power, in furtherance of the general public good, which regards and preserved these principles of liberty and justice, must be held to be due process of law" (Hurtado vs. California, 110 U.S. 516). Compliance with due process requirements cannot be deemed non-compliance with treaty commitments. The United States and the Philippines share a mutual concern about the suppression and punishment of crime in their respective jurisdictions. At the same time, both States accord common due process protection to their respective citizens. The due process clauses in the American and Philippine Constitutions are not only worded in exactly identical language and terminology, but more importantly, they are alike in what their respective Supreme Courts have expounded as the spirit with which the provisions are informed and impressed, the elasticity in their interpretation, their dynamic and resilient character which make them capable of meeting every modern problem, and their having been designed from earliest time to the present to meet the exigencies of an undefined and expanding future. The requirements of due process are interpreted in both the United States and the Philippines as not denying to the law the capacity for progress and improvement. Toward this effect and in order to avoid the confines of a legal straitjacket, the courts instead prefer to have the meaning of the due process clause "gradually ascertained by the process of inclusion and exclusion in the course of the decisions of cases as they arise" (Twining vs. New Jersey,

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211 U.S. 78). Capsulized, it refers to "the embodiment of the sporting idea of fair play" (Ermita-Malate Hotel and Motel Owner's Association vs. City Mayor of Manila, 20 SCRA 849 [1967]). It relates to certain immutable principles of justice which inhere in the very idea of free government (Holden vs. Hardy, 169 U.S. 366). Due process is comprised of two components substantive due process which requires the intrinsic validity of the law in interfering with the rights of the person to his life, liberty, or property, and procedural due process which consists of the two basic rights of notice and hearing, as well as the guarantee of being heard by an impartial and competent tribunal (Cruz, Constitutional Law, 1993 Ed., pp. 102-106). True to the mandate of the due process clause, the basic rights of notice and hearing pervade not only in criminal and civil proceedings, but in administrative proceedings as well. Non-observance of these rights will invalidate the proceedings. Individuals are entitled to be notified of any pending case affecting their interests, and upon notice, they may claim the right to appear therein and present their side and to refute the position of the opposing parties (Cruz, Phil. Administrative Law, 1996 ed., p. 64). In a preliminary investigation which is an administrative investigatory proceeding, Section 3, Rule 112 of the Rules of Court guarantees the respondent's basic due process rights, granting him the right to be furnished a copy of the complaint, the affidavits, and other supporting documents, and the right to submit counter-affidavits and other supporting documents within ten days from receipt thereof. Moreover, the respondent shall have the right to examine all other evidence submitted by the complainant. These twin rights may, however, be considered dispensable in certain instances, such as: 1. In proceeding where there is an urgent need for immediate action, like the summary abatement of a nuisance per se (Article 704, Civil Code), the preventive suspension of a public servant facing administrative charges (Section 63, Local Government Code, B.P. Blg. 337), the padlocking of filthy restaurants or theaters showing obscene movies or like establishments which are immediate threats to public health and decency, and the cancellation of a passport of a person sought for criminal prosecution; 2. Where there is tentativeness of administrative action, that is, where the respondent is not precluded from enjoying the right to notice and hearing at a later time without prejudice to the person affected, such as the summary distraint and levy of the property of a delinquent taxpayer, and the replacement of a temporary appointee; and 3. Where the twin rights have previously been offered but the right to exercise them had not been claimed. Applying the above principles to the case at bar, the query may be asked: Does the evaluation stage of the extradition proceedings fall under any of the described situations mentioned above? Let us take a brief look at the nature of American extradition proceedings which are quite noteworthy considering that the subject treaty involves the U.S. Government. American jurisprudence distinguishes between interstate rendition or extradition which is based on the Extradition Clause in the U.S. Constitution (Art. IV, 2 cl 2), and international extradition proceedings. In interstate rendition or extradition, the governor of the asylum state has the duty to deliver the fugitive to the demanding state. The Extradition Clause and the implementing statute are given a liberal construction to carry out their manifest purpose, which is to effect the return as swiftly as possible of persons for trial to the state in which they have been charged with crime (31A Am Jur 2d 754-755). In order to achieve extradition of an alleged fugitive, the requisition papers or the demand must be in proper form, and all the elements or jurisdictional facts essential to the extradition must appear on the face of the papers, such as the allegation that the person demanded was in the demanding state at the time the offense charged was committed, and that the person demanded is charged with the commission of the crime or