December 2004 - Philippine Supreme Court Decisions/Resolutions
La Bugal-B'Laan Tribal Assn v. Ramos : 127882 : December 1, 2004 : J. Tinga : En Banc : Separate Opinion
[G.R. NO. 127882 : December 1, 2004]
LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., Represented by its Chairman F'LONG MIGUEL M. LUMAYONG; WIGBERTO E. TAÑADA; PONCIANO BENNAGEN; JAIME TADEO; RENATO R. CONSTANTINO JR.; F'LONG AGUSTIN M. DABIE; ROBERTO P. AMLOY; RAQIM L. DABIE; SIMEON H. DOLOJO; IMELDA M. GANDON; LENY B. GUSANAN; MARCELO L. GUSANAN; QUINTOL A. LABUAYAN; LOMINGGES D. LAWAY; BENITA P. TACUAYAN; Minors JOLY L. BUGOY, Represented by His Father UNDERO D. BUGOY and ROGER M. DADING; Represented by His Father ANTONIO L. DADING; ROMY M. LAGARO, Represented by His Father TOTING A. LAGARO; MIKENY JONG B. LUMAYONG, Represented by His Father MIGUEL M. LUMAYONG; RENE T. MIGUEL, Represented by His Mother EDITHA T. MIGUEL; ALDEMAR L. SAL, Represented by His Father DANNY M. SAL; DAISY RECARSE, Represented by Her Mother LYDIA S. SANTOS; EDWARD M. EMUY; ALAN P. MAMPARAIR; MARIO L. MANGCAL; ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO CULAR; MARVIC M.V.F. LEONEN; JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR JR., Represented by Their Father VIRGILIO CULAR; PAUL ANTONIO P. VILLAMOR, Represented by His Parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR; ANA GININA R. TALJA, Represented by Her Father MARIO JOSE B. TALJA; SHARMAINE R. CUNANAN, Represented by Her Father ALFREDO M. CUNANAN; ANTONIO JOSE A. VITUG III, Represented by His Mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, Represented by His Father MANUEL E. NARVADEZ JR.; ROSERIO MARALAG LINGATING, Represented by Her Father RIO OLIMPIO A. LINGATING; MARIO JOSE B. TALJA; DAVID E. DE VERA; MARIA MILAGROS L. SAN JOSE; Sr. SUSAN O. BOLANIO, OND; LOLITA G. DEMONTEVERDE; BENJIE L. NEQUINTO; ROSE LILIA S. ROMANO; ROBERTO S. VERZOLA; EDUARDO AURELIO C. REYES; LEAN LOUEL A. PERIA, Represented by His Father ELPIDIO V. PERIA; GREEN FORUM PHILIPPINES; GREEN FORUM WESTERN VISAYAS (GF-WV); ENVIRONMENTAL LEGAL ASSISTANCE CENTER (ELAC); KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN); PARTNERSHIP FOR AGRARIAN REFORM and RURAL DEVELOPMENT SERVICES, INC. (PARRDS); PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA); WOMEN'S LEGAL BUREAU (WLB); CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI); UPLAND DEVELOPMENT INSTITUTE (UDI); KINAIYAHAN FOUNDATION, INC.; SENTRO NG ALTERNATIBONG LINGAP PANLIGAL (SALIGAN); and LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC. (LRC), Petitioners, v. 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 WMC (PHILIPPINES), INC., Respondents.
The Constitution was crafted by men and women of divergent backgrounds and varying ideologies. Understandably, the resultant document is accommodative of these distinct, at times competing philosophies. Untidy as any mlange would seem, our fundamental law nevertheless hearkens to the core democratic ethos over and above the obvious inconveniences it spawns.
However, when the task of judicial construction of the Constitution comes to fore, clarity is demanded from this Court. In turn, there is a need to balance and reconcile the diverse views that animate the provisions of the Constitution, so as to effectuate its true worth as an instrument of national unity and progress.
The variances and consequent challenges are vividly reflected in Article XII of the Constitution on National Patrimony, in a manner akin to Article II on Declaration of Principles and State Policies. Some of the provisions impress as protectionist, yet there is also an undisguised accommodation of liberal economic policies. Section 2, Article XII,1 the provision key to this case, is one such Janus-faced creature. It seems to close the door on foreign handling of our natural resources, but at the same time it leaves open a window for alien participation in some aspects. The central question before us is how wide is the entry of opportunity created by the provision.
My vote on the motions for reconsideration is hinged on a renewed exegesis of Section 22 of Article XII in conjunction with the proper understanding of the nature of the power vested on the President under Section 2. It has to be appreciated in relation to the inherent functions of the executive branch of government.
The Contract-Making Power of the President
While all government authority emanates from the people, the breadth and depth of such authority are not brought to bear by direct popular action, but through representative government in accord with the principles of republicanism.3 By investiture of the Constitution, the function of executive power is parceled solely to the duly elected President.4 The Constitution contains several express manifestations of executive power, such as the provision on control over all executive departments, bureaus and offices,5 as well as the so-called Commander-in-Chief clause.6 cralawred
Yet it has likewise been recognized in this jurisdiction that executive power is not limited to such powers as are expressly granted by the Constitution. Marcos v. Manglapus7 concedes that the President has powers other than those expressly stated under the Constitution,8 and thus implies that these powers may be exercised without being derivative from constitutional authority.9 The precedental value of Marcos v. Manglapus may be controvertible,10 but the cogency of its analysis of the scope of executive power is indisputable. Neither is the concept of plenary executive power novel, as discussed by Justice Irene Cortes in her ponencia:chanroblesvirtua1awlibrary
It has been advanced that whatever power inherent in the government that is neither legislative nor judicial has to be executive. Thus, in the landmark decision of Springer v. Government of the Philippine Islands, 277 U.S. 189 (1928), on the issue of who between the Governor-General of the Philippines and the Legislature may vote the shares of stock held by the Government to elect directors in the National Coal Company and the Philippine National Bank, the U.S. Supreme Court, in upholding the power of the Governor-General to do so, said:chanroblesvirtua1awlibrary
.. . Here the members of the legislature who constitute a majority of the "board" and "committee" respectively, are not charged with the performance of any legislative functions or with the doing of anything which is in aid of performance of any such functions by the legislature. Putting aside for the moment the question whether the duties devolved upon these members are vested by the Organic Act in the Governor-General, it is clear that they are not legislative in character, and still more clear that they are not judicial. The fact that they do not fall within the authority of either of these two constitutes logical ground for concluding that they do fall within that of the remaining one among which the powers of government are divided. .. [At 202-203; emphasis supplied.]
