Narra Nickel Mining and Development Corp.

vs Redmont Consolidated Mines Corporation

G.R. No. 195580 April 21, 2014

FACTS:

This case started when Redmont Consolidated Mines Corp. (Redmont), a domestic corporation
organized and existing under Philippine laws, took interest in mining and exploring certain areas of the
province of Palawan. After inquiring with the Department of Environment and Natural Resources
(DENR), it learned that the areas where it wanted to undertake exploration and mining activities where
already covered by Mineral Production Sharing Agreement (MPSA) applications of petitioners Narra,
Tesoro and McArthur.

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3) separate
petitions for the denial of petitioners’ applications for MPSA and EP designated as AMA-IVB-153, AMA-
IVB-154 and MPSA IV-1-12. In the petitions, Redmont alleged that at least 60% of the capital stock of
McArthur, Tesoro and Narra are owned and controlled by MBMI Resources, Inc. (MBMI), a 100%
Canadian corporation.

Redmont reasoned that since MBMI is a considerable stockholder of petitioners, it was the driving force
behind petitioners’ filing of the MPSAs over the areas covered by applications since it knows that it can
only participate in mining activities through corporations which are deemed Filipino citizens. Redmont
argued that given that petitioners’ capital stocks were mostly owned by MBMI, they were likewise
disqualified from engaging in mining activities through MPSAs, which are reserved only for Filipino
citizens.

Issue:

Whether or not the petitioner corporations are Filipino and can validly be issued MPSA and EP.

Held:

NO. The Court note that a grave violation of the Constitution, specifically Section 2 of Article XII, is being
committed by a foreign corporation right under our country’s nose through a myriad of corporate
layering under different, allegedly, Filipino corporations.

The intricate corporate layering utilized by the Canadian company, MBMI, is of exceptional character
and involves paramount public interest since it undeniably affects the exploitation of our Country’s
natural resources. The corresponding actions of petitioners during the lifetime and existence of the
instant case raise questions as what principle is to be applied to cases with similar issues. No definite
ruling on such principle has been pronounced by the Court; hence, the disposition of the issues or errors
in the instant case will serve as a guide "to the bench, the bar and the public."35 Finally, the instant case
is capable of repetition yet evading review, since the Canadian company, MBMI, can keep on utilizing
dummy Filipino corporations through various schemes of corporate layering and conversion of
applications to skirt the constitutional prohibition against foreign mining in Philippine soil.
 The Grandfather Rule or the second part of the SEC Rule applies only when the 60-40 Filipino-foreign
equity ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign
stockholders with less than 60% Filipino stockholdings [or 59%] invests in other joint venture
corporation which is either 60-40% Filipino-alien or the 59% less Filipino). Stated differently, where the
60-40 Filipino- foreign equity ownership is not in doubt, the Grandfather Rule will not apply.

The Court finds that this case calls for the application of the grandfather rule since, as ruled by the POA
and affirmed by the OP, doubt prevails and persists in the corporate ownership of petitioners. Also, as
found by the CA, doubt is present in the 60-40 Filipino equity ownership of petitioners Narra, McArthur
and Tesoro, since their common investor, the 100% Canadian corporation––MBMI, funded them.
However, petitioners also claim that there is "doubt" only when the stockholdings of Filipinos are less
than 60%.43