EN BANC
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, 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,[1]
ROSE LILIA S. ROMANO, ROBERTO S.
VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by
his father ELPIDIO V. PERIA,[2]
GREEN FORUM PHILIPPINES, GREEN FORUM
WESTERN VISAYAS, (GF-WV), ENVIRONMETAL LEGAL ASSISTANCE CENTER (ELAC),
PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG
PANSAKAHAN (KAISAHAN),[3]
KAISAHAN TUNGO SA KAUNLARAN NG
KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN
REFORM and RURAL DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE
PART`NERSHIP 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), LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC.
(LRC),
Petitioners,
|
G.R.
No.
127882
January 27, 2004
-versus-
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.,[4]
Respondents.
|
D E C I S I O N
CARPIO-MORALES, J.:
The present petition
for mandamus and prohibition assails the constitutionality of Republic
Act No. 7942,[5]
otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the
Implementing
Rules and Regulations issued pursuant thereto, Department of
Environment
and Natural Resources (DENR) Administrative Order 96-40, and of the
Financial
and Technical Assistance Agreement (FTAA) entered into on March 30,
1995
by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP),
a corporation organized under Philippine laws.chanrobles virtuallaw libraryred
On July 25, 1987, then
President Corazon C. Aquino issued Executive Order (E.O.) No. 279[6]
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.
In entering into such proposals, the President shall consider the real
contributions to the economic growth and general welfare of the country
that will be realized, as well as the development and use of local
scientific
and technical resources that will be promoted by the proposed contract
or agreement. Until Congress shall determine otherwise, large-scale
mining,
for purpose of this Section, shall mean those proposals for contracts
or
agreements for mineral resources exploration, development, and
utilization
involving a committed capital investment in a single mining unit
project
of at least Fifty Million Dollars in United States Currency (US
$50,000,000.00).[7]chanrobles virtuallaw libraryred
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."[8]R.A.
No. 7942 defines the modes of mineral agreements for mining
operations,[9]
outlines the procedure for their filing and approval,[10]
assignment/transfer[11]
and withdrawal,[12]
and fixes their terms.[13]
Similar provisions govern financial or technical assistance agreements.[14]
The law prescribes the
qualifications of contractors[15]
and grants them certain rights, including timber,[16]
water[17]
and easement[18]
rights, and the right to possess explosives.[19]
Surface owners, occupants, or concessionaires are forbidden from
preventing
holders of mining rights from entering private lands and concession
areas.[20]
A procedure for the settlement of conflicts is likewise provided for.[21]
The Act restricts the
conditions for exploration,[22]
quarry[23]
and other[24]
permits. It regulates the transport, sale and processing of minerals,[25]
and promotes the development of mining communities, science and mining
technology,[26]
and safety and environmental protection.[27]
The government's share
in the agreements is spelled out and allocated,[28]
taxes and fees are imposed,[29]
incentives granted.[30]
Aside from penalizing certain acts,[31]
the law likewise specifies grounds for the cancellation, revocation and
termination of agreements and permits.[32]
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.[33]
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.[34]
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.cralaw:red
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,[35]
giving the DENR fifteen days from receipt[36]
to act thereon. The DENR, however, has yet to respond or act on
petitioners'
letter.[37]
Petitioners thus filed
the present petition for prohibition and mandamus, with a prayer for a
temporary restraining order. They allege that at the time of the filing
of the petition, 100 FTAA applications had already been filed, covering
an area of 8.4 million hectares,[38]
64 of which applications are by fully foreign-owned corporations
covering
a total of 5.8 million hectares, and at least one by a fully
foreign-owned
mining company over offshore areas.[39]chanrobles virtuallaw libraryred
Petitioners claim that
the DENR Secretary acted without or in excess of jurisdiction:
I
x x x in signing and
promulgating DENR Administrative Order No. 96-40 implementing Republic
Act No. 7942, the latter being unconstitutional in that it allows
fully
foreign owned corporations to explore, develop, utilize and exploit
mineral
resources in a manner contrary to Section 2, paragraph 4, Article XII
of
the Constitution;
II
x x x in signing and
promulgating DENR Administrative Order No. 96-40 implementing Republic
Act No. 7942, the latter being unconstitutional in that it allows
the
taking of private property without the determination of public use and
for just compensation;
III
x x x in signing and
promulgating DENR Administrative Order No. 96-40 implementing Republic
Act No. 7942, the latter being unconstitutional in that it violates
Sec. 1, Art. III of the Constitution;
IV
x x x in signing and
promulgating DENR Administrative Order No. 96-40 implementing Republic
Act No. 7942, the latter being unconstitutional in that it allows
enjoyment
by foreign citizens as well as fully foreign owned corporations of the
nation's marine wealth contrary to Section 2, paragraph 2 of Article
XII
of the Constitution;
V
x x x in signing and
promulgating DENR Administrative Order No. 96-40 implementing Republic
Act No. 7942, the latter being unconstitutional in that it allows
priority
to foreign and fully foreign owned corporations in the exploration,
development
and utilization of mineral resources contrary to Article XII of the
Constitution;
VI
x x x in signing and
promulgating DENR Administrative Order No. 96-40 implementing Republic
Act No. 7942, the latter being unconstitutional in that it allows
the
inequitable sharing of wealth contrary to Sections [sic] 1, paragraph
1,
and Section 2, paragraph 4[,] [Article XII] of the Constitution;
VII
x x x in
recommending
approval of and implementing the Financial and Technical Assistance
Agreement
between the President of the Republic of the Philippines and Western
Mining
Corporation Philippines Inc. because the same is illegal and
unconstitutional.[40]
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; andchanrobles virtuallaw libraryred
(d) Cancelling the Financial
and Technical Assistance Agreement issued to Western Mining
Philippines,
Inc. as unconstitutional, illegal and null and void.[41]
Impleaded as public
respondents are Ruben Torres, the then Executive Secretary, Victor O.
Ramos,
the then DENR Secretary, and Horacio Ramos, Director of the Mines and
Geosciences
Bureau of the DENR. Also impleaded is private respondent WMCP, which
entered
into the assailed FTAA with the Philippine Government. WMCP is owned by
WMC Resources International Pty., Ltd. (WMC), "a wholly owned
subsidiary
of Western Mining Corporation Holdings Limited, a publicly listed major
Australian mining and exploration company."[42]
By WMCP's information, "it is a 100% owned subsidiary of WMC LIMITED."[43]
Respondents, aside from
meeting petitioners' contentions, argue that the requisites for
judicial
inquiry have not been met and that the petition does not comply with
the
criteria for prohibition and mandamus. Additionally, respondent WMCP
argues
that there has been a violation of the rule on hierarchy of courts.cralaw:red
After petitioners filed
their reply, this Court granted due course to the petition. The parties
have since filed their respective memoranda.cralaw:red
WMCP subsequently filed
a Manifestation dated September 25, 2002 alleging that on January 23,
2001,
WMC sold all its shares in WMCP to Sagittarius Mines, Inc.
(Sagittarius),
a corporation organized under Philippine laws.[44]
WMCP was subsequently renamed "Tampakan Mineral Resources Corporation."[45]
WMCP claims that at least 60% of the equity of Sagittarius is owned by
Filipinos and/or Filipino-owned corporations while about 40% is owned
by
Indophil Resources NL, an Australian company.[46]
It further claims that by such sale and transfer of shares, "WMCP has
ceased
to be connected in any way with WMC."[47]
By virtue of such sale
and transfer, the DENR Secretary, by Order of December 18, 2001,[48]
approved the transfer and registration of the subject FTAA from WMCP to
Sagittarius. Said Order, however, was appealed by Lepanto Consolidated
Mining Co. (Lepanto) to the Office of the President which upheld it by
Decision of July 23, 2002.[49]
Its motion for reconsideration having been denied by the Office of the
President by Resolution of November 12, 2002,[50]
Lepanto filed a petition for review[51]
before the Court of Appeals. Incidentally, two other petitions for
review
related to the approval of the transfer and registration of the FTAA to
Sagittarius were recently resolved by this Court.[52]
It bears stressing that
this case has not been rendered moot either by the transfer and
registration
of the FTAA to a Filipino-owned corporation or by the non-issuance of a
temporary restraining order or a preliminary injunction to stay the
above-said
July 23, 2002 decision of the Office of the President.[53]
The validity of the transfer remains in dispute and awaits final
judicial
determination. This assumes, of course, that such transfer cures the
FTAA's
alleged unconstitutionality, on which question judgment is reserved.chanrobles virtuallaw libraryred
WMCP also points out
that the original claimowners of the major mineralized areas included
in
the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and
Southcot
Mining Corporation, are all Filipino-owned corporations,[54]
each of which was a holder of an approved Mineral Production Sharing
Agreement
awarded in 1994, albeit their respective mineral claims were subsumed
in
the WMCP FTAA;[55]
and that these three companies are the same companies that consolidated
their interests in Sagittarius to whom WMC sold its 100% equity in WMCP.[56]
WMCP concludes that in the event that the FTAA is invalidated, the
MPSAs
of the three corporations would be revived and the mineral claims would
revert to their original claimants.[57]
These circumstances,
while informative, are hardly significant in the resolution of this
case,
it involving the validity of the FTAA, not the possible consequences of
its invalidation.cralaw:red
Of the above-enumerated
seven grounds cited by petitioners, as will be shown later, only the
first
and the last need be delved into; in the latter, the discussion shall
dwell
only insofar as it questions the effectivity of E. O. No. 279 by virtue
of which order the questioned FTAA was forged.
I
Before going into the
substantive issues, the procedural questions posed by respondents shall
first be tackled.
REQUISITES FOR
JUDICIAL
REVIEW
When an issue of constitutionality
is raised, this Court can exercise its power of judicial review only if
the following requisites are present:
(1) The existence of
an actual and appropriate case;
(2) A personal and substantial
interest of the party raising the constitutional question;
(3) The exercise of
judicial review is pleaded at the earliest opportunity; and
(4) The constitutional
question is the lis mota of the case.[58]chanrobles virtuallaw libraryred
Respondents claim that
the first three requisites are not present.cralaw:red
Section 1, Article VIII
of the Constitution states that "(j)udicial power includes the duty of
the courts of justice to settle actual controversies involving rights
which
are legally demandable and enforceable." The power of judicial review,
therefore, is limited to the determination of actual cases and
controversies.[59]
An actual case or controversy
means an existing case or controversy that is appropriate or ripe for
determination,
not conjectural or anticipatory,[60]
lest the decision of the court would amount to an advisory opinion.[61]
The power does not extend to hypothetical questions[62]
since any attempt at abstraction could only lead to dialectics and
barren
legal questions and to sterile conclusions unrelated to actualities.[63]
"Legal standing" or
locus standi has been defined as a personal and substantial interest in
the case such that the party has sustained or will sustain direct
injury
as a result of the governmental act that is being challenged,[64]
alleging more than a generalized grievance.[65]
The gist of the question of standing is whether a party alleges "such
personal
stake in the outcome of the controversy as to assure that concrete
adverseness
which sharpens the presentation of issues upon which the court depends
for illumination of difficult constitutional questions."[66]
Unless a person is injuriously affected in any of his constitutional
rights
by the operation of statute or ordinance, he has no standing.[67]
Petitioners traverse
a wide range of sectors. Among them are La Bugal B'laan Tribal
Association,
Inc., a farmers and indigenous people's cooperative organized under
Philippine
laws representing a community actually affected by the mining
activities
of WMCP, members of said cooperative,[68]
as well as other residents of areas also affected by the mining
activities
of WMCP.[69]
These petitioners have standing to raise the constitutionality of the
questioned
FTAA as they allege a personal and substantial injury. They claim that
they would suffer "irremediable displacement"[70]
as a result of the implementation of the FTAA allowing WMCP to conduct
mining activities in their area of residence. They thus meet the
appropriate
case requirement as they assert an interest adverse to that of
respondents
who, on the other hand, insist on the FTAA's validity.cralaw:red
In view of the alleged
impending injury, petitioners also have standing to assail the validity
of E.O. No. 279, by authority of which the FTAA was executed.cralaw:red
Public respondents maintain
that petitioners, being strangers to the FTAA, cannot sue either or
both
contracting parties to annul it.[71]
In other words, they contend that petitioners are not real parties in
interest
in an action for the annulment of contract.chanrobles virtuallaw libraryred
Public respondents'
contention fails. The present action is not merely one for annulment of
contract but for prohibition and mandamus. Petitioners allege that
public
respondents acted without or in excess of jurisdiction in implementing
the FTAA, which they submit is unconstitutional. As the case involves
constitutional
questions, this Court is not concerned with whether petitioners are
real
parties in interest, but with whether they have legal standing. As held
in Kilosbayan v. Morato:[72]
x x x. "It is important
to note.that standing because of its constitutional and public
policy
underpinnings, is very different from questions relating to whether a
particular
plaintiff is the real party in interest or has capacity to sue.
Although
all three requirements are directed towards ensuring that only certain
parties can maintain an action, standing restrictions require a partial
consideration of the merits, as well as broader policy concerns
relating
to the proper role of the judiciary in certain areas.["] (FRIEDENTHAL,
KANE AND MILLER, CIVIL PROCEDURE 328 [1985])
Standing is a special
concern in constitutional law because in some cases suits are brought
not
by parties who have been personally injured by the operation of a law
or
by official action taken, but by concerned citizens, taxpayers or
voters
who actually sue in the public interest. Hence, the question in
standing
is whether such parties have "alleged such a personal stake in the
outcome
of the controversy as to assure that concrete adverseness which
sharpens
the presentation of issues upon which the court so largely depends for
illumination of difficult constitutional questions." (Baker v. Carr,
369
U.S. 186, 7 L.Ed.2d 633 [1962].)
As earlier stated, petitioners
meet this requirement.cralaw:red
The challenge against
the constitutionality of R.A. No. 7942 and DAO No. 96-40 likewise
fulfills
the requisites of justiciability. Although these laws were not in force
when the subject FTAA was entered into, the question as to their
validity
is ripe for adjudication.chanrobles virtuallaw libraryred
The WMCP FTAA provides:
14.3 Future Legislation
Any term and condition
more favorable to Financial & Technical Assistance Agreement
contractors
resulting from repeal or amendment of any existing law or regulation or
from the enactment of a law, regulation or administrative order shall
be
considered a part of this Agreement.cralaw:red
It is undisputed that
R.A. No. 7942 and DAO No. 96-40 contain provisions that are more
favorable
to WMCP, hence, these laws, to the extent that they are favorable to
WMCP,
govern the FTAA.cralaw:red
In addition, R.A. No.
7942 explicitly makes certain provisions apply to pre-existing
agreements.cralaw:red
SEC. 112. Non-impairment
of Existing Mining/Quarrying Rights. – x x x That the provisions of
Chapter
XIV on government share in mineral production-sharing agreement and of
Chapter XVI on incentives of this Act shall immediately govern and
apply
to a mining lessee or contractor unless the mining lessee or contractor
indicates his intention to the secretary, in writing, not to avail of
said
provisions x x x Provided, finally, That such leases,
production-sharing
agreements, financial or technical assistance agreements shall comply
with
the applicable provisions of this Act and its implementing rules and
regulations.cralaw:red
As there is no suggestion
that WMCP has indicated its intention not to avail of the provisions of
Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply
to the WMCP FTAA.chanrobles virtuallaw libraryred
Misconstruing the application
of the third requisite for judicial review – that the exercise of the
review
is pleaded at the earliest opportunity – WMCP points out that the
petition
was filed only almost two years after the execution of the FTAA, hence,
not raised at the earliest opportunity.cralaw:red
The third requisite
should not be taken to mean that the question of constitutionality must
be raised immediately after the execution of the state action
complained
of. That the question of constitutionality has not been raised before
is
not a valid reason for refusing to allow it to be raised later.[73]
A contrary rule would mean that a law, otherwise unconstitutional,
would
lapse into constitutionality by the mere failure of the proper party to
promptly file a case to challenge the same.
PROPRIETY OF
PROHIBITION
AND MANDAMUS
Before the effectivity
in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule
65 read:
SEC. 2. Petition for
prohibition. – When the proceedings of any tribunal, corporation,
board,
or person, whether exercising functions judicial or ministerial, are
without
or in excess of its or his jurisdiction, or with grave abuse of
discretion,
and there is no appeal or any other plain, speedy, and adequate remedy
in the ordinary course of law, a person aggrieved thereby may file a
verified
petition in the proper court alleging the facts with certainty and
praying
that judgment be rendered commanding the defendant to desist from
further
proceeding in the action or matter specified therein.cralaw:red
Prohibition is a preventive
remedy.[74]
It seeks a judgment ordering the defendant to desist from continuing
with
the commission of an act perceived to be illegal.[75]
The petition for prohibition
at bar is thus an appropriate remedy. While the execution of the
contract
itself may be fait accompli, its implementation is not. Public
respondents,
in behalf of the Government, have obligations to fulfill under said
contract.
Petitioners seek to prevent them from fulfilling such obligations on
the
theory that the contract is unconstitutional and, therefore, void.chanrobles virtuallaw libraryred
The propriety of a petition
for prohibition being upheld, discussion of the propriety of the
mandamus
aspect of the petition is rendered unnecessary.
