• NATIONAL ECONOMY AND PATRIMONY

• ARTICLE XII

Section 1. The goals of the national

economy are a more equitable distribution of
opportunities, income, and wealth; a sustained
increase in the amount of goods and services
produced by the nation for the benefit of the
people; and an expanding productivity as the
key to raising the quality of life for all, especially
the underprivileged.
• The state shall promote industrialization
and full employment based on sound
agricultural development and agrarian
reform, through industries that make full
and efficient use of human and natural
resources, and which are competitive in
both domestic and foreign markets.
However, the state shall protect Filipino
enterprises against unfair foreign
competition and trade practices.
• In the pursuit of these goals, all sectors
of the economy and all regions of the
country shall be given optimum opportunity
to develop. Private enterprises, including
 corporations, cooperatives, and similar
collective organizations, shall be
encouraged to broaden the base of their
ownership.
• Article XII contains the national economic
policy of the Constitution.
• Article XII elaborates the mandate of Sec
19 and 20, Art II (Declaration of Principles)
• Section 1 expresses the general economic
policies of the Constitution. It contains the
three basic directions of the national
economy
• The first paragraph sets the three fold goal
of the national economy to be:
• The economic policy promotes a balance
between industrialization and agricultural
development.

Section 2. All lands of the public domain,

waters, 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.
 
 • Jura regalia or the Regalian Doctrine
principle.
• Q: What is Jura Regalia or the Regalian
Doctrine principle. What if any is the
constitutional basis for this doctrine?
• Imperium/Dominium.
• Lee Hong Kok v. David, 48 SCRA 379, 1972

(2) With the exception of agricultural lands, all

other natural resources shall not be alienated.
• Limits of dominium.
• ...only agricultural lands of the public
domain may be alienated. All other natural
resources may not be.
• Oh Cho v. Director of Lands, 75 Phil 890.
• San Miguel Corporation v. Court of
Appeals, GR No. 57667, May 28, 1990.
• Almeda v. Court of Appeals, GR No. 5322,
April 30, 1991.
• Summit v. CA, GR No. 124293, January 31,
2005.
• Reclaimed foreshore and submerged lands
are lands of the public domain
• Requisites for reclaimed land to be
registered as private property:
• Republic v. Enciso, GR No. 160145, Nov 11,
2005.
 • Chavez v. PEA-Amari, GR No. 133250, July
9, 2002.
• Laurel v. Garcia, GR No. 92013 and 92047,
July 25, 1990.

(2) The exploration, development, and

utilization of natural resources shall be under
the full control and supervision of the state.
• How may inalienable natural resources be
explored, developed or utilized? –
• Who are qualified to take part in the
exploration, development and utilization
of inalienable natural resources?
• The Grandfather Rule: the method by
which the percentage of Filipino equity in a
Corporation is computed, in cases where
corporate shareholders are present.
• Two levels of control:

(2) The state may directly undertake such

activities, or it may enter into co-production,
joint venture, or production sharing agreements
with Filipino citizens, or corporations or
associations at least sixty percent of whose
capital is owned by such citizens. Such
agreements may be for not more than
exceeding twenty-five years, renewable for not
more than twenty-five years, and under such
terms and conditions as may be provided by
law.
 
• La Bugal B'laan Tribal Assn. v. DENR, GR
No. 127882, December 1, 2004.

• (2) In cases of water rights for irrigation,

water supply, fisheries, or industrial uses
other than the development of water
power, beneficial use may be the measure
and limit of the grant.
• The state shall protect the nation's marine
wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and
reserve its use and enjoyment exclusively to
Filipino citizens.
 
• As to marine wealth.

(2) The congress may, by law, allow small-

scale utilization of natural resources by Filipino
citizens, as well as cooperative farming, with
priority to subsistence fishermen and fish
workers in rivers, lakes, bays and lagoons.
(2) The President may enter into
agreements with foreign-owned corporations
involving either technical or financial assistance
for large-scale exploration, development, and
utilization of minerals, petroleum, and other
mineral oils according to the general terms and
conditions provided by law, based on real
contributions to the economic growth and
general welfare of the country. In such
agreements, the state shall promote the
development and use of local scientific and
technical resources.
(2)The President shall notify the congress of
every contract entered into in accordance with
this provision, within thirty days from its
execution.

Other limitations in Sec.2:

Section 3. Lands of the public domain are

classified into agricultural, forest or timber,
mineral lands and national parks. Agricultural
lands of the public domain may be further
classified by law according to the uses to which
they may be devoted. Alienable lands of the
public domain shall be limited to agricultural
lands. Private corporations or associations may
not hold such lands of the public domain except
by lease, for a period not exceeding twenty-five
years, and not to exceed one thousand hectares
in area. Citizens of the Philippines may lease not
more than five hundred hectares, or acquire not
more than twelve hectares thereof by purchase,
homestead, or grant.
Taking into account the requirements of
conservation, ecology, and development, and
subject to the requirements of agrarian reform,
the congress shall determine, by law, the size of
lands of the public domain which may be
acquired, developed, held, or leased and the
conditions therefore.
 