We are not unmindful of Justice Holmes' strong dissent. But in his enduring words of dissent we find reinforcement for the view that it would indeed be a folly to construe the powers of a branch of government to embrace only what are specifically mentioned in the Constitution:chanroblesvirtua1awlibrary
The great ordinances of the Constitution do not establish and divide fields of black and white. Even the more specific of them are found to terminate in a penumbra shading gradually from one extreme to the other.. ..
x x x
It does not seem to need argument to show that however we may disguise it by veiling words we do not and cannot carry out the distinction between legislative and executive action with mathematical precision and divide the branches into watertight compartments, were it ever so desirable to do so, which I am far from believing that it is, or that the Constitution requires.[At 210-211.]11 cralawred
Such general power has not been diminished notwithstanding the avowed intent of some of the framers of the 1987 Constitution to limit the powers of the President as a reaction to abuses under President Marcos, for as the Court noted, the result was a limitation of the specific powers of the President, particularly those relating to the commander-in-chief clause, but not a diminution of the general grant of executive power.12 The critical perspective of this case should spring from a recognition of this elemental fact.
Undeniably, the particular power now in question is expressly provided for by Section 2, Article XII of the Constitution. Still, it originates from the concept of executive power that is not explicitly provided for by the Constitution. As a necessary incident of the functions of the executive office, it can be concluded that the President has the authority to enter into contracts in behalf of the State in matters which are not denied him or her or not otherwise assigned to the other great branches of government, even if such general power is not categorically recognized in the Constitution. Among these traditional functions of the executive branch is the power to determine economic policy.
As once noted by Justice Feliciano, the Republic of the Philippines is itself a body corporate and juridical person vested with the full panoply of powers and attributes which are compendiously described as legal personality.13 As Chief of State the President is also regarded as the head of this body corporate,14 and thus is capacitated to represent the State when engaging with other entities. Such executive function, in theory, does not require a constitutional provision, or even a Constitution, in order to be operative. It is a power possessed by every duly constituted presidency starting with Aguinaldos. This faculty is complementary to the traditional regard of a Head of State as emblematic of the State he/she represents.
The power to contract in behalf of the State is clearly an executive function, as opposed to legislative or judicial. This is easily discernible through the process of exclusion. The other branches of government the legislative and the judiciary are not similarly capacitated since their core functions pertain to legislating and adjudicating respectively.
However, I am not making any pretense that such executive power to contract is unimpeachable or limitless. The Constitution frowns on unchecked executive power, mandating in broad strokes, the power of judicial review15 and legislative oversight.16 The Constitution itself may expressly restrict the exercise of any sort of executive function. Section 2 undeniably constrains the exercise of the executive power to contract in several regards.
Constitutional Limitations under Section 2, Article XII
What are the express limitations under Section 2 on the power of the executive to contract with foreign corporations regarding the exploration, development and utilization of our natural resources?chanroblesvirtualawlibrary
There are two fundamental restrictions, both of which are asserted in the second paragraph of Section 2. These are that the State retains legal ownership of all natural resources,17 and that the State shall have full control and supervision over the exploration, development and utilization of natural resources.18 These key postulates are facially broad and warrant clarification. They also predicate several specific restrictions laid down in the fourth paragraph of Section 2 on the power of the President to enter into agreements with foreign corporations. These specific limitations are as follows:chanroblesvirtua1awlibrary
First, the natural resources that may be subject of the agreement are a limited class, particularly minerals, petroleum, and other mineral oils. Among the natural resources which are excluded from these agreements are lands of the public domain, waters, coal, fisheries, forests or timbers, wildlife, flora and fauna. Most notable of the exclusions are forests and timbers which are in all respects expressly limited to Filipinos.
It is noteworthy that a previous version of the fourth paragraph of Section 2 deliberated upon during the 1987 Constitutional Commission allowed agreements with foreign-owned corporations with respect to all classes of natural resources.19 However, on the initiative of Commissioner (now Chief Justice) Davide, the provision was amended to limit the scope of such agreements to minerals, petroleum and other mineral oils, which Commissioner Davide recognized as those particular areas where Filipino capital may not be sufficient.20 cralawred
The exclusion of timber resources from the scope of financial/technical assistance agreements marks a significant distinction from the service contracts of old. This does not come as a surprise, considering well-reported abuses under the old regime of issuing timber licensing agreements, which numbered in the thousands prior to the 1987 Constitution. On the other hand, no similar extensive collateral damage has been reported for the petroleum and mining industry, capital-intensive industries whose potential for government revenues in billions of pesos has long been sought after by the State.21 Hence, the variance in treatment from the timber industry and the rest of the natural resources.