HIERARCHY OF COURTS
The contention that
the filing of this petition violated the rule on hierarchy of courts
does
not likewise lie. The rule has been explained thus:
Between two courts of
concurrent original jurisdiction, it is the lower court that should
initially
pass upon the issues of a case. That way, as a particular case goes
through
the hierarchy of courts, it is shorn of all but the important legal
issues
or those of first impression, which are the proper subject of attention
of the appellate court. This is a procedural rule borne of experience
and
adopted to improve the administration of justice.cralaw:red
This Court has consistently
enjoined litigants to respect the hierarchy of courts. Although this
Court
has concurrent jurisdiction with the Regional Trial Courts and the
Court
of Appeals to issue writs of certiorari, prohibition, mandamus, quo
warranto,
habeas corpus and injunction, such concurrence does not give a party
unrestricted
freedom of choice of court forum. The resort to this Court's primary
jurisdiction
to issue said writs shall be allowed only where the redress desired
cannot
be obtained in the appropriate courts or where exceptional and
compelling
circumstances justify such invocation. We held in People v. Cuaresma
that:
A becoming regard for
judicial hierarchy most certainly indicates that petitions for the
issuance
of extraordinary writs against first level ("inferior") courts should
be
filed with the Regional Trial Court, and those against the latter, with
the Court of Appeals. A direct invocation of the Supreme Court's
original
jurisdiction to issue these writs should be allowed only where there
are
special and important reasons therefor, clearly and specifically set
out
in the petition. This is established policy. It is a policy necessary
to
prevent inordinate demands upon the Court's time and attention which
are
better devoted to those matters within its exclusive jurisdiction, and
to prevent further over-crowding of the Court's docket x x x.[76]
[Emphasis supplied]
The repercussions of
the issues in this case on the Philippine mining industry, if not the
national
economy, as well as the novelty thereof, constitute exceptional and
compelling
circumstances to justify resort to this Court in the first instance.cralaw:red
In all events, this
Court has the discretion to take cognizance of a suit which does not
satisfy
the requirements of an actual case or legal standing when paramount
public
interest is involved.[77]
When the issues raised are of paramount importance to the public, this
Court may brush aside technicalities of procedure.[78]
II
Petitioners contend
that E.O. No. 279 did not take effect because its supposed date of
effectivity
came after President Aquino had already lost her legislative powers
under
the Provisional Constitution.chanrobles virtuallaw libraryred
And they likewise claim
that the WMC FTAA, which was entered into pursuant to E.O. No. 279,
violates
Section 2, Article XII of the Constitution because, among other reasons:
(1) It allows foreign-owned
companies to extend more than mere financial or technical assistance to
the State in the exploitation, development, and utilization of
minerals,
petroleum, and other mineral oils, and even permits foreign owned
companies
to "operate and manage mining activities."
(2) It allows foreign-owned
companies to extend both technical and financial assistance, instead of
"either technical or financial assistance."
To appreciate the import
of these issues, a visit to the history of the pertinent constitutional
provision, the concepts contained therein, and the laws enacted
pursuant
thereto, is in order.cralaw:red
Section 2, Article XII
reads in full:
Sec. 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.cralaw:red
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.cralaw:red
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 fish-workers in rivers, lakes, bays, and lagoons.chanrobles virtuallaw libraryred
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.cralaw:red
The President shall
notify the Congress of every contract entered into in accordance with
this
provision, within thirty days from its execution.
THE SPANISH REGIME
AND
THE REGALIAN DOCTRINE
The first sentence of
Section 2 embodies the Regalian doctrine or jura regalia. Introduced by
Spain into these Islands, this feudal concept is based on the State's
power
of dominium, which is the capacity of the State to own or acquire
property.[79]
In its broad sense,
the term "jura regalia" refers to royal rights, or those rights which
the
King has by virtue of his prerogatives. In Spanish law, it refers to a
right which the sovereign has over anything in which a subject has a
right
of property or propriedad. These were rights enjoyed during feudal
times
by the king as the sovereign.cralaw:red
The theory of the feudal
system was that title to all lands was originally held by the King, and
while the use of lands was granted out to others who were permitted to
hold them under certain conditions, the King theoretically retained the
title. By fiction of law, the King was regarded as the original
proprietor
of all lands, and the true and only source of title, and from him all
lands
were held. The theory of jura regalia was therefore nothing more than a
natural fruit of conquest.[80]
The Philippines having
passed to Spain by virtue of discovery and conquest,[81]
earlier Spanish decrees declared that "all lands were held from the
Crown."[82]
The Regalian doctrine
extends not only to land but also to "all natural wealth that may be
found
in the bowels of the earth."[83]
Spain, in particular, recognized the unique value of natural resources,
viewing them, especially minerals, as an abundant source of revenue to
finance its wars against other nations.[84]
Mining laws during the Spanish regime reflected this perspective.[85]
THE AMERICAN
OCCUPATION
AND THE CONCESSION REGIME
By the Treaty of Paris
of December 10, 1898, Spain ceded "the archipelago known as the
Philippine
Islands" to the United States. The Philippines was hence governed by
means
of organic acts that were in the nature of charters serving as a
Constitution
of the occupied territory from 1900 to 1935.[86]
Among the principal organic acts of the Philippines was the Act of
Congress
of July 1, 1902, more commonly known as the Philippine Bill of 1902,
through
which the United States Congress assumed the administration of the
Philippine
Islands.[87]Section 20 of said Bill reserved the disposition of mineral lands of
the
public domain from sale. Section 21 thereof allowed the free and open
exploration,
occupation and purchase of mineral deposits not only to citizens of the
Philippine Islands but to those of the United States as well:chanrobles virtuallaw libraryred
Sec. 21. That all valuable
mineral deposits in public lands in the Philippine Islands, both
surveyed
and unsurveyed, are hereby declared to be free and open to exploration,
occupation and purchase, and the land in which they are found, to
occupation
and purchase, by citizens of the United States or of said Islands:
Provided,
That when on any lands in said Islands entered and occupied as
agricultural
lands under the provisions of this Act, but not patented, mineral
deposits
have been found, the working of such mineral deposits is forbidden
until
the person, association, or corporation who or which has entered and is
occupying such lands shall have paid to the Government of said Islands
such additional sum or sums as will make the total amount paid for the
mineral claim or claims in which said deposits are located equal to the
amount charged by the Government for the same as mineral claims.cralaw:red
Unlike Spain, the United
States considered natural resources as a source of wealth for its
nationals
and saw fit to allow both Filipino and American citizens to explore and
exploit minerals in public lands, and to grant patents to private
mineral
lands.[88]
A person who acquired ownership over a parcel of private mineral land
pursuant
to the laws then prevailing could exclude other persons, even the
State,
from exploiting minerals within his property.[89]
Thus, earlier jurisprudence[90]
held that:
A valid and subsisting
location of mineral land, made and kept up in accordance with the
provisions
of the statutes of the United States, has the effect of a grant by the
United States of the present and exclusive possession of the lands
located,
and this exclusive right of possession and enjoyment continues during
the
entire life of the location. x x x.cralaw:red
x x x.cralaw:red
The discovery of minerals
in the ground by one who has a valid mineral location perfects his
claim
and his location not only against third persons, but also against the
Government.
x x x. [Italics in the original.]
The Regalian doctrine
and the American system, therefore, differ in one essential respect.
Under
the Regalian theory, mineral rights are not included in a grant of land
by the state; under the American doctrine, mineral rights are included
in a grant of land by the government.[91]
Section 21 also made
possible the concession (frequently styled "permit", license" or
"lease")[92]
system.[93]
This was the traditional regime imposed by the colonial administrators
for the exploitation of natural resources in the extractive sector
(petroleum,
hard minerals, timber, etc.).[94]
Under the concession
system, the concessionaire makes a direct equity investment for the
purpose
of exploiting a particular natural resource within a given area.[95]
Thus, the concession amounts to complete control by the concessionaire
over the country's natural resource, for it is given exclusive and
plenary
rights to exploit a particular resource at the point of extraction.[96]
In consideration for the right to exploit a natural resource, the
concessionaire
either pays rent or royalty, which is a fixed percentage of the gross
proceeds.[97]chanrobles virtuallaw libraryred
Later statutory enactments
by the legislative bodies set up in the Philippines adopted the
contractual
framework of the concession.[98]
For instance, Act No. 2932,[99]
approved on August 31, 1920, which provided for the exploration,
location,
and lease of lands containing petroleum and other mineral oils and gas
in the Philippines, and Act No. 2719,[100]
approved on May 14, 1917, which provided for the leasing and
development
of coal lands in the Philippines, both utilized the concession system.[101]
THE 1935
CONSTITUTION
AND THE NATIONALIZATION OF NATURAL RESOURCES
By the Act of United
States Congress of March 24, 1934, popularly known as the
Tydings-McDuffie
Law, the People of the Philippine Islands were authorized to adopt a
constitution.[102]
On July 30, 1934, the Constitutional Convention met for the purpose of
drafting a constitution, and the Constitution subsequently drafted was
approved by the Convention on February 8, 1935.[103]
The Constitution was submitted to the President of the United States on
March 18, 1935.[104]
On March 23, 1935, the President of the United States certified that
the
Constitution conformed substantially with the provisions of the Act of
Congress approved on March 24, 1934.[105]
On May 14, 1935, the Constitution was ratified by the Filipino people.[106]
The 1935 Constitution
adopted the Regalian doctrine, declaring all natural resources of the
Philippines,
including mineral lands and minerals, to be property belonging to the
State.[107]
As adopted in a republican system, the medieval concept of jura regalia
is stripped of royal overtones and ownership of the land is vested in
the
State.[108]
Section 1, Article XIII,
on Conservation and Utilization of Natural Resources, of the 1935
Constitution
provided:
SECTION 1. All agricultural,
timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, and
other natural resources of the Philippines belong to the State, and
their
disposition, exploitation, development, or utilization shall be limited
to citizens of the Philippines, or to corporations or associations at
least
sixty per centum of the capital of which is owned by such citizens,
subject
to any existing right, grant, lease, or concession at the time of the
inauguration
of the Government established under this Constitution. Natural
resources,
with the exception of public agricultural land, shall not be alienated,
and no license, concession, or lease for the exploitation, development,
or utilization of any of the natural resources shall be granted for a
period
exceeding twenty-five years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development
of water power, in which cases beneficial use may be the measure and
the
limit of the grant.cralaw:red
The nationalization
and conservation of the natural resources of the country was one of the
fixed and dominating objectives of the 1935 Constitutional Convention.[109]
One delegate relates:
There was an overwhelming
sentiment in the Convention in favor of the principle of state
ownership
of natural resources and the adoption of the Regalian doctrine. State
ownership
of natural resources was seen as a necessary starting point to secure
recognition
of the state's power to control their disposition, exploitation,
development,
or utilization. The delegates of the Constitutional Convention very
well
knew that the concept of State ownership of land and natural resources
was introduced by the Spaniards, however, they were not certain whether
it was continued and applied by the Americans. To remove all doubts,
the
Convention approved the provision in the Constitution affirming the
Regalian
doctrine.chanrobles virtuallaw libraryred
The adoption of the
principle of state ownership of the natural resources and of the
Regalian
doctrine was considered to be a necessary starting point for the plan
of
nationalizing and conserving the natural resources of the country. For
with the establishment of the principle of state ownership of the
natural
resources, it would not be hard to secure the recognition of the power
of the State to control their disposition, exploitation, development or
utilization.[110]
The nationalization
of the natural resources was intended (1) to insure their conservation
for Filipino posterity; (2) to serve as an instrument of national
defense,
helping prevent the extension to the country of foreign control through
peaceful economic penetration; and (3) to avoid making the Philippines
a source of international conflicts with the consequent danger to its
internal
security and independence.[111]
The same Section 1,
Article XIII also adopted the concession system, expressly permitting
the
State to grant licenses, concessions, or leases for the exploitation,
development,
or utilization of any of the natural resources. Grants, however, were
limited
to Filipinos or entities at least 60% of the capital of which is owned
by Filipinos.cralaw:red
The swell of nationalism
that suffused the 1935 Constitution was radically diluted when on
November
1946, the Parity Amendment, which came in the form of an "Ordinance
Appended
to the Constitution," was ratified in a plebiscite.[112]
The Amendment extended, from July 4, 1946 to July 3, 1974, the right to
utilize and exploit our natural resources to citizens of the United
States
and business enterprises owned or controlled, directly or indirectly,
by
citizens of the United States:[113]
Notwithstanding the
provision of section one, Article Thirteen, and section eight, Article
Fourteen, of the foregoing Constitution, during the effectivity of the
Executive Agreement entered into by the President of the Philippines
with
the President of the United States on the fourth of July, nineteen
hundred
and forty-six, pursuant to the provisions of Commonwealth Act Numbered
Seven hundred and thirty-three, but in no case to extend beyond the
third
of July, nineteen hundred and seventy-four, the disposition,
exploitation,
development, and utilization of all agricultural, timber, and mineral
lands
of the public domain, waters, minerals, coals, petroleum, and other
mineral
oils, all forces and sources of potential energy, and other natural
resources
of the Philippines, and the operation of public utilities, shall, if
open
to any person, be open to citizens of the United States and to all
forms
of business enterprise owned or controlled, directly or indirectly, by
citizens of the United States in the same manner as to, and under the
same
conditions imposed upon, citizens of the Philippines or corporations or
associations owned or controlled by citizens of the Philippines.chanrobles virtuallaw libraryred
The Parity Amendment
was subsequently modified by the 1954 Revised Trade Agreement, also
known
as the Laurel-Langley Agreement, embodied in Republic Act No. 1355.[114]
THE PETROLEUM ACT OF
1949 AND THE CONCESSION SYSTEM
In the meantime, Republic
Act No. 387,[115]
also known as the Petroleum Act of 1949, was approved on June 18, 1949.cralaw:red
The Petroleum Act of
1949 employed the concession system for the exploitation of the
nation's
petroleum resources. Among the kinds of concessions it sanctioned were
exploration and exploitation concessions, which respectively granted to
the concessionaire the exclusive right to explore for[116]
or develop[117]
petroleum within specified areas.cralaw:red
Concessions may be granted
only to duly qualified persons[118]
who have sufficient finances, organization, resources, technical
competence,
and skills necessary to conduct the operations to be undertaken.[119]
Nevertheless, the Government
reserved the right to undertake such work itself.[120]
This proceeded from the theory that all natural deposits or occurrences
of petroleum or natural gas in public and/or private lands in the
Philippines
belong to the State.[121]
Exploration and exploitation concessions did not confer upon the
concessionaire
ownership over the petroleum lands and petroleum deposits.[122]
However, they did grant concessionaires the right to explore, develop,
exploit, and utilize them for the period and under the conditions
determined
by the law.[123]
Concessions were granted
at the complete risk of the concessionaire; the Government did not
guarantee
the existence of petroleum or undertake, in any case, title warranty.[124]
Concessionaires were
required to submit information as maybe required by the Secretary of
Agriculture
and Natural Resources, including reports of geological and geophysical
examinations, as well as production reports.[125]
Exploration[126]
and exploitation[127]
concessionaires were also required to submit work programs.cralaw:red
Exploitation concessionaires,
in particular, were obliged to pay an annual exploitation tax,[128]
the object of which is to induce the concessionaire to actually produce
petroleum, and not simply to sit on the concession without developing
or
exploiting it.[129]
These concessionaires were also bound to pay the Government royalty,
which
was not less than 12½% of the petroleum produced and saved, less
that consumed in the operations of the concessionaire.[130]
Under Article 66, R.A. No. 387, the exploitation tax may be credited
against
the royalties so that if the concessionaire shall be actually producing
enough oil, it would not actually be paying the exploitation tax.[131]
Failure to pay the annual
exploitation tax for two consecutive years,[132]
or the royalty due to the Government within one year from the date it
becomes
due,[133]
constituted grounds for the cancellation of the concession. In case of
delay in the payment of the taxes or royalty imposed by the law or by
the
concession, a surcharge of 1% per month is exacted until the same are
paid.[134]
As a rule, title rights
to all equipment and structures that the concessionaire placed on the
land
belong to the exploration or exploitation concessionaire.[135]
Upon termination of such concession, the concessionaire had a right to
remove the same.[136]
The Secretary of Agriculture
and Natural Resources was tasked with carrying out the provisions of
the
law, through the Director of Mines, who acted under the Secretary's
immediate
supervision and control.[137]
The Act granted the Secretary the authority to inspect any operation of
the concessionaire and to examine all the books and accounts pertaining
to operations or conditions related to payment of taxes and royalties.[138]
The same law authorized
the Secretary to create an Administration Unit and a Technical Board.[139]
The Administration Unit was charged, inter alia, with the enforcement
of
the provisions of the law.[140]
The Technical Board had, among other functions, the duty to check on
the
performance of concessionaires and to determine whether the obligations
imposed by the Act and its implementing regulations were being complied
with.[141]
Victorio Mario A. Dimagiba,
Chief Legal Officer of the Bureau of Energy Development, analyzed the
benefits
and drawbacks of the concession system insofar as it applied to the
petroleum
industry:
Advantages of Concession.
Whether it emphasizes income tax or royalty, the most positive aspect
of
the concession system is that the State's financial involvement is
virtually
risk free and administration is simple and comparatively low in cost.
Furthermore,
if there is a competitive allocation of the resource leading to
substantial
bonuses and/or greater royalty coupled with a relatively high level of
taxation, revenue accruing to the State under the concession system may
compare favorably with other financial arrangements.cralaw:red
Disadvantages of Concession.
There are, however, major negative aspects to this system. Because the
Government's role in the traditional concession is passive, it is at a
distinct disadvantage in managing and developing policy for the
nation's
petroleum resource. This is true for several reasons. First, even
though
most concession agreements contain covenants requiring diligence in
operations
and production, this establishes only an indirect and passive control
of
the host country in resource development. Second, and more importantly,
the fact that the host country does not directly participate in
resource
management decisions inhibits its ability to train and employ its
nationals
in petroleum development. This factor could delay or prevent the
country
from effectively engaging in the development of its resources. Lastly,
a direct role in management is usually necessary in order to obtain a
knowledge
of the international petroleum industry which is important to an
appreciation
of the host country's resources in relation to those of other countries.[142]
Other liabilities of
the system have also been noted:
x x x there are functional
implications which give the concessionaire great economic power arising
from its exclusive equity holding. This includes, first, appropriation
of the returns of the undertaking, subject to a modest royalty; second,
exclusive management of the project; third, control of production of
the
natural resource, such as volume of production, expansion, research and
development; and fourth, exclusive responsibility for downstream
operations,
like processing, marketing, and distribution. In short, even if
nominally,
the state is the sovereign and owner of the natural resource being
exploited,
it has been shorn of all elements of control over such natural resource
because of the exclusive nature of the contractual regime of the
concession.
The concession system, investing as it does ownership of natural
resources,
constitutes a consistent inconsistency with the principle embodied in
our
Constitution that natural resources belong to the state and shall not
be
alienated, not to mention the fact that the concession was the bedrock
of the colonial system in the exploitation of natural resources.[143]chanrobles virtuallaw libraryred
Eventually, the concession
system failed for reasons explained by Dimagiba:
Notwithstanding the
good intentions of the Petroleum Act of 1949, the concession system
could
not have properly spurred sustained oil exploration activities in the
country,
since it assumed that such a capital-intensive, high risk venture could
be successfully undertaken by a single individual or a small company.
In
effect, concessionaires' funds were easily exhausted. Moreover, since
the
concession system practically closed its doors to interested foreign
investors,
local capital was stretched to the limits. The old system also failed
to
consider the highly sophisticated technology and expertise required,
which
would be available only to multinational companies.[144]
A shift to a new regime
for the development of natural resources thus seemed imminent.
