LA BUGAL B'LAAN TRIBAL ASSOCIATION INC vs RAMOS
G.R. No. 127882. January 27, 2004
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Order 95-23, which was later repealed by DENR Administrative Order 96-40,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.
ISSUES:
Whether or not the Philippine Mining Act is unconstitutional for allowing fully
foreign-owned corporations to exploit the Philippine mineral resources.
HELD:
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. The 1987 Constitution 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 nation‘s 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 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. 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.
LA BUGAL B'LAAN TRIBAL ASSOCIATION INC vs RAMOS
G.R. No. 127882. December 1, 2004
Facts:
The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of Republic Act 7942 (The Philippine Mining Act of 1995); its
Implementing Rules and Regulations (DENR Administrative Order [DAO]
96-40)and 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, 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 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, et al.
filed several motions for reconsideration.
Issue: Whether or not the R.A. 7942 is unconstitutional.
Held:
NO. The drafters — whose ranks included many academicians, economists,
businessmen, lawyers, politicians and government officials — were not
unfamiliar with the practices of foreign corporations and multinationals.
Neither were they so naïve as to believe that these entities would provide
“assistance” without conditionalities or some quid pro quo. Definitely, as
business persons well know and as a matter of judicial notice, this matter is not
just a question of signing a promissory note or executing a technology transfer
agreement. Foreign corporations usually require that they be given a say in the
management, for instance, of day-to-day operations of the joint venture. They
would demand the appointment of their own men as, for example, operations
managers, technical experts, quality control heads, internal auditors or
comptrollers. Furthermore, they would probably require seats on the Board of
Directors — all these to ensure the success of the enterprise and the
repayment of the loans and other financial assistance and to make certain that
the funding and the technology they supply would not go to waste. Ultimately,
they would also want to protect their business reputation and bottom lines.
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 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 posterity the blessings of prosperity
and peace. The Court fully sympathize with the plight of La Bugal B’laan and
other tribal groups, and commend their efforts to uplift their communities.
However, the Court cannot justify the invalidation of an otherwise
constitutional statute along with its implementing rules, or the nullification of
an otherwise legal and binding FTAA contract. The Court believes that it is not
unconstitutional to allow a wide degree of discretion to the Chief Executive,
given the nature and complexity of such agreements, the humongous amounts
of capital and financing required for large-scale mining operations, the
complicated technology needed, and the intricacies of international trade,
coupled with the State’s need to maintain flexibility in its dealings, in order to
preserve and enhance our country’s 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).