NARRA NICKEL MINING AND DEVELOPMENT CORP. vs. REDMONT CONSOLIDATED MINES CORP. G.R.

No. 195580 April 21, 2014

Facts:
In Dec 2016, Redmont Consolidated Mines Inc (Redmont) filed before the Panel of Arbitrators (POA) of
DENR separate petitions for denial that McArthur Mining Inc (McArthur), Tesoro Mining & Dev Corp
(Tesoro), and Narra Nickel Mining & Dev Corp's applications to explore and mine areas under the Mineral
Production Sharing Agreement (MPSA) be disqualified for reasons that the mentioned corporations are not
"qualified persons." Redmont alleged that at least 60% of the capital stocks of McArthur, Tesoro, and Narra
are owned and controlled by MBMI Resources Inc (MBMI), a 100% Canadian corp. Redmont contended that
the mentioned companies cannot participate in mining activities in Philippines through the MPSA as it is
reserved only for Filipinos thereby disqualifying them. The 3 mining companies filed for a motion for
reconsideration in the Court of Appeals (CA) to which it found that there was doubt in the nationality of
petitioners. CA used the Grandfather rule in ascertaining nationality. The three filed again for a petition for
review that CA erred in using the Grandfather rule as it is contrary to law, particularly in the Foreign
Investments Act of 1991. Moreover, petitioners argued that the Control Test, not the Grandfather Rule,
should be used in determining nationality of the corporations.

Issue: Whether or not the Grandfather Rule is applicable in determining nationality of the mining
corporations

Ruling: Yes, Grandfather Rule is applicable. Where the case presents a situation where the mentioned
companies schemed and used corporate layering to circumvent the law and thereby creating doubts as to
its nationality, the GF rule must be used. It must be that the combined totals in the Investing and Investee
Corps should be traced (i.e. grandfathered) to determine total percentage of ownership. However, Justice
Leonen dissented that the Control Test must be used in this case for the Grandfather Rule has no statutory
basis. At such, it is the Control Test that governs Filipino equity in corporations. Furthermore, Leonen
disagreed that the three are not Filipino corporations. Construction using Grandfather rule of the SEC
Provision is erroneous for "i.e." (id est) meaning that is, is not the same as "e.g." (exempli gratia) meaning
for example. In the rule that GF Rule must apply, the ponencia relies in the deliberations of the 1986
Constitutional Commission. The meaning of constitutional provisions should be determined from a
contemporary reading of the text in relation to the other provisions of the entire document. More so, the
Preamble established that the sovereign Filipino people continue to "ordain and promulgate" and this
cannot be undermined by the ideas of the Consitutional Commission participating in a forum in 1986 as it
against the realities that we have in the present.