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.

RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942 (The Philippine
Mining Act), 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Victor Ramos issued DENR Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-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. 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:
1. Yes. 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. RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting
fully foreign owned corporations to exploit the Philippine natural resources. 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 nation‘s 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.

2. Yes. 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. They are precisely the vices that the
fundamental law seeks to avoid, the evils that it aims to suppress.

Insights:

The mining industry in the Philippines is regulated by the government and subject to foreign equity restrictions
because of the Constitutional policy that mineral resources are owned by the State and their exploration,
development, utilization, and processing are under its full control and supervision. The State may however directly
undertake such activities or it may enter into mineral agreements with contractors, enter into co-production, joint
venture, or production sharing agreements with Filipino citizens, or corporations or associations at least 60% of
whose capital is owned by Filipinos with the other 40% foreign-owned. These agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty five years, and under such terms and conditions
as may be provided by Philippine law.

The State is permitted to 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 Philippine law. The terms and conditions of
the financial or technical assistance agreements are contained in The Philippine Mining Act. Under this law, only
“qualified persons” may engage in the exploration, utilization, and development of mineral resources in the
Philippines. These are:

 Any citizen of the Philippines with capacity to contract and

 Corporations, Partnerships, Associations, or Cooperatives organized or authorized for the purpose of

engaging in mining, with technical and financial capability to undertake mineral resources development
and duly registered in accordance with law at least sixty per centum (60%) of the capital of which is
owned by citizens of the Philippines.

A legally organized foreign-owned corporation may be deemed a qualified person for purposes of granting an
exploration permit, financial or technical assistance agreement, or mineral processing permit. A financial or
technical assistance agreement means a contract involving financial or technical assistance for large-scale
exploration, development, and utilization of mineral resources.

If the company is involved in exploration, development, or utilization of mineral resources, you may need to do
business in the Philippines through a 60-40 Philippine-owned corporation. Branches and companies without the
required foreign equity may enter into a financial or technical assistance agreement under the terms and
conditions of the Philippine Mining Act. Companies not involved in exploration, utilization, and development, but
which are in related mining business do not fall under the foreign equity restriction of the Philippine Mining Act
and depending on the scope of their activities may do business in the Philippines as a fully foreign-owned branch
or domestic subsidiary.

The Mining Act of 1995 has been selling-out our national patrimony to trans-national corporations. The salient
points of the Mining Act which clearly put mining firms in a pedestal while alienating and plundering our own lands
and resources for greed and profit:

 100 percent foreign ownership of mining projects;

 Foreign company can lay claim to 81,000 hectares onshore or 324,000 hectares offshore;
  Companies can repatriate all profits, equipment and investment; Companies are guaranteed against
expropriation by the state;

 Excise duties are cut from five to two percent and tax holidays and deferred payment are allowed until all
costs are recovered;

 Losses can be carried forward against income tax;

 The government commits itself to ensuring the removal of all obstacles to mining, including settlements
and farms;

 Companies are promised priority access to water resources within their concession;

 Companies are given the right to sell gold directly to the international market without Central Bank
intervention;

 Mining leases last 25 years with an option of a 25-year extension.

The Philippine Mining Act of 1995 is clearly anti-people and anti-environment. Worst, it does not protect the
Filipino people from foreign mining firms. The people are neither benefitting from, nor in control, of these
resources.