PRESIDENTIAL DECREE
NO. 87, THE 1973 CONSTITUTION AND THE SERVICE CONTRACT SYSTEM
The promulgation on
December 31, 1972 of Presidential Decree No. 87,[145]
otherwise known as The Oil Exploration and Development Act of 1972
signaled
such a transformation. P.D. No. 87 permitted the government to explore
for and produce indigenous petroleum through "service contracts."[146]
"Service contracts"
is a term that assumes varying meanings to different people, and it has
carried many names in different countries, like "work contracts" in
Indonesia,
"concession agreements" in Africa, "production-sharing agreements" in
the
Middle East, and "participation agreements" in Latin America.[147]
A functional definition of "service contracts" in the Philippines is
provided
as follows:
A service contract is
a contractual arrangement for engaging in the exploitation and
development
of petroleum, mineral, energy, land and other natural resources by
which
a government or its agency, or a private person granted a right or
privilege
by the government authorizes the other party (service contractor) to
engage
or participate in the exercise of such right or the enjoyment of the
privilege,
in that the latter provides financial or technical resources,
undertakes
the exploitation or production of a given resource, or directly manages
the productive enterprise, operations of the exploration and
exploitation
of the resources or the disposition of marketing or resources.[148]chanrobles virtuallaw libraryred
In a service contract
under P.D. No. 87, service and technology are furnished by the service
contractor for which it shall be entitled to the stipulated service fee.[149]
The contractor must be technically competent and financially capable to
undertake the operations required in the contract.[150]
Financing is supposed
to be provided by the Government to which all petroleum produced
belongs.[151]
In case the Government is unable to finance petroleum exploration
operations,
the contractor may furnish services, technology and financing, and the
proceeds of sale of the petroleum produced under the contract shall be
the source of funds for payment of the service fee and the operating
expenses
due the contractor.[152]
The contractor shall undertake, manage and execute petroleum
operations,
subject to the government overseeing the management of the operations.[153]
The contractor provides all necessary services and technology and the
requisite
financing, performs the exploration work obligations, and assumes all
exploration
risks such that if no petroleum is produced, it will not be entitled to
reimbursement.[154]
Once petroleum in commercial quantity is discovered, the contractor
shall
operate the field on behalf of the government.[155]
P.D. No. 87 prescribed
minimum terms and conditions for every service contract.[156]
It also granted the contractor certain privileges, including exemption
from taxes and payment of tariff duties,[157]
and permitted the repatriation of capital and retention of profits
abroad.[158]
Ostensibly, the service
contract system had certain advantages over the concession regime.[159]
It has been opined, though, that, in the Philippines, our concept of a
service contract, at least in the petroleum industry, was basically a
concession
regime with a production-sharing element.[160]
On January 17, 1973,
then President Ferdinand E. Marcos proclaimed the ratification of a new
Constitution.[161]
Article XIV on the National Economy and Patrimony contained provisions
similar to the 1935 Constitution with regard to Filipino participation
in the nation's natural resources. Section 8, Article XIV thereof
provides:
Sec. 8. All lands of
the public domain, waters, minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries, wildlife, and other
natural
resources of the Philippines belong to the State. With the exception of
agricultural, industrial or commercial, residential and resettlement
lands
of the public domain, natural resources shall not be alienated, and no
license, concession, or lease for the exploration, development,
exploitation,
or utilization of any of the natural resources shall be granted for a
period
exceeding twenty-five years, renewable for not more than twenty-five
years,
except as to water rights for irrigation, water supply, fisheries, or
industrial
uses other than the development of water power, in which cases
beneficial
use may be the measure and the limit of the grant.cralaw:red
While Section 9 of the
same Article maintained the Filipino-only policy in the enjoyment of
natural
resources, it also allowed Filipinos, upon authority of the Batasang
Pambansa,
to enter into service contracts with any person or entity for the
exploration
or utilization of natural resources.cralaw:red
Sec. 9. The disposition,
exploration, development, exploitation, or utilization of any of the
natural
resources of the Philippines shall be limited to citizens, or to
corporations
or associations at least sixty per centum of which is owned by such
citizens.
The Batasang Pambansa, in the national interest, may allow such
citizens,
corporations or associations to enter into service contracts for
financial,
technical, management, or other forms of assistance with any person or
entity for the exploration, or utilization of any of the natural
resources.
Existing valid and binding service contracts for financial, technical,
management, or other forms of assistance are hereby recognized as such.
[Emphasis supplied]
The concept of service
contracts, according to one delegate, was borrowed from the methods
followed
by India, Pakistan and especially Indonesia in the exploration of
petroleum
and mineral oils.[162]
The provision allowing such contracts, according to another, was
intended
to "enhance the proper development of our natural resources since
Filipino
citizens lack the needed capital and technical know-how which are
essential
in the proper exploration, development and exploitation of the natural
resources of the country."[163]
The original idea was
to authorize the government, not private entities, to enter into
service
contracts with foreign entities.[164]
As finally approved, however, a citizen or private entity could be
allowed
by the National Assembly to enter into such service contract.[165]
The prior approval of the National Assembly was deemed sufficient to
protect
the national interest.[166]
Notably, none of the laws allowing service contracts were passed by the
Batasang Pambansa. Indeed, all of them were enacted by presidential
decree.chanrobles virtuallaw libraryred
On March 13, 1973, shortly
after the ratification of the new Constitution, the President
promulgated
Presidential Decree No. 151.[167]
The law allowed Filipino citizens or entities which have acquired lands
of the public domain or which own, hold or control such lands to enter
into service contracts for financial, technical, management or other
forms
of assistance with any foreign persons or entity for the exploration,
development,
exploitation or utilization of said lands.[168]
Presidential Decree
No. 463,[169]
also known as The Mineral Resources Development Decree of 1974, was
enacted
on May 17, 1974. Section 44 of the decree, as amended, provided that a
lessee of a mining claim may enter into a service contract with a
qualified
domestic or foreign contractor for the exploration, development and
exploitation
of his claims and the processing and marketing of the product thereof.cralaw:red
Presidential Decree
No. 704[170]
(The Fisheries Decree of 1975), approved on May 16, 1975, allowed
Filipinos
engaged in commercial fishing to enter into contracts for financial,
technical
or other forms of assistance with any foreign person, corporation or
entity
for the production, storage, marketing and processing of fish and
fishery/aquatic
products.[171]
Presidential Decree
No. 705[172]
(The Revised Forestry Code of the Philippines), approved on May 19,
1975,
allowed "forest products licensees, lessees, or permitees to enter into
service contracts for financial, technical, management, or other forms
of assistance.with any foreign person or entity for the
exploration,
development, exploitation or utilization of the forest resources."[173]
Yet another law allowing
service contracts, this time for geothermal resources, was Presidential
Decree No. 1442,[174]
which was signed into law on June 11, 1978. Section 1 thereof
authorized
the Government to enter into service contracts for the exploration,
exploitation
and development of geothermal resources with a foreign contractor who
must
be technically and financially capable of undertaking the operations
required
in the service contract.cralaw:red
Thus, virtually the
entire range of the country's natural resources –from petroleum and
minerals
to geothermal energy, from public lands and forest resources to fishery
products – was well covered by apparent legal authority to engage in
the
direct participation or involvement of foreign persons or corporations
(otherwise disqualified) in the exploration and utilization of natural
resources through service contracts.[175]chanrobles virtuallaw libraryred
THE 1987
CONSTITUTION
AND TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS
After the February 1986
Edsa Revolution, Corazon C. Aquino took the reins of power under a
revolutionary
government. On March 25, 1986, President Aquino issued Proclamation No.
3,[176]
promulgating the Provisional Constitution, more popularly referred to
as
the Freedom Constitution. By authority of the same Proclamation, the
President
created a Constitutional Commission (CONCOM) to draft a new
constitution,
which took effect on the date of its ratification on February 2, 1987.[177]
The 1987 Constitution
retained the Regalian doctrine. The first sentence of Section 2,
Article
XII states: "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."
Like the 1935 and 1973
Constitutions before it, the 1987 Constitution, in the second sentence
of the same provision, prohibits the alienation of natural resources,
except
agricultural lands.cralaw:red
The third sentence of
the same paragraph is new: "The exploration, development and
utilization
of natural resources shall be under the full control and supervision of
the State." The constitutional policy of the State's "full control and
supervision" over natural resources proceeds from the concept of jura
regalia,
as well as the recognition of the importance of the country's natural
resources,
not only for national economic development, but also for its security
and
national defense.[178]
Under this provision, the State assumes "a more dynamic role" in the
exploration,
development and utilization of natural resources.[179]
Conspicuously absent
in Section 2 is the provision in the 1935 and 1973 Constitutions
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 public domain through
"license, concession or lease" is no longer allowed under the 1987
Constitution.[180]
Having omitted the provision
on the concession system, Section 2 proceeded to introduce "unfamiliar
language":[181]
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.cralaw:red
Consonant with the State's
"full supervision and control" over natural resources, Section 2 offers
the State two "options."[182]
One, the State may directly undertake these activities itself; or two,
it may enter into co-production, joint venture, or production-sharing
agreements
with Filipino citizens, or entities at least 60% of whose capital is
owned
by such citizens.chanrobles virtuallaw libraryred
A third option is found
in the third paragraph of the same section:
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 fish-workers in rivers, lakes, bays, and lagoons.cralaw:red
While the second and
third options are limited only to Filipino citizens or, in the case of
the former, to corporations or associations at least 60% of the capital
of which is owned by Filipinos, a fourth allows the participation of
foreign-owned
corporations. The fourth and fifth paragraphs of Section 2 provide:
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.cralaw:red
The President shall
notify the Congress of every contract entered into in accordance with
this
provision, within thirty days from its execution.cralaw:red
Although Section 2 sanctions
the participation of foreign-owned corporations in the exploration,
development,
and utilization of natural resources, it imposes certain limitations or
conditions to agreements with such corporations.cralaw:red
First, the parties to
FTAAs. Only the President, in behalf of the State, may enter into these
agreements, and only with corporations. By contrast, under the 1973
Constitution,
a Filipino citizen, corporation or association may enter into a service
contract with a "foreign person or entity."
Second, the size of
the activities: only large-scale exploration, development, and
utilization
is allowed. The term "large-scale usually refers to very
capital-intensive
activities."[183]
Third, the natural resources
subject of the activities is restricted to minerals, petroleum and
other
mineral oils, the intent being to limit service contracts to those
areas
where Filipino capital may not be sufficient.[184]chanrobles virtuallaw libraryred
Fourth, consistency
with the provisions of statute. The agreements must be in accordance
with
the terms and conditions provided by law.cralaw:red
Fifth, Section 2 prescribes
certain standards for entering into such agreements. The agreements
must
be based on real contributions to economic growth and general welfare
of
the country.cralaw:red
Sixth, the agreements
must contain rudimentary stipulations for the promotion of the
development
and use of local scientific and technical resources.cralaw:red
Seventh, the notification
requirement. The President shall notify Congress of every financial or
technical assistance agreement entered into within thirty days from its
execution.cralaw:red
Finally, the scope of
the agreements. While the 1973 Constitution referred to "service
contracts
for financial, technical, management, or other forms of assistance" the
1987 Constitution provides for "agreementsinvolving either
financial
or technical assistance." It bears noting that the phrases "service
contracts"
and "management or other forms of assistance" in the earlier
constitution
have been omitted.cralaw:red
By virtue of her legislative
powers under the Provisional Constitution,[185]
President Aquino, on July 10, 1987, signed into law E.O. No. 211
prescribing
the interim procedures in the processing and approval of applications
for
the exploration, development and utilization of minerals. The omission
in the 1987 Constitution of the term "service contracts"
notwithstanding,
the said E.O. still referred to them in Section 2 thereof:
Sec. 2. Applications
for the exploration, development and utilization of mineral resources,
including renewal applications and applications for approval of
operating
agreements and mining service contracts, shall be accepted and
processed
and may be approved x x x. [Emphasis supplied]
The same law provided
in its Section 3 that the "processing, evaluation and approval of all
mining
applications.operating agreements and service contracts.shall
be governed by Presidential Decree No. 463, as amended, other existing
mining laws, and their implementing rules and regulations"
As earlier stated, on
the 25th also of July 1987, the President issued E.O. No. 279 by
authority
of which the subject WMCP FTAA was executed on March 30, 1995.cralaw:red
On March 3, 1995, President
Ramos signed into law R.A. No. 7942. Section 15 thereof declares that
the
Act "shall govern the exploration, development, utilization, and
processing
of all mineral resources." Such declaration notwithstanding, R.A. No.
7942
does not actually cover all the modes through which the State may
undertake
the exploration, development, and utilization of natural resources.chanrobles virtuallaw libraryred
The State, being the
owner of the natural resources, is accorded the primary power and
responsibility
in the exploration, development and utilization thereof. As such, it
may
undertake these activities through four modes:
The State may directly
undertake such activities.cralaw:red
(2) The State may enter
into co-production, joint venture or production-sharing agreements with
Filipino citizens or qualified corporations.cralaw:red
(3) Congress may, by
law, allow small-scale utilization of natural resources by Filipino
citizens.cralaw:red
(4) For the large-scale
exploration, development and utilization of minerals, petroleum and
other
mineral oils, the President may enter into agreements with
foreign-owned
corporations involving technical or financial assistance.[186]
Except to charge the
Mines and Geosciences Bureau of the DENR with performing researches and
surveys,[187]
and a passing mention of government-owned or controlled corporations,[188]
R.A. No. 7942 does not specify how the State should go about the first
mode. The third mode, on the other hand, is governed by Republic Act
No.
7076[189]
(the People's Small-Scale Mining Act of 1991) and other pertinent laws.[190]
R.A. No. 7942 primarily concerns itself with the second and fourth
modes.cralaw:red
Mineral production sharing,
co-production and joint venture agreements are collectively classified
by R.A. No. 7942 as "mineral agreements."[191]
The Government participates the least in a mineral production sharing
agreement
(MPSA). In an MPSA, the Government grants the contractor[192]
the exclusive right to conduct mining operations within a contract area[193]
and shares in the gross output.[194]
The MPSA contractor provides the financing, technology, management and
personnel necessary for the agreement's implementation.[195]
The total government share in an MPSA is the excise tax on mineral
products
under Republic Act No. 7729,[196]
amending Section 151(a) of the National Internal Revenue Code, as
amended.[197]chanrobles virtuallaw libraryred
In a co-production agreement
(CA),[198]
the Government provides inputs to the mining operations other than the
mineral resource,[199]
while in a joint venture agreement (JVA), where the Government enjoys
the
greatest participation, the Government and the JVA contractor organize
a company with both parties having equity shares.[200]
Aside from earnings in equity, the Government in a JVA is also entitled
to a share in the gross output.[201]
The Government may enter into a CA[202]
or JVA[203]
with one or more contractors. The Government's share in a CA or JVA is
set out in Section 81 of the law:
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) the 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 contractor's income tax, excise tax, special allowance,
withholding
tax due from the contractor's 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.cralaw:red
All mineral agreements
grant the respective contractors the exclusive right to conduct mining
operations and to extract all mineral resources found in the contract
area.[204]
A "qualified person" may enter into any of the mineral agreements with
the Government.[205]
A "qualified person" is any citizen of the Philippines with capacity to
contract, or a corporation, partnership, association, or cooperative
organized
or authorized for the purpose of engaging in mining, with technical and
financial capability to undertake mineral resources development and
duly
registered in accordance with law at least sixty per centum (60%) of
the
capital of which is owned by citizens of the Philippines x x x.[206]
The fourth mode involves
"financial or technical assistance agreements." An FTAA is defined as
"a
contract involving financial or technical assistance for large-scale
exploration,
development, and utilization of natural resources."[207]
Any qualified person with technical and financial capability to
undertake
large-scale exploration, development, and utilization of natural
resources
in the Philippines may enter into such agreement directly with the
Government
through the DENR.[208]
For the purpose of granting an FTAA, a legally organized foreign-owned
corporation (any corporation, partnership, association, or cooperative
duly registered in accordance with law in which less than 50% of the
capital
is owned by Filipino citizens)[209]
is deemed a "qualified person."[210]
Other than the difference
in contractors' qualifications, the principal distinction between
mineral
agreements and FTAAs is the maximum contract area to which a qualified
person may hold or be granted.[211]
"Large-scale" under R.A. No. 7942 is determined by the size of the
contract
area, as opposed to the amount invested (US $50,000,000.00), which was
the standard under E.O. 279.chanrobles virtuallaw libraryred
Like a CA or a JVA,
an FTAA is subject to negotiation.[212]
The Government's contributions, in the form of taxes, in an FTAA is
identical
to its contributions in the two mineral agreements, save that in an
FTAA:
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.[213]
III
Having examined the
history of the constitutional provision and statutes enacted pursuant
thereto,
a consideration of the substantive issues presented by the petition is
now in order.
THE EFFECTIVITY OF
EXECUTIVE
ORDER NO. 279
Petitioners argue that
E.O. No. 279, the law in force when the WMC FTAA was executed, did not
come into effect.cralaw:red
E.O. No. 279 was signed
into law by then President Aquino on July 25, 1987, two days before the
opening of Congress on July 27, 1987.[214]Section 8 of the E.O. states that the same "shall take effect
immediately."
This provision, according to petitioners, runs counter to Section 1 of
E.O. No. 200,[215]
which provides:
SECTION 1. Laws shall
take effect after fifteen days following the completion of their
publication
either in the Official Gazette or in a newspaper of general circulation
in the Philippines, unless it is otherwise provided.[216]
[Emphasis supplied]
On that premise, petitioners
contend that E.O. No. 279 could have only taken effect fifteen days
after
its publication at which time Congress had already convened and the
President's
power to legislate had ceased.cralaw:red
Respondents, on the
other hand, counter that the validity of E.O. No. 279 was settled in
Miners
Association of the Philippines v. Factoran, supra. This is of course
incorrect
for the issue in Miners Association was not the validity of E.O. No.
279
but that of DAO Nos. 57 and 82 which were issued pursuant thereto.cralaw:red
Nevertheless, petitioners'
contentions have no merit.chanrobles virtuallaw libraryred
It bears noting that
there is nothing in E.O. No. 200 that prevents a law from taking effect
on a date other than – even before – the 15-day period after its
publication.
Where a law provides for its own date of effectivity, such date
prevails
over that prescribed by E.O. No. 200. Indeed, this is the very essence
of the phrase "unless it is otherwise provided" in Section 1 thereof.