that prosecution has been begun in the demanding state before some court or magistrate (35 C.J.S. 406-407). The extradition documents are then filed with the governor of the asylum state, and must contain such papers and documents prescribed by statute, which essentially include a copy of the instrument charging the person demanded with a crime, such as an indictment or an affidavit made before a magistrate. Statutory requirements with respect to said charging instrument or papers are mandatory since said papers are necessary in order to confer jurisdiction on the government of the asylum state to effect extradition (35 C.J.S. 408-410). A statutory provision requiring duplicate copies of the indictment, information, affidavit, or judgment of conviction or sentence and other instruments accompanying the demand or requisitions be furnished and delivered to the fugitive or his attorney is directory. However, the right being such a basic one has been held to be a right mandatory on demand (Ibid., p. 410, citing Ex parte Moore, 256 S.W. 2d 103, 158 Tex. Cr. 407 andEx parte Tucker, Cr., 324, S.W.2d 853). In international proceedings, extradition treaties generally provide for the presentation to the executive authority of the Requested State of a requisition or demand for the return of the alleged offender, and the designation of the particular officer having authority to act in behalf of the demanding nation (31A Am Jur 2d 815). In petitioner's memorandum filed on September 15, 1999, he attached thereto a letter dated September 13, 1999 from the Criminal Division of the U.S. Department of Justice, summarizing the U.S. extradition procedures and principles, which are basically governed by a combination of treaties (with special reference to the RP-US Extradition Treaty), federal statutes, and judicial decisions, to wit: 1. All requests for extradition are transmitted through the diplomatic channel. In urgent cases, requests for the provincial arrest of an individual may be made directly by the Philippine Department of Justice to the U.S. Department of Justice, and vice-versa. In the event of a provisional arrest, a formal request for extradition is transmitted subsequently through the diplomatic channel. 2. The Department of State forwards the incoming Philippine extradition request to the Department of Justice. Before doing so, the Department of State prepares a declaration confirming that a formal request has been made, that the treaty is in full force and effect, that under Article 17 thereof the parties provide reciprocal legal representation in extradition proceedings, that the offenses are covered as extraditable offenses under Article 2 thereof, and that the documents have been authenticated in accordance with the federal statute that ensures admissibility at any subsequent extradition hearing. 3. A judge or magistrate judge is authorized to issue a warrant for the arrest of the prospective extraditee (18 U.S.C. 3184). Said judge or magistrate is authorized to hold a hearing to consider the evidence offered in support of the extradition request (Ibid.) 4. At the hearing, the court must determine whether the person arrested is extraditable to the foreign country. The court must also determine that (a) it has jurisdiction over the defendant and jurisdiction to conduct the hearing; (b) the defendant is being sought for offenses for which the applicable treaty permits extradition; and (c) there is probable cause to believe that the defendant is the person sought and that he committed the offenses charged (Ibid.) 5. The judge or magistrate judge is vested with jurisdiction to certify extraditability after having received a "complaint made under oath,

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charging any person found within his jurisdiction" with having committed any of the crimes provided for by the governing treaty in the country requesting extradition (Ibid.) [In this regard, it is noted that a long line of American decisions pronounce that international extradition proceedings partake of the character of a preliminary examination before a committing magistrate, rather than a trial of the guilt or innocence of the alleged fugitive (31A Am Jur 2d 826).] 6. If the court decides that the elements necessary for extradition are present, it incorporates its determinations in factual findings and conclusions of law and certifies the person's extraditability. The court then forwards this certification of extraditability to the Department of State for disposition by the Secretary of State. The ultimate decision whether to surrender an individual rests with the Secretary of State (18 U.S.C. 3186). 7. The subject of an extradition request may not litigate questions concerning the motives of the requesting government in seeking his extradition. However, a person facing extradition may present whatever information he deems relevant to the Secretary of State, who makes the final determination whether to surrender an individual to the foreign government concerned. From the foregoing, it may be observed that in the United States, extradition begins and ends with one entity the Department of State which has the power to evaluate the request and the extradition documents in the beginning, and, in the person of the Secretary of State, the power to act or not to act on the court's determination of extraditability. In the Philippine setting, it is the Department of Foreign Affairs which should make the initial evaluation of the request, and having satisfied itself on the points earlier mentioned (see pp. 10-12), then forwards the request to the Department of Justice for the preparation and filing of the petition for extradition. Sadly, however, the Department of Foreign Affairs, in the instant case, perfunctorily turned