You are on page 1of 18

Article XII


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. Private
enterprises, including corporations, cooperatives, and similar collective
organizations, shall be encouraged to broaden the base of their
Section 1 by itself expresses the general economic policies of the
Constitution. It contains the three basic directions of the National Economy.
What are the 3 basic directions of the National Economy? What are the goals of our
National Economy? In order to answer the basic directions, it is contained in
whole of the Section 1 paragraph 1, 2 and 3. The goals are contained in
Paragraph 1.
The three basic directions of the National Economy are first, it sets the
dual goal of economic productivity and more equitable distribution of what is
produced. Second, it seeks complementary between industrialization and
agricultural development. Third, it is protective of all things Filipino.
The first paragraph, sets the three fold goal of the National Economy,
they are more equitable distribution of opportunities, income and wealth,
for the benefit of the people, especially the under privileged and to
broaden the base of ownership
Section 1 of social justice and human rights maybe similar to section 1 of
national economy and patrimony because section 1 it speaks of equity states the
goals of national patrimony 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, expanded productivity as the key in raising the quality of
life for all specially the under privileged. Section 1 speaks of equity, so the social
justice is in the section 1 of national patrimony also. Aside from the economic goals
of the country it also involves equity and social justice.
Is the economic policy stated on the Constitution protectionist or
not? Does it protect too much Philippine interest and the interest of the
Filipino Capitalist? The end effect would be there is little or non-foreign
direct investments? If there had been problems in the Aquino Administration
regarding lack of FDIs, some say it is because of the restrictive provisions of the
Constitution. That is why the Belmonte proposal to amend the constitution, they
want to liberalize the equity participation of foreigners in investments in our country
by a simple approach, they want to add the phrase as may be provided for by
Congress can now legislate a higher or lower participation of Filipino Citizens
and higher participations for foreigners because of the phrase as may be
provided for by law. This would be an enough authority and license of the
Congress to enact a foreign ration of foreign investment in the country.
Article 12 contains the national economic policy, kapag naririnig naten ung
constitutional amendments eto ung gusto nilang I-ammend ung constitutional
economic provisions. Gusto nilang dagdagan ng phrase ng as may be provided for
by law.
Provisions in article 12 say the specific provisions that limits of participation
of foreigners in investments in industries and it is stated that if the constitution says
that corporations of which are owned by 60 percent by Filipino citizens hanggang
dun nalang yon. Ung mga gustong mag amend ng economic provision of the
constitution nato very much like that on what Belmonte had proposed na hindi
natuloy, they want to add the phrase as may be provided for by law so that
this venture of this industry and investment shall be limited to Filipino citizens or
corporations which are owned by 60 percent by Filipino citizens as may be provided
for by law.
Article 12 elaborates the Section 19 and 20 of Declaration of principles, that
these are the pillars of the economic policy of the constitution. Section 19
commands the development of a self-reliant and independent national economy
while Section 20 recognizes the indispensable role of the private sector. Section 19
and 20 finds substance in Article 12.
Section 1 of article 12 expresses the general economic policies of
the constitution. This section also tells us that the economy envisioned by the
constitution is dynamic. The dynamism of the economy is envisioned by this
article is expressed in the words sustained increase in the amount of goods
and services produced and expanding productivity because of this the
economic envisioned is dynamic. The equity goal is expressed in the words a