Section
1, E.O. No. 200, therefore, applies only when a statute does not
provide
for its own date of effectivity.cralaw:red
What is mandatory under
E.O. No. 200, and what due process requires, as this Court held in
Tañada
v. Tuvera,[217]
is the publication of the law for without such notice and publication,
there would be no basis for the application of the maxim "ignorantia
legis
n[eminem] excusat." It would be the height of injustice to punish or
otherwise
burden a citizen for the transgression of a law of which he had no
notice
whatsoever, not even a constructive one.cralaw:red
While the effectivity
clause of E.O. No. 279 does not require its publication, it is not a
ground
for its invalidation since the Constitution, being "the fundamental,
paramount
and supreme law of the nation," is deemed written in the law.[218]
Hence, the due process clause,[219]
which, so Tañada held, mandates the publication of statutes, is
read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O.
No.
200 which provides for publication "either in the Official Gazette or
in
a newspaper of general circulation in the Philippines," finds
suppletory
application. It is significant to note that E.O. No. 279 was actually
published
in the Official Gazette[220]
on August 3, 1987.cralaw:red
From a reading then
of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and
Tañada
v. Tuvera, this Court holds that E.O. No. 279 became effective
immediately
upon its publication in the Official Gazette on August 3, 1987.cralaw:red
That such effectivity
took place after the convening of the first Congress is irrelevant. At
the time President Aquino issued E.O. No. 279 on July 25, 1987, she was
still validly exercising legislative powers under the Provisional
Constitution.[221]
Article XVIII (Transitory Provisions) of the 1987 Constitution
explicitly
states:
Sec. 6. The incumbent
President shall continue to exercise legislative powers until the first
Congress is convened.cralaw:red
The convening of the
first Congress merely precluded the exercise of legislative powers by
President
Aquino; it did not prevent the effectivity of laws she had previously
enacted.chanrobles virtuallaw libraryred
There can be no question,
therefore, that E.O. No. 279 is an effective, and a validly enacted,
statute.
THE
CONSTITUTIONALITY
OF THE WMCP FTAA
Petitioners submit that,
in accordance with the text of Section 2, Article XII of the
Constitution,
FTAAs should be limited to "technical or financial assistance" only.
They
observe, however, that, contrary to the language of the Constitution,
the
WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to
extend
more than mere financial or technical assistance to the State, for it
permits
WMCP to manage and operate every aspect of the mining activity.[222]
Petitioners' submission
is well-taken. It is a cardinal rule in the interpretation of
constitutions
that the instrument must be so construed as to give effect to the
intention
of the people who adopted it.[223]
This intention is to be sought in the constitution itself, and the
apparent
meaning of the words is to be taken as expressing it, except in cases
where
that assumption would lead to absurdity, ambiguity, or contradiction.[224]
What the Constitution says according to the text of the provision,
therefore,
compels acceptance and negates the power of the courts to alter it,
based
on the postulate that the framers and the people mean what they say.[225]
Accordingly, following the literal text of the Constitution, assistance
accorded by foreign-owned corporations in the large-scale exploration,
development, and utilization of petroleum, minerals and mineral oils
should
be limited to "technical" or "financial" assistance only.cralaw:red
WMCP nevertheless submits
that the word "technical" in the fourth paragraph of Section 2 of E.O.
No. 279 encompasses a "broad number of possible services," perhaps,
"scientific
and/or technological in basis."[226]
It thus posits that it may also well include "the area of management or
operations.so long as such assistance requires specialized
knowledge
or skills, and are related to the exploration, development and
utilization
of mineral resources."[227]
This Court is not persuaded.
As priorly pointed out, the phrase "management or other forms of
assistance"
in the 1973 Constitution was deleted in the 1987 Constitution, which
allows
only "technical or financial assistance." Casus omisus pro omisso
habendus
est. A person, object or thing omitted from an enumeration must be held
to have been omitted intentionally.[228]
As will be shown later, the management or operation of mining
activities
by foreign contractors, which is the primary feature of service
contracts,
was precisely the evil that the drafters of the 1987 Constitution
sought
to eradicate.cralaw:red
Respondents insist that
"agreements involving technical or financial assistance" is just
another
term for service contracts. They contend that the proceedings of the
CONCOM
indicate "that although the terminology 'service contract' was avoided
[by the Constitution], the concept it represented was not." They add
that
"[t]he concept is embodied in the phrase 'agreements involving
financial
or technical assistance.'"[229]
And point out how members of the CONCOM referred to these agreements as
"service contracts." For instance:
SR. TAN. Am I correct
in thinking that the only difference between these future service
contracts
and the past service contracts under Mr. Marcos is the general law to
be
enacted by the legislature and the notification of Congress by the
President?
That is the only difference, is it not?
MR. VILLEGAS. That is
right.cralaw:red
SR. TAN. So those are
the safeguards[?]
MR. VILLEGAS. Yes. There
was no law at all governing service contracts before.cralaw:red
SR. TAN. Thank you,
Madam President.[230]
[Emphasis supplied]
WMCP also cites the
following statements of Commissioners Gascon, Garcia, Nolledo and Tadeo
who alluded to service contracts as they explained their respective
votes
in the approval of the draft Article:
MR. GASCON. Mr. Presiding
Officer, I vote no primarily because of two reasons: One, the provision
on service contracts. I felt that if we would constitutionalize any
provision
on service contracts, this should always be with the concurrence of
Congress
and not guided only by a general law to be promulgated by Congress. x x
x.[231]
[Emphasis supplied]chanrobles virtuallaw libraryred
x x x.cralaw:red
MR. GARCIA. Thank you.cralaw:red
I vote no. x x x.cralaw:red
Service contracts are
given constitutional legitimization in Section 3, even when they have
been
proven to be inimical to the interests of the nation, providing as they
do the legal loophole for the exploitation of our natural resources for
the benefit of foreign interests. They constitute a serious negation of
Filipino control on the use and disposition of the nation's natural
resources,
especially with regard to those which are nonrenewable.[232]
[Emphasis supplied]
x x x
MR. NOLLEDO. While there
are objectionable provisions in the Article on National Economy and
Patrimony,
going over said provisions meticulously, setting aside prejudice and
personalities
will reveal that the article contains a balanced set of provisions. I
hope
the forthcoming Congress will implement such provisions taking into
account
that Filipinos should have real control over our economy and patrimony,
and if foreign equity is permitted, the same must be subordinated to
the
imperative demands of the national interest.cralaw:red
x x x.cralaw:red
It is also my understanding
that service contracts involving foreign corporations or entities are
resorted
to only when no Filipino enterprise or Filipino-controlled enterprise
could
possibly undertake the exploration or exploitation of our natural
resources
and that compensation under such contracts cannot and should not equal
what should pertain to ownership of capital. In other words, the
service
contract should not be an instrument to circumvent the basic provision,
that the exploration and exploitation of natural resources should be
truly
for the benefit of Filipinos.chanrobles virtuallaw libraryred
Thank you, and I vote
yes.[233]
[Emphasis supplied]
x x x.cralaw:red
MR. TADEO. Nais ko lamang
ipaliwanag ang aking boto.cralaw:red
Matapos suriin ang kalagayan
ng Pilipinas, ang saligang suliranin, pangunahin ang salitang
"imperyalismo."
Ang ibig sabihin nito ay ang sistema ng lipunang pinaghaharian ng
iilang
monopolyong kapitalista at ang salitang "imperyalismo" ay buhay na
buhay
sa National Economy and Patrimony na nating ginawa. Sa pamamagitan ng
salitang
"based on," naroroon na ang free trade sapagkat tayo ay mananatiling
tagapagluwas
ng hilaw na sangkap at tagaangkat ng yaring produkto. Pangalawa,
naroroon
pa rin ang parity rights, ang service contract, ang 60-40 equity sa
natural
resources. Habang naghihirap ang sambayanang Pilipino, ginagalugad
naman
ng mga dayuhan ang ating likas na yaman. Kailan man ang Article on
National
Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating
ekonomiya
sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng bansa ay dalawa
lamang:
ang pagpapatupad ng tunay na reporma sa lupa at ang national
industrialization.
Ito ang tinatawag naming pagsikat ng araw sa Silangan. Ngunit ang mga
landlords
and big businessmen at ang mga komprador ay nagsasabi na ang free trade
na ito, ang kahulugan para sa amin, ay ipinipilit sa ating sambayanan
na
ang araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang
araw sa Kanluran. I vote no.[234]
[Emphasis supplied]
This Court is likewise
not persuaded.cralaw:red
As earlier noted, the
phrase "service contracts" has been deleted in the 1987 Constitution's
Article on National Economy and Patrimony. If the CONCOM intended to
retain
the concept of service contracts under the 1973 Constitution, it could
have simply adopted the old terminology ("service contracts") instead
of
employing new and unfamiliar terms ("agreements.involving either
technical or financial assistance"). Such a difference between the
language
of a provision in a revised constitution and that of a similar
provision
in the preceding constitution is viewed as indicative of a difference
in
purpose.[235]
If, as respondents suggest, the concept of "technical or financial
assistance"
agreements is identical to that of "service contracts," the CONCOM
would
not have bothered to fit the same dog with a new collar. To uphold
respondents'
theory would reduce the first to a mere euphemism for the second and
render
the change in phraseology meaningless.cralaw:red
An examination of the
reason behind the change confirms that technical or financial
assistance
agreements are not synonymous to service contracts.cralaw:red
[T]he Court in construing
a Constitution should bear in mind the object sought to be accomplished
by its adoption, and the evils, if any, sought to be prevented or
remedied.
A doubtful provision will be examined in light of the history of the
times,
and the condition and circumstances under which the Constitution was
framed.
The object is to ascertain the reason which induced the framers of the
Constitution to enact the particular provision and the purpose sought
to
be accomplished thereby, in order to construe the whole as to make the
words consonant to that reason and calculated to effect that purpose.[236]chanrobles virtuallaw libraryred
As the following question
of Commissioner Quesada and Commissioner Villegas' answer shows the
drafters
intended to do away with service contracts which were used to
circumvent
the capitalization (60%-40%) requirement:
MS. QUESADA. The 1973
Constitution used the words "service contracts." In this particular
Section
3, is there a safeguard against the possible control of foreign
interests
if the Filipinos go into coproduction with them?
MR. VILLEGAS. Yes. In
fact, the deletion of the phrase "service contracts" was our first
attempt
to avoid some of the abuses in the past regime in the use of service
contracts
to go around the 60-40 arrangement. The safeguard that has been
introduced
– and this, of course can be refined – is found in Section 3, lines 25
to 30, where Congress will have to concur with the President on any
agreement
entered into between a foreign-owned corporation and the government
involving
technical or financial assistance for large-scale exploration,
development
and utilization of natural resources.[237]
[Emphasis supplied]
In a subsequent discussion,
Commissioner Villegas allayed the fears of Commissioner Quesada
regarding
the participation of foreign interests in Philippine natural resources,
which was supposed to be restricted to Filipinos.cralaw:red
MS. QUESADA. Another
point of clarification is the phrase "and utilization of natural
resources
shall be under the full control and supervision of the State." In the
1973
Constitution, this was limited to citizens of the Philippines; but it
was
removed and substituted by "shall be under the full control and
supervision
of the State." Was the concept changed so that these particular
resources
would be limited to citizens of the Philippines? Or would these
resources
only be under the full control and supervision of the State; meaning,
noncitizens
would have access to these natural resources? Is that the understanding?
MR. VILLEGAS. No, Mr.
Vice-President, if the Commissioner reads the next sentence, it states:
Such activities may
be directly undertaken by the State, or it may enter into
co-production,
joint venture, production-sharing agreements with Filipino citizens.cralaw:red
So we are still limiting
it only to Filipino citizens.chanrobles virtuallaw libraryred
x x x.cralaw:red
MS. QUESADA. Going back
to Section 3, the section suggests that:
The exploration, development,
and utilization of natural resources… may be directly undertaken by the
State, or it may enter into co-production, joint venture or
production-sharing
agreement with.corporations or associations at least sixty per
cent
of whose voting stock or controlling interest is owned by such citizens.cralaw:red
Lines 25 to 30, on the
other hand, suggest that in the large-scale exploration, development
and
utilization of natural resources, the President with the concurrence of
Congress may enter into agreements with foreign-owned corporations even
for technical or financial assistance.cralaw:red
I wonder if this part
of Section 3 contradicts the second part. I am raising this point for
fear
that foreign investors will use their enormous capital resources to
facilitate
the actual exploitation or exploration, development and effective
disposition
of our natural resources to the detriment of Filipino investors. I am
not
saying that we should not consider borrowing money from foreign
sources.
What I refer to is that foreign interest should be allowed to
participate
only to the extent that they lend us money and give us technical
assistance
with the appropriate government permit. In this way, we can insure the
enjoyment of our natural resources by our own people.cralaw:red
MR. VILLEGAS. Actually,
the second provision about the President does not permit foreign
investors
to participate. It is only technical or financial assistance – they do
not own anything – but on conditions that have to be determined by law
with the concurrence of Congress. So, it is very restrictive.cralaw:red
If the Commissioner
will remember, this removes the possibility for service contracts which
we said yesterday were avenues used in the previous regime to go around
the 60-40 requirement.[238]
[Emphasis supplied]chanrobles virtuallaw libraryred
The present Chief Justice,
then a member of the CONCOM, also referred to this limitation in scope
in proposing an amendment to the 60-40 requirement:
MR. DAVIDE. May I be
allowed to explain the proposal?
MR. MAAMBONG. Subject
to the three-minute rule, Madam President.cralaw:red
MR. DAVIDE. It will
not take three minutes.cralaw:red
The Commission had just
approved the Preamble. In the Preamble we clearly stated that the
Filipino
people are sovereign and that one of the objectives for the creation or
establishment of a government is to conserve and develop the national
patrimony.
The implication is that the national patrimony or our natural resources
are exclusively reserved for the Filipino people. No alien must be
allowed
to enjoy, exploit and develop our natural resources. As a matter of
fact,
that principle proceeds from the fact that our natural resources are
gifts
from God to the Filipino people and it would be a breach of that
special
blessing from God if we will allow aliens to exploit our natural
resources.cralaw:red
I voted in favor of
the Jamir proposal because it is not really exploitation that we
granted
to the alien corporations but only for them to render financial or
technical
assistance. It is not for them to enjoy our natural resources. Madam
President,
our natural resources are depleting; our population is increasing by
leaps
and bounds. Fifty years from now, if we will allow these aliens to
exploit
our natural resources, there will be no more natural resources for the
next generations of Filipinos. It may last long if we will begin now.
Since
1935 the aliens have been allowed to enjoy to a certain extent the
exploitation
of our natural resources, and we became victims of foreign dominance
and
control. The aliens are interested in coming to the Philippines because
they would like to enjoy the bounty of nature exclusively intended for
Filipinos by God.cralaw:red
And so I appeal to all,
for the sake of the future generations, that if we have to pray in the
Preamble "to preserve and develop the national patrimony for the
sovereign
Filipino people and for the generations to come," we must at this time
decide once and for all that our natural resources must be reserved
only
to Filipino citizens.cralaw:red
Thank you.[239]
[Emphasis supplied]
The opinion of another
member of the CONCOM is persuasive[240]
and leaves no doubt as to the intention of the framers to eliminate
service
contracts altogether. He writes:
Paragraph 4 of Section
2 specifies large-scale, capital-intensive, highly technological
undertakings
for which the President may enter into contracts with foreign-owned
corporations,
and enunciates strict conditions that should govern such contracts. x x
x.cralaw:red
This provision balances
the need for foreign capital and technology with the need to maintain
the
national sovereignty. It recognizes the fact that as long as Filipinos
can formulate their own terms in their own territory, there is no
danger
of relinquishing sovereignty to foreign interests.chanrobles virtuallaw libraryred
Are service contracts
allowed under the new Constitution? No. Under the new Constitution,
foreign
investors (fully alien-owned) can NOT participate in Filipino
enterprises
except to provide: (1) Technical Assistance for highly technical
enterprises;
and (2) Financial Assistance for large-scale enterprises.cralaw:red
The intent of this provision,
as well as other provisions on foreign investments, is to prevent the
practice
(prevalent in the Marcos government) of skirting the 60/40 equation
using
the cover of service contracts.[241]
[Emphasis supplied]
Furthermore, it appears
that Proposed Resolution No. 496,[242]
which was the draft Article on National Economy and Patrimony, adopted
the concept of "agreements.involving either technical or
financial
assistance" contained in the "Draft of the 1986 U.P. Law Constitution
Project"
(U.P. Law draft) which was taken into consideration during the
deliberation
of the CONCOM.[243]
The former, as well as Article XII, as adopted, employed the same
terminology,
as the comparative table below shows:
DRAFT OF THE UP LAW
CONSTITUTION PROJECT PROPOSED RESOLUTION NO. 496 OF THE CONSTITUTIONAL
COMMISSION
ARTICLE XII OF THE
1987 CONSTITUTION
Sec. 1. All lands of
the public domain, waters, minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries, flora and fauna and
other
natural resources of the Philippines 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. Such activities
may be directly undertaken by the state, or it may enter into
co-production,
joint venture, production sharing agreements with Filipino citizens or
corporations or associations sixty per cent of whose voting stock or
controlling
interest is owned by such citizens for a period of not more than
twenty-five
years, renewable for not more than twenty-five years and under such
terms
and conditions as may be provided by law. In case as to 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 National Assembly
may by law allow small scale utilization of natural resources by
Filipino
citizens.cralaw:red
The National Assembly,
may, by two-thirds vote of all its members by special law provide the
terms
and conditions under which a foreign-owned corporation may enter into
agreements
with the government involving either technical or financial assistance
for large-scale exploration, development, or utilization of natural
resources.
[Emphasis supplied]chanrobles virtuallaw libraryred
Sec. 3. All lands
of the public domain, waters, minerals, coal, petroleum and other
mineral
oils, all forces of potential energy, fisheries, forests, 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. Such activities
may be directly undertaken by the State, or it may enter into
co-production,
joint venture, production-sharing agreements with Filipino citizens or
corporations or associations at least sixty per cent of whose voting
stock
or controlling interest is owned by such citizens. Such agreements
shall
be for a period of twenty-five years, renewable for not more than
twenty-five
years, and under such term 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 for water power, beneficial use may be
the measure and limit of the grant.