over the request to the Department of Justice which has taken over the task of evaluating the request as well as thereafter, if so warranted, preparing, filing, and prosecuting the petition for extradition. Private respondent asks what prejudice will be caused to the U.S. Government should the person sought to be extradited be given due process rights by the Philippines in the evaluation stage. He emphasizes that petitioner's primary concern is the possible delay in the evaluation process. We agree with private respondent's citation of an American Supreme Court ruling: The establishment of prompt efficacious procedures to achieve legitimate state ends is a proper state interest worthy of cognizance in constitutional adjudication. But the Constitution recognizes higher values than speed and efficiency. Indeed, one might fairly say of the Bill of Rights in general, and the Due Process Clause, in particular, that they were designed to protect the fragile values of a vulnerable citizenry from the overbearing concern for efficiency and efficacy that may characterize praiseworthy government officials no less, and perhaps more, than mediocre ones. (Stanley vs. Illinois, 404 U.S. 645, 656) The United States, no doubt, shares the same interest as the Philippine Government that no right that of liberty secured not only by the Bills of Rights of the Philippines Constitution but of the United States as well, is sacrificed at the altar of expediency. (pp. 40-41, Private Respondent's Memorandum.) In the Philippine context, this Court's ruling is invoked: One of the basic principles of the democratic system is that where the rights of the individual are concerned, the end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the means employed to pursue it be in keeping with the Constitution. Mere expediency will not excuse constitutional shortcuts. There is no question that not even the strongest moral conviction or the most urgent public need, subject only to a few notable exceptions, will excuse the bypassing of an individual's rights. It is no exaggeration to say that a person invoking a right guaranteed under Article III of the Constitution is a majority of one even as against the rest of the nation who would deny him that right (Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343, 375376 [1989]). There can be no dispute over petitioner's argument that extradition is a tool of criminal law enforcement. To be effective, requests for extradition or the surrender of accused or convicted persons must be processed expeditiously. Nevertheless, accelerated or fast-tracked proceedings and adherence to fair procedures are, however, not always incompatible. They do not always clash in discord. Summary does not mean precipitous haste. It does not carry a disregard of the basic principles inherent in "ordered liberty." Is there really an urgent need for immediate action at the evaluation stage? At that point, there is no extraditee yet in the strict sense of the word. Extradition may or may not occur. In interstate extradition, the governor of the asylum state may not, in the absence of mandatory statute, be compelled to act favorably (37 C.J.S. 387) since after a close evaluation of the extradition papers, he may hold that federal and statutory requirements, which are significantly jurisdictional, have not been met (31 Am Jur 2d 819). Similarly, under an extradition treaty, the executive authority of the requested state has the power to deny the behest from the requesting state. Accordingly, if after a careful examination of the extradition documents the Secretary of Foreign Affairs finds that the request fails to meet the requirements of the law and the treaty, he shall not forward the request to the Department of Justice for the filing of the extradition petition since non-compliance with the aforesaid requirements will not vest our government with jurisdiction to effect the extradition. In this light, it should be observed that the Department of Justice exerted notable efforts in assuring compliance with the requirements of the law and the treaty since it even informed the U.S. Government of certain problems in the extradition papers (such as those that are in Spanish and without the official English translation, and those that are not properly authenticated). In fact, petitioner even admits that consultation meetings are still supposed to take place between the lawyers in his Department and those from the U.S. Justice Department. With the meticulous nature of the evaluation, which cannot just be completed in an abbreviated period of time due to its intricacies, how then can we say that it is a proceeding that urgently necessitates immediate and prompt action where notice and hearing can be dispensed with? Worthy of inquiry is the issue of whether or not there is tentativeness of administrative action. Is private respondent precluded from enjoying the right to notice and hearing at a later time without prejudice to him? Here lies the peculiarity and deviant characteristic of the evaluation procedure. On one hand there is yet no extraditee, but ironically on the other, it results in an administrative if adverse to the person involved, may cause his immediate incarceration. The grant of the request shall lead to the filing of the extradition petition in court. The "accused" (as Section 2[c] of Presidential Decree No. 1069 calls him), faces the threat of arrest, not only after the extradition petition is filed in court, but even during the evaluation proceeding itself by virtue of the provisional arrest allowed under the treaty and the implementing law. The prejudice to the "accused" is thus blatant and manifest. Plainly, the notice and hearing requirements of administrative due process cannot be dispensed with and shelved aside.