• Sec. 3 deals with the classification of lands
of the public domain
• The classification is descriptive of the legal
nature of the land and not what it looks
like. (Director of Lands v. Judge Aquino, GR
No. 31688, December 17, 1990).
• The rights over the land are indivisible .
(Republic v. CA, 160 SCRA 228, 1988).
• Rules in the disposition of lands of the
public domain:
• corporations cannot acquire land of the
public domain, they can acquire private
land.
 • Meralco v. Judge Bartolome, 114 SCRA 799
(1982),
• Director of Lands v. IAC, 146 SCRA 509
(1986) abandoned the Meralco case.
• Once "title" to alienable public land passes
to a private individual.

Section 4. The congress shall, as soon as

possible, determine by law the specific limits of
forest lands and national parks, marking clearly
their boundaries on the ground. Thereafter,
such forest lands and national parks shall be
conserved and may not be increased nor
diminished, except by law. The congress shall
provide, for such periods as it may determine,
measures to prohibit logging in endangered
forests and in watershed areas.
 
Section 5. The state, subject to the
provisions of this constitution and national
development policies and programs, shall
protect the rights of indigenous cultural
communities and their ancestral lands to ensure
their economic, social, and cultural well being.
The congress may provide for the
applicability of customary laws governing
property rights or relations in determining the
ownership and extent of ancestral domain.
 
• RA 8371 - the Indigenous People's Rights
Law (IPRA).
• Ancestral domain; Ancestral land
• Cruz v. Secretary, GR 135385, December 6,
2000,

Section 6. The use of property bears a social

function, and all economic agents shall
contribute to the common good. Individuals and
private groups, including corporations,
cooperatives, and similar organizations, shall
have the right to own, establish, and operate
economic enterprises subject to the duty of the
state to promote distributive justice and to
intervene when the common good so demands.
 
Section 7. Save in cases of hereditary
succession, no private lands shall be transferred
or conveyed except to individuals, corporations
or associations qualified to acquire or hold
lands of the public domain.
• Private land means.
• The capacity to acquire private land is
made dependent upon the capacity to
acquire or hold lands of the public domain
• Krivenko v. Register of Deeds, 79 Phil 461
(1947).
• Cheeseman v. Intermediate Appellate
Court, 193 SCRA 93.
• Republic vs. Court of Appeals, 235 SCRA
567 (1994).
• Ramirez v. Vda. de Ramirez, 111 SCRA 704
(1982).
• Halili vs. Court of Appeals, GR No. 113539,
March 12, 1998.
• prohibition in Section 7 does not extend
to lease of private lands to aliens. Also,
usufructuary right.
• Can a Filipino corporation acquire private
land?

• Section 8. Notwithstanding the provisions of

Section 7 of this Article, a natural born
citizen of the Philippines who has lost his
Philippine citizenship may be a transferee of
private lands, subject to limitations provided
by law.
• RA 8179 (Foreign Investments Act)
 • Lantino v. Co Llong Chong, 188 SCRA 592
(1990)

Section 9. Congress may establish an

independent economic and planning agency
headed by the President, which shall, after
consultations with the appropriate public
agencies, various private sectors, and local
government units, recommend to congress, and
implement continuing integrated and
coordinated programs and policies for national
development.
Until congress provides otherwise, the
National Economic and Planning Authority shall
function as the independent planning agency of
the government
• "may establish”.

• Section 10. The congress shall, upon

recommendation of the economic and
planning agency, when the national interest
dictates, reserve to citizens of the
Philippines or to corporations or
associations at least sixty per centum of
whose capital is owned by such citizens, or
such higher percentage as congress may
prescribe, certain areas of investments. The
 congress shall enact measures that will
encourage the formation and operation of
enterprises whose capital is wholly owned
by Filipinos.
• Sec. 10 mandates the Filipinization
• Ichong vs. Hernandez, 101 Phil 1155 (1957)

(10) In the grant of rights, privileges, and

concessions covering the national economy and
patrimony, the state shall give preference to
qualified Filipinos.
• The state shall give preference to qualified
Filipinos .
• provided the filipino is qualified, even if a
foreigner is more qualified.
• Manila Prince Hotel vs. GSIS, GR No.
122156 February 3, 1997.
• Tanada vs. Angara, GR No. 118295, May 2,
1997