The Congress may by
law allow small-scale utilization of natural resources by Filipino
citizens,
as well as cooperative fish farming in rivers, lakes, bays, and lagoons.cralaw:red
The President with the
concurrence of Congress, by special law, shall provide the terms and
conditions
under which a foreign-owned corporation may enter into agreements with
the government involving either technical or financial assistance for
large-scale
exploration, development, and utilization of natural resources.
[Emphasis
supplied]
Sec. 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 case 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.chanrobles virtuallaw libraryred
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.cralaw:red
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 fish-workers in rivers, lakes, bays, and lagoons.cralaw:red
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. [Emphasis supplied]
The President shall
notify the Congress of every contract entered into in accordance with
this
provision, within thirty days from its execution.cralaw:red
The insights of the
proponents of the U.P. Law draft are, therefore, instructive in
interpreting
the phrase "technical or financial assistance."
In his position paper
entitled Service Contracts: Old Wine in New Bottles?, Professor
Pacifico
A. Agabin, who was a member of the working group that prepared the U.P.
Law draft, criticized service contracts for they "lodge exclusive
management
and control of the enterprise to the service contractor, which is
reminiscent
of the old concession regime. Thus, notwithstanding the provision of
the
Constitution that natural resources belong to the State, and that these
shall not be alienated, the service contract system renders nugatory
the
constitutional provisions cited."[244]
He elaborates:
Looking at the Philippine
model, we can discern the following vestiges of the concession regime,
thus:chanrobles virtuallaw libraryred
1. Bidding of a selected
area, or leasing the choice of the area to the interested party and
then
negotiating the terms and conditions of the contract; (Sec. 5, P.D. 87)
2. Management of the
enterprise vested on the contractor, including operation of the field
if
petroleum is discovered; (Sec. 8, P.D. 87)
3. Control of production
and other matters such as expansion and development; (Sec. 8)
4. Responsibility for
downstream operations – marketing, distribution, and processing may be
with the contractor (Sec. 8);
5. Ownership of equipment,
machinery, fixed assets, and other properties remain with contractor
(Sec.
12, P.D. 87);
6. Repatriation of capital
and retention of profits abroad guaranteed to the contractor (Sec. 13,
P.D. 87); and
7. While title to the
petroleum discovered may nominally be in the name of the government,
the
contractor has almost unfettered control over its disposition and sale,
and even the domestic requirements of the country is relegated to a pro
rata basis (Sec. 8).cralaw:red
In short, our version
of the service contract is just a rehash of the old concession regime x
x x. Some people have pulled an old rabbit out of a magician's hat, and
foisted it upon us as a new and different animal.cralaw:red
The service contract
as we know it here is antithetical to the principle of sovereignty over
our natural resources restated in the same article of the [1973]
Constitution
containing the provision for service contracts. If the service
contractor
happens to be a foreign corporation, the contract would also run
counter
to the constitutional provision on nationalization or Filipinization,
of
the exploitation of our natural resources.[245]
[Emphasis supplied. Underscoring in the original]
Professor Merlin M.
Magallona, also a member of the working group, was harsher in his
reproach
of the system:
x x x the nationalistic
phraseology of the 1935 [Constitution] was retained by the [1973]
Charter,
but the essence of nationalism was reduced to hollow rhetoric. The 1973
Charter still provided that the exploitation or development of the
country's
natural resources be limited to Filipino citizens or corporations owned
or controlled by them. However, the martial-law Constitution allowed
them,
once these resources are in their name, to enter into service contracts
with foreign investors for financial, technical, management, or other
forms
of assistance. Since foreign investors have the capital resources, the
actual exploitation and development, as well as the effective
disposition,
of the country's natural resources, would be under their direction, and
control, relegating the Filipino investors to the role of second-rate
partners
in joint ventures.chanrobles virtuallaw libraryred
Through the instrumentality
of the service contract, the 1973 Constitution had legitimized at the
highest
level of state policy that which was prohibited under the 1973
Constitution,
namely: the exploitation of the country's natural resources by foreign
nationals. The drastic impact of [this] constitutional change becomes
more
pronounced when it is considered that the active party to any service
contract
may be a corporation wholly owned by foreign interests. In such a case,
the citizenship requirement is completely set aside, permitting foreign
corporations to obtain actual possession, control, and [enjoyment] of
the
country's natural resources.[246]
[Emphasis supplied]
Accordingly, Professor
Agabin recommends that:
Recognizing the service
contract for what it is, we have to expunge it from the Constitution
and
reaffirm ownership over our natural resources. That is the only way we
can exercise effective control over our natural resources.cralaw:red
This should not mean
complete isolation of the country's natural resources from foreign
investment.
Other contract forms which are less derogatory to our sovereignty and
control
over natural resources – like technical assistance agreements,
financial
assistance [agreements], co-production agreements, joint ventures,
production-sharing
– could still be utilized and adopted without violating constitutional
provisions. In other words, we can adopt contract forms which recognize
and assert our sovereignty and ownership over natural resources, and
where
the foreign entity is just a pure contractor instead of the beneficial
owner of our economic resources.[247]
[Emphasis supplied]
Still another member
of the working group, Professor Eduardo Labitag, proposed that:
2. Service contracts
as practiced under the 1973 Constitution should be discouraged, instead
the government may be allowed, subject to authorization by special law
passed by an extraordinary majority to enter into either technical or
financial
assistance. This is justified by the fact that as presently worded in
the
1973 Constitution, a service contract gives full control over the
contract
area to the service contractor, for him to work, manage and dispose of
the proceeds or production. It was a subterfuge to get around the
nationality
requirement of the constitution.[248]
[Emphasis supplied]chanrobles virtuallaw libraryred
In the annotations on
the proposed Article on National Economy and Patrimony, the U.P. Law
draft
summarized the rationale therefor, thus:
5. The last paragraph
is a modification of the service contract provision found in Section 9,
Article XIV of the 1973 Constitution as amended. This 1973 provision
shattered
the framework of nationalism in our fundamental law (see Magallona,
"Nationalism
and its Subversion in the Constitution"). Through the service contract,
the 1973 Constitution had legitimized that which was prohibited under
the
1935 constitution—the exploitation of the country's natural resources
by
foreign nationals. Through the service contract, acts prohibited by the
Anti-Dummy Law were recognized as legitimate arrangements. Service
contracts
lodge exclusive management and control of the enterprise to the service
contractor, not unlike the old concession regime where the
concessionaire
had complete control over the country's natural resources, having been
given exclusive and plenary rights to exploit a particular resource
and,
in effect, having been assured of ownership of that resource at the
point
of extraction (see Agabin, "Service Contracts: Old Wine in New
Bottles").
Service contracts, hence, are antithetical to the principle of
sovereignty
over our natural resources, as well as the constitutional provision on
nationalization or Filipinization of the exploitation of our natural
resources.cralaw:red
Under the proposed provision,
only technical assistance or financial assistance agreements may be
entered
into, and only for large-scale activities. These are contract forms
which
recognize and assert our sovereignty and ownership over natural
resources
since the foreign entity is just a pure contractor and not a beneficial
owner of our economic resources. The proposal recognizes the need for
capital
and technology to develop our natural resources without sacrificing our
sovereignty and control over such resources by the safeguard of a
special
law which requires two-thirds vote of all the members of the
Legislature.
This will ensure that such agreements will be debated upon exhaustively
and thoroughly in the National Assembly to avert prejudice to the
nation.[249]
[Emphasis supplied]
The U.P. Law draft proponents
viewed service contracts under the 1973 Constitution as grants of
beneficial
ownership of the country's natural resources to foreign owned
corporations.
While, in theory, the State owns these natural resources – and Filipino
citizens, their beneficiaries – service contracts actually vested
foreigners
with the right to dispose, explore for, develop, exploit, and utilize
the
same. Foreigners, not Filipinos, became the beneficiaries of Philippine
natural resources. This arrangement is clearly incompatible with the
constitutional
ideal of nationalization of natural resources, with the Regalian
doctrine,
and on a broader perspective, with Philippine sovereignty.chanrobles virtuallaw libraryred
The proponents nevertheless
acknowledged the need for capital and technical know-how in the
large-scale
exploitation, development and utilization of natural resources – the
second
paragraph of the proposed draft itself being an admission of such
scarcity.
Hence, they recommended a compromise to reconcile the nationalistic
provisions
dating back to the 1935 Constitution, which reserved all natural
resources
exclusively to Filipinos, and the more liberal 1973 Constitution, which
allowed foreigners to participate in these resources through service
contracts.
Such a compromise called for the adoption of a new system in the
exploration,
development, and utilization of natural resources in the form of
technical
agreements or financial agreements which, necessarily, are distinct
concepts
from service contracts.cralaw:red
The replacement of "service
contracts" with "agreements… involving either technical or financial
assistance,"
as well as the deletion of the phrase "management or other forms of
assistance,"
assumes greater significance when note is taken that the U.P. Law draft
proposed other equally crucial changes that were obviously heeded by
the
CONCOM. These include the abrogation of the concession system and the
adoption
of new "options" for the State in the exploration, development, and
utilization
of natural resources. The proponents deemed these changes to be more
consistent
with the State's ownership of, and its "full control and supervision"
(a
phrase also employed by the framers) over, such resources. The Project
explained:
3. In line with the
State ownership of natural resources, the State should take a more
active
role in the exploration, development, and utilization of natural
resources,
than the present practice of granting licenses, concessions, or leases
– hence the provision that said activities shall be under the full
control
and supervision of the State. There are three major schemes by which
the
State could undertake these activities: first, directly by itself;
second,
by virtue of co-production, joint venture, production sharing
agreements
with Filipino citizens or corporations or associations sixty per cent
(60%)
of the voting stock or controlling interests of which are owned by such
citizens; or third, with a foreign-owned corporation, in cases of
large-scale
exploration, development, or utilization of natural resources through
agreements
involving either technical or financial assistance only. x x x.chanrobles virtuallaw libraryred
At present, under the
licensing concession or lease schemes, the government benefits from
such
benefits only through fees, charges, ad valorem taxes and income taxes
of the exploiters of our natural resources. Such benefits are very
minimal
compared with the enormous profits reaped by theses licensees,
grantees,
concessionaires. Moreover, some of them disregard the conservation of
natural
resources and do not protect the environment from degradation. The
proposed
role of the State will enable it to a greater share in the profits – it
can also actively husband its natural resources and engage in
developmental
programs that will be beneficial to them.cralaw:red
4. Aside from the three
major schemes for the exploration, development, and utilization of our
natural resources, the State may, by law, allow Filipino citizens to
explore,
develop, utilize natural resources in small-scale. This is in
recognition
of the plight of marginal fishermen, forest dwellers, gold panners, and
others similarly situated who exploit our natural resources for their
daily
sustenance and survival.[250]
Professor Agabin, in
particular, after taking pains to illustrate the similarities between
the
two systems, concluded that the service contract regime was but a
"rehash"
of the concession system. "Old wine in new bottles," as he put it. The
rejection of the service contract regime, therefore, is in consonance
with
the abolition of the concession system.chanrobles virtuallaw libraryred
In light of the deliberations
of the CONCOM, the text of the Constitution, and the adoption of other
proposed changes, there is no doubt that the framers considered and
shared
the intent of the U.P. Law proponents in employing the phrase
"agreements.involving either technical or financial assistance."
While certain commissioners
may have mentioned the term "service contracts" during the CONCOM
deliberations,
they may not have been necessarily referring to the concept of service
contracts under the 1973 Constitution. As noted earlier, "service
contracts"
is a term that assumes different meanings to different people.[251]
The commissioners may have been using the term loosely, and not in its
technical and legal sense, to refer, in general, to agreements
concerning
natural resources entered into by the Government with foreign
corporations.
These loose statements do not necessarily translate to the adoption of
the 1973 Constitution provision allowing service contracts.cralaw:red
It is true that, as
shown in the earlier quoted portions of the proceedings in CONCOM, in
response
to Sr. Tan's question, Commissioner Villegas commented that, other than
congressional notification, the only difference between "future" and
"past"
"service contracts" is the requirement of a general law as there were
no
laws previously authorizing the same.[252]
However, such remark is far outweighed by his more categorical
statement
in his exchange with Commissioner Quesada that the draft article "does
not permit foreign investors to participate" in the nation's natural
resources
– which was exactly what service contracts did – except to provide
"technical
or financial assistance."[253]chanrobles virtuallaw libraryred
In the case of the other
commissioners, Commissioner Nolledo himself clarified in his work that
the present charter prohibits service contracts.[254]
Commissioner Gascon was not totally averse to foreign participation,
but
favored stricter restrictions in the form of majority congressional
concurrence.[255]
On the other hand, Commissioners Garcia and Tadeo may have veered to
the
extreme side of the spectrum and their objections may be interpreted as
votes against any foreign participation in our natural resources
whatsoever.cralaw:red
WMCP cites Opinion No.
75, s. 1987,[256]
and Opinion No. 175, s. 1990[257]
of the Secretary of Justice, expressing the view that a financial or
technical
assistance agreement "is no different in concept" from the service
contract
allowed under the 1973 Constitution. This Court is not, however, bound
by this interpretation. When an administrative or executive agency
renders
an opinion or issues a statement of policy, it merely interprets a
pre-existing
law; and the administrative interpretation of the law is at best
advisory,
for it is the courts that finally determine what the law means.[258]
In any case, the constitutional
provision allowing the President to enter into FTAAs with foreign-owned
corporations 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.
