Philippine Supreme Court Jurisprudence

CONCURRING OPINION

CHICO-NAZARIO, J.:

I concur in the well-reasoned ponencia of my esteemed colleague Mr. Justice Artemio V. Panganiban. I feel obligated, however, to add the following observations:chanroblesvirtua1awlibrary

I. RE FULL CONTROL AND SUPERVISION

With all due respect, I believe that the issue of unconstitutionality of Republic Act No. 7942, its implementing rules, and the Financial Assistance Agreement between the Philippine Government and WMPC (Philippines) Inc. (WMPC FTAA) executed pursuant to Rep. Act No. 7942 hinges, to a large extent, on the interpretation of the phrase in Section 2, Article XII of the 1987 Constitution, which states:chanroblesvirtua1awlibrary

(T) he exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. X x x. (Emphasis supplied)cralawlibrary

Construing said phrase vis--vis the entire provision, it appears from the deliberations in the Constitutional Commission that the term control does not have the meaning it ordinarily has in political law which is the power of a superior to substitute his judgment for that of an inferior.¹ Thus

MR. NOLLEDO: Suppose a judicial entity is given the power to exploit natural resources and, of course, there are decisions made by the governing board of that judicial entity, can the state change the decisions of the governing board of that entity based on the words full control.

MR. VILLEGAS: If it is within the context of the contract, I think the State cannot violate the laws of the land.² cralawred

Moreover, full control and supervision does not mean that foreign stockholders cannot be legally elected as members of the board of a corporation doing business under, say, a co-production, joint venture or profit-sharing agreement, 40% of whose capital is foreign owned. Otherwise, and as Commissioner Romulo declared, it would be unfair to the foreign stockholder³ and, per Commissioner Padilla, refusing them a voice in management would make a co-production, joint venture and production sharing illusory.⁴ cralawred

It is apparently for the foregoing reasons that there was a disapproval of the amendment proposed by Commissioner, now Mr. Chief Justice Davide, that the governing and managing bodies of such corporations shall be vested exclusively in citizens of the Philippines⁵ so that control of all corporations involved in the business of utilizing our natural resources would always be in Filipino hands.

The disapproval must be juxtaposed with the fact that a provision substantially similar to the proposed Davide amendment was approved with regard to educational institutions, viz:chanroblesvirtua1awlibrary

Section 4 (2). Educational institutions, other than those established by religious groups and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least sixty per centum of the capital of which is owned by such citizens. The Congress may, however, require increased Filipino equity participation in all educational institutions.

The control and administration of educational institutions shall be vested in citizens of the Philippines. (Emphasis supplied)cralawlibrary

From the foregoing, it can be clearly inferred that it was NOT the intention of the framers of the Constitution to deprive governing boards of domestic corporations with non-Filipino members, the right to control and administer the corporation that explores, develops and utilizes natural resources insofar as agreements with the State for co-production, joint venture and production-sharing are concerned, otherwise the Davide amendment would have been approved and, like the prohibition in above-quoted Section 4(2), Article XIV, control and supervision of all business involved in the exploration and development of mineral resources would have been left solely in Filipino hands.

Accordingly, to the extent that the corporate board governs and manages the operations for the exploration and use of natural resources, to that extent the full control and supervision thereof by the State is diminished.

In effect, therefore, when the State enters into such agreements as provided in the Constitution, it allows itself to surrender part of its sovereign right to full control and supervision of said activities, the State having the right to partly surrender the exercise of sovereign powers under the doctrine of auto-limitation.⁶ cralawred

If foreigners (under joint ventures etc.) have a say in the management of the business of utilizing natural resources as corporate directors of domestic corporations, there is no justification for holding that foreign corporations who put in considerably large amounts of money under agreements involving either technical or financial assistance for large scale exploration, development and utilization of minerals, petroleum and other mineral oils are prohibited from managing such business.

Indeed, to say that the Constitution requires the State to have full and total control and supervision of the exploration, development and utilization of minerals when undertaken in a large scale under agreements with foreign corporations involving huge amounts of money is to divorce oneself from reality. As Mr. Justice Panganiban said, no firm would invest funds in such enterprise unless it has a say in the management of the business.

To paraphrase this Court in one of its landmark cases, the fundamental law does not intend an impossible undertaking.⁷ It must therefore be presumed that the Constitution did not at all intend an interpretation of Section 2, Article XII which deprives the foreign corporation engaged in large scale mining activities a measure of control in the management and operation of such activities, and in said manner, remove from the realm of the possible the enterprise the Constitution envisions thereunder.