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Apart from the due process clause of the Constitution, private respondent likewise invokes Section 7 of Article III which reads: Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. The above provision guarantees political rights which are available to citizens of the Philippines, namely: (1) the right to information on matters of public concern, and (2) the corollary right of access to official records documents. The general right guaranteed by said provision is the right to information on matters of public concern. In its implementation, the right of access to official records is likewise conferred. These cognate or related rights are "subject to limitations as may be provided by law" (Bernas, The 1987 Phil. Constitution A Reviewer-Primer, 1997 ed., p. 104) and rely on the premise that ultimately it is an informed and critical public opinion which alone can protect the values of democratic government (Ibid.). Petitioner argues that the matters covered by private respondent's letterrequest dated July 1, 1999 do not fall under the guarantee of the foregoing provision since the matters contained in the documents requested are not of public concern. On the other hand, private respondent argues that the distinction between matters vested with public interest and matters which are of purely private interest only becomes material when a third person, who is not directly affected by the matters requested, invokes the right to information. However, if the person invoking the right is the one directly affected thereby, his right to information becomes absolute. The concept of matters of public concerns escapes exact definition. Strictly speaking, every act of a public officer in the conduct of the governmental process is a matter of public concern (Bernas, The 1987 Constitution of the Republic of the Philippines, 1996 ed., p. 336). This concept embraces a broad spectrum of subjects which the public may want to know, either because these directly affect their lives or simply because such matters arouse the interest of an ordinary citizen (Legaspi v. Civil Service Commission, 150 SCRA 530 [1987]). Hence, the real party in interest is the people and any citizen has "standing". When the individual himself is involved in official government action because said action has a direct bearing on his life, and may either cause him some kind of deprivation or injury, he actually invokes the basic right to be notified under Section 1 of the Bill of Rights and not exactly the right to information on matters of public concern. As to an accused in a criminal proceeding, he invokes Section 14, particularly the right to be informed of the nature and cause of the accusation against him. The right to information is implemented by the right of access to information within the control of the government (Bernas, The 1987 Constitution of the Republic of the Philippines, 1996 ed., p. 337). Such information may be contained in official records, and in documents and papers pertaining to official acts, transactions, or decisions. In the case at bar, the papers requested by private respondent pertain to official government action from the U.S. Government. No official action from our country has yet been taken. Moreover, the papers have some relation to matters of foreign relations with the U.S. Government. Consequently, if a third party invokes this constitutional provision, stating that the extradition papers are matters of public concern since they may result in the extradition of a Filipino, we are afraid that the balance must be tilted, at such particular time, in favor of the interests necessary for the proper functioning of the government. During the evaluation procedure, no official governmental action of our own government has as yet been done; hence the invocation of the right is premature. Later, and in contrast, records of the extradition hearing would already fall under matters of public concern, because our government by then shall have already made an official decision to grant the extradition request. The extradition of a fellow Filipino would be forthcoming. We now pass upon the final issue pertinent to the subject matter of the instant controversy: Would private respondent's entitlement to notice and hearing during the evaluation stage of the proceedings constitute a breach of the legal duties of the Philippine Government under the RP-Extradition Treaty? Assuming the answer is in the affirmative, is there really a conflict between the treaty and the due process clause in the Constitution? First and foremost, let us categorically say that this is not the proper time to pass upon the constitutionality of the provisions of the RP-US Extradition Treaty nor the Extradition Law implementing the same. We limit ourselves only to the effect of the grant of the basic rights of notice and hearing to private respondent on foreign relations. The rule of pacta sunt servanda, one of the oldest and most fundamental maxims of international law, requires the parties to a treaty to keep their agreement therein in good faith. The observance of our country's legal duties under a treaty is also compelled by Section 2, Article II of the Constitution which provides that "[t]he Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity with nations." Under the doctrine of incorporation, rules of international law form part of the law of the and land no further legislative action is needed to make such rules applicable in the