LA BUGAL BLAAN TRIBAL ASSOCIATION INC vs RAMOS Case Digest

LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O. RAMOS, Secretary Department of
Environment and Natural Resources; HORACIO RAMOS, Director, Mines and Geosciences Bureau
(MGB-DENR); RUBEN TORRES, Executive Secretary; and WMC (PHILIPPINES) INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
The constitutional provision allowing the President to enter into FTAA is a exception to the rule that
participation in the nations natural resources is reserved exclusively to Filipinos. Provision must be
construed strictly against their enjoyment by non-Filipinos.
FACTS: RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942, or on
March 30, 1995, the President signed a Financial and Technical Assistance Agreement (FTAA) with WMCP, a
corporation organized under Philippine laws, covering close to 100,000 hectares of land in South Cotabato,
Sultan Kudarat, Davao del Sur and North Cotabato. On August 15, 1995, the Environment Secretary Victor
Ramos issued DENR Administrative Order 95-23, which was later repealed by DENR Administrative Order 9640, adopted on December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and WMCP be
declared unconstitutional on ground that they allow fully foreign owned corporations like WMCP to exploit,
explore and develop Philippine mineral resources in contravention of Article XII Section 2 paragraphs 2 and 4 of
the Charter.
In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its whole stake in
WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is owned by Indophil
Resources, an Australian company. DENR approved the transfer and registration of the FTAA in Sagittarius
name but Lepanto Consolidated assailed the same. The latter case is still pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept, consider and
evaluate proposals from foreign owned corporations or foreign investors for contracts or agreements involving
wither technical or financial assistance for large scale exploration, development and utilization of minerals which
upon appropriate recommendation of the (DENR) Secretary, the President may execute with the foreign
proponent. WMCP likewise contended that the annulment of the FTAA would violate a treaty between the
Philippines and Australia which provides for the protection of Australian investments.
ISSUES:
1.
Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned
corporations to exploit the Philippine mineral resources.
2.
Whether or not the FTAA between the government and WMCP is a service contract that
permits fully foreign owned companies to exploit the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional
RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned corporations to
exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that All lands of the
public domain, waters, minerals, coal, petroleum, and other 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. The same section also states that, the exploration and development and utilization of
natural resources shall be under the full control and supervision of the State.
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing the State to
grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural
resources. By such omission, the utilization of inalienable lands of the public domain through license, concession
or lease is no longer allowed under the 1987 Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting
a particular natural resource within a given area. The concession amounts to complete control by the

concessionaire over the countrys natural resource, for it is given exclusive and plenary rights to exploit a
particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or other forms of assistance in the
1973 Charter. The present Constitution now allows only technical and financial assistance. The management
and the operation of the mining activities by foreign contractors, the primary feature of the service contracts was
precisely the evil the drafters of the 1987 Constitution sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that
participation in the nations natural resources is reserved exclusively to Filipinos. Accordingly, such provision
must be construed strictly against their enjoyment by non-Filipinos. Therefore, RA 7942 is invalid insofar as the
said act authorizes service contracts. Although the statute employs the phrase financial and technical
agreements in accordance with the 1987 Constitution, its pertinent provisions actually treat these agreements
as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages the mineral
resources just like the foreign contractor in a service contract. By allowing foreign contractors to manage or
operate all the aspects of the mining operation, RA 7942 has, in effect, conveyed beneficial ownership over the
nations mineral resources to these contractors, leaving the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained
60-40% capitalization requirement for corporations or associations engaged in the exploitation, development and
utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as conditions, considerations, inducements or
compensations for each other as to warrant a belief that the legislature intended them as a whole, then if some
parts are unconstitutional, all provisions that are thus dependent, conditional or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to merely technical
or financial assistance to the State for large scale exploration, development and utilization of minerals, petroleum
and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional since the agreement
itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to explore, exploit,
utilize and dispose of all minerals and by-products that may be produced from the contract area. Section 1.2 of
the same agreement provides that EMCP shall provide all financing, technology, management, and personnel
necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken together, grant WMCP beneficial
ownership over natural resources that properly belong to the State and are intended for the benefit of its citizens.
These stipulations are abhorrent to the 1987 Constitution. They are precisely the vices that the fundamental law
seeks to avoid, the evils that it aims to suppress. Consequently, the contract from which they spring must be
struck down.