Second, these agreements with foreign-owned corporations can only be entered into for only large-scale exploration, development and utilization of minerals, petroleum, and other mineral oils.
Third, it is only the President who may enter into these agreements. This is another pronounced change from the 1973 Constitution, which allowed private persons to enter into service contracts with foreign corporations.
Fourth, these agreements must be in accord with the general terms and conditions provided by law. This proviso by itself, and more so when taken together, as it should, with another provision,22 entails legislative intervention and affirmance in the exercise of this executive power. While it is the President who enters into these contracts, he/she must act within such terms and conditions as may be prescribed by Congress through legislation. The value of legislative input as a means of influencing policy should not be discounted. Policy initiatives grounded on particular economic ideologies may find enactment through legislation when approved by the necessary majorities in Congress. Legislative work includes consultative processes with persons of diverse interests, assuring that economic decisions need not be made solely from an ivory tower. There is also the possible sanction of repudiation by the voters of legislators who prove insensate to the economic concerns of their constituents.
Fifth, the President is mandated to base the decision of entering into these agreements on real contributions to the economic growth and general welfare of the country. In terms of real limitations, this condition has admittedly little effect. The discretion as to whether or not to enter into these agreements is vested solely by the Constitution in the President, and such exercise of discretion, pertaining as it does to the political wisdom of a co-equal branch, generally deserves respect from the courts.
The above conditionalities, particularly the first three, effect the desire of the framers of the 1987 Constitution to limit foreign participation in natural resource-oriented enterprises. They provide a vivid contrast to the 1973 Constitution, which permitted private persons to enter into service contracts for financial, technical, management, or other forms of assistance with any person or entity, including foreigners, and for the exploration or utilization of any of the natural resources.23 These requisites imposed by the 1987 Constitution, which are significantly more onerous than those laid down in the 1973 Constitution, warrant obeisance by the executive branch and recognition by this Court.
Not Strictly Technical or Financial Assistance
The Courts previous Decision, now for reconsideration, insisted on another restriction purportedly imposed by the fourth paragraph of Section 2. It is argued that foreignowned corporations are allowed to render only technical or financial assistance in the large-scale exploration, development and utilization of minerals, petroleum and mineral oils. This conservative view is premised on the sentiment that the Constitution limits foreign involvement only to areas where they are needed, the overpowering intent being to allow Filipinos to benefit from Filipino resources.24 Towards that end, the perception arises that the power of the executive to enter into agreements with foreign-owned corporations is an executive privilege, hampered by the limitations that generally attach to the grant of privileges.
On the fundamental nature of this power, I harbor an entirely different view. The actual art of governing under our Constitution does not and cannot conform to judicial definitions of the power of any of its branches based on isolated clauses or even single articles torn from context.25 The previously adopted approach is rigidly formalist, and impervious to the traditional prerogatives of executive power.
As I stated earlier, the executive authority to contract is a right emanating from traditional executive functions, and is connected with the power of the executive branch to determine economic policy. Hence, the proper approach in interpreting Section 2, Article XII is to tilt in favor of asserting the right rather than view the provision as a limitation on a privilege. To subscribe to the Courts previous view will necessitate adopting as a fundamental premise that absent an express grant of power, the executive branch has no capacity to contract since such capacity arises from a privilege.
Had the provision been worded to state that the President may enter into agreements for technical or financial assistance only, then this unambiguous limitation should be affirmed. Yet the Constitution does not express such an intent. The controversial provision is crafted in such a way that allows any type of agreement, so long as they involve either technical or financial assistance. In fact, the provision does not restrict the scope of the agreement so as to pertain exclusively either to technical or financial assistance.
The Constitution, in allowing foreign participation specifically in the large scale exploration, development and utilization of natural resources, is cognizant of the sad truth that such activities entail significant outlay of capital and advanced technological know-how that domestic corporations may not yet have.26 The provision expressly adverts to technical and financial assistance in recognition of the reality that these two facets are the indispensable requisites to qualify foreign participants in the exploration, development, and utilization of mineral and petroleum resources.
Had the framers chosen to restrict all aspects of all mining activities to domestic persons, the real fear would have materialized that our mineral reserves could remain untapped for a significant period of time, owing to the paucity of venture capital. There was a real option to heed dogmatic guns who insisted that the mineral resources remain unutilized until the day when the domestic mining industry becomes capacitated to undertake the extraction without need of foreign aid. Obviously, the more pragmatic view won the day.
If indeed the foreign entity is limited only to technical or financial participation, the implication is that it is up to the State to do all the rest. Considering the lack of know-how and financial capital, matters which were appreciated by the framers of the Constitution, this intended effect is preposterous. Even the State itself would hesitate to undertake such extractive activities owing to the intensive capital and extensive training such enterprise would entail. By allowing this expansive set-up under Section 2, the Constitution enables the minimization of risk on the part of the State should it desire to undertake large-scale mineral extractive activities. The pay-off though, understandably, is an atypical cession of several State prerogatives in the development of its mineral and petroleum resources.
Perhaps there is need to be explicit and incisive about the implications of Section 2. The word assistance, shorn of context, implies a charitable grant offered without any quid pro quo attached. Unconditional foreign aid may be more prevalent this day and age with the acceptance of the notion that there are base minimum standards of decent living which all persons are entitled to. However, such concept is alien to the mining industry. There is no such entity as an International Benevolent Association for Extraction of Minerals. If assistance is to be restrictively interpreted according to ordinary parlance, no entity would be interested in undertaking this regulated industry.