domestic sphere (Salonga & Yap, Public International Law, 1992 ed., p. 12). The doctrine of incorporation is applied whenever municipal tribunals (or local courts) are confronted with situations in which there appears to be a conflict between a rule of international law and the provisions of the constitution or statute of the local state. Efforts should first be exerted to harmonize them, so as to give effect to both since it is to be presumed that municipal law was enacted with proper regard for the generally accepted principles of international law in observance of the observance of the Incorporation Clause in the above-cited constitutional provision (Cruz, Philippine Political Law, 1996 ed., p. 55). In a situation, however, where the conflict is irreconcilable and a choice has to be made between a rule of international law and municipal law, jurisprudence dictates that municipal law should be upheld by the municipal courts (Ichong vs. Hernandez, 101 Phil. 1155 [1957]; Gonzales vs. Hechanova, 9 SCRA 230 [1963]; In re: Garcia, 2 SCRA 984 [1961]) for the reason that such courts are organs of municipal law and are accordingly bound by it in all circumstances (Salonga & Yap, op. cit., p. 13). The fact that international law has been made part of the law of the land does not pertain to or imply the primacy of international law over national or municipal law in the municipal sphere. The doctrine of incorporation, as applied in most countries, decrees that rules of international law are given equal standing with, but are not superior to, national legislative enactments. Accordingly, the principle lex posterior derogat priori takes effect a treaty may repeal a statute and a statute may repeal a treaty. In states where the constitution is the highest law of the land, such as the Republic of the Philippines, both statutes and treaties may be invalidated if they are in conflict with the constitution (Ibid.). In the case at bar, is there really a conflict between international law and municipal or national law? En contrario, these two components of the law of the land are not pined against each other. There is no occasion to choose which of the two should be upheld. Instead, we see a void in the provisions of the RP-US Extradition Treaty, as implemented by Presidential Decree No. 1069, as regards the basic due process rights of a prospective extraditee at the evaluation stage of extradition proceedings. From the procedures earlier abstracted, after the filing of the extradition petition and during the judicial determination of the propriety of extradition, the rights of notice and hearing are clearly granted to the prospective extraditee. However, prior thereto, the law is silent as to these rights. Reference to the U.S. extradition procedures also manifests this silence.

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Petitioner interprets this silence as unavailability of these rights. Consequently, he describes the evaluation procedure as an "ex parte technical assessment" of the sufficiency of the extradition request and the supporting documents. We disagree. In the absence of a law or principle of law, we must apply the rules of fair play. An application of the basic twin due process rights of notice and hearing will not go against the treaty or the implementing law. Neither the Treaty nor the Extradition Law precludes these rights from a prospective extraditee. Similarly, American jurisprudence and procedures on extradition pose no proscription. In fact, in interstate extradition proceedings as explained above, the prospective extraditee may even request for copies of the extradition documents from the governor of the asylum state, and if he does, his right to be supplied the same becomes a demandable right (35 C.J.S. 410). Petitioner contends that the United States requested the Philippine Government to prevent unauthorized disclosure of confidential information. Hence, the secrecy surrounding the action of the Department of Justice Panel of Attorneys. The confidentiality argument is, however, overturned by petitioner's revelation that everything it refuses to make available at this stage would be obtainable during trial. The Department of Justice states that the U.S. District Court concerned has authorized the disclosure of certain grand jury information. If the information is truly confidential, the veil of secrecy cannot be lifted at any stage of the extradition proceedings. Not even during trial. A libertarian approach is thus called for under the premises. One will search in vain the RP-US Extradition Treaty, the Extradition Law, as well as American jurisprudence and procedures on extradition, for any prohibition against the conferment of the two basic due process rights of notice and hearing during the evaluation stage of the extradition proceedings. We have to consider similar situations in jurisprudence for an application by analogy. Earlier, we stated that there are similarities between the evaluation process and a preliminary investigation since both procedures may result in the arrest of the respondent or the prospective extraditee. In the evaluation process, a provisional arrest is even allowed by the Treaty and the Extradition Law (Article 9, RP-US Extradition Treaty; Sec. 20, Presidential Decree No. 1069). Following petitioner's theory, because there is no provision of its availability, does this imply that for a period of time, the privilege of the writ of habeas corpus is suspended, despite Section 15, Article III of