La Bugal-B'Laan Tribal Assn vs Ramos Case Digest

G.R. No 127882

Facts :

On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No.
2796 authorizing the DENR Secretary to accept, consider and evaluate proposals from
foreign-owned corporations or foreign investors for contracts or agreements involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, which, upon appropriate recommendation of the Secretary, the
President may execute with the foreign proponent.

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to "govern
the exploration, development, utilization and processing of all mineral resources." R.A.
No. 7942 defines the modes of mineral agreements for mining operations, outlines the
procedure for their filing and approval, assignment/transfer and withdrawal, and fixes
their terms. Similar provisions govern financial or technical assistance agreements.

On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and
Manila Times, two newspapers of general circulation, R.A. No. 7942 took effect. Shortly
before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the President
entered into an FTAA with WMCP covering 99,387 hectares of land in South Cotabato,
Sultan Kudarat, Davao del Sur and North Cotabato.

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative
Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing Rules and
Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s. 1996 which
was adopted on December 20, 1996.

On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary
demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No. 96-
40, giving the DENR fifteen days from receipt to act thereon. The DENR, however, has
yet to respond or act on petitioners' letter.
Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction.

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or
Technical Assistance Agreements;
(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as
unconstitutional and null and void;
(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act
contained in DENR Administrative Order No. 96-40 and all other similar administrative
issuances as unconstitutional and null and void; and
(d) Cancelling the Financial and Technical Assistance Agreement issued to Western
Mining Philippines, Inc. as unconstitutional, illegal and null and void.

Issue :

Whether or not Republic Act No. 7942 is unconstitutional.

Ruling :
The Court finds the following provisions of R.A. No. 7942 to be violative of Section 2,
Article XII of the Constitution and hereby declares unconstitutional and void:

(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:
Provided, That a legally organized foreign-owned corporation shall be deemed a
qualified person for purposes of granting an exploration permit, financial or technical
assistance agreement or mineral processing permit.

(2) Section 23, which specifies the rights and obligations of an exploration permittee,
insofar as said section applies to a financial or technical assistance agreement,

(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical
assistance agreement;
(4) Section 35, which enumerates the terms and conditions for every financial or
technical assistance agreement;

(5) Section 39, which allows the contractor in a financial and technical assistance
agreement to convert the same into a mineral production-sharing agreement;

(6) Section 56, which authorizes the issuance of a mineral processing permit to a
contractor in a financial and technical assistance agreement;
The following provisions of the same Act are likewise void as they are dependent on the
foregoing provisions and cannot stand on their own:

(1) Section 3 (g), which defines the term "contractor," insofar as it applies to a financial
or technical assistance agreement.

Section 34, which prescribes the maximum contract area in a financial or technical
assistance agreements;

Section 36, which allows negotiations for financial or technical assistance agreements;

Section 37, which prescribes the procedure for filing and evaluation of financial or
technical assistance agreement proposals;

Section 38, which limits the term of financial or technical assistance agreements;

Section 40, which allows the assignment or transfer of financial or technical assistance
agreements;

Section 41, which allows the withdrawal of the contractor in an FTAA;

The second and third paragraphs of Section 81, which provide for the Government's
share in a financial and technical assistance agreement; and

Section 90, which provides for incentives to contractors in FTAAs insofar as it applies to
said contractors;

When the parts of the 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, and that if all could not be carried into
effect, the legislature would not pass the residue independently, then, if some parts are
unconstitutional, all the provisions which are thus dependent, conditional, or
connected, must fall with them.

WHEREFORE, the petition is GRANTED.

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 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 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.