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La Bugal-B’laan Tribal Association, Inc. vs.

Ponente: Panganiban Parties Involved: Date: 1 December 2004 Nature: Special Civil Action for Prohibition and Mandamus ictor Ramos, D&'( Sec"$ )oracio (amos* +,-D&'( Dir"$ (!ben .orres* &/ec" Sec" 0 CP* 1nc" %respondent2

La Bugal-B’laan Tribal Association, Inc., represented by its Chairman F’long ig!el " #!mayong$ et" al" %petitioner

!acts and Bac"ground o# t$e %ase 24 3an!ary 20045 the Co!rt en banc declared unconstitutional5 &a' certain (rovisions o# RA No. )*+, % ining #a62* &b' its 1mplementing (!les and (eg!lations DA- No. *.-+/, and &c' the !inancial and Tec$nical Assistance Agreement &!TAA' dated arch 70* 1889* e/ec!ted by the government 6ith 0estern ining Corporation %Philippines2* 1nc" &01%P'* mainly on the finding that FTAAs are service contracts prohibited by the 1987 Constitution (espondents filed separate otions for (econsideration Legal Issues A" 0:' case has been rendered moot by the sale of 0 C shares in 0 CP to Sagittari!s ines* 1nc" %a Filipino corporation2 and by the s!bse;!ent transfer and registration of the F.AA from 0 CP to Sagittari!s" ," 0:' it is still proper to resolve constit!tionality of the assailed provisions* ass!ming that the case has been rendered moot" C" the proper interpretation of the phrase5 Agreements Involving Either Technical or Financial Assistance contained in paragraph 4 of Section 2 of Article <11 of the Constit!tion" D" th!s* 0:' provisions are !nconstit!tional" %ontentions and Resolutions 2(etitioners3 A. T$e case $as not become moot:
4- the alleged invalidity of the transfer of the 0 CP shares to Sagittari!s violates the fo!rth paragraph of Section 2 of Article <11 of the Constit!tion" !etitioners claim that a Filipino corporation is not allo"ed by the Constitution to enter into an FTAA "ith the government# ,-it is contrary to the provisions of the 0 CP F.A itself* in that the FTAA "as intended to apply solely to a $oreign corporation as can allegedly be seen $rom the provisions therein# =Section 12* 6hich provides for international commercial arbitration !nder the a!spices of the 1nternational Chamber of Commerce* after local remedies are e/ha!sted>clearly intended to apply only to a foreign contractor? 5-the sale of the shares is s!spect and sho!ld therefore be the s!b@ect of a case in 6hich it validity may be properly litigated" %ection &' o$ (A 79&) allegedly re*uires the !resident+s prior approval o$ a trans$er#

%ourt A. 4- 'o6here in the provision is there any e/press limitation or restriction insofar as arrangements other than the three mentioned contract!al schemes are concerned" .here is no reason to believe that the framers of the Constit!tion* a ma@ority of 6hom 6here obvio!sly concerned 6ith f!rthering the development and !tiliAation of the co!ntry’s nat!ral reso!rces* co!ld have 6anted to restrict Filipino participation in that area" ,- .his provision does not necessarily imply that the 0 CP F.AA cannot be transferred to and ass!med by a Filipino corporation liBe Sagittari!s* in 6hich event the said provision sho!ld simply be disregarded as a s!perfl!ity" 5- Section 40 e/pressly applies to the assignment or transfer of the F.AA* not to the sale and transfer of shares of stocB in 0 CP" 0hen the transfer of the F.AA happens to be a Filipino corporation* the need for s!ch safeg!ard is not critical" Petitioners $ave assumed as #act t$at 6$ic$ $as 7et to be establis$ed. .he Decision of the Co!rt declaring the F.AA void has not yet become final" The FTAA is not per se de$ective or unconstitutional# It "as *uestioned only because


Petitioners also insist t$at !TAA is void, and $ence, cannot be trans#erred. 1ts transfer does not operate to c!re the constit!tional infirmity that is inherent in it$ neither 6ill a change in the circ!mstances of one of the parties serve to