more equitable distribution of opportunities, income, and wealth for the

benefit of the people especially the under-privileged and to broaden the
base of ownership.
Equity is given prominence as the first objective of the National
Economic Development. The goal of reducing inequality is an explicit statement
of the emerging concept in social philosophy as contained in the social justice and
human rights article of this constitution. The preferential option of love for the poor
and the underprivileged, the reference to the national product being for the benefit
of the Filipino people tries to guarantee the national development efforts shall give
priority to the needs of the local population rather than foreign consumers.
In Section 1, it mentions that The economic policy promotes a balance
between the industrialization and agricultural development. Bernas says
that industrialization can be attained by using the released locked up capital
through agrarian reform. Bernas seems to be banking too much on agrarian reform
which is also provided in the constitution. In agrarian reform, the land and
estates shall be taken by the government for distribution. The payment to
be made to the owners will spur industrialization according to Bernas.
Question, what is the suggested formula of the constitution in arriving
industrialization? The suggested formula is to attain industrialization through the
releasing locked up capital
through agrarian reform. How is this done? Land is
distributed to the farmers and landless with just compensation. The just
compensation paid to the owner of the land. The constitution hopes shall be used
for industrialization purposes.
That is why in the provision; it encourages the state to give incentives to land
owners to receive just compensation for the lands that are subjected for reform.
The policy of protecting all things Filipino intent is to protect both the Filipino
consumer and the Filipino Producer. The Filipino must be protected against a flood of
low quality products. The Filipino producer in turn must be protected from unfair
foreign competition and trade practices.
The goals of the economy are pursuit not just for the people and sectors of
the economy but also among geographic regions of the country.
Section 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.
Section 2 is based on the doctrine of dominium which is also the basis
of the principle of jura regalia also known as the regalia doctrine. This doctrine
is known to mean that everything belongs to the state. All natural resources
enumerated in section 2 are owned by the state. This is found on the concept of
dominium; it is the foundation of the feudal and embraces the theory of jura
regalia which means ownership is vested in the state.
We now introduce the concept of dominium and imperium. Dominium is
the capacity of the state to own or acquire property. It is the concept of
ownership by the state, property holdings by the state. This is the proprietary
aspect of the state. Imperium, is the governmental part of the state, is
the government authority possessed by the state expressed in the
concept of sovereignty. Imperium is for governance and dominium is for
ownership of property.
What are jura regalia? What is the constitutional basis of this doctrine? The
answer is Section 2 article 12.
Only agricultural lands shall be alienated. Second paragraph, the
exception of agricultural lands and all other natural resources shall not be alienated,
except agricultural lands. Agricultural lands may be alienated if it is declared
as alienable and disposable. There is a category and it is the state that
categorizes whether or not the agricultural lands are alienable and disposable.
Section 2 also provides that the exploration, development and utilization of
natural resources shall be under the full control and supervision of the State. In so
doing, the state may enter into co-production, joint venture or co-production sharing
agreement with natural Filipino citizens or corporations and associations at least 60
percent of which capital is owned by a Filipino Citizens. This is an example of the
Belmonte amendment. The agreement must be not exceeding 25 years and is
renewable for another 25 years.
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 constitution itself provides that we must protect our nations marine
wealth in our archipelagic waters, territorial sea and exclusive economic zone and
reserve its use and enjoyment exclusively to Filipino citizens minus the Chinese.
Since all the natural resources is belongs to the state, any person who is
claiming a portion of a public domain must be able to show title to the state
according to any of the modes of acquisition. If a person is the owner of an
agricultural land in which minerals are discovered. The persons ownership of such
land does not give them the right to extract or utilize the said mineral without the
permission of the State because the mineral belongs to the state.
A sample of this is the Malampaya of Batangas, this is co-developed by the
Philippines government with a foreign country. It was entered into by former
President Ramos.
The limits of dominium, while the concept of dominium includes the power
to alienate what is owned, Section 2, following the lead of earlier constitutions,
limits the power of the state to alienate the natural resources of the public domain.
The same section limits the power of the state to alienate natural resources and
that limitation comes with the phrase with the exceptions of the agricultural
lands. All other natural resources shall not be alienated
In Oh Cho vs Director of Lands, agricultural land in a public domain
becomes a private land only when it is acquired form the government
either by purchase or by grant. All lands that were not acquired from the
government either by purchase or grant belongs to the public domain. All the lands
of the public domain, what may be alienated are the agricultural lands. Agricultural
lands may only be alienated by purchase or by grant to a private citizen or to a
public corporation like a municipality but not to a private corporation. After it is
alienated to a private person, it becomes a private land.
Prescription can transform public land into private land only if it is
alienable public land. Lands of the public domain, agricultural lands may be
alienated but before it can be alienated it must be declared as alienable
and disposable land. It will be the state to declare it, principally it should be
congress but it is usually delegated to the executive. So it is only when a public
agricultural land has already been declared as alienable and disposable that a
private citizen may acquire this property by grant or purchase.
In granting, we have an open grant. One must apply for it and the
government will grant. Another mode of acquisition of disposable agricultural land is
by prescription. Open, exclusive and undisputed possession of alienable public land
for the period prescribed by law creates the legal fiction whereby the land, upon
completion of the requisite period ipso-jure and without the need of judicial or other