Any decision by any enterprise to assist in the exploration, development or utilization of mineral resources does not arise from a philanthropic impulse. It is a pure and simple investment, and one that is not engaged in unless there is the expectation or hope of a reasonable return. I hasten to add that the deliberate incorporation of the fourth paragraph of Section 2 has created a window of opportunity for foreign investments in the extractive enterprises involving petroleum and other mineral oils, subject of course to limitations under the law. The term may prove discomfiting to the ideologically committed, the sentimental nationalist or the visceral oppositionist. Still, the notion is not inconsistent with the general power of the executive to enter into agreements for the purpose of enticing foreign investments.
Why then the term assistance? Apart from its apparent political palatability in comparison with investment, as intimated before, the term is useful in underscoring the essential facets of the foreign investment which is assistance in the financial or technical areas, as well as the fundamental limitations and conditionalities of the investment. What is allowed is participation, though limited, by foreign corporations which in turn are entitled to expect a return on their investments.
The Court had earlier premised the invalidity of several provisions of the Mining Act on the argument that those provisions authorized service contracts. But while the 1987 Constitution does not utilize the term service contracts, it actually contemplates a broader expanse of agreements beyond mere contracts for services rendered. Still, although the provision sanctions a more numerous class of agreements, these are subjected to more stringent restrictions than what had been allowed under the 1973 Constitution. Thus, the test should be whether the law and the contract take away the States full control and supervision over the exploration, development and utilization of the countrys mineral resources and negate or defeat the States ownership thereof.
In line with the test, Section 2 should be accorded a liberal interpretation so as to recognize this fundamental prerogative of the presidency. Such liberal interpretation does not equate to a wholesale concession of mining resources to foreigners, much less to an atmosphere of complaisance, whether from their perception or the Filipinos. The fourth paragraph sets specific limitations on the exercise by the President of this contract-making power. On the other hand, the second paragraph of Section 2 lays down the fundamental limitations which likewise may not be countermanded.
On the basis of the foregoing discussion, and as a necessary consequence of my view that the agreements under Section 2 are not strictly limited to financial or technical assistance, I would consider the following questioned provisions of Republic Act No. 7942 as valid Sections 3 (g), 34 to 38, 40 to 41, 56 and 90. These provisions were struck down on the premise that they allowed the constitution of service contracts, an agreement which to my mind is still within the contemplation of Section 2, Article XII.
State Ownership over Mineral and Petroleum Resources
There is need to clarify the specific meaning of these general limitations arising from the States assertion of ownership, full control and supervision.
In respect to the petition, the question of ownership has become material to the proper share the State should receive from the exploration, development and utilization of mineral resources. I perceive that all the members of the Court agree that such profit may not be limited to only such revenue derived from the taxation of the mining activities. Since the right of the State to obtain a share in the net proceeds and not merely through taxes arises as an attribute of ownership unequivocally reserved by the Constitution for the State, such right may not be proscribed either by legislative provision or contractual stipulation.
Yet it should be conceded that the State has the right to enter into an agreement concerning such profits. There are, as probably should be, political consequences if the President opts to surrender all of the States profits to a foreign corporation, yet in bare theory, the right to bargain profits pertains to the wisdom of a political act not ordinarily justiciable before this Court. Still, the overriding adherence of the Constitution to the regalian doctrine should be given due respect, and an interpretation allowing beneficial ownership by the foreign corporation should not be favored.
For purposes of the present judicial review, I would consider it prudent to limit myself to conceding that the Court had previously erred in invalidating certain provisions of Rep. Act No. 7942 and the WMC FTAA on the mistaken notion that the law and the agreement cede beneficial ownership of mineral resources to a foreign corporation.
Section 4 of Rep. Act No. 7942 expressly recognizes State ownership over mineral resources, though it is silent on the operational terms of such ownership. Of course, such general submission would not be in itself curative of whatever contraventions to State ownership are contained in the same law; hence, the need for deeper inquiry.
The dissenters wish to strike down the second paragraph of Section 81 of Rep. Act No. 7942 because it purportedly precludes the Government from obtaining profits under the agreement from sources other than its share in taxation. However, as the ponencia points out, the phrase among other things sufficiently allows the government from demanding a share in the cash flow or earnings of the mining enterprise. A contrary view is anchored on a rule of statutory construction that concludes that among other things refers only to taxes. Yet, there is also a rule of construction that laws should be interpreted with a view of upholding rather than destroying it. Thus, the ponencias formulation, which achieves the result of the minority without need of statutory invalidation, is highly preferable.
The provisions of Rep. Act No. 7942 which authorize the conversion of a financial or technical assistance into a mineral production sharing agreement (MPSA) turned out to be just as controversial. In this regard, the minority wishes to strike down Section 39, which in conjunction with Sections 80 and 84 of the law would purportedly allow such conversion, in that it would effectively limit the government share in the profits to only the excise tax on mineral products under internal revenue law.
These concerns are valid and raise troubling questions. Yet equally troubling is that the Court is being called upon to rule on a premature question. There is no such creature yet as an FTAA converted into an MPSA, and so there is no occasion that calls for the application of Sections 39, 80 and 84. I do not subscribe to judicial pre-emptive strikes, as they preclude the application of still undisclosed considerations which may prove illuminating and even crucial to the proper disposition of the case. By seeking invalidation of these MPSA provisions, the Court is also asked to strike down an enactment of a co-equal branch which has not given rise to an actual case or controversy. After all, such enactment deserves due respect from this branch of government. Assuming that the provisions are indeed invalid, the Court will not hesitate, at the proper time, to strike them down or at least impose a proper interpretation that does not run afoul of the Constitution.27 However, in the absence of any actual attempt to convert an FTAA to an MPSA, the time is not now.