the Constitution which states that "[t]he privilege of the writ or habeas corpus shall not be suspended except in cases of invasion or rebellion when the public safety requires it"? Petitioner's theory would also infer that bail is not available during the arrest of the prospective extraditee when the extradition petition has already been filed in court since Presidential Decree No. 1069 does not provide therefor, notwithstanding Section 13, Article III of the Constitution which provides that "[a]ll persons, except those charged with offenses punishable by reclusion perpetua when evidence of guilt is strong, shall, before conviction, be bailable by sufficient sureties, or be released on recognizance as may be provided by law. The right to bail shall not be impaired even when the privilege of the writ of habeas corpus is suspended. . ." Can petitioner validly argue that since these contraventions are by virtue of a treaty and hence affecting foreign relations, the aforestated guarantees in the Bill of Rights could thus be subservient thereto? The basic principles of administrative law instruct us that "the essence of due process in administrative proceeding is an opportunity to explain one's side or an opportunity to seek reconsideration of the actions or ruling complained of (Mirano vs. NLRC, 270 SCRA 96 [1997]; Padilla vs. NLRC, 273 SCRA 457 [1997]; PLDT vs. NLRC, 276 SCRA 1 [1997]; Helpmate, Inc. vs. NLRC, 276 SCRA 315 [1997]; Aquinas School vs. Magnaye, 278 SCRA 602 [1997]; Jamer vs. NLRC, 278 SCRA 632 [1997]). In essence, procedural due process refers to the method or manner by which the law is enforced (Corona vs. United Harbor Pilots Association of the Phils., 283 SCRA 31 [1997]). This Court will not tolerate the least disregard of constitutional guarantees in the enforcement of a law or treaty. Petitioner's fears that the Requesting State may have valid objections to the Requested State's non-performance of its commitments under the Extradition Treaty are insubstantial and should not be given paramount consideration. How then do we implement the RP-US Extradition Treaty? Do we limit ourselves to the four corners of Presidential Decree No. 1069? Of analogous application are the rulings in Government Service Insurance System vs. Court of Appeals (201 SCRA 661 [1991]) and Go vs. National Police Commission (271 SCRA 447 [1997]) where we ruled that in summary proceedings under Presidential Decree No. 807 (Providing for the Organization of the Civil Service Commission in Accordance with Provisions of the Constitution, Prescribing its Powers and Functions and for Other Purposes), and Presidential Decree No. 971 (Providing Legal Assistance for Members of the Integrated National Police who may be charged for Service-Connected Offenses and Improving the Disciplinary System in the Integrated National Police, Appropriating Funds Therefor and for other purposes), as amended by Presidential Decree No. 1707, although summary dismissals may be effected without the necessity of a formal investigation, the minimum requirements of due process still operate. As held in GSIS vs. Court of Appeals: . . . [I]t is clear to us that what the opening sentence of Section 40 is saying is that an employee may be removed or dismissed even without formal investigation, in certain instances. It is equally clear to us that an employee must be informed of the charges preferred against him, and that the normal way by which the employee is so informed is by furnishing him with a copy of the charges against him. This is a basic procedural requirement that a statute cannot dispense with and still remain consistent with the constitutional provision on due process. The second minimum requirement is that the employee charged with some misfeasance or malfeasance must have a reasonable opportunity to present his side of the matter, that is to say, his defenses against the charges levelled against him and to present evidence in support of his defenses. . . . (at p. 671) Said summary dismissal proceedings are also non-litigious in nature, yet we upheld the due process rights of the respondent. In the case at bar, private respondent does not only face a clear and present danger of loss of property or employment, but of liberty itself, which may eventually lead to his forcible banishment to a foreign land. The convergence of petitioner's favorable action on the extradition request and the deprivation of private respondent's liberty is easily comprehensible. We have ruled time and again that this Court's equity jurisdiction, which is aptly described as "justice outside legality," may be availed of only in the absence of, and never against, statutory law or judicial pronouncements (Smith Bell & Co., Inc. vs. Court of Appeals, 267 SCRA 530 [1997]; David-Chan vs. Court of Appeals, 268 SCRA 677 [1997]). The constitutional issue in the case at bar does not even call for "justice outside legality," since private respondent's due process rights, although not guaranteed by statute or by treaty, are protected by constitutional guarantees. We would not be true to the organic law of the land if we choose strict construction over guarantees against the deprivation of liberty. That would not be in keeping with the principles of democracy on which our Constitution is premised. Verily, as one traverses treacherous waters of conflicting and opposing currents of liberty and government authority, he must ever hold the oar of freedom in the stronger arm, lest an errant and wayward course be laid.