As Commissioner Villegas emphasized, the provision is "very
restrictive."[259]
Commissioner Nolledo also remarked that "entering into service
contracts
is an exception to the rule on protection of natural resources for the
interest of the nation and, therefore, being an exception, it should be
subject, whenever possible, to stringent rules."[260]
Indeed, exceptions should be strictly but reasonably construed; they
extend
only so far as their language fairly warrants and all doubts should be
resolved in favor of the general provision rather than the exception.[261]
With the foregoing discussion
in mind, this Court finds that R.A. No. 7942 is invalid insofar as said
Act authorizes service contracts. Although the statute employs the
phrase
"financial and technical agreements" in accordance with the 1987
Constitution,
it actually treats these agreements as service contracts that grant
beneficial
ownership to foreign contractors contrary to the fundamental law.chanrobles virtuallaw libraryred
Section 33, which is
found under Chapter VI (Financial or Technical Assistance Agreement) of
R.A. No. 7942 states:
SEC. 33. Eligibility.—Any
qualified person with technical and financial capability to undertake
large-scale
exploration, development, and utilization of mineral resources in the
Philippines
may enter into a financial or technical assistance agreement directly
with
the Government through the Department. [Emphasis supplied]
"Exploration," as defined
by R.A. No. 7942,
means the searching
or prospecting for mineral resources by geological, geochemical or
geophysical
surveys, remote sensing, test pitting, trending, drilling, shaft
sinking,
tunneling or any other means for the purpose of determining the
existence,
extent, quantity and quality thereof and the feasibility of mining them
for profit.[262]
A legally organized
foreign-owned corporation may be granted an exploration permit,[263]
which vests it with the right to conduct exploration for all minerals
in
specified areas,[264]
i.e., to enter, occupy and explore the same.[265]
Eventually, the foreign-owned corporation, as such permittee, may apply
for a financial and technical assistance agreement.[266]
"Development" is the
work undertaken to explore and prepare an ore body or a mineral deposit
for mining, including the construction of necessary infrastructure and
related facilities.[267]chanrobles virtuallaw libraryred
"Utilization" "means
the extraction or disposition of minerals."[268]
A stipulation that the proponent shall dispose of the minerals and
byproducts
produced at the highest price and more advantageous terms and
conditions
as provided for under the implementing rules and regulations is
required
to be incorporated in every FTAA.[269]
A foreign-owned/-controlled
corporation may likewise be granted a mineral processing permit.[270]
"Mineral processing" is the milling, beneficiation or upgrading of ores
or minerals and rocks or by similar means to convert the same into
marketable
products.[271]
An FTAA contractor makes
a warranty that the mining operations shall be conducted in accordance
with the provisions of R.A. No. 7942 and its implementing rules[272]
and for work programs and minimum expenditures and commitments.[273]
And it obliges itself to furnish the Government records of geologic,
accounting,
and other relevant data for its mining operation.[274]
"Mining operation,"
as the law defines it, means mining activities involving exploration,
feasibility,
development, utilization, and processing.[275]
The underlying assumption
in all these provisions is that the foreign contractor manages the
mineral
resources, just like the foreign contractor in a service contract.cralaw:red
Furthermore, Chapter
XII of the Act grants foreign contractors in FTAAs the same auxiliary
mining
rights that it grants contractors in mineral agreements (MPSA, CA and
JV).[276]
Parenthetically, Sections 72 to 75 use the term "contractor," without
distinguishing
between FTAA and mineral agreement contractors. And so does "holders of
mining rights" in Section 76. A foreign contractor may even convert its
FTAA into a mineral agreement if the economic viability of the contract
area is found to be inadequate to justify large-scale mining operations,[277]
provided that it reduces its equity in the corporation, partnership,
association
or cooperative to forty percent (40%).[278]
Finally, under the Act,
an FTAA contractor warrants that it "has or has access to all the
financing,
managerial, and technical expertise"[279]
This suggests that an FTAA contractor is bound to provide some
management
assistance – a form of assistance that has been eliminated and,
therefore,
proscribed by the present Charter.cralaw:red
By allowing foreign
contractors to manage or operate all the aspects of the mining
operation,
the above-cited provisions of R.A. No. 7942 have in effect conveyed
beneficial
ownership over the nation's mineral resources to these contractors,
leaving
the State with nothing but bare title thereto.cralaw:red
Moreover, 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.chanrobles virtuallaw libraryred
In sum, the Court finds
the following provisions of R.A. No. 7942 to be violative of Section 2,
Article XII of the Constitution:
(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.cralaw:red
(2) Section 23,[280]
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,[281]
which enumerates the terms and conditions for every financial or
technical
assistance agreement;chanrobles virtuallaw libraryred
(5) Section 39,[282]
which allows the contractor in a financial and technical assistance
agreement
to convert the same into a mineral production-sharing agreement;
(6) Section 56,[283]
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),[284]
which defines the term "contractor," insofar as it applies to a
financial
or technical assistance agreement.cralaw:red
Section 34,[285]
which prescribes the maximum contract area in a financial or technical
assistance agreements;
Section 36,[286]
which allows negotiations for financial or technical assistance
agreements;
Section 37,[287]
which prescribes the procedure for filing and evaluation of financial
or
technical assistance agreement proposals;
Section 38,[288]
which limits the term of financial or technical assistance agreements;
Section 40,[289]
which allows the assignment or transfer of financial or technical
assistance
agreements;
Section 41,[290]
which allows the withdrawal of the contractor in an FTAA;chanrobles virtuallaw libraryred
The second and third
paragraphs of Section 81,[291]
which provide for the Government's share in a financial and technical
assistance
agreement; and
Section 90,[292]
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.[293]
There can be little
doubt that the WMCP FTAA itself is a service contract.cralaw:red
Section 1.3 of the WMCP
FTAA grants WMCP "the exclusive right to explore, exploit, utilise[,]
process
and dispose of all Minerals products and by-products thereof that may
be
produced from the Contract Area."[294]
The FTAA also imbues WMCP with the following rights:chanrobles virtuallaw libraryred
(b) to extract and carry
away any Mineral samples from the Contract area for the purpose of
conducting
tests and studies in respect thereof;
(c) to determine the
mining and treatment processes to be utilised during the
Development/Operating
Period and the project facilities to be constructed during the
Development
and Construction Period;
(d) have the right of
possession of the Contract Area, with full right of ingress and egress
and the right to occupy the same, subject to the provisions of
Presidential
Decree No. 512 (if applicable) and not be prevented from entry into
private
ands by surface owners and/or occupants thereof when prospecting,
exploring
and exploiting for minerals therein;
x x x
(f) to construct roadways,
mining, drainage, power generation and transmission facilities and all
other types of works on the Contract Area;
(g) to erect, install
or place any type of improvements, supplies, machinery and other
equipment
relating to the Mining Operations and to use, sell or otherwise dispose
of, modify, remove or diminish any and all parts thereof;
(h) enjoy, subject to
pertinent laws, rules and regulations and the rights of third Parties,
easement rights and the use of timber, sand, clay, stone, water and
other
natural resources in the Contract Area without cost for the purposes of
the Mining Operations;
x x x
(i) have the right to
mortgage, charge or encumber all or part of its interest and
obligations
under this Agreement, the plant, equipment and infrastructure and the
Minerals
produced from the Mining Operations;
x x x.[295]
All materials, equipment,
plant and other installations erected or placed on the Contract Area
remain
the property of WMCP, which has the right to deal with and remove such
items within twelve months from the termination of the FTAA.[296]
Pursuant to Section
1.2 of the FTAA, WMCP shall provide "[all] financing, technology,
management
and personnel necessary for the Mining Operations." The mining company
binds itself to "perform all Mining Operations.providing all
necessary
services, technology and financing in connection therewith,"[297]
and to "furnish all materials, labour, equipment and other
installations
that may be required for carrying on all Mining Operations."[298]
WMCP may make expansions, improvements and replacements of the mining
facilities
and may add such new facilities as it considers necessary for the
mining
operations.[299]
These contractual stipulations,
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.chanrobles virtuallaw libraryred
In arguing against the
annulment of the FTAA, WMCP invokes the Agreement on the Promotion and
Protection of Investments between the Philippine and Australian
Governments,
which was signed in Manila on January 25, 1995 and which entered into
force
on December 8, 1995.cralaw:red
x x x. Article 2 (1)
of said treaty states that it applies to investments whenever made and
thus the fact that [WMCP's] FTAA was entered into prior to the entry
into
force of the treaty does not preclude the Philippine Government from
protecting
[WMCP's] investment in [that] FTAA. Likewise, Article 3 (1) of the
treaty
provides that "Each Party shall encourage and promote investments in
its
area by investors of the other Party and shall [admit] such investments
in accordance with its Constitution, Laws, regulations and investment
policies"
and in Article 3 (2), it states that "Each Party shall ensure that
investments
are accorded fair and equitable treatment." The latter stipulation
indicates
that it was intended to impose an obligation upon a Party to afford
fair
and equitable treatment to the investments of the other Party and that
a failure to provide such treatment by or under the laws of the Party
may
constitute a breach of the treaty. Simply stated, the Philippines could
not, under said treaty, rely upon the inadequacies of its own laws to
deprive
an Australian investor (like [WMCP]) of fair and equitable treatment by
invalidating [WMCP's] FTAA without likewise nullifying the service
contracts
entered into before the enactment of RA 7942 such as those mentioned in
PD 87 or EO 279.cralaw:red
This becomes more significant
in the light of the fact that [WMCP's] FTAA was executed not by a mere
Filipino citizen, but by the Philippine Government itself, through its
President no less, which, in entering into said treaty is assumed to be
aware of the existing Philippine laws on service contracts over the
exploration,
development and utilization of natural resources. The execution of the
FTAA by the Philippine Government assures the Australian Government
that
the FTAA is in accordance with existing Philippine laws.[300]
[Emphasis and italics by private respondents]chanrobles virtuallaw libraryred
The invalidation of
the subject FTAA, it is argued, would constitute a breach of said
treaty
which, in turn, would amount to a violation of Section 3, Article II of
the Constitution adopting the generally accepted principles of
international
law as part of the law of the land. One of these generally accepted
principles
is pacta sunt servanda, which requires the performance in good faith of
treaty obligations.cralaw:red
Even assuming arguendo
that WMCP is correct in its interpretation of the treaty and its
assertion
that "the Philippines could not.deprive an Australian investor
(like
[WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA
without
likewise nullifying the service contracts entered into before the
enactment
of RA 7942.," the annulment of the FTAA would not constitute a
breach
of the treaty invoked. For this decision herein invalidating the
subject
FTAA forms part of the legal system of the Philippines.[301]
The equal protection clause[302]
guarantees that such decision shall apply to all contracts belonging to
the same class, hence, upholding rather than violating, the "fair and
equitable
treatment" stipulation in said treaty.chanrobles virtuallaw libraryred
One other matter requires
clarification. Petitioners contend that, consistent with the provisions
of Section 2, Article XII of the Constitution, the President may enter
into agreements involving "either technical or financial assistance"
only.
The agreement in question, however, is a technical and financial
assistance
agreement.cralaw:red
Petitioners' contention
does not lie. To adhere to the literal language of the Constitution
would
lead to absurd consequences.[303]
As WMCP correctly put it:
x x x such a theory
of petitioners would compel the government (through the President) to
enter
into contract with two (2) foreign-owned corporations, one for
financial
assistance agreement and with the other, for technical assistance over
one and the same mining area or land; or to execute two (2) contracts
with
only one foreign-owned corporation which has the capability to provide
both financial and technical assistance, one for financial assistance
and
another for technical assistance, over the same mining area. Such an
absurd
result is definitely not sanctioned under the canons of constitutional
construction.[304]
[Underscoring in the original]
Surely, the framers
of the 1987 Charter did not contemplate such an absurd result from
their
use of "either/or." A constitution is not to be interpreted as
demanding
the impossible or the impracticable; and unreasonable or absurd
consequences,
if possible, should be avoided.[305]
Courts are not to give words a meaning that would lead to absurd or
unreasonable
consequences and a literal interpretation is to be rejected if it would
be unjust or lead to absurd results.[306]
That is a strong argument against its adoption.[307]
Accordingly, petitioners' interpretation must be rejected.cralaw:red
The foregoing discussion
has rendered unnecessary the resolution of the other issues raised by
the
petition.cralaw:red
WHEREFORE, the petition
is GRANTED. The Court hereby declares unconstitutional and void:
(1) The following provisions
of Republic Act No. 7942:
(a) The proviso in Section
3 (aq),
(b) Section 23,
(c) Section 33 to 41,chanrobles virtuallaw libraryred
(d) Section 56,
(e) The second and third
paragraphs of Section 81, and
(f) Section 90.chanrobles virtuallaw libraryred
(2) All provisions of
Department of Environment and Natural Resources Administrative Order
96-40,
s. 1996 which are not in conformity with this Decision, and
(3) The Financial and
Technical Assistance Agreement between the Government of the Republic
of
the Philippines and WMC Philippines, Inc.cralaw:red
SO ORDERED.cralaw:red
Davide, Jr., C.J., Puno,
Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga, JJ., concur.
Vitug, J., see Separate
Opinion.chan
robles virtual law library
Panganiban, J., see
Separate Opinion.
Ynares-Santiago,
Sandoval-Gutierrez
and Austria-Martinez, JJ.,
joins J., Panganiban's
separate opinion.
Azcuna, J., no part, one
of the parties was a client.
____________________________
Endnotes:
[1]
Appears as "Nequito" in the caption of the Petition but "Nequinto" in
the
body. (Rollo, p. 12.)
[2]
As appears in the body of the Petition. (Id., at 13.) The caption of
the
petition does not include Louel A. Peria as one of the petitioners but
the name of his father Elpidio V. Peria appears therein.
[3]
Appears as "Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang
Pansakahan
(KAISAHAN)" in the caption of the Petition by "Philippine Kaisahan
Tungo
sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN)" in the
body.
(Id., at 14.)
[4]
Erroneously designated in the Petition as "Western Mining Philippines
Corporation."
(Id., at 212.) Subsequently, WMC (Philippines), Inc. was renamed
"Tampakan
Mineral Resources Corporation." (Id., at 778.)chanrobles virtuallaw libraryred
[5]
An Act Instituting A New System of Mineral Resources Exploration,
Development,
Utilization and Conservation.
[6]
Authorizing the Secretary of Environment and Natural Resources to
Negotiate
and Conclude Joint Venture, Co-Production, or Production-Sharing
Agreements
for the Exploration, Development and Utilization of Mineral Resources,
and Prescribing the Guidelines for such Agreements and those Agreements
involving Technical or Financial Assistance by Foreign-Owned
Corporations
for Large-Scale Exploration, Development and Utilization of Minerals.
[7]
Exec. Order No. 279 (1987), sec. 4.
[8]
Rep. Act No. 7942 (1995), sec. 15.
[9]
Id., sec. 26 (a)-(c).
[10]
Id., sec. 29.
[11]
Id., sec. 30.
[12]
Id., sec. 31.
[13]
Id., sec. 32.
[14]
Id., ch. VI.
[15]
Id., secs. 27 and 33 in relation to sec. 3 (aq).
[16]
Id., sec. 72.
[17]
Id., sec. 73.
[18]
Id., sec. 75.
[19]
Id., sec. 74.
[20]
Id., sec. 76.
[21]
Id., ch. XIII.
[22]
Id., secs. 20-22.
[23]
Id., secs. 43, 45.
[24]
Id., secs. 46-49, 51-52.
[25]
Id., ch. IX.chanrobles virtuallaw libraryred
[26]
Id., ch. X.
[27]
Id., ch. XI.
[28]
Id., ch. XIV.
[29]
Id., ch. XV.
[30]
Id., ch. XVI.
[31]
Id., ch. XIX.
[32]
Id., ch. XVII.
[33]
Section 116, R.A. No. 7942 provides that the Act "shall take effect
thirty
(30) days following its complete publication in two (2) newspapers of
general
circulation in the Philippines."
[34]
WMCP FTAA, sec. 4.1.
[35]
Rollo, p. 22.
[36]
Ibid.
[37]
Ibid.
[38]
Ibid. The number has since risen to 129 applications when the
petitioners
filed their Reply. (Rollo, p. 363.)
[39]
Id., at 22.
[40]
Id., at 23-24.
[41]
Id., at 52-53. Emphasis and underscoring supplied.
[42]
WMCP FTAA, p. 2.
[43]
Rollo, p. 220.
[44]
Id., at 754.
[45]
Vide Note 4.
[46]
Rollo, p. 754.
[47]
Id., at 755.
[48]
Id., at 761-763.
[49]
Id., at 764-776.chanrobles virtuallaw libraryred
[50]
Id., at 782-786.
[51]
Docketed as C.A.-G. R. No. 74161.
[52]
G.R. No. 153885, entitled Lepanto Consolidated Mining Company v. WMC
Resources
International Pty. Ltd., et al., decided September 24, 2003 and G.R.
No.
156214, entitled Lepanto Mining Company v. WMC Resources International
Pty. Ltd., WMC (Philippines), Inc., Southcot Mining Corporation,
Tampakan
Mining Corporation and Sagittarius Mines, Inc., decided September 23,
2003.
[53]
Section 12, Rule 43 of the Rules of Court, invoked by private
respondent,
states, " The appeal shall not stay the award, judgment, final order or
resolution sought to be reviewed unless the Court of Appeals shall
direct
otherwise upon such terms as it may deem just."
[54]
WMCP's Reply (dated May 6, 2003) to Petitioners' Comment (to the
Manifestation
and Supplemental Manifestation), p. 3.
[55]
Ibid.
[56]
Ibid.
[57]
WMCP's Reply (dated May 6, 2003) to Petitioners' Comment (to the
Manifestation
and Supplemental Manifestation), p. 4.
[58]
Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994);
National
Economic Protectionism Association v. Ongpin, 171 SCRA 657 (1989);
Dumlao
v. COMELEC, 95 SCRA 392 (1980).
[59]
Dumlao v. COMELEC, supra.
[60]
Board of Optometry v. Colet, 260 SCRA 88 (1996).
[61]
Dumlao v. COMELEC, supra.
[62]
Subic Bay Metropolitan Authority v. Commission on Elections, 262 SCRA
492
(1996).
[63]
Angara v. Electoral Commission, 63 Phil. 139 (1936).
[64]
Integrated Bar of the Philippines v. Zamora, 338 SCRA 81, 100 (2000);
Dumlao
v. COMELEC, supra; People v. Vera, 65 Phil. 56 (1937).
[65]
Dumlao v. COMELEC, supra.
[66]
Integrated Bar of the Philippines v. Zamora, supra.
[67]
Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor
of Manila¸ 21 SCRA 449 (1967).
[68]
Petitioners Roberto P. Amloy, Raqim L. Dabie, Simeon H. Dolojo, Imelda
Gandon, Leny B. Gusanan, Marcelo L. Gusanan, Quintol A. Labuayan,
Lomingges
Laway, and Benita P. Tacuayan.
[69]
Petitioners F'long Agutin M. Dabie, Mario L. Mangcal, Alden S. Tusan,
Sr.
Susuan O. Bolanio, OND, Lolita G. Demonteverde, Benjie L. Nequinto,
Rose
Lilia S. Romano and Amparo S. Yap.
[70]
Rollo, p. 6.
[71]
Id. at 337, citing Malabanan v. Gaw Ching, 181 SCRA 84 (1990).
[72]
246 SCRA 540 (1995).
[73]
People v. Vera, supra.
[74]
Militante v. Court of Appeals, 330 SCRA 318 (2000).
[75]
Ibid.chanrobles virtuallaw libraryred
[76]
Cruz v. Secretary of Environment and Natural Resources, 347 SCRA 128
(2000),
Kapunan, J., Separate Opinion. [Emphasis supplied.]
[77]
Joya v. Presidential Commission on Good Government, 225 SCRA 568 (1993).
[78]
Integrated Bar of the Philippines v. Zamora, supra.
[79]
J. Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary
1009 (1996).
[80]
Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion.
[81]
Id., Puno, J., Separate Opinion, and Panganiban, J., Separate Opinion.
[82]
Cariño v. Insular Government, 212 US 449, 53 L.Ed. 595 (1909).
For
instance, Law 14, Title 12, Book 4 of the Recopilacion de Leyes de las
Indias proclaimed:chanroblesvirtuallawlibrary
We
having acquired full sovereignty over the Indies, and all lands,
territories,
and possessions not heretofore ceded away by our royal predecessors, or
by us, or in our name, still pertaining to the royal crown and
patrimony,
it is our will that all lands which are held without proper and true
deeds
of grant be restored to us according as they belong to us, in order
that
after reserving before all what to us or to our viceroys, audiencias,
and
governors may seem necessary for public squares, ways, pastures, and
commons
in those places which are peopled, taking into consideration not only
their
present condition, but also their future and their probable increase,
and
after distributing to the natives what may be necessary for tillage and
pasturage, confirming them in what they now have and giving them more
if
necessary, all the rest of said lands may remain free and unencumbered
for us to dispose of as we may wish.
[83]
Republic v. Court of Appeals, 160 SCRA 228 (1988). It has been noted,
however,
that "the prohibition in the [1935] Constitution against alienation by
the state of mineral lands and minerals is not properly a part of the
Regalian
doctrine but a separate national policy designed to conserve our
mineral
resources and prevent the state from being deprived of such minerals as
are essential to national defense." (A. Noblejas, Philippine Law on
Natural
Resources 126-127 [1959 ed.], citing V. Francisco, The New Mining Law.)
[84]
Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion, citing A. Noblejas, Philippine Law on Natural
Resources
6 (1961). Noblejas continues:chanroblesvirtuallawlibrary
Thus,
they asserted their right of ownership over mines and minerals or
precious
metals, golds, and silver as distinct from the right of ownership of
the
land in which the minerals were found. Thus, when on a piece of land
mining
was more valuable than agriculture, the sovereign retained ownership of
mines although the land has been alienated to private ownership.
Gradually,
the right to the ownership of minerals was extended to base metals. If
the sovereign did not exploit the minerals, they grant or sell it as a
right separate from the land. (Id., at 6.)
[85]
In the unpublished case of Lawrence v. Garduño (L-10942, quoted
in V. Francisco, Philippine Law on Natural Resources 14-15 [1956]),
this
Court observed:chanroblesvirtuallawlibrary
The
principle underlying Spanish legislation on mines is that these are
subject
to the eminent domain of the state. The Spanish law of July 7, 1867,
amended
by the law of March 4, 1868, in article 2 says: "The ownership of the
substances
enumerated in the preceding article (among them those of inflammable
nature),
belong[s] to the state, and they cannot be disposed of without the
government
authority."
The
first Spanish mining law promulgated for these Islands (Decree of
Superior
Civil Government of January 28, 1864), in its Article I, says: "The
supreme
ownership of mines throughout the kingdom belong[s] to the crown and to
the king. They shall not be exploited except by persons who obtained
special
grant from this superior government and by those who may secure it
thereafter,
subject to this regulation."
Article
2 of the royal decree on ownership of mines in the Philippine Islands,
dated May 14, 1867, which was the law in force at the time of the
cession
of these Islands to the Government of the United States, says: "The
ownership
of the substances enumerated in the preceding article (among them those
of inflammable nature) belongs to the state, and they cannot be
disposed
of without an authorization issued by the Superior Civil Governor."
Furthermore,
all those laws contained provisions regulating the manner of
prospecting,
locating and exploring mines in private property by persons other than
the owner of the land as well as the granting of concessions, which
goes
to show that private ownership of the land did not include, without
express
grant, the mines that might be found therein.