I likewise agree with the ponencia that Section 7.9 deprives the State of its rightful share as an incident of ownership without offsetting compensation. The provisions of the FTAA are fair game for judicial review considering their present applicability. In fact, the invalidation of Section 7.9 becomes even more proper now under the circumstances since the provision has become effectual considering the sale of the foreign equity in WMCP to a domestic corporation. It is within the competence of this Court to invalidate Section 7.9 here and now. For that matter, Section 7.8(e) of the FTAA may be similarly invalidated as it can already serve to unduly deprive the Government of its proper share by allowing double recovery by WMC.
Full Control and Supervision of the State
The matter of full control and supervision emerges just as controversial. Does this grant of power mandate that the State exercise management over the activity, or exclude the exercise of managerial control by the foreign corporation?chanroblesvirtualawlibrary
I dont think it proper to construe the word full as implying that such control or supervision may not be at all yielded or delegated, for reasons I shall elaborate upon. Instead, full should be read as pertaining to the encompassing scope of the concerns of the State relating to the extractive enterprises on which it may interfere or impose its will.
It must be conceded that whichever party obtains managerial control must be allowed considerable elbow room in the exercise of management prerogatives. Management is in the most informed position to make resources productive in the pursuit of the enterprises objectives.28 In this age of specialization, corporations have benefited with the devolution of operational control to specialists, rather than generalists. The era of the buccaneer entrepreneur chartering his industry solely on gut feel is over. The vagaries of international finance have dictated that prudent capitalists cede to the opinion of their experts who are hired because they trained within their particular fields to know better than the persons who employ them. The Constitution does not prescribe a particular manner of management; thus, we can conclude that the State is not compelled to adopt outmoded methods that could tend to minimize profits.
Still, the question as to who should exercise management is best left to the parties of the agreement, namely the President and the foreign corporations. They would be in the best position to determine who is best qualified to exert managerial control. This prerogative of management can be exercised by the State if it so insists and the co-parties agree, and the wisdom of such arrogation is ultimately a policy question this Court has little control over. And even if the State cedes management to a different entity such as the foreign corporation, it has the duty to safeguard that the actual exercise of managerial power does not contravene our laws and public policy.
There is barely any support of the view that only the State may exert managerial control. Even the minority concede that these foreign corporations are not precluded from participating in the management of the project. I think it unwise to construe full supervision and control to the effect that the States assent or opinion is necessary before any day-to-day operational questions may be resolved. There is neither an express rule to that effect, nor any law of construction that necessitates such interpretation. Ideally of course, the most qualified party should be allowed to manage the enterprise, and we should not allow an interpretation that compels a possibly unsuited entity, such as the State, to operationalize the business.29 Such a limited construction would be inconvenient and absurd,30 not to mention potentially wasteful.
The Constitution itself concedes that the State may not have the best sense as to how to undertake large-scale exploration, development and utilization of mineral and petroleum resources. This is evinced by the allowance of foreign technical assistance and foreign participation in the extractive enterprise. Had the Constitution recognized that the State was supremely qualified to undertake the operational aspects of the activity, then it could have phrased the provision in such a way that would strictly limit the foreign participation to monetary investment or a financial grant of assistance.
The absence of an express provision on management permits consideration of the following sensible critique on yielding too many management prerogatives to a remote overseer such as the State. An early United Nations report once noted that while it is theoretically possible to endow a government department with a high degree of operating flexibility, it is in practice difficult to do so.31 It has been proposed that the further away a decision-maker is to the market, the higher the information cost, or the opportunity cost to the gaining of information.32 Remoteness can be achieved through the layering of bureaucratic structure, and because of the information loss that accompanies the transmission of information and judgments from lower levels of the hierarchy to higher levels, the ultimate basis of a decision may be misleading at best and erroneous at worst.33 cralawred
The same conclusion arises from the view that what the provision authorizes is foreign investment. The foreign player necessarily at least has a reasonable say in how the mining venture is run. The interest of the investor in seeing that the investment is not wasted should be recognized not only as a right available to the investor, but from the broader view that such say would lead to a more prudent management of the project. It must be noted that mineral and petroleum resources are non-renewable, thus a paramount interest arises to ensure against wasteful exploitation.
Next for consideration is the situation, as in this case, if management is ceded to the foreign corporation, or even to a private domestic corporation for that matter. What should be the proper dichotomy, if any, between the private entitys exercise of managerial control, and the States full control and supervision?chanroblesvirtualawlibrary
The President may insist on conditions into the agreement pertaining to the States degree of control and supervision in the mining activity. This was certainly done with the WMC FTAA, which is replete with stipulations delineating the States control which are judicially enforceable, imposed presumably at the Presidents call. But the FTAA itself is not the only vehicle by which State control and supervision is exercised. These can similarly be enforced through statutes, as well as executive or administrative issuances. The Mining Act itself is an expression of State control and supervision, implemented in coordination with the executive and legislative branches.
As a general point, I believe that State control and supervision is unconstitutionally yielded if either of the Mining Act or the FTAA precludes the application of the laws and regulations of the Philippines, enunciatory as they are of State policy. Neither the Mining Act nor the WMC FTAA are flawed in that regard. The agreements under contemplation are not beyond the ambit of our regular laws, or regulatory enactments pertaining to such areas as environmental concerns. Violations of these laws uttered in the name of the FTAA are punishable in this jurisdiction.