sanction, ceases to be public land and becomes private property. Such open,
continuous, exclusive and notorious occupation of the disputed properties for more
than 30 years must, however, be conclusively established. This is the San Miguel
Corporation case.
In computing the 30 years, a period for acquisitive prescription under Section
49 of the Public Land Law, the period before a forest land is converted into as
alienable and disposable land is not included.
Example: The property is still a public property and not has been declared as
alienable and disposable land. Inupuan mo na, for 20 years then it becomes
alienable and disposable, then you continued to stay in the land for another 10
years. Are you now entitled to the ownership of the land by prescription? NO,
because the 20 year period of such possession of the property before the
property became alienable and disposable is not included in computing
the 30 year period. The 30 year period starts, must be while the property is
already as alienable and disposable property. The Repongde Property in Japan, is
that a public Dominium? It is outside of the commerce of men; it cannot be
alienated or sold.
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.
To agreements involving either technical or financial assistance, this
is the agreement entered into by the President either technical or financial
assistance are in fact service contracts but such new service contracts between
foreign corporations acting as contractors and on the other hand government acting
as the principal or owner of the works whereby the foreign contractor will provide
the capital the technology and technical know-how and managerial expertise in the
creation and operation of the large scale mining and extractive enterprise and
government through its agencies, the DENR, the MGB, actively exercises full control
of supervision over the entire enterprise. It is saying that the agency used by
the Government would be the DENR in supervising these technical service

The case of La Bugal Blaan Tribal Association vs DENR, which was

cited by Bernas is saying that those contracts entered into by the
President are in effect are service contracts. The parties of which would be
the foreigners and the government thru the DENR and the MGB.
The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution.
Who are qualified to take part of the exploration, development and utilization
of inalienable resources? Only Filipino citizens and Companies of which 60 percent
of it is owned by a Filipino Citizen may engage in the development and utilization of
these natural resources. Inalienable natural resources are the petroleum, oil,
coals etc..
A problem may arise in determining the compliance with the 60 percent limit
ownership of a Filipino in a Foreign Corporation that is engaged in an exploration,
development and utilization of inalienable natural resources. The constitution says
that, the Corporation, 60 percent of which must owned by Filipino Citizen. If that
Corporation who applied for the exploration, development and utilization of
inalienable natural resources, just verify if the 60 percent of the names of the
owners are Filipino then they are qualified.
To make sure this is complied, we have what we call Control Test. This is the
prevailing mode in determining whether or not a corporation is a Filipino
Corporation within the ambit of Section 2, Article 12 of the 1987 Philippine
Constitution, entitled to undertake the exploration, development and utilization of
the natural resources of the Philippines. When in the mind of the Court, there is
doubt, based on the attendant facts and circumstances of the case, in the 60-40
Filipino equity ownership in the corporation, and then it may apply the Grandfather
The Grandfather Rule is merely to follow the lineage of the owners, if
they have a Filipino Citizenship. These rule implements the intent of the
Filipinization provisions of the Constitution. To reiterate, Sec. 2, Art. XII of the
Constitution reserves the exploration, development, and utilization of natural
resources to Filipino citizens and "corporations or associations at least sixty
per centum of whose capital is owned by such citizens." Consistent with
this objective, the Grandfather Rule was originally conceived to look into
the citizenship of the individuals who ultimately own and control the
shares of stock of a corporation for purposes of determining compliance
with the constitutional requirement of Filipino ownership. It cannot,
therefore, be denied that the framers of the Constitution have not foreclosed the
Grandfather Rule as a tool in verifying the nationality of corporations for purposes of
ascertaining their right to participate in nationalized or partly nationalized activities.