Analogous
provisions are found in the Civil Code of Spain determining the
ownership
of mines. In its Article 339 (Article 420, New Civil Code) enumerating
properties of public ownership, the mines are included, until specially
granted to private individuals. In its article 350 (Art. 437, New Civil
Code) declaring that the proprietor of any parcel of land is the owner
of its surface and of everything under it, an exception is made as far
as mining laws are concerned. Then in speaking of minerals, the Code in
its articles 426 and 427 (Art. 519, New Civil Code) provides rules
governing
the digging of pits by third persons on private-owned lands for the
purpose
of prospecting for minerals.
[86]
Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 261 SCRA 528
(1996).
[87]
Ibid.
[88]
Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion.
[89]
Ibid.
[90]
McDaniel v. Apacible and Cuisia, 42 Phil. 749 (1922).
[91]
Noblejas, supra, at 5.
[92]
V. M. A. Dimagiba, Service Contract Concepts in Energy, 57 Phil. L. J.
307, 313 (1982).
[93]
P. A. Agabin, Service Contracts: Old Wine in New Bottles?, in II Draft
Proposal of the 1986 U.P. Law Constitution Project 3.
[94]
Id., at 2-3.
[95]
Id., at 3.
[96]
Ibid.
[97]
Ibid.
[98]
Ibid.
[99]
An Act to Provide for the Exploration, Location and Lease of Lands
Containing
Petroleum and other Mineral Oils and Gas in the Philippine Islands.
[100]
An Act to Provide for the Leasing and Development of Coal Lands in the
Philippine Islands.
[101]
Agabin, supra, at 3.
[102]
People v. Linsangan, 62 Phil. 646 (1935).
[103]
Ibid.chanrobles virtuallaw libraryred
[104]
Ibid.
[105]
Ibid.
[106]
Ibid.
[107]
Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.
[108]
Bernas, S.J., supra, at 1009-1010, citing Lee Hong Hok v. David, 48
SCRA
372 (1972).
[109]
II J. Aruego, The Framing of the Philippine Constitution 592 (1949).
[110]
Id., at 600-601.
[111]
Id., at 604. Delegate Aruego expounds:chanroblesvirtuallawlibrary
At
the time of the framing of the Philippine Constitution, Filipino
capital
had been known to be rather shy. Filipinos hesitated as a general rule
to invest a considerable sum of their capital for the development,
exploitation,
and utilization of the natural resources of the country. They had not
as
yet been so used to corporate enterprises as the peoples of the West.
This
general apathy, the delegates knew, would mean the retardation of the
development
of the natural resources, unless foreign capital would be encouraged to
come in and help in that development. They knew that the
nationalization
of the natural resources would certainly not encourage the investment
of
foreign capital into them. But there was a general feeling in the
Convention
that it was better to have such development retarded or even postponed
altogether until such time when the Filipinos would be ready and
willing
to undertake it rather than permit the natural resources to be placed
under
the ownership or control of foreigners in order that they might be
immediately
developed, with the Filipinos of the future serving not as owners but
at
most as tenants or workers under foreign masters. By all means, the
delegates
believed, the natural resources should be conserved for Filipino
posterity.
The
nationalization of natural resources was also intended as an instrument
of national defense. The Convention felt that to permit foreigner to
own
or control the natural resources would be to weaken the national
defense.
It would be making possible the gradual extension of foreign influence
into our politics, thereby increasing the possibility of foreign
control.
x x x.
Not
only these. The nationalization of the natural resources, it was
believed,
would prevent making the Philippines a source of international
conflicts
with the consequent danger to its internal security and independence.
For
unless the natural resources were nationalized, with the nationals of
foreign
countries having the opportunity to own or control them, conflicts of
interest
among them might arise inviting danger to the safety and independence
of
the nation. (Id., at 605-606.)
[112]
Palting v. San Jose Petroleum Inc., 18 SCRA 924 (1966); Republic v.
Quasha,
46 SCRA 160 (1972).
[113]
Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.
[114]
Article VI thereof provided:chanroblesvirtuallawlibrary
1.
The disposition, exploitation, development and utilization of all
agricultural,
timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces and sources of potential
energy,
and other natural resources of either Party, and the operation of
public
utilities, shall, if open to any person, be open to citizens of the
other
Party and to all forms of business enterprise owned or controlled
directly
or indirectly, by citizens of such other Party in the same manner as to
and under the same conditions imposed upon citizens or corporations or
associations owned or controlled by citizens of the Party granting the
right.
2.
The rights provided for in Paragraph 1 may be exercised x x x in the
case
of citizens of the United States, with respect to natural resources in
the public domain in the Philippines, only through the medium of a
corporation
organized under the laws of the Philippines and at least 60% of the
capital
stock of which is owned or controlled by citizens of the United States
x x x.
3.
The United States of America reserves the rights of the several States
of the United States to limit the extent to which citizens or
corporations
or associations owned or controlled by citizens of the Philippines may
engage in the activities specified in this Article. The Republic of the
Philippines reserves the power to deny any of the rights specified in
this
Article to citizens of the United States who are citizens of States, or
to corporations or associations at least 60% of whose capital stock or
capital is owned or controlled by citizens of States, which deny like
rights
to citizens of the Philippines, or to corporations or associations
which
ore owned or controlled by citizens of the Philippines x x x.
[115]
An Act to Promote the Exploration, Development, Exploitation, and
Utilization
of the Petroleum Resources of the Philippines; to Encourage the
Conservation
of such Petroleum Resources; to Authorize the Secretary of Agriculture
and Natural Resources to Create an Administration Unit and a Technical
Board in the Bureau of Mines; to Appropriate Funds therefor; and for
other
purposes.
[116]
Rep. Act No. 387 (1949), as amended, art. 10 (b).
[117]
Id., art. 10 (c).
[118]
Id., art. 5.
[119]
Id., art. 31. The same provision recognized the rights of American
citizens
under the Parity Amendment:chanroblesvirtuallawlibrary
During
the effectivity and subject to the provisions of the ordinance appended
to the Constitution of the Philippines, citizens of the United States
and
all forms of business enterprises owned and controlled, directly or
indirectly,
by citizens of the United States shall enjoy the same rights and
obligations
under the provisions of this Act in the same manner as to, and under
the
same conditions imposed upon, citizens of the Philippines or
corporations
or associations owned or controlled by citizens of the Philippines.
[120]
Id., art. 10.
[121]
Id., art. 3.
[122]
Id., art. 9.
[123]
Ibid.
[124]
Rep. Act No. 387 (1949), as amended, art. 8.
[125]
Id., art. 25.
[126]
Id., art. 47.
[127]
Id., art. 60.chanrobles virtuallaw libraryred
[128]
Id., art. 64. Article 49, R.A. No. 387 originally imposed an annual
exploration
tax on exploration concessionaires but this provision was repealed by
Section
1, R.A. No. 4304.
[129]
Francisco, supra, at 103.
[130]
Rep. Act No. 387 (1949), as amended, art. 65.
[131]
Francisco, supra, at 103.
[132]
Rep. Act No. 387 (1949), as amended, art. 90 (b) 3.
[133]
Id., art. 90 (b) 4.
[134]
Id., art. 93-A.
[135]
Id., art. 93.
[136]
Ibid.
[137]
Rep. Act No. 387 (1949), as amended, art. 94.
[138]
Id., art. 106.
[139]
Id., art. 95.
[140]
Ibid.
[141]
Rep. Act No. 387 (1949), as amended, art. 95 (e).
[142]
Dimagiba, supra, at 315, citing Fabrikant, Oil Discovery and Technical
Change in Southeast Asia, Legal Aspects of Production Sharing Contracts
in the Indonesian Petroleum Industry, 101-102, sections 13C.24 and
13C.25
(1972).chanrobles virtuallaw libraryred
[143]
Agabin, supra, at 4.
[144]
Dimagiba, supra, at 318.
[145]
Amending Presidential Decree No. 8 issued on October 2, 1972, and
Promulgating
an Amended Act to Promote the Discovery and Production of Indigenous
Petroleum
and Appropriate Funds Therefor.
[146]
Pres. Decree No. 87 (1972), sec. 4.
[147]
Agabin, supra, at 6.
[148]
M. Magallona, Service Contracts in Philippine Natural Resources, 9
World
Bull. 1, 4 (1993).
[149]
Pres. Decree No. 87 (1972), sec. 6.
[150]
Id., sec. 4.
[151]
Id., sec. 6.
[152]
Id., sec. 7.
[153]
Id., sec. 8.
[154]
Ibid.
[155]
Ibid.
[156]
Pres. Decree No. 87 (1972), sec. 9.
[157]
Id., sec. 12.
[158]
Id., sec. 13.
[159]
Dimagiba draws the following comparison between the service contract
scheme
and the concession system:chanroblesvirtuallawlibrary
In
both the concession system and the service contract scheme, work and
financial
obligations are required of the developer. Under Republic Act No. 387
and
Presidential Decree No. 87, the concessionaire and the service
contractors
are extracted certain taxes in favor of the government. In both
arrangements,
the explorationist/developer is given incentives in the form of tax
exemptions
in the importation or disposition of machinery, equipment, materials
and
spare parts needed in petroleum operations.chanrobles virtuallaw libraryred
The
concessionaire and the service contractor are required to keep in their
files valuable data and information and may be required to submit need
technological or accounting reports to the Government. Duly authorized
representatives of the Government could, under the law, inspect or
audit
the books of accounts of the contract holder.
In
both systems, signature, discovery or production bonuses may be given
by
the developer to the host Government.
The
concession system, however, differs considerably from the service
contract
system in important areas of the operations. In the concession system,
the Government merely receives fixed royalty which is a certain
percentage
of the crude oil produced or other units of measure, regardless of
whether
the concession holder makes profits or not. This is not so in the
service
contract system. A certain percentage of the gross production is set
aside
for recoverable expenditures by the contractor. Of the net proceeds the
parties are entitled percentages of share that will accrue to each of
them.
In
the royalty system, the concessionaire may be discouraged to produce
more
for the reason that since the royalty paid to the host country is
closely
linked to the volume of production, the greater the produce, the more
amount
or royalty would be allocated to the Government. This is not so in the
production sharing system. The share of the Government depends largely
on the net proceeds of production after reimbursing the service
contractor
of its recoverable expenses.
As
a general rule, the Government plays a passive role in the concession
system,
more particularly, interested in receiving royalties from the
concessionaire.
In the production-sharing arrangement, the Government plays a more
active
role in the management and monitoring of oil operations and requires
the
service contractor entertain obligations designed to bring more
economic
and technological benefits to the host country. (Dimagiba, supra, at
330-331)
[160]
Agabin, supra, at 6.chanrobles virtuallaw libraryred
[161]
The antecedents leading to the Proclamation are narrated in Javellana
v.
Executive Secretary, 50 SCRA 55 (1973):chanroblesvirtuallawlibrary
On
March 16, 1967, Congress of the Philippines passed Resolution No. 2,
which
was amended by Resolution No. 4, of said body, adopted on June 17,
1969,
calling a convention to propose amendments to the Constitution of the
Philippines.
Said Resolution No. 2, as amended, was implemented by Republic Act No.
6132 approved on August 24, 1970, pursuant to the provisions of which
the
election of delegates to said convention was held on November 10, 1970,
and the 1971 Convention began to perform its functions on June 1, 1971.
While the Convention was in session on September 21, 1972, the
President
issued Proclamation No. 1081 placing the entire Philippines under
Martial
Law. On November 29, 1972, the President of the Philippines issued
Presidential
Decree No. 73, submitting to the Filipino people for ratification or
rejection
the Constitution of the Republic of the Philippines proposed by the
1971
Constitutional Convention, and appropriating funds therefor, as well as
setting the plebiscite for such ratification on January 15, 1973.
On
January 17, 1973, the President issued Proclamation No. 1102 certifying
and proclaiming that the Constitution proposed by the 1971
Constitutional
Convention "has been ratified by an overwhelming majority of all the
votes
cast by the members of all the Barangays (Citizens Assemblies)
throughout
the Philippines, and has thereby come into effect."
[162]
Bernas, S.J., supra, at 1016, Note 28, citing Session of November 25,
1972.
[163]
Agabin, supra, at 1, quoting Sanvictores, The Economic Provisions in
the
1973 Constitution, in Espiritu, 1979 Philconsa Reader on Constitutional
and Policy Issues 449.
[164]
Bernas, S.J., supra, at 1016, Note 28, citing Session of November 25,
1972.
[165]
Ibid.chanrobles virtuallaw libraryred
[166]
Ibid.
[167]
Allowing Citizens of the Philippines or Corporations or Associations at
least Sixty Per Centum of the Capital of which is Owned by such
Citizens
to Enter into Service Contracts with Foreign Persons, Corporations for
the Exploration, Development, Exploitation or Utilization of Lands of
the
Public Domain, Amending for the purpose certain provisions of
Commonwealth
Act No. 141.
[168]
Pres. Decree No. 151 (1973), sec. 1.
[169]
Providing for A Modernized System of Administration and Disposition of
Mineral Lands and to Promote and Encourage the Development and
Exploitation
thereof.
[170]
Revising and Consolidating All Laws and Decrees Affecting Fishing and
Fisheries.
[171]
Pres. Decree No. 704 (1975), sec. 21.
[172]
Revising Presidential Decree No. 389, otherwise known as The Forestry
Reform
Code of the Philippines.
[173]
Pres. Decree No. 705 (1975), sec. 62.
[174]
An Act to Promote the Exploration and Development of Geothermal
Resources.
[175]
Magallona, supra, at 6.
[176]
Declaring a National Policy to Implement the Reforms Mandated by the
People,
Protecting their Basic Rights, Adopting a Provisional Constitution, and
Providing for an Orderly Transition to a Government under a New
Constitution.
[177]
Const., art. XVIII, sec. 27; De Leon v. Esguerra, 153 SCRA 602 (1987).
[178]
Miners Association of the Philippines, Inc. v. Factoran, Jr., 240 SCRA
100 (1995).
[179]
Ibid.chanrobles virtuallaw libraryred
[180]
Ibid.
[181]
J. Bernas, S.J., The Intent of the 1986 Constitution Writers 812 (1995).
[182]
Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.
[183]
III Records of the Constitutional Commission 255.
[184]
Id., at 355-356.
[185]
Const. (1986), art. II, sec. 1.
[186]
Cruz v. Secretary of Environment and Natural Resources, supra, Puno, J., Separate Opinion.
[187]
Rep. Act No. 7942 (1995), sec. 9.
[188]
SEC. 82. Allocation of Government Share.—The Government share as
referred
to in the preceding sections shall be shared and allocated in
accordance
with Sections 290 and 292 of Republic Act No. 7160 otherwise known as
the
Local Government Code of 1991. In case the development and utilization
of mineral resources is undertaken by a government-owned or -controlled
corporation, the sharing and allocation shall be in accordance with
Sections
291 and 292 of the said Code.
[189]
An Act Creating A People's Small-Scale Mining Program and for other
purposes.
[190]
Rep. Act No. 7942 (1995), sec. 42.
[191]
Id., secs. 3 (ab) and 26.
[192]
"Contractor" means a qualified person acting alone or in consortium who
is a party to a mineral agreement or to a financial or technical
assistance
agreement. (Id., sec. 3[g].)
[193]
"Contract area" means land or body water delineated for purposes of
exploration,
development, or utilization of the minerals found therein. (Id., sec.
3[f].)
[194]
"Gross output" means the actual market value of minerals or mineral
products
from its mining area as defined in the National Internal Revenue Code
(Id.,
sec. 3[v]).
[195]
Id., sec. 26 (a).chanrobles virtuallaw libraryred
[196]
An Act Reducing Excise Tax Rates on Metallic and Non-Metallic Minerals
and Quarry Resources, amending for the purpose Section 151 (a) of the
National
Internal Revenue Code, as amended.
[197]
Rep. Act No. 7942 (1995), sec. (80).
[198]
Id., Sec. 26 (b).
[199]
"Mineral resource" means any concentration of minerals/rocks with
potential
economic value. (Id., sec. 3[ad].)
[200]
Id., sec. 26 (c).
[201]
Ibid.
[202]
Id., sec. 3 (h).
[203]
Id., sec. 3 (x).
[204]
Id., sec. 26, last par.
[205]
Id., sec. 27.
[206]
Id., sec. 3 (aq).
[207]
Id., sec. 3 (r).
[208]
Id., sec. 33.
[209]
Id., sec. 3 (t).chanrobles virtuallaw libraryred
[210]
Id., sec. 3 (aq).
[211]
The maximum areas in cases of mineral agreements are prescribed in
Section
28 as follows:chanroblesvirtuallawlibrary
SEC.
28. Maximum Areas for Mineral Agreement. – The maximum area that a
qualified
person may hold at any time under a mineral agreement shall be:chanroblesvirtuallawlibrary
(a)
Onshore, in any one province –
(1)
For individuals, ten (10) blocks; and
(2)
For partnerships, cooperatives, associations, or corporations, one
hundred
(100) blocks.
(b)
Onshore, in the entire Philippines –
(1)
For individuals, twenty (20) blocks; and
(2)
For partnerships, cooperatives, associations, or corporations, two
hundred
(200) blocks.
(c)
Offshore, in the entire Philippines –
(1)
For individuals, fifty (50) blocks;
(2)
For partnerships, cooperatives, associations, or corporations, five
hundred
(500) blocks; and
(3)
For the exclusive economic area, a larger area to be determined by the
Secretary.
The
maximum areas mentioned above that a contractor may hold under a
mineral
agreement shall not include mining/quarry areas under operating
agreements
between the contractor and a claimowner/lessee/permittee/licensee
entered
into under Presidential Decree No. 463.
On
the other hand, Section 34, which governs the maximum area for FTAAs
provides:chanroblesvirtuallawlibrary
SEC.
34. Maximum Contract Area. – The maximum contract area that may be
granted
per qualified person, subject to relinquishment shall be:chanroblesvirtuallawlibrary
(a)
1,000 meridional blocks onshore;
(b)
4,000 meridional blocks offshore; or
(c)
Combinations of (a) and (b) provided that it shall not exceed the
maximum
limits for onshore and offshore areas.
[212]
Id., sec. 33.chanrobles virtuallaw libraryred
[213]
Id., sec. 81.
[214]
Kapatiran v. Tan, 163 SCRA 371 (1988).
[215]
Providing for the Publication of Laws either in the Official Gazette or
in a Newspaper of General Circulation in the Philippines as a
Requirement
for their Effectivity.