Still, the fact that the Constitution requires full control and supervision indicates an expectation of a more activist role on the part of the State in the operations of the mining enterprise, perhaps to the prejudice of the laissez-faire capitalist. Most importantly, the State cannot abdicate its traditional functions by contractual limitations. It could compel the mining operations to comply with existing environmental regulations, as well as with future issuances. It may compel the foreign corporation payment of all assessable levies. It may evict officers of the foreign corporation for violation of immigration laws. It may preclude mining operations that affect prerogatives granted by law to indigenous peoples. It could restrict particular mining operations which are established to be disasters or nuisances to the affected communities. The power of the State to enforce its police powers needs no statutory grant and are certainly not limited either by the Mining Act or the WMC FTAA.
As to business decisions, I think that the State may exercise control for the purpose of ensuring profit of the enterprise as a whole. This may involve visitorial activity, the conduct of periodic audits, and such powers normally attributed to an overseer of a business. Just as the foreign corporation is expected to guard against waste of financial capital, the State is expected likewise to guard against the waste of resource capital.
I might as well add that, in my view, the constitutional objective of maintaining full control and supervision over the exploration, development and utilization of the countrys mineral resources in the State would be best served by the creation of a public corporation for the development and utilization of these resources, accountable to the State for all actions in its behalf. The device of a corporation properly utilized provides sufficient protection to the States interests while affording flexibility and efficiency in the conduct of mining operations.34 cralawred
The creation of a public corporation could remedy a number of potential problems regarding full State control and supervision of extractive activities concerning our mineral resources by entities which have the funds and/or technical know-how but which cannot have a great degree of control and supervision over such activities. Persons knowledgeable and competent in mining operations may sit in the corporations board of directors and craft policies which implement and further concretize the broad aims of R.A. No. 7942, taking into consideration the nature of the mining industry. The Board would also be in charge of studying existing contracts for mining activities, and approving proposed contracts. The Board may also employ corporate officers and employees to take charge of the day-to-day operations of the mining activities pursuant to the corporations contracts with other entities.
Under such a scheme, the perceived abdication by the State of control and supervision over mining activities in favor of the foreign entities rendering financial and/or technical assistance would be greatly diminished. It would be the public corporation which would principally undertake mining activities and contract with foreign entities for financial and/or technical assistance if necessary. The foreign contractor in such cases would not have the power to determine the course of the project or the major policies involved therein because these functions would belong to the public corporation as the agent of the State.
A public corporation would also have the additional benefit of compelling the input of not only the executive branch, but also that of the legislative. Such executive-legislative coordination is necessary since public corporations may only be created through statute.
Section 3.3 of WMC FTAA Constitutional
Finally, it is argued that Section 3.3 of the WMC FTAA violates paragraph 1, Section 2, Article XII of the Constitution, which imposes a limitation on the term of mineral agreements. I agree with the ponencia that the constitutional provision does not pertain to FTAAs. It is clear from reading Section 1 that the agreements limited in term therein are co-production agreements, joint venture agreements, and mineral production-sharing agreements, which are all referred to in Section 1, and not the FTAAs mentioned only in Section 4. Accordingly, Section 3.3 of the WMC FTAA is not infirm.
Behind the legal issues presented by the petition are fundamental policy questions from which highly opinionated views can develop, even from the members of this Court. The promise brought about by the large-scale exploitation of our mineral and petroleum resources may bring in much needed revenue, but Filipinos should properly inquire at what cost. As a Filipino, I am distressed whenever the government crosses the line from cooperation to subservience to foreign partners in development. Popular Western wisdom aside, what is good for General Motors is not necessarily good for the country. The propagation of a foreign-influenced mining industry may lead to a whole slew of social problems35 which shall be exacerbated if the government is complicit, either through active participation or benign neglect, to abuses committed by the mining industry against the Filipino people. Unlike the foreign corporation, the bottom line which the State should consider is not found below a ledger, but in the socio-economic dynamic that will confront the government as a result of the large-scale mining venture. Political capital is more fickle than financial capital.
Still, the right to vote I exercise today is that as of a member of the Court, and not that of the general electorate. The limits of judicial power would exasperate any well-meaning judge who feels duty-bound to affirm a constitutionally valid law or principle he or she may otherwise disagree with. My views on how the government should act are segregate from my view on whether the government has the power to act at all.
My conclusions are borne out of a close textual analysis of Section 2 in light of my fundamental understanding of the constitutional powers of the executive branch. This is in line with my perception of the judicial duty as being limited to charting the scope and boundaries of the law. The philosophy of inclusiveness that drives my interpretation of Section 2 is bolstered not because it might lead to benefits to the economy, but because it gives due regard to the discretion of the Executive to determine what is good for the economy. This judicial attitude may not always ensure the economic good. But before we carve that judicial path out of what we believe are good intentions, restraint is imperative out of due deference to our co-equal branches, since the duty of formulating and implementing economic policies falls exclusively within their purview.
In view of the foregoing, I concur with the opinion of Justice Panganiban.
1 SECTION 2. All lands of the public domain, waters, 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. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. (Emphasis supplied)cralawlibrary
2 Each time Sec. 2 is hereafter mentioned, it is understood to be Sec. 2, Art. XII of the Constitution.
3 The Philippines is a democratic and republican State. xxx" See Section 1, Article II, Constitution. Republicanism, in so far as it implies the adoption of a representative type of government, necessarily points to the enfranchised citizen as a particle of popular sovereignty and as the ultimate source of the established authority. Moya v. Del Fierro, 69 Phil. 199, 204 (1939), See also Badelles v. Cabili, 136 Phil. 383, 395-396 (1969).
4 Section 1, Article VII of the Constitution states: The executive power shall be vested in the President of the Philippines.
5 See Section 17, Article VII, Constitution, which reads: The President shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed.
6 See Section 18, Article VII, Constitution, which begins: The President shall be the Commander-in-Chief of all armed forces of the Philippines and whenever it becomes necessary, he may call out such armed forces to prevent or suppress lawless violence, invasion or rebellion. xxx
7 G.R. No. 88211, 27 October 1989, 178 SCRA 760.
8 Id. at 764. Citing the eminent American legal scholar Laurence Tribe, who notes that US jurisprudence makes clear that the constitutional concept of inherent power is not a synonym for power without limit; rather, the concept suggests only that not all powers granted in the Constitution are themselves exhausted by internal enumeration, so that, within a sphere properly regarded as one of executive power, authority is implied unless there or elsewhere expressly limited. Ibid.
9 Justice Irene Cortes, who penned the Courts decision in Marcos v. Manglapus, has opined elsewhere on the grant of plenary executive powers on the President, [who] personifies the executive branch. There is a unity in the executive branch absent from the two other branches of government. The president is not the chief of many executives. He is the executive. His direction of the executive branch can be more immediate and direct than the United States president because he is given by express provision of the constitution control over all executive departments, bureaus and offices. I. Cortes, The Philippine Presidency: A Study of Executive Power, pp. 68-69; cited in Sanlakas v. Executive Secretary et al., G.R. NOS. 159086, 159103, 159185, 159196, 3 February 2004.
10 This case is unique. It should not create a precedent, for the case of a dictator forced out of office and into exile after causing twenty years of political, economic and social havoc in the country and who within the short space of three years seeks to return, is in a class by itself. Marcos v. Manglapus, supra note 7, at 682.
11 Id. at 692. See also supra note 8. In light of the U.S. Supreme Court decision in the famed Steel Seizure case, Youngstown Sheet v. Sawyer, supra note 2, and the competing analyses of Justice Black (whose formalist approach led to rigid categorization of separate legislative, executive and judicial functions), and Justices Frankfurter and Jackson (who opted for a more flexible, functional approach), Gunther and Sullivan note that [m]uch scholarly commentary on separation of powers has endorsed the functional approach, and cite this following argument for the functional view: When the Constitution confers power, it confers power on the three generalist political heads of authority, not on branches as such. [Its] silence about the shape of the inevitable, actual government was a product both of drafting compromises and of the explicit purpose to leave Congress free to make whatever arrangements it deemed necessary and proper for the detailed pursuit of government purposes. G. Gunther and K. Sullivan, Constitutional Law (14th ed., 2001), at 342; citing Strauss, Formal and Functional Approaches to Separation of Powers Questions A Foolish Inconsistency, 72 Corn.L.Rev. 488 (1987).
Another analysis is proferred by Chemerinsky, who acknowledges that the debate on inherent presidential power has existed from the earliest days of the country. E. Chemerinsky, Constitutional Law: Principles and Policies (2nd ed., 2002), at 329. In analyzing the U.S. Supreme Courts divided opinions in the seminal case of Youngstown Sheet, supra note 2, he notes that while the majority opinion of Justice Black seems to deny the existence of any inherent presidential power, the concurring opinions of Justices Douglas, Frankfurter and Jackson do seem to acknowledge the existence of such power, albeit subject to proscription by the legislative branch. Chemerinsky also notes that the view of inherent presidential authority had been affirmed in the earlier case of U.S. v. Curtiss-Wright Export Corporation, 299 U.S. 304 (1936), which pertained to the presidential power to conduct foreign policy. Id. at 334.
12 Ibid. See also Sanlakas v. Executive Secretary; supra note 9.
13 Iron and Steel Authority v. Court of Appeals, 319 Phil. 648, 658 (1995).
14 Apropos to the nature of the Filipino presidency is the following comment on the U.S. presidency by an American historian, As our Chief of State, and as such the embodiment of the peoples elective will, the President is clad with the prerogative of the office, and possesses more actual sovereign power than any British king since George III. In his role as Chief of Foreign Relations, from the beginning he has been the sole organ of the nation in its external relations, and its sole representative with foreign nations. While the Senate must advise and consent to any treaty, the President has exclusive initiative in their negotiation. G.F. Milton, The Use of Presidential Power: 1789-1943 (1980 ed.), at 3.
15 Section 1, Article VIII, Constitution enables the courts to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the executive, a duty which is made easier if there is a specifically prescribed constitutional standard which warrants obeisance by the executive branch.
16 See Secs. 21 and 22, Art. VI, Const., which read:chanroblesvirtua1awlibrary
Sec. 21. The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or affected by such inquiries shall be respected.
Sec. 22. The heads of departments may upon their own initiative, with the consent of the President, or upon the request of either House, as the rules of each House shall provide, appear before and be heard by such House or any matter pertaining to their departments. Written questions shall be submitted to the President of the Senate or the Speaker of the House of Representatives at least three days before their scheduled appearance. Interpellations shall not be limited to written questions, but may cover matters related thereto. When the security of the State or the public interest so requires and the President so states in writing, the appearance shall be conducted in executive session.
17 See Section 2, Article XII, Constitution, which states in part, All lands of the public domain, waters, 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. An offshoot of the long-standing Regalian doctrine recognized in this jurisdiction.
18 The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. Id.
19 The so-called Jamir amendment, proposed by Commissioner Alberto M.K. Jamir, which read The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development and utilization of natural resources according to the general terms and conditions provided by law based on real contributions to the long-term growth of the economy. 3 Record of the Constitutional Commission: Proceedings and Debates (1987), at 351.
20 Id. at 356.
21 Indeed, since 1973 when the service contract system for petroleum was implemented, the government has earned over 1.882 Billion Pesos and 10.160 Billion Pesos in revenues from oil and natural gas production, respectively. Based on data provided by the Department of Energy.