Thus, to arrive at the actual Filipino ownership and control in a corporation, both the
direct and indirect shareholdings in the corporation are determined. This is the case
CONSOLIDATED MINES CORP., Respondent. G.R. No. 195580, January 28,
As to Marine wealth, Filipino Citizens are qualified also for natural resources
and rivers, lagoons lakes. All those cooperatives are qualified.
How may an inalienable resources may
they be explored, developed or
utilized? The answer for that question is by direct undertaking of activities by the
State or co-production, joint venture, or production sharing agreements
with the State and all under the full control and supervision of the State.
There are 2 levels of control that must be considered.
The first level is the control over the corporation which may engage with
the State in co-production, joint venture, or production sharing
agreements. If individuals they must be Filipino Citizens; if corporations,
ownership must be 60percent Filipino. The second level is control of the coproduction, joint venture, or production sharing agreements operation.
This must be under the full control and Supervision of the State even if the
operation is by a Filipino Citizen.
What are the other limitations provided in Section 2? First, agreements of
the exploitation of the natural resources can have a life of only 25 years,
renewable for another 25 years. Second, the use and enjoyment of marine
wealth in archipelagic waters, territorial sea and exclusive economic zone
is reserved for the exclusive use and enjoyment of Filipino Citizens meaning Filipino
natural persons. Third, Filipino citizen may have small scale utilization of natural
resources, as well as cooperative fish farming in rivers, lakes and lagoons. Fourth,
service contracts to large scale utilizations of minerals, petroleum and oils.
In Summit vs. CA, G.R. No. 124293 January 31, 2005, aliens are not
disqualified from owning every kind of real property. They are not entirely
disqualified in owning real property. The concept of a real property is not merely a
land; a building that is attached to the land is also real property therefore the
constitutional prohibition applies only the ownership of a land, it does not extend to
all immovable or real property as defined in Article 415 of the Civil Code. These are
considered immovable properties that are attached to the land, including buildings

and constructions of all kinds attached to the soil. Aliens are only disqualified to
own lands but not all real property.
Reclaimed, foreshore submerged lands, Somewhere in Roxas Boulevard in Manila
Bay, that part is foreshore submerged lands. When they were reclaimed, they were
lands of the public domain. Before SM and other buildings were built, there was a
process to follow. The owner of that property when it was a part of a public domain
then was Public Estates Authority, then was the agency of the government that
handles these lands. Then they went to congress, and congress declared it as
alienable and disposable lands before selling the said properties.
The reclaimed foreshore and submerged lands are lands of the public domain
unless they are already classified as alienable they may not be disposed of. For
reclaimed land to be registered as private property, 2 things must be required.
Since reclaimed land is part of the inalienable public lands, there must be proof that
the land has been classified as alienable by congress. To the person seeking
registration must show proof of having acquired the property for instance by
prescription, but for the foreshore lands, by acquired by sale from the government.
Inalienable land cannot be acquired by prescription, because only
alienable lands which are part of the public domain s can be acquired by
Reclaimed lands of the public domain, if sold or transferred to a public
corporation (municipality) which has a right to hold properties, foe a monetary
consideration becomes a patrimonial property. It will be a property of the
municipality, and maybe sold to private parties whether to Filipino
Citizens or qualified corporations. Reclaimed lands of the public domain maybe
transferred to public corporations.
Section 3 Lands of the public domain are classified into agricultural, forest
or timber, mineral lands and national parks. Agricultural lands of the
public domain may be further classified by law according to the uses to
which they may be devoted. Alienable lands of the public domain shall be
limited to agricultural lands. Private corporations or associations may not
hold such alienable lands of the public domain except by lease, for a
period not exceeding twenty-five years, renewable for not more than
twenty-five years, and not to exceed one thousand hectares in area.
Citizens of the Philippines may lease not more than five hundred hectares,
or acquire not more than twelve hectares thereof, by purchase,
homestead, or grant.
In section 3, you will encounter the word hold and acquire. Hold id only
for lease/rent and not concept of ownership. Acquire on the other hand is for
the private citizens for ownership.

Section 3 therefor, deals with the classification of lands in the public domain
to agricultural forest timber, mineral and national park. Agricultural lands may be
further classified by law according to the uses to which may be devoted.
Classification is descriptive of the legal nature of the land and not what it looks like.
In Buntun bridge, may mga bundok sa Madduarulug. Wala ng kahoy, pero that
doesnt mean agricultural na siya. Forest land parin siya. The fact that the forest
lands have been deluded that doesnt mean it has seized as a forest land, Director
of Lands vs. Aquino.
The rights over the land are indivisible and that the land itself cannot be half
agricultural and half mineral. The classification must be categorical; the land must
be either completely mineral or completely agricultural. Republic of the
Philippines vs. CA.
Disposition of lands of the Public Domain, the first rule is that only
agricultural lands of the public domain may be alienated. Second, only public
corporations and qualified individuals may acquire alienable lands of the public
domain, because it may only hold alienable lands of the public domain only by
lease. While private corporations cannot acquire lands of the public domains, they
can acquire private lands.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the
Congress shall determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and the conditions
MERALCO vs. Judge Bartolome, MERALCO bought 2 lots from a private
Filipino individual. Apparently the land bought already becomes private property
because it was already bought by MERALCO. The private corporation can own
alienable lands of the public domain only by buying it from a private person.
MERALCO is asking for a confirmation of its title of the two lots. The court did not
perform the confirmation because they have no proof to show that the said property
was alienated by the government and because there is no title from that private
citizen. The concept is that a property does not become private unless there is a
title from the private individual.
Director of Lands vs Intermediate Appellate Court, it has abandoned
the MERALCO case, the rule now is that alienable land held by a possessor,
personally or through his predecessors in-interest, openly, continuously and
exclusively for the 30 years is converted to private property by the mere lapse or
completion of said period. Pero it goes without saying that these properties must
have been declared alienable and disposable; otherwise it is still a part of the lands
of the public domains. We will assume that the property is already declared as

alienable and disposable. In this case, unlike MERALCO it does not need a title in
favor of the private person; it is enough that it is acquired by prescription for 30
years and has its title confirmed by the court.
Once title of alienable public land passes thru a private individual it is
segregated from lands from the public domain and becomes private land subject to
the rights of private ownership.
Section 4 The Congress shall, as soon as possible, determine, by law, the
specific limits of forest lands and national parks, marking clearly their
boundaries on the ground. Thereafter, such forest lands and national
parks shall be conserved and may not be increased nor diminished, except
by law. The Congress shall provide for such period as it may determine
measures to prohibit logging in endangered forests and watershed areas.
Section 5 The State, subject to the provisions of this Constitution and
national development policies and programs, shall protect the rights of
indigenous cultural communities to their ancestral lands to ensure their
economic, social, and cultural well-being.
The Congress may provide for the applicability of customary laws
governing property rights or relations in determining the ownership and
extent of ancestral domain.
The enabling law to implement Section 5 is the R.A. 8371 of the Indigenous
Peoples Rights, was passed in the 10th Congress 1995-1998, it was not passed on
the 9th Congress because of the question of the concept of ancestral domain and
ancestral lands.
The ancestral domain as defined refers to all areas generally belonging to
ICCs/IPs comprising lands, inland waters, coastal areas, and natural resources
therein, held under a claim of ownership, occupied or possessed by ICCs/IPs
themselves or through their ancestor. The ancestral lands, refers to lands
occupied and utilized by individuals, families and clans who are members of the
ICCs/IPs since time immemorial, by themselves or through their predecessors ininterest.
In Cruz vs, Secretary, Petitioners assail the constitutionality of the following
provisions of the IPRA and its Implementing Rules on the ground that they amount
to an unlawful deprivation of the States ownership over lands of the public domain
as well as minerals and other natural resources therein, in violation of the regalian
doctrine embodied in Section 2, Article XII of the Constitution. The SC upheld the
validity of the IPRA Law, on what grounds? The ancestral domains and the ancestral
lands are not parts of the lands of the public domains. They are private lands and

they belong to the indigenous people. The IPRA Law is an exception to the jura
regalia doctrine.
Section 6 The use of property bears a social function, and all economic
agents shall contribute to the common good. Individuals and private
groups, including corporations, cooperatives, and similar collective
organizations, shall have the right to own, establish, and operate
economic enterprises, subject to the duty of the State to promote
distributive justice and to intervene when the common good so demands.
Section 6 is saying that the state can come in and rejects free enterprise and
laissez faire. How will you rationalize this provision to the free enterprise that
prevails in our economy? It is as if saying that the state can intervene in the
management of a free enterprise.
Section 7 Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain.
If the land is from a hereditary succession, it will not be a part of lands of
public domain. Private Corporation may now be qualified to own private lands.
Section 7 is telling who are qualified to acquire and buy private property are Filipino
Citizens, because under Section 3 Filipino Citizens may acquire lands up to 12
hectares by prescription grant or purchase. The right to own a private land is now
dependent on the qualifications to hold or acquire lands from a public domain.

Private lands mean any land of private ownership. This includes both lands
owned by private individuals and lands which are patrimonial property of the State
or of municipal corporations.
An old case Krivenko vs. Register of Deeds, absolutely foreigners cannot
own private lands.
Cheeseman vs Intermediate Court of Appeals, the prohibition of aliens
not qualified to own private lands applies also to a regime of a conjugal partnership.
Foreigner with a Filipina wife, they own private lands and the signature of the
foreign husband is not needed in order to sell the private land. The foreigner spouse
does not have the right of a conjugal partner to consent to or not to consent to a
disposition of a land.

Republic vs. Court of Appeals, the time to determine whether the person
acquiring land is qualified is the time hewn the right to own is acquired and not the
time to register. A specific example of this is a Filipino who bought a land and he
registered it when he was already a foreigner. There is law that gives a former
Filipino Citizen to acquire land.
In Ramirez vs. Vda de Ramirez, aliens may acquire in cases of hereditary
succession. However it was clarified in this case. The court ruled that the
constitution provision does not extend to testamentary succession it
applies only to intestate succession.
Halili vs CA, when an alien acquires land by hereditary succession such alien
cannot renounce the right to inherit in favor of one who is not qualified. What is
prohibited by the Constitution is the vesting of Title of Lands in favor of aliens.
Hence the prohibition in Section 7, does not extend to lease of private lands.
Ownership of private lands ang pinag uusapan sa section 7. Usufractuary right over
land may be conveyed to an alien, this means right to use.
Can a Filipino corporation acquire a private land? The answer is YES. Since
section 7 makes capacity to acquire private land dependent to the capacity to
acquire or hold lands of the public domain.
Section 8 Notwithstanding the provisions of Section 7 of this Article, a
natural-born citizen of the Philippines who has lost his Philippine
citizenship may be a transferee of private lands, subject to limitations
provided by law.
Example of this is R.A. 8179
Section 9. The Congress may establish an independent economic and
planning agency headed by the President, which shall, after consultations
with the appropriate public agencies, various private sectors, and local
government units, recommend to Congress, and implement continuing
integrated and coordinated programs and policies for national
Until the Congress provides otherwise, the National Economic and
Development Authority shall function as the independent planning agency
of the government.
Section 10 The Congress shall, upon recommendation of the economic and
planning agency, when the national interest dictates, reserve to citizens of
the Philippines or to corporations or associations at least sixty per
centum of whose capital is owned by such citizens, or such higher

percentage as Congress may prescribe, certain areas of investments. The

Congress shall enact measures that will encourage the formation and
operation of enterprises whose capital is wholly owned by Filipinos.
What is the Filipinization of certain areas of investment? Section 10 provides
the answer, because it mandates congress to reserve to citizens of the Philippines
or to corporations or associations at least sixty per centum of whose capital is
owned by such citizens, or such higher percentage as Congress may prescribe
certain areas of investments.
In the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified
When the shares of GSIS in Manila Prince Hotel was being sold, a Malaysian
investor bided and won but there was another bidder a Filipino Citizen named Don
Jose Yap. But the shares were given to Don Jose Yap because of the 2 nd paragraph of
Section 10. The court said that the 2 nd paragraph was a mandatory positive
command which is complete in itself.
Tanada vs Angara, this is about General Agreement on Tariffs and Trade.
The GAP was challenged as unconstitutional treaty for placing foreign investors on
the same level as Filipinos. GAP is agreement among nations whereby after the
lapse of a number of years there will be free flowing of goods in these countries.
Mawawala na ung tariff protection of goods that are produced in the Philippines. It
gives undue advantage to Filipinos. The court said the 2 nd paragraph of Section 10 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 State shall regulate and exercise authority over foreign investments
within its national jurisdiction and in accordance with its national goals
and priorities.
Section 11 No franchise, certificate, or any other form of authorization for
the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of
the Philippines, at least sixty per centum of whose capital is owned by
such citizens; nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years. Neither shall
any such franchise or right be granted except under the condition that it
shall be subject to amendment, alteration, or repeal by the Congress when
the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of

foreign investors in the governing body of any public utility enterprise

shall be limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or association must
be citizens of the Philippines.
This section is a superfluity, meaning even if this provision is not here in the
constitution and because of the concept of exercise of police power the State may
amend or alter any contract for as long as it is for the common good.
The governing board of this enterprise belongs to 40 percent foreigner

What is public utility? Public utility is defined as utility corporations

which render services to the general public for compensation. Who may
grant franchises? Essentially it is the Congress who grants it, but this power may be
devoid to agencies of the government like LTFRB, they have the power to issue
franchises to public utility vehicles. The Energy Regulatory Board has the power to
issue franchises to power supplies and gasoline stations.
The moment for determining a corporation is entitled as a public utility is
hewn it applies for a franchise. What is meant by this? Foreign Corporation could
construct and own facilities like a light rail system but it may not give the franchise
to operate the system. LRT, MRT are foreign owned, but the constitutional
prohibition is on the operation of the franchise.
Franchises granted cannot be exclusive in character. Foreign investors may
participate in a governing body of a public utility but only to the extent of their
proportionate share of the capital.
A commentary by Bernardo Villegas, it is clear that in the minds of the
members of the Constitutional Commission that the word capital in Section 11
refers not only in the voting stock but in the total subscribed to the capital both
common and preferred. It includes everything type of shares and stock.
All executive and managing officers
association must be citizens of the Philippines.





Section 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.

Section 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.
Section 14 The sustained development of a reservoir of national talents
consisting of Filipino scientists, entrepreneurs, professionals, managers,
high-level technical manpower and skilled workers and craftsmen in all
fields shall be promoted by the State. The State shall encourage
appropriate technology and regulate its transfer for the national benefit.
The practice of all professions in the Philippines shall be limited to Filipino
citizens, save in cases prescribed by law.
Section 15 The Congress shall create an agency to promote the viability
and growth of cooperatives as instruments for social justice and economic
Section 16 The Congress shall not, except by general law, provide for the
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and
subject to the test of economic viability.
Section 16 is a prohibition in Congress to provide for the organization or
formation or regulation of private corporations. The purpose is to insulate Congress
from special private interest.
Section 17 In times of national emergency, when the public interest so
requires, the State may, during the emergency and under reasonable
terms prescribed by it, temporarily take over or direct the operation of
any privately-owned public utility or business affected with public
The president is the only one who can own the privately-owned public utility
or business affected with public interest because of the word State. Is this juris
prudence? It is not. As held in the case of David vs. Arroyo. Randy David who
owns Philippine Daily Inquirer during 2006 while celebrating at EDSA in Februray,
this was the time when GMA was almost ousted as President of the Philippines. And
a Coup was being planned. GMA issued a Presidential Proclamation, declaring a
state of emergency. But the SC said that there is no such thing as state of
emergency. Bernas said the State means it was the President, Bernas was
wrong. SC said the State means that it is the Congress that will declare the
State of Emergency.

It is the Congress who will provide for the takeover of the utilities.
National State of emergency means threat from external aggression,
calamities or natural disasters.
How long is the takeover that was mentioned in Section 17? Is that provided
in the law that authorizes the takeover?
Section 18 The State may, in the interest of national welfare or defense,
establish and operate vital industries and, upon payment of just
compensation, transfer to public ownership utilities and other private
enterprises to be operated by the Government.
Likewise section 18 must be similarly read like section 17, meaning by
enactment of Congress.
Section 19 The State shall regulate or prohibit monopolies when the public
interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed.
You will note, comparing the first sentence dealing with monopolies may be
allowed because it says the State shall regulate or prohibit monopolies when the
public interest so requires, if it is regulatory then it is allowed. But for the 2 nd
sentence, absolutely it is not allowed.
1987 Constitution speaks simply of Monopolies, in 1973 Constitution speaks
of the Private Monopolies, even public monopolies are governed and regulated by
Section 19.
The purpose of Section 19 encourages competition, to assure a
competitive economy based upon the belief that through competition
producers will strive to satisfy consumer wants at the lowest price
possible, in here there is reliance upon the operation of the market system to
decide what shall be produced, how resources shall be allocated in the production
process and to whom various products will be distributed. The market system relies
on the consumer to decide what and how much shall be produced, and on
competition, among producers who will manufacture it.
When there is a combination in restraint of trade as unfair competition are
prohibited by the Constitution? When there is only one seller or producer of product
or service of which there are no substitutes. It Is conspiracy to dominate trade and
commerce in a commodity to such an extent that they are able , as a group, to
exclude actual or potential competitors from the field, accompanied with the
intention and purpose to exercise such power.

There is now a Law just recently passed by the Congress. The Philippine
Competition Act, it is an Anti-Trust Policy, Prohibiting anti-competitive arrangements
between and among competitors and behaviors as well as other unfair business
practices to protect consumer rights.
Section 20 The Congress shall establish an independent central monetary
authority, the members of whose governing board must be natural-born
Filipino citizens, of known probity, integrity, and patriotism, the majority
of whom shall come from the private sector. They shall also be subject to
such other qualifications and disabilities as may be prescribed by law. The
authority shall provide policy direction in the areas of money, banking,
and credit. It shall have supervision over the operations of banks and
exercise such regulatory powers as may be provided by law over the
operations of finance companies and other institutions performing similar
Until the Congress otherwise provides, the Central Bank of the Philippines
operating under existing laws, shall function as the central monetary
Section 21 Foreign loans may only be incurred in accordance with law and
the regulation of the monetary authority. Information on foreign loans
obtained or guaranteed by the Government shall be made available to the
Section 22 Acts which circumvent or negate any of the provisions of this
Article shall be considered inimical to the national interest and subject to
criminal and civil sanctions, as may be provided by law.