[216]
Section 1, E.O. No. 200 was subsequently incorporated in the
Administrative
Code of 1987 (Executive Order No. 292 as Section 18, Chapter 5
(Operation
and Effect of Laws), Book 1 (Sovereignty and General Administration).
[217]
136 SCRA 27 (1985).
[218]
Manila Prince Hotel v. Government Service Insurance System, 267 SCRA
408
(1997).
[219]
Const., art. 3, sec. 1.chanrobles virtuallaw libraryred
[220]
83 O.G. (Suppl.) 3528-115 to 3528-117 (August 1987).
[221]
Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.
[222]
Petitioners note in their Memorandum that the FTAA:chanroblesvirtuallawlibrary
x
x x guarantees that wholly foreign owned [WMCP] entered into the FTAA
in
order to facilitate "the large scale exploration, development and
commercial
exploitation of mineral deposits that may be found to exist within the
Contract area." [Section 1.1] As a contractor it also has the
"exclusive
right to explore, exploit, utilize, process and dispose of all mineral
products and by-products thereof that may be derived or produced from
the
Contract Area." [Section 1.3] Thus, it is divided into an "exploration
and feasibility phase" [Section 3.2 (a)] and a "construction,
development
and production phase." [Section 3. 2 (b).]
Thus,
it is this wholly foreign owned corporation that, among other things:chanroblesvirtuallawlibrary
(a)
operates within a prescribed contract area [Section 4],
(b)
opts to apply for a Mining Production Sharing Agreement [Section 4.2],
(c)
relinquishes control over portions thereof at their own choice [Section
4.6],
(d)
submits work programs, incurs expenditures, and makes reports during
the
exploration period [Section 5],
(e)
submits a Declaration of Mining Feasibility [Sections 5.4 and 5.5],
(f)
during the development period, determines the timetable, submits work
programs,
provides the reports and determines and executes expansions,
modifications,
improvements and replacements of new mining facilities within the area
[Section 6],
(g)
complies with the conditions for environmental protection and
industrial
safety, posts the necessary bonds and makes representations and
warranties
to the government [Section 10.5].
The
contract subsists for an initial term of twenty-five (25) years from
the
date of its effectivity [Section 3.1] and renewable for a further
period
of twenty-five years under the same terms and conditions upon
application
by private respondent [Section 3.3]. (Rollo, pp. 458-459.)
[223]
H. C. Black, Handbook on the Construction and Interpretation of the
Laws
§ 8.
[224]
Ibid.chanrobles virtuallaw libraryred
[225]
J. M. Tuason & Co., Inc. v. Land Tenure Association, 31 SCRA 413
(1970).
[226]
Rollo, p. 580.
[227]
Ibid. Emphasis supplied.
[228]
People v. Manantan, 115 Phil. 657 (1962); Commission on Audit of the
Province
of Cebu v. Province of Cebu, 371 SCRA 196 (2001).
[229]
Rollo, p. 569.
[230]
III Record of the Constitutional Commission 351-352.
[231]
V Record of the Constitutional Commission 844.
[232]
Id., at 841.
[233]
Id., at 842.
[234]
Id. at 844.
[235]
Vide Cherey v. Long Beach, 282 NY 382, 26 NE 2d 945, 127 ALR 1210
(1940),
cited in 16 Am Jur 2d Constitutional Law §79.
[236]
Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 325 (1991).
[237]
III Record of the Constitutional Commission 278.
[238]
Id., at 316-317.chanrobles virtuallaw libraryred
[239]
III Record of the Constitutional Commission 358-359.
[240]
Vera v. Avelino, 77 Phil. 192 (1946).
[241]
J. Nolledo, The New Constitution of the Philippines Annotated 924-926
(1990).
[242]
Resolution to Incorporate in the New Constitution an Article on
National
Economy and Patrimony.
[243]
The Chair of the Committee on National Economy and Patrimony, alluded
to
it in the discussion on the capitalization requirement:chanroblesvirtuallawlibrary
MR.
VILLEGAS. We just had a long discussion with the members of the team
from
the UP Law Center who provided us a draft. The phrase that is contained
here which we adopted from the UP draft is "60 percent of voting
stock."
(III Record of the Constitutional Commission 255.)
Likewise,
in explaining the reasons for the deletion of the term "exploitation":chanroblesvirtuallawlibrary
MR.
VILLEGAS. Madam President, following the recommendation in the UP
draft,
we omitted "exploitation" first of all because it is believed to be
subsumed
under "development" and secondly because it has a derogatory
connotation.
(Id., at 358.)
[244]
Id., at 12.
[245]
Id., at 15-16.
[246]
M. Magallona, Nationalism and Its Subversion in the Constitution 5, in
II Draft Proposal of the 1986 U.P. Law Constitution Project.
[247]
Agabin, supra, at 16.chanrobles virtuallaw libraryred
[248]
E. Labitag, Philippine Natural Resources: Some Problems and
Perspectives
17 in II Draft Proposal of the 1986 U.P. Law Constitution Project.
[249]
I Draft Proposal of the 1986 U.P. Law Constitution Project 11-13.
[250]
Id., at 9-11. Professor Labitag also suggests that:chanroblesvirtuallawlibrary
x
x x. The concession regime of natural resources disposition should be
discontinued.
Instead the State shall enter into such arrangements and agreements
like
co-production, joint ventures, etc. as shall bring about effective
control
and a larger share in the proceeds, harvest or production. (Labitag,
supra,
at 17.)
[251]
Vide Note 147.
[252]
Vide Note 230. The question was posed before the Jamir amendment and
subsequent
proposals introducing other limitations.
Comm.
Villegas' response that there was no requirement in the 1973
Constitution
for a law to govern service contracts and that, in fact, there were
then
no such laws is inaccurate. The 1973 Charter required similar
legislative
approval, although it did not specify the form it should take: "The
Batasang
Pambansa, in the national interest, may allow such citizens… to enter
into
service contracts…." As previously noted, however, laws authorizing
service
contracts were actually enacted by presidential decree.
[253]
Vide Note 238.
[254]
Vide Note 241.chanrobles virtuallaw libraryred
[255]
Vide Note 231.
[256]
Dated July 28, 1987.
[257]
Dated October 3, 1990.
[258]
Peralta v. Civil Service Commission, 212 SCRA 425 (1992).
[259]
Vide Note 238.
[260]
III Record of the Constitutional Commission 354.
[261]
Salaysay v. Castro, 98 Phil. 364 (1956).
[262]
Rep. Act No. 7942 (1995), sec. 3 (q).
[263]
Id., sec. 3 (aq).
[264]
Id., sec. 20.chanrobles virtuallaw libraryred
[265]
Id., sec. 23, first par.
[266]
Id., sec. 23, last par.
[267]
Id., sec. 3 (j).
[268]
Id., sec. 3 (az).
[269]
Id., sec. 35 (m).
[270]
Id., secs. 3 (aq) and 56.
[271]
Id., sec. 3 (y).
[272]
Id., sec. 35 (g).
[273]
Id., sec. 35 (h).
[274]
Id., sec. 35 (l).
[275]
Id., sec. 3 (af).chanrobles virtuallaw libraryred
[276]
SEC. 72. Timber Rights.—Any provision of the law to the contrary
notwithstanding,
a contractor may be granted a right to cut trees or timber within his
mining
area as may be necessary for his mining operations subject to forestry
laws, rules and regulations: Provided, That if the land covered by the
mining area is already covered by exiting timber concessions, the
volume
of timber needed and the manner of cutting and removal thereof shall be
determined by the mines regional director, upon consultation with the
contractor,
the timber concessionaire/permittee and the Forest Management Bureau of
the Department: Provided, further, That in case of disagreement between
the contractor and the timber concessionaire, the matter shall be
submitted
to the Secretary whose decision shall be final. The contractor shall
perform
reforestation work within his mining area in accordance with forestry
laws,
rules and regulations. [Emphasis supplied]chanrobles virtuallaw libraryred
SEC.
73. Water Rights.—A contractor shall have water rights for mining
operations
upon approval of application with the appropriate government agency in
accordance with existing water laws, rules and regulations promulgated
thereunder: Provided, That water rights already granted or vested
through
long use, recognized and acknowledged by local customs, laws and
decisions
of courts shall not thereby be impaired: Provided, further, That the
Government
reserves the right to regulate water rights and the reasonable and
equitable
distribution of water supply so as to prevent the monopoly of the use
thereof.
[Emphasis supplied]
SEC.
74. Right to Possess Explosives.—A contractor/exploration permittee
shall
have the right to possess and use explosives within his contract/permit
area as may be necessary for his mining operations upon approval of an
application with the appropriate government agency in accordance with
existing
laws, rules and regulations promulgated thereunder: Provided, That the
Government reserves the right to regulate and control the explosive
accessories
to ensure safe mining operations. [Emphasis supplied]
SEC.
75. Easement Rights.—When mining areas are so situated that for
purposes
of more convenient mining operations it is necessary to build,
construct
or install on the mining areas or lands owned, occupied or leased by
other
persons, such infrastructure as roads, railroads, mills, waste dump
sites,
tailings ponds, warehouses, staging or storage areas and port
facilities,
tramways, runways, airports, electric transmission, telephone or
telegraph
lines, dams and their normal flood and catchment areas, sites for water
wells, ditches, canals, new river beds, pipelines, flumes, cuts,
shafts,
tunnels, or mills, the contractor, upon payment of just compensation,
shall
be entitled to enter and occupy said mining areas or lands. [Emphasis
supplied]
SEC.
76. Entry into Private Lands and Concession Areas.—Subject to prior
notification,
holders of mining rights shall not be prevented from entry into private
lands and concession areas by surface owners, occupants, or
concessionaires
when conducting mining operations therein: Provided, That any damage
done
to the property of the surface owner, occupant, or concessionaire as a
consequence of such operations shall be properly compensated as may be
bee provided for in the implementing rules and regulations: Provided,
further,
That to guarantee such compensation, the person authorized to conduct
mining
operation shall, prior thereto, post a bond with the regional director
based on the type of properties, the prevailing prices in and around
the
area where the mining operations are to be conducted, with surety or
sureties
satisfactory to the regional director. [Emphasis supplied]chanrobles virtuallaw libraryred
[277]
Id., sec. 39, first par.
[278]
Id., sec. 39, second par.
[279]
Id., sec. 35 (e).chanrobles virtuallaw libraryred
[280]
SEC. 23. Rights and Obligations of the Permittee.—x x x.
The
permittee may apply for a mineral production sharing agreement, joint
venture
agreement, co-production agreement or financial or technical assistance
agreement over the permit area, which application shall be granted if
the
permittee meets the necessary qualifications and the terms and
conditions
of any such agreement: Provided, That the exploration period covered by
the exploration period of the mineral agreement or financial or
technical
assistance agreement.
[281]
SEC. 35. Terms and Conditions. — The following terms, conditions, and
warranties
shall be incorporated in the financial or technical assistance
agreement,
to wit:chanroblesvirtuallawlibrary
(a)
A firm commitment in the form of a sworn statement, of an amount
corresponding
to the expenditure obligation that will be invested in the contract
area:
Provided, That such amount shall be subject to changes as may be
provided
for in the rules and regulations of this Act;
(b)
A financial guarantee bond shall be posted in favor of the Government
in
an amount equivalent to the expenditure obligation of the applicant for
any year;
(c)
Submission of proof of technical competence, such as, but not limited
to,
its track record in mineral resource exploration, development, and
utilization;
details of technology to be employed in the proposed operation; and
details
of technical personnel to undertake the operation;
(d)
Representations and warranties that the applicant has all the
qualifications
and none of the disqualifications for entering into the agreement;
(e)
Representations and warranties that the contractor has or has access to
all the financing, managerial and technical expertise and, if
circumstances
demand, the technology required to promptly and effectively carry out
the
objectives of the agreement with the understanding to timely deploy
these
resources under its supervision pursuant to the periodic work programs
and related budgets, when proper, providing an exploration period up to
two (2) years, extendible for another two (2) years but subject to
annual
review by the Secretary in accordance with the implementing rules and
regulations
of this Act, and further, subject to the relinquishment obligations;chanrobles virtuallaw libraryred
(f)
Representations and warranties that, except for paymets for
dispositions
for its equity, foreign investments in local enterprises which are
qualified
for repatriation, and local supplier's credits and such other generally
accepted and permissible financial schemes for raising funds for valid
business purposes, the conractor shall not raise any form of financing
from domestic sources of funds, whether in Philippine or foreign
currency,
for conducting its mining operations for and in the contract area;
(g)
The mining operations shall be conducted in accordance with the
provisions
of this Act and its implementing rules and regulations;
(h)
Work programs and minimum expenditures commitments;
(i)
Preferential use of local goods and services to the maximum extent
practicable;
(j)
A stipulation that the contractors are obligated to give preference to
Filipinos in all types of mining employment for which they are
qualified
and that technology shall be transferred to the same;
(k)
Requiring the proponent to effectively use appropriate anti-pollution
technology
and facilities to protect the environment and to restore or
rehabilitate
mined out areas and other areas affected by mine tailings and other
forms
of pollution or destruction;
(l)
The contractors shall furnish the Government records of geologic,
accounting,
and other relevant data for its mining operations, and that book of
accounts
and records shall be open for inspection by the government;chanrobles virtuallaw libraryred
(m)
Requiring the proponent to dispose of the minerals and byproducts
produced
under a financial or technical assistance agreement at the highest
price
and more advantageous terms and conditions as provided for under the
rules
and regulations of this Act;
(n)
Provide for consultation and arbitration with respect to the
interpretation
and implementation of the terms and conditions of the agreements; and
(o)
Such other terms and conditions consistent with the Constitution and
with
this Act as the Secretary may deem to be for the best interest of the
State
and the welfare of the Filipino people.
[282]
SEC. 39. Option to Convert into a Mineral Agreement. — The contractor
has
the option to convert the financial or technical assistance agreement
to
a mineral agreement at any time during the term of the agreement, if
the
economic viability of the contract area is found to be inadequate to
justify
large-scale mining operations, after proper notice to the Secretary as
provided for under the implementing rules and regulations; Provided,
That
the mineral agreement shall only be for the remaining period of the
original
agreement.
In
the case of a foreign contractor, it shall reduce its equity to forty
percent
(40%) in the corporation, partnership, association, or cooperative.
Upon
compliance with this requirement by the contractor, the Secretary shall
approve the conversion and execute the mineral production-sharing
agreement.
[283]
SEC. 56. Eligibility of Foreign-owned/-controlled Corporation.—A
foreign
owned/ -controlled corporation may be granted a mineral processing
permit.
[284]
SEC. 3. Definition of Terms. – As used in and for purposes of this Act,
the following terms, whether in singular or plural, shall mean:chanroblesvirtuallawlibrary
x
x x
(g)
"Contractor" means a qualified person acting alone or in consortium who
is a party to a mineral agreement or to a financial or technical
assistance
agreement.
[285]
SEC. 34. Maximum Contract Area. — The maximum contract area that may be
granted per qualified person, subject to relinquishment shall be:chanroblesvirtuallawlibrary
(a)
1,000 meridional blocks onshore;
(b)
4,000 meridional blocks offshore; orchanrobles virtuallaw libraryred
(c)
Combinations of (a) and (b) provided that it shall not exceed the
maximum
limits for onshore and offshore areas.
[286]
SEC. 36. Negotiations. — A financial or technical assistance agreement
shall be negotiated by the Department and executed and approved by the
President. The President shall notify Congress of all financial or
technical
assistance agreements within thirty (30) days from execution and
approval
thereof.
[287]
SEC. 37. Filing and Evaluation of Financial or Technical Assistance
Agreement
Proposals. — All financial or technical assistance agreement proposals
shall be filed with the Bureau after payment of the required processing
fees. If the proposal is found to be sufficient and meritorious in form
and substance after evaluation, it shall be recorded with the
appropriate
government agency to give the proponent the prior right to the area
covered
by such proposal: Provided, That existing mineral agreements, financial
or technical assistance agreements and other mining rights are not
impaired
or prejudiced thereby. The Secretary shall recommend its approval to
the
President.
[288]
SEC. 38. Term of Financial or Technical Assistance Agreement. — A
financial
or technical assistance agreement shall have a term not exceeding
twenty-five
(25) years to start from the execution thereof, renewable for not more
than twenty-five (25) years under such terms and conditions as may be
provided
by law.
[289]
SEC. 40. Assignment/Transfer. — A financial or technical assistance
agreement
may be assigned or transferred, in whole or in part, to a qualified
person
subject to the prior approval of the President: Provided, That the
President
shall notify Congress of every financial or technical assistance
agreement
assigned or converted in accordance with this provision within thirty
(30)
days from the date of the approval thereof.chanrobles virtuallaw libraryred
[290]
SEC. 41. Withdrawal from Financial or Technical Assistance Agreement. —
The contractor shall manifest in writing to the Secretary his intention
to withdraw from the agreement, if in his judgment the mining project
is
no longer economically feasible, even after he has exerted reasonable
diligence
to remedy the cause or the situation. The Secretary may accept the
withdrawal:
Provided, That the contractor has complied or satisfied all his
financial,
fiscal or legal obligations.
[291]
SEC. 81. Government Share in Other Mineral Agreements.—x x x.
The
Government share in financial or technical assistance agreement shall
consist
of, among other things, the contractor's corporate income tax, excise
tax,
special allowance, withholding tax due from the contractor's foreign
stockholders
arising from dividend or interest payments to the said foreign
stockholder
in case of a 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.
[292]
SEC. 90. Incentives.—The contractors in mineral agreements, and
financial
or technical assistance agreements shall be entitled to the applicable
fiscal and non-fiscal incentives as provided for under Executive Order
No. 226, otherwise known as the Omnibus Investments Code of 1987:
Provided,
That holders of exploration permits may register with the Board of
Investments
and be entitled to the fiscal incentives granted under the said Code
for
the duration of the permits or extensions thereof: Provided, further,
That
mining activities shall always be included in the investment priorities
plan.
[293]
Lidasan v. Commission on Elections, 21 SCRA 496 (1967).
[294]
Vide also WMCP FTAA, sec. 10.2 (a).
[295]
WMCP, sec. 10.2.
[296]
Id., sec. 11.chanrobles virtuallaw libraryred
[297]
Id., sec. 10.1(a).
[298]
Id., sec. 10.1(c).
[299]
Id., sec. 6.4.chanrobles virtuallaw libraryred
[300]
Rollo, