LA BUGAL B’LAAN TRIBAL ASSOCIATION INC., et.al.

v.
V.O RAMOS, Secretary Department of Environment and Natural Resources; H. RAMOS,
Director, Mines and Geosciences Bureau (MGB-DENR); R. TORRES, Executive Secretary
; and WMC (PHILIPPINES) INC.

Ponente: Panganiban, J.

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Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-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.

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 Philippine Mining Act is unconstitutional for permitting fully
foreign owned corporation to explore, exploit, and develop the Philippine natural 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.

RULING: (1) Yes. 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 in violation of Article XII Section 2 of the 1987 Constitution. 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.
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. (2) No. 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.