he real iss!e in this case is 6hether paragraph 4 of Section 2 of Article <11 of the Constit!tion is contravened by (A 4842 and DAC 8D-40" B7 t$e mere enactment o# t$e 9uestioned la6 or t$e a((roval o# t$e c$allenged action.AA allo6ed the foreign contractor to have direct and e:clusive management of a mining enterprise* and vests in the foreign company bene#icial o6ners$i( of o!r mineral reso!rces" it had been issued to an allegedly non. e:cludes #oreign management and o(eration o# a mining enter(rise.agreements : : : involving eit$er tec$nical or #inancial assistance< in an e:clusionar7 and limiting manner. o"ned corporation# B. . . .AA allo6ed in the Constit!tion is a comprehensive agreement for the foreign-o6ned corporation’s integrated e/ploration* development and !tiliAation of mineral* petrole!m or other mineral oils on a large-scale basis" . t$e7 argue.AAs had been filed? .!ivocal statement to that effect" Pertinent portions of the deliberations of the members of the ConCom concl!sively sho6 that t$e7 discussed agreements involving eit$er tec$nical or #inancial assistance in t$e same breadt$ as service contracts and used t$e terms interc$angeabl7.AAs 6ill be the s!b@ect of yet another s!it gro!nded on constit!tional iss!es" =as of 3!ne 2002* some 47 F.he !se of the 6ord EinvolvingF signi#ies t$e (ossibilit7 o# t$e inclusion o# ot$er #orms o# assistance or activities having to do 6ith* other6ise related to or compatible 6ith financial or technical assistance" .AA contractor by the stat!te and reg!lations easily overt!rns petitioners’ contention" T$e B. Petitioners claim that the phrase -agreements .he gam!t of re.the Constit!tion imposes !pon the S!preme Co!rt the d!ty to declare invalid any la6 that offends the Constit!tion" %. .AA* b!t also t$e constitutionalit7 o# RA )*+.ratify the void contract" B. .!estion>other6ise moot and academic>if it is Ecapable of repetition yet evading revie6"F %. involving either technical or $inancial assistance.. t$e sub8ect !TAA and #uture !TAAs.simply means technical assistance or financial assistance agreements* nothing more and nothing else* and suc$ a limitation. Co!rt’s previo!s decision 6as correct* in that the F. and t$e need to avert a multi(licit7 o# suits.he F.*uali$ied $oreign. %.he co!rt concedes that there e/ists the distinct possibility that one or more of the f!t!re F.he co!rts 6ill decide a . S!ch intent cannot be definitively and concl!sively established from the mere fail!re to carry the same e/pression or term over to the ne6 Constit!tion* absent amore specific* e/plicit and !ne.he deletion or omission from the 18G4 Constit!tion of the term Eservice contractsF fo!nd in the 1847 Constit!tion s!fficiently proves the drafters’ intent to e/cl!de foreigners from the management of the affected enterprises" D. . D. 4.0hat is at iss!e is not only the validity of the 0 CPF.!irements* reg!lations* restrictions and limitations imposed !pon the F.the acts of private respondent cannot operate to c!re the la6 of its alleged !nconstit!tionality or to divest this Co!rt of its @!risdiction to decide" 5. and its Im(lementing Rules and Regulations . t$e dis(ute is said to $ave ri(ened into a 8udicial controvers7 even 6it$out an7 ot$er overt act.he Co!rt m!st recogniAe the e/ceptional character of the sit!ation and the paramo!nt p!blic interest involved* as 6ell as t$e necessit7 #or a ruling to (ut an end to t$e uncertainties (laguing t$e mining industr7 and t$e a##ected communities as a result o# doubts cast u(on t$e constitutionalit7 and validit7 o# t$e 1ining Act. (A 4842* as 6ell as its 1mplementing (!les and (eg!lations* maBes it possible #or !TAA contracts to cede #ull control and management o# mining enter(rises over to .hese agreements 6ith foreign corporations are not limited to mere financial or technical assistance" Cther6ise* the lang!age of the drafters 6o!ld have certainly been so !nmistaBably restrictive and stringent as to leave no do!bt in anyone’s mind abo!t their tr!e intent" T$ere 6as a conscious and deliberate decision to avoid t$e use o# restrictive 6ording t$at bes(ea"s an intent not to use t$e e:(ression . . .