This brings me to the final point raised by my esteemed colleague,Mme. Justice Conchita Carpio Morales, that it is of no moment that the declaration of Rep. Act No. 7942 may discourage foreign assistance and/or retard or delay the exploration, development or utilization of the nations natural resources as the Filipino people, as early as the 1935 Constitution, have determined such matters as secondary to the protection and preservation of their ownership of these natural resources. With due respect, I find such proposition not legally justifiable as it looks backward to the justification in the 1935 Constitution instead of forward under the 1987 Constitution which expressly allows foreign participation in the exploration, development or utilization of the nations marine wealth to allow the State to take advantage of foreign funding or technical assistance. As long as the means employed by such foreign assistance result in real contributions to the economic growth of our country and enhance the general welfare of our people, the development of our mineral resources by and through foreign corporations, such FTAAs are not unconstitutional.

II. RE: REQUIREMENT THAT FTAAs MUST BE BASED ON REAL CONTRIBUTIONS TO THE ECONOMIC GROWTH AND GENERAL WELFARE OF THE COUNTRY

The policy behind Rep. Act No. 7942 is to promote the rational exploration, development, utilization and conservation of the State-owned mineral resources through the combined efforts of government and the private sector in order to enhance national growth in a way that effectively safe-guards the environment and protect the rights of affected communities.⁸ This policy, with reference specifically to FTAAs, is in keeping with the constitutional precept that FTAAs must be based on real contributions to the economic growth and general welfare of the country. As has been said, a statute derives its vitality from the purpose for which it is enacted and to construe it in a manner that disregards or defeats such purpose is to nullify or destroy the law.⁹ In this regard, much has been said about the alleged unconstitutionality of Section 81 of Rep. Act No. 7942 as it allegedly allows for the waiver of the States right to receive income from the exploitation of its mineral resources as it limits the States share in FTAAs with foreign contractors to taxes, duties and fees. For clarity, the provision states

SEC. 81. Government Share in Other Mineral Agreements. -- The share of the Government in co-production and joint-venture agreements shall be negotiated by the Government and the contractor taking into consideration the: (a) capital investment of the project, (b) risks involved, (c) contribution of the project to the economy, and (d) other factors that will provide for a fair and equitable sharing between the Government and the contractor. The Government shall also be entitled to compensations for its other contributions which shall be agreed upon by the parties, and shall consist, among other things, the contractors income tax, excise tax, special allowance, withholding tax due from the contractors foreign stockholders, arising from dividend or interest payments to the said foreign stockholders, in case of a foreign national, and all such other taxes, duties and fees as provided for under existing laws.

The Government share in financial or technical assistance agreement shall consist of, among other things, the contractors corporate income tax, excise tax, special allowance, withholding tax due from the contractors foreign stockholders arising from dividend or interest payments to the said foreign stockholder in case of foreign national and all such other taxes, duties and fees as provided for under existing laws.

The collection of Government share in financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development expenditures, inclusive. (Emphasis supplied)cralawlibrary

The controversy revolves around the proper interpretation of among other things stated in the second paragraph of Section 81. Mr. Justice Carpio is of the opinion that among other things could only mean among other taxes, referring to the unnamed other taxes, duties, and fees as provided for under existing laws contained in the last clause of Section 81, paragraph 2. If such were the correct interpretation, then truly, the provision is unconstitutional as a sharing based only on taxes cannot be considered as contributing to the economic growth and general welfare of the country. I am bothered, however, by the interpretation that the phrase among other things refers to and all such other taxes, duties and fees as provided for under existing laws since it would render the former phrase superfluous. In other words, there would have been no need to include the phrase among other things if all it means is all other taxes since the latter is already expressly stated in the provision. As it is a truism that all terms/phrases used in a statute has relevance to the object of the law, then I find the view of Mr. Justice Panganiban that all other things means additional government share in the form of earnings or cash flow of the mining enterprise as interpreted by the DENR -- more compelling. Besides, such an interpretation would affirm the constitutionality of the provision which would then be in keeping with the rudimentary principle that a law shall not be declared invalid unless the conflict with the Constitution is clear beyond reasonable doubt.¹⁰ To justify nullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication.¹¹ cralawred

Finally, I wish to stress that it would appear that the constitutional mandate that large-scale mining activities under FTAAs must be based on real contributions to the economic growth and general welfare of the country is both a standard for the statute required to implement subject provision as well as the vehicle for the exercise of the States resultant residual control and supervision of the mining activities.

In all FTAAs, the State is deemed to reserve its right to control the end to be achieved so that real contributions to the economy can be realized and, in the final analysis, the business will redound to the general welfare of the country.

However, the question of whether or not the FTAA will, in fact, redound to the general welfare of the public involves a judgment call by our policy makers who are answerable to our people during the appropriate electoral exercises and are not subject to judicial pronouncements based on grave abuse of discretion.¹² cralawred

For the foregoing reasons, I vote to grant the motion for reconsideration.