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G.R. No. 127882. January 27, 2004


RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of the said law on March 30, 1995, the President
signed a Financial and Technical Assistance Agreement (FTAA) with WMCP, a corporation organized under Philippine laws, covering
99,387 hectares of land in South Cotabato 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DENR Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-40, adopted on December 20, 1996.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.


(1) WON RA 7942 is unconstitutional.
(2) WON the FTAA between the government and WMCP is unconstitutional.


(1) YES. 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 and that the
exploration and development and utilization of natural resources shall be under the full control and supervision of the State.
RA 7942 is invalid it 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 nation‘s mineral resources to these contractors,
leaving the State with nothing but bare title thereto. It also permits 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.
(2) YES. 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.