*. . #ees and duties.=ection ).he incl!sion of the phrase Eamong other thingsF in the second paragraph of Section G1 clearly and !nmistaBable reveals the legislative intent to have the State collect more than @!st the !s!al ta/es* d!ties and fees" B?T.* of the 0 CP F. t$e government’s s$are is limited to ta:es.he la6* the implementing reg!lations* and the 0 CP F.he provisions vest the State 6ith control and s!pervision over practically all aspects of the operations of the F.AA contractor* incl!ding the charging of pre-operating and operating e/penses* and the disposition of mineral prod!cts" (A 4842 allegedly limits the State’s share in F.AA cede Ebene#icial o6ners$i(F of the mineral reso!rces to the foreign contractor" Section 7 of (A 4842>6hich allo6s a foreign contractor to apply for and hold an e/ploration permit>is !nconstit!tional" !TAA contractor is not #ree to do 6$atever it (leases and get a6a7 6it$ it> on t$e contrar7.-+/ vest in t$e government more t$an a su##icient degree o# control and su(ervision over t$e conduct o# mining o(erations.#ull7 #oreign-o6ned cor(orations.his constit!te !n@!st enrichment on the part of the contractor* at the e/pense .AA clearly renders ill!sory the State’s D0 percent share of 0 CP’s reven!es in providing that5 sho!ld 0 CP’s foreign stocBholders sell D0 percent or more of their e. . it 6ill $ave to #ollo6 t$e government line i# it 6ants to sta7 in t$e enter(rise.. .@ is liBe6ise invalid* since by allo6ing the s!ms spent by government for the benefit of the contractor to be ded!ctible from the State’s share in net mining reven!es* it res!lts in benefiting the contractor t6ice over" .he e/ploration permit serves a practical and legitimate p!rpose in that it protects the interests and preserves the rights of the e/ploration permit grantee %the 6o!ld-be contractor2>foreign or local>d!ring the period of time that it is spending heavily on e/ploration 6orBs* 6itho!t yet being able to earn reven!es to reco!p any of its investments and e/pendit!res" T$e evaluation and anal7sis o# t$e !TAA (rovisions su##icientl7 overturn (etitioners’ litan7 o# ob8ections to and criticisms o# t$e =tate’s alleged lac" o# control. and DA. 6it$ 6ea" revie6 and audit (o6ers. 6it$ t$e result t$at t$e =tate is allegedl7 reduced to a (assive regulator de(endent on submitted (lans and re(orts. . 1nel!ctably then* RA )*+. t$e 01%P !TAA $as invalid (rovisions: .!ity to a Filipino citiAen or corporation* the State loses its right to receive its share in net mining reven!es !nder Section 4"4* 6ith any offsetting compensation to the State" .AAs 6ith foreign contractors to @!st ta/es* fees and d!ties* and depriving the State of a share in the after-ta/ income of the enterprise" T$e %ourt does not s$are t$e vie6 t$at in !TAAs 6it$ #oreign contractors under RA )*+.=ection ).

he phrase Eagreements involving either technical and financial assistance*F as !sed interchangeably 6ith the term Eservice contractsF by the drafters of the Constit!tion and as interpreted by the co!rt* is not e/cl!sionary and limiting" D" ." there is a need to resolve the !nconstit!tionality of the assailed provisions" C" .AA is not void per se* the case has become moot" )o6ever* .of the government Audgment A" .sir pointed o!t5 altho!gh the iss!e is very technical* 6e m!st all go bacB to the basic iss!e of 6hether or not Congress* D&'( and the President acted 6ithin @!risdiction" T$e issue is al6a7s about 8urisdiction.!al and coordinate branches of government* this Co!rt m!st restrain itself from intr!ding into policy matters and m!st allo6 the President and Congress ma/im!m discretion in !sing the reso!rces of o!r co!ntry and in sec!ring the assistance of foreign gro!ps to eradicate the grinding poverty of o!r people and ans6er their cry or viable employment opport!nities in this co!ntry"F E#et the development of the mining ind!stry be the responsibility of the political branches of the government" And let not this Co!rt interfere inordinately and !nnecessarily"F .he cr!/ of the controversy is the amount o# discretion to be accorded t$e B:ecutive De(artment* partic!larly the President of the (ep!blic* in respect of negotiations over the terms of F.!estion* the &P1#C+I& provides5 E.AAs* partic!larly 6hen it comes to the government share of financial benefits from F. K and in this case* the co!rt fo!nd that they did act 6ithin their respective @!risdictions" .he assailed provisions are not !nconstit!tional" Im(ortant Notes .he F.eca!se of the validity of sale and the transfer* and that the F.AAs"F EJerily* !nder the doctrine of separation of po6ers and d!e respect for co-e.AA is for the e/ploration* development and commercial e/ploitation of mineral deposits in So!th Cotabato* S!ltan H!darat* Davao del S!r and 'orth Cotabato* covering an area of 88*G74 ha" 0 C is 6holly o6ned s!bsidiary of 0estern ining Corporation )oldings #imited* a p!blicly listed ma@or A!stralian mining and e/ploration company" A service contract has been defined as a contract!al agreement for engaging in the e/ploitation and development of petrole!m* mineral* energy* land and other nat!ral reso!rces* 6hereby a government or an agency thereof* or a private person granted a right or privilege by said government* a!thoriAes the other party>the service contractor>to engage or participate in the e/ercise of s!ch right or the en@oyment of the privilege* by providing financial or technical reso!rces* !ndertaBing the e/ploitation or prod!ction of a given reso!rce* or directly managing the prod!ctive enterprise* operations of the e/ploration and e/ploitation of the reso!rces* or the disposition or marBeting of said reso!rces" Personal Notes As to the case being a political .