22 Paragraph 5, Sec. 2, Art. XII. It provides: The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.
23 See Section 9, Article XIV, 1973 Constitution.
24 Resolution, p. 26.
25 Per Jackson, J., concurring, Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952).
26 The following exchanges during the debates of the 1987 Constitutional Commission indicate that the absence of domestic capital for mineral and petroleum development was duly considered by the framers.
MR. GASCON. As far as investment is concerned in developing certain priority areas for our economic development, are there areas where there is much need for foreign investments?chanroblesvirtualawlibrary
MR. VILLEGAS. During the public hearings, we heard people from the mining and oil exploration industries, who presented a very strong case, that foreign investment is actually indispensable because there is no risk capital available in the Philippines. If the Gentleman will remember, the figure cited over the last ten years is that
P800 million literally went down the drain in oil exploration and up to now, no oil has been found, and all that money was foreign money. These people asked a rhetorical question: Can you imagine if that money belonged to Filipinos? 3 Record of the Constitutional Commission: Proceedings and Debates (1987), at 310.
MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals, petroleum and mineral oils. The Commission has just approved the possible foreign entry into the development, exploration and utilization of these minerals, petroleum and other mineral oils by virtue of the Jamir amendment. I voted in favor of the Jamir amendment because it will eventually give way to vesting in exclusively Filipino citizens and corporations wholly owned by Filipino citizens the right to utilize the other natural resources. This means that as a matter of policy, natural resources should be utilized and exploited only by Filipino citizens or corporations wholly owned by such citizens. But by virtue of the Jamir amendment, since we feel that Filipino capital may not be enough for the development and utilization of minerals, petroleum and other mineral oils, the President can enter into service contracts with foreign corporations precisely for the development and utilization of such resources. 3 Record of the Constitutional Commission: Proceedings and Debates (1987), at 361.
27 Invalidity of provisions which do not adequately assert constitutional rights or prerogatives need not always be the proper remedy, considering, as Justice Vitug noted in his separate opinion in this case, that [t]he fundamental law is deemed written in every contract. Vitug, J., Separate Opinion, La Bugal-B'laan Tribal Association, Inc. v. Ramos, G.R. No. 127882, 27 January 2004.
28 N. Hamilton, The Iron Range Resources and Rehabilitation Board: An Unconstitutional and Confused Delegation of Executive Power to Legislators, 25 William Mitchell Law Rev. 1204, 1235 (1999).
29 The following traditional observation of John Thurston, as cited in a periodical article, bears noting:chanroblesvirtua1awlibrary
Thurston] explained that the day-to-day administration of the corporation should be independent of the executive and the legislature, but [I]n matters of general and public policy, the corporation must necessarily be subject to executive and legislative control. In addition to having control over general and public policy, the executive and legislature also should monitor the efficiency of the public corporation. However, Thurston perceived a dilemma in balancing the need to ensure that the corporation functions efficiently and without waste, and the problem of preventing unnecessary interference with details of administration. xxx Id., at 1231.
30 Interpretatio talis in ambiguis simper fienda est, ut evitur inconveniens et absurdum. Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to be adopted. Cosico v. NLRC, 338 Phil. 1080, 1089 (1997); citing Commissioner of Internal Revenue v. TMX Sales, Inc., 205 SCRA 184, 188 (1992).
31 United Nations Technical Assistance Administration, Some Problems in the Organization and Administration of Public Enterprise in the Industrial Field 8 (1954), cited in Hamilton, supra note 35, at 1230. As long as an enterprise is not clearly differentiated from other types of governmental activity, strong pressures will be brought to make it conform to standard government regulations and procedures. Ibid.
32 Id. at 1228.
34 The employment of the corporate entity was suggested by Neil W. Hamilton, a Professor of Regulatory Policy in the William Mitchell College of Law, in his article analyzing the effectiveness and economic efficiency of a government board for the rehabilitation iron mines in Minnesota, U.S.A. which were being depleted. Professor Hamilton proffered the view that the executive and the legislative branches of government would have control over the general and public policy concerning the operation of iron mines and should monitor the efficiency of the public corporation created to take care of the operation of iron mines, but the corporation, through its board of directors and officers, would have control over day-to-day operations. (The Iron Range Resources and Rehabilitation Board: An Unconstitutional and Confused Delegation of Executive Power to Legislators, 25 William Mitchell Law Review 1203 ) .
35 The following perspective from sectors not affiliated with the business community deserve contemplation:chanroblesvirtua1awlibrary
Creating a favorable investment climate for foreign mining companies has led to new social problems, namely human rights problems and dislocation of indigenous peoples. The country has experienced incidents of armed violence from mining guards and military personnel assigned to assist the mining companies. Indigenous tribes have been displaced as military operations facilitate the entry of corporations into mining areas. Mining operations are severely infringing on communities and their livelihoods. In 1996, a mining tailings spill from the Marcopper tailing dam in Marinduque seriously polluted the Boac River and Calancan Bay on which the local communities depend. See http://www.foe.org/camps/intl/imf/selling/asia4.php .
At risk to the peoples of the Philippines is their remaining patrimony and economic sovereignty. Mining legislation opens up the country to further foreign domination and control. It perpetuates the semi-feudal, semi-capitalist neocolonial character of the economy. It is creating mass displacement, especially of indigenous communities and upland farmers. Foreign companies have an abominable history of creating environmental disasters as well, and turning virgin forests and clean water sources and farming lands into wastelands and deserts. They also have a terrible reputation for excessive exploitation of workers and mass unemployment. Finally, foreign owned mines will bring militarization as the owners will guard mining areas. B.J. Warden, at http://www.canadianliberty.bcca/relatedinfo/miningco.php.