recommendation of the (DENR) Secretary, the President may execute with
LA BUGAL BLAAN TRIBAL ASSOCIATION INC vs RAMOS Case
Digest
LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O.
RAMOS, Secretary Department of Environment and Natural Resources;
HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGB-
DENR); RUBEN TORRES, Executive Secretary; and WMC (PHILIPPINES)
INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
The constitutional provision allowing the President to enter into FTAA is a
exception to the rule that participation in the nations natural resources is
reserved exclusively to 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issued DENR Administrative Order 95-23, which was later repealed by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
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.
La Bugal-Blaan Tribal Association, Inc. Vs Ramos
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.
La Bugal-BLaan v. Ramos
G.R. No. 127882.
December 1, 2004
Facts:
The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act 7942 (The Philippine Mining Act of
1995); (2) its Implementing Rules and Regulations (DENR Administrative
Order [DAO] 96-40); and (3) the Financial and Technical Assistance
Agreement (FTAA) dated 30 March 1995, executed by the government with
Western Mining Corporation (Philippines), Inc. (WMCP).
On 27 January 2004, the Court en banc promulgated its Decision, granting
the Petition and declaring the unconstitutionality of certain provisions of RA
7942, DAO 96-40, as well as of the entire FTAA executed between the
government and WMCP, mainly on the finding that FTAAs are service
contracts prohibited by the 1987 Constitution. The Decision struck down the
subject FTAA for being similar to service contracts,[9] which, though
permitted under the 1973 Constitution, were subsequently denounced for
being 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.
The Decision quoted several legal scholars and authors who had criticized
service contracts for, inter alia, vesting in the foreign contractor exclusive
management and control of the enterprise, including operation of the field in
the event petroleum was discovered; control of production, expansion and
development; nearly unfettered control over the disposition and sale of the
products discovered/extracted; effective ownership of the natural resource
at the point of extraction; and beneficial ownership of our economic
resources. According to the Decision, the 1987 Constitution (Section 2 of
Article XII) effectively banned such service contracts. Subsequently, Victor O.
Ramos (Secretary, Department of Environment and Natural Resources
[DENR]), Horacio Ramos (Director, Mines and Geosciences Bureau [MGB-
DENR]), Ruben Torres (Executive Secretary), and the WMC (Philippines) Inc.
filed separate Motions for Reconsideration.
Issue:
Whether or not the Court has a role in the exercise of the power of control
over the EDU of our natural resources?
Held:
The Chief Executive is the official constitutionally mandated to enter into
agreements with foreign owned corporations. On the other hand, Congress
may review the action of the President once it is notified of every contract
entered into in accordance with this [constitutional] provision within thirty
days from its execution. In contrast to this express mandate of the President
and Congress in the exploration, development and utilization (EDU) of
natural resources, Article XII of the Constitution is silent on the role of the
judiciary. However, should the President and/or Congress gravely abuse
their discretion in this regard, the courts may -- in a proper case -- exercise
their residual duty under Article VIII. Clearly then, the judiciary should not
inordinately interfere in the exercise of this presidential power of control
over the EDU of our natural resources.
Under the doctrine of separation of powers and due respect for co-equal and
coordinate branches of government, the Court must restrain itself from
intruding into policy matters and must allow the President and Congress
maximum discretion in using the resources of our country and in securing
the assistance of foreign groups to eradicate the grinding poverty of our
people and answer their cry for viable employment opportunities in the
country. The judiciary is loath to interfere with the due exercise by coequal
branches of government of their official functions. As aptly spelled out
seven decades ago by Justice George Malcolm, Just as the Supreme Court,
as the guardian of constitutional rights, should not sanction usurpations by
any other department of government, so should it as strictly confine its own
sphere of influence to the powers expressly or by implication conferred on it
by the Organic Act. Let the development of the mining industry be the
responsibility of the political branches of government. And let not the Court
interfere inordinately and unnecessarily. The Constitution of the Philippines
is the supreme law of the land. It is the repository of all the aspirations and
hopes of all the people.
The Constitution should be read in broad, life-giving strokes. It should not
be used to strangulate economic growth or to serve narrow, parochial
interests. Rather, it should be construed to grant the President and Congress
sufficient discretion and reasonable leeway to enable them to attract foreign
investments and expertise, as well as to secure for our people and our Ruling: Only technical assistance or financial assistance agreements may be
posterity the blessings of prosperity and peace. The Court fully sympathize entered into, and only for large-scale activities. Full control is not
with the plight of La Bugal Blaan and other tribal groups, and commend
anathematic to day-to-day management by the contractor, provided that the
their efforts to uplift their communities. However, the Court cannot justify
State retains the power to direct overall strategy; and to set aside, reverse or
the invalidation of an otherwise constitutional statute along with its
implementing rules, or the nullification of an otherwise legal and binding modify plans and actions of the contractor. The idea of full control is similar
FTAA contract. The Court believes that it is not unconstitutional to allow a to that which is exercised by the board of directors of a private corporation:
wide degree of discretion to the Chief Executive, given the nature and the performance of managerial, operational, financial, marketing and other
complexity of such agreements, the humongous amounts of capital and functions may be delegated to subordinate officers or given to contractual
financing required for large-scale mining operations, the complicated entities, but the board retains full residual control of the business.
technology needed, and the intricacies of international trade, coupled with
the States need to maintain flexibility in its dealings, in order to preserve
and enhance our countrys competitiveness in world markets. On the basis of
this control standard, the Court upholds 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 (FTAA).

LA BUGAL-B'LAAN vs DENR
Dec. 1, 2004

Facts: On January 27, 2004, the Court en banc promulgated its Decision
granting the Petition and declaring the unconstitutionality of certain
provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed
between the government and WMCP, mainly on the finding that FTAAs are
service contracts prohibited by the 1987 Constitution.

The Decision struck down the subject FTAA for being similar to service
contracts, which, though permitted under the 1973 Constitution, were
subsequently denounced for being 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: Are foreign-owned corporations in the large-scale exploration,

development, and utilization of petroleum, minerals and mineral oils limited
to technical or financial assistance only?