WHEREFORE, in view of the foregoing premises, the instant petition is hereby DISMISSED for lack of merit. Petitioner is ordered to furnish private respondent copies of the extradition request and its supporting papers, and to grant him a reasonable period within which to file his comment with supporting evidence. The incidents in Civil Case No. 9994684 having been rendered moot and academic by this decision, the same is hereby ordered dismissed. SO ORDERED.

BENGZON, J.:

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Victor A. Borovsky, a stateless citizen though a Russian by birth according to his allegations, prays for release from the custody of the Director of Prisons, who holds him for purposes of deportation. In December, 1946, the President of the Philippines ordered petitioner's deportation as undesirable alien, after a proper investigation by the Deportation Board upon charges of being a vagrant and habitual drunkard, engaged in espionage activities, whose presence and conduct endangered the public interest. Pursuant to such order, Borovsky was placed aboard a vessel bound for Shanghai; but the authorities there declined to admit him for lack of the proper visa, which the Chinese Consulate in this country had refused to give. Wherefore he was brought back to the Philippines. Thereafter he was temporarily released pending further arrangements for his banishment. And when subsequently a Russian boat called at Cebu, Borovsky was re-arrested and transported to Cebu for deportation; however, the captain of the boat declined take him, explaining he had no permission from his government to do so. Wherefore the petitioner the petitioner is now confined in the premises of the New Bilibid Prisonnot exactly as the prisonerwhile the Government is exerting efforts to ship him to a foreign country. There is no question as to the validity of the deportation decree. It must be admitted that temporary detention is a necessary step in the process of exclusion or expulsion of undesirable aliens and that pending arrangement for his deportation, the Government has the right to hold the undesirable alien under confinement for a reasonable length of time. However, under established precedents, too long a detention may justify the issuance of a writ ofhabeas corpus.1 The meaning of "reasonable time" depends upon the circumstances, specially the difficulties of obtaining a passport, the availability of transportation, the diplomatic arrangements of the government concerned and the efforts displayed to send the deportee away.2 Considering that this Government desires to expel the alien, and does not relish keeping him at the people's expense, we presume it is making efforts in making efforts to carry out the decree of exclusion by the highest officer of the land. On top of this presumption assurances were made during the oral argument that the Government is really trying to expedite the expulsion of this petitioner. On the other hand, the record fails to show how long he has been under confinement since the last time he was apprehended. Neither does he indicate neglected opportunities to send him abroad. And unless it is shown that the deportee is being indefinitely imprisoned under the pretense of awaiting a chance for deportation3 or unless the Government admits that it cannot deport him4 or unless the detainee is being held for too long a period our courts will not interfere. In the United States there were at least two instances in which courts fixed a time limit within which the imprisoned aliens should be deported5 otherwise their release would be ordered by writ of habeas corpus. Nevertheless, supposing such precedents apply in this jurisdiction, still we have no sufficient data fairly to fix a definite deadline. Petition denied. No costs.

G.R. No. L-2852

June 30, 1949

VICTOR A. BOROVSKY, petitioner, vs. THE COMMISSIONER OF IMMIGRATION and THE DIRECTOR OF PRISONS, respondents. The petitioner in his own behalf. First Assistant Solicitor General Roberto A. Gianzon and Solicitor Lucas Lacson for respondents.