La Bugal-Blaan Tribal Association, Inc.
Vs Ramos nations natural resources is reserved exclusively to
Natural Resources and Environmental Laws
G.R. No. 127882; January 27, 2004
FACTS:
This petition for prohibition and mandamus challenges the
constitutionality of Republic Act No. 7942 (The Philippine Mining
Act of 1995), its implementing rules and regulations and the
Financial and Technical Assistance Agreement (FTAA) dated March
30, 1995 by the government with Western Mining
Corporation(Philippines) Inc. (WMCP).
Accordingly, the FTAA violated the 1987 Constitution in that it is a
service contract and is antithetical to the principle of sovereignty
over our natural resources, because they allowed foreign control
over the exploitation of our natural resources, to the prejudice of
the Filipino nation.
ISSUE:
What is the proper interpretation of the phrase Agreements
involving Either Technical or Financial Assistance contained in
paragraph 4, Section 2, Article XII of the Constitution.
HELD:
The Supreme Court upheld the constitutionality of the Philippine
Mining Law, its implementing rules and regulations insofar as
they relate to financial and technical agreements as well as the
subject Financial and Technical Assistance Agreement.
Full control is not anathematic to day-to-day management by the
contractor, provided that the State retains the power to direct
overall strategy; and to set aside, reverse or modify plans and
actions of the contractor. The idea of full control is similar to that
which is exercised by the board of directors of a private
corporation, the performance of managerial, operational, financial,
marketing and other functions may be delegated to subordinate
officers or given to contractual entities, but the board retains full
residual control of the business.
The constitutional provision allowing the President to enter
into FTAA is a exception to the rule that participation in the
Filipinos. Provision must be construed strictly against their
enjoyment by non-Filipinos.
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 the Philippine Mining Act is unconstitutional
for allowing fully foreign-owned corporations to exploit the
Philippine mineral 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.
HELD:
First Issue: 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.
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. 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.
Under the concession system, the concessionaire makes a direct
equity investment for the purpose of exploiting a particular natural
resource within a given area. The concession amounts to complete
control by the concessionaire over the countrys natural resource,
for it is given exclusive and plenary rights to exploit a particular
resource at the point of extraction.
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. The management and the operation of the mining
activities by foreign contractors, the primary feature of the service
contracts was precisely the evil the drafters of the 1987
Constitution sought to avoid.
The constitutional provision allowing the President to enter into
FTAAs is an exception to the rule that participation in the nations
natural resources is reserved exclusively to Filipinos. Accordingly,
such provision must be construed strictly against their enjoyment
by non-Filipinos. 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.
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 nations mineral resources to these contractors, leaving
the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit 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.
When parts of a statute are so mutually dependent and connected
as conditions, considerations, inducements or compensations for
each other as to warrant a belief that the legislature intended them
as a whole, then if some parts are unconstitutional, all provisions
that are thus dependent, conditional or connected, must fail with
them.
Under Article XII Section 2 of the 1987 Charter, foreign owned
corporations are limited only to merely technical or financial
assistance to the State for large scale exploration, development
and utilization of minerals, petroleum and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service
Contract
The FTAA between he WMCP and the Philippine government is
likewise unconstitutional since the agreement itself is a service
contract.
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.