Narra Nickel Mining, et al. v.

Redmont Consolidated
• Respondent Redmont wanted to mine certain areas in Palawan.

• After inquiring with the DENR, itl earned that the area was already covered by the application
of Petitioners, Narra, Tesoro, and McArthur.

• McArthur and Tesoro acquired its MPSA, through its predeessor-in-interest SMMI.

• Narra acquired its MPSA from Alpha Marie and PLMC.

• Redmont filed a petition for the denial of the applications of petitioners.

- Ground: 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.

• Petitioner’Claims:

- Nationality is irrelevant since they only applied for Financial or Technical Assistance
Agreements with the Petitioners.

- They claim that all petitioners are 60% Fil.

- Though MBMI owns 40% of the shares of PLMC

- That though MBMI owns 40% of the shares of PLMC (which owns 5,997 shares of Narra),
40% of the shares of MMC (which owns 5,997 shares of McArthur) and 40% of the shares
of SLMC (which, in turn, owns 5,997 shares of Tesoro), the shares of MBMI will not make it
the owner of at least 60% of the capital stock of each of petitioners.

• POA: Disqualified petitioners from gaining MPSA.

- POA considered petitioners as foreign corporations being "effectively controlled" by

MBMI, a 100% Canadian company and declared their MPSAs null and void.

• Petitioners appealed. Pending appeal, Redmont filed a petition fo the cancellation of the
certificate of registration of Petitioners before the SEC. Later, he filed with the RTC an action
for injunction to suspend the Appeal with the MAB, pending resolution by the SEC.

• MAB reversed the POA order denying Petitioners’ applications; CA: Petitioners are foreign
corps. (Grandfather Rule) but nulification of MPSAs is highly improper.

• Pending appeal to the CA, Redmont filed with the OP a petition for the cancellation of
Petitioners’ FTAAs.

• OP revoked the FTAA on the ground of misrepresentation that Petitioners were PH Corp.

• ISSUE: W/N Petitioners are PH Co.

• Two Tests to identify the nationality of a corporation: (1) Control Test; (2) Grandfather Rule.

• "Corporate layering" is admittedly allowed by the FIA; but if it is used to circumvent the
Constitution and pertinent laws, then it becomes illegal.

• It is the intention of the framers of the Constitution to apply the grandfather rule in cases
where corporate layering is present.
• Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing
Corporation and the Investee Corporation must be traced

- PH Co (60% PH, 40% Foreign) owns 100k shares in another corp. Only 60k shares will be
counted as PH nationality.

- In other words, the Grandfather Rule applies only when the 60-40 Filipino-foreign equity
ownership is in doubt.

- 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.

- Concluding from the above-stated facts, it is quite safe to say that petitioners McArthur,
Tesoro and Narra are not Filipino since MBMI, a 100% Canadian corporation, owns 60% or
more of their equity interests.
- Such conclusion is derived from grandfathering petitioners’ corporate owners, namely:
MMI, SMMI and PLMDC. Going further and adding to the picture, MBMI’s Summary of
Significant Accounting Policies statement– –regarding the "joint venture" agreements that
it entered into with the "Olympic" and "Alpha" groups––involves SMMI, Tesoro, PLMDC
and Narra.