(10) The state shall regulate and exercise

authority over foreign investments within its
national jurisdiction and in accordance with its
national goals and priorities.
Section 11. No franchise, certificate, or any
other form of authorization for the operation of
a public utility shall be granted except to
citizens of the Philippines or to corporations or
associations organized under the laws of the
Philippines at least sixty per centum of whose
capital is owned by such citizens, nor shall such
franchise, certificate or authorization be
exclusive in character or for a longer period
than fifty years. Neither shall any such franchise
or right be granted except under the condition
that it shall be subject to amendment,
alteration, or repeal by the congress when the
common good so requires. The state shall
encourage equity participation in public utilities
by the general public. The participation of
foreign investors in the governing body of any
public utility enterprise shall be limited to their
proportionate share in its capital, and all the
executive and managing officers of such
corporation or association must be citizens of
the Philippines.
• Public utility
• Congress has the authority to grant
franchises
• A foreign corporation could construct and
own the facilities for a light rail system
• Franchises granted cannot be exclusive.
(RCPI vs. NTC, 150 SCRA 450).
 • Foreign investors may participate in the
governing board of any public utility but...
• that the word “capital“ in Section 11,
Article XII, refers not only to voting stock,
but to total subscribed capital, both
common and preferred. (Bernardo
Villegas)
Section 12. The state shall promote the
preferential use of Filipino labor, domestic
materials and locally produced goods, and
adopt measures that help make them
competitive.
• Filipino first policy -

Section 13. The state shall pursue a trade

policy that serves the general welfare and
utilizes all forms and arrangements or
exchange on the basis of equality and
reciprocity.

Section 14. The sustained development of a

reservoir of national talents consisting of
Filipino scientists, entrepreneurs, professionals,
managers, high-level technical manpower and
skilled workers and craftsmen in all fields shall
be promoted by the state. The state shall
encourage appropriate technology and regulate
its transfer for the national benefit.
The practice of all professionals in the
Philippines shall be limited to Filipino citizens
save in cases prescribed by law.
 
Section 15. The congress shall create an
agency to promote the viability and growth of
cooperatives as instruments for social justice
and economic development.
 
Section 16. The congress shall not, except
by general law, provide for the formation,
organization, or regulation of private
corporations. Government owned or controlled
corporations may be created or established by
special charters in the interest of the common
good and subject to the test of economic
viability.
• The purpose

Section 17. In times of national emergency,

when the public interest requires it, the state
may, during the emergency and under
reasonable terms prescribed by it, temporarily
take over or direct the operation of any
privately owned public utility or business
affected with public interest.
•  Sec. 17 empowers the temporary state
take over.

• David vs. Arroyo, GR 171396, May 3, 2006,

• Section 23, Article VI of the Constitution reads:
•
• SEC. 23. (1) The Congress, by a vote of two-
thirds of both Houses in joint session
assembled, voting separately, shall have the
sole power to declare the existence of a
state of war.
• (2) In times of war or other national
emergency, the Congress may, by law,
authorize the President, for a limited period
and subject to such restrictions as it may
prescribe, to exercise powers necessary and
proper to carry out a declared national
policy. Unless sooner withdrawn by
resolution of the Congress, such powers
shall cease upon the next adjournment
thereof.
 • 'the State may, during the emergency and under reasonable terms
prescribed by it, temporarily take over or direct the operation of any
privately owned public utility or business affected with public interest, it
refers to Congress, not the President. Now, whether or not the President
may exercise such power is dependent on whether Congress may delegate
it to him pursuant to a law prescribing the reasonable terms thereof.

•
• National emergency / Duration
• Cacho-Olivares, et al. contends that the term 'emergency under Section 17,
Article XII refers to 'tsunami, 'typhoon, 'hurricane and 'similar
occurrences.
• rebellion, economic crisis, pestilence or epidemic, typhoon, flood, or other
similar catastrophe of nationwide proportions or effect.

Section 18. The state may, in the interest of

national welfare or defense, establish and
operate vital industries and, upon payment of
just compensation, transfer to public ownership
utilities and other private enterprises to be
operated by the government. 
• Sec. 18 mandates the nationalization of
industries .
• Sec. 11 / Sec. 10/ Sec. 18

Section 19. The state shall regulate or

prohibit monopolies when the public interest so
requires. No combinations in restraint of trade
or unfair competition shall be allowed.
Sec. 19 speaks simply of "monopolies" instead
of "private monopolies".
Monopolies are not necessarily prohibited.
Combinations in restraint of trade and unfair
competition are prohibited.

Section 20. The congress shall establish an

independent central monetary authority, the
members of whose governing board shall be
natural born Filipino citizens, of known probity,
integrity, and patriotism, the majority of whom
shall come from the private sector. They shall
also be subject to such other qualifications and
disabilities as may be prescribed by law. The
authority shall provide policy direction in the
areas of money, banking, and credit. It shall
have supervision over the operations of banks
and exercise such regulatory powers as may be
provided by law over the operation of finance
companies and other institutions performing
similar functions.
Until the congress otherwise provides, the
central bank of the Philippines, operating under
existing laws, shall function as the central
monetary authority.
 Section 21. Foreign loans may only be
incurred in accordance with law and the
regulation of the monetary authority.
Information on foreign loans obtained or
guaranteed by the government shall be made
available to the public.

Section 22. Acts which circumvent or negate

any of the provisions of this Article shall be
considered inimical to the national interest and
subject to criminal and civil sanctions, as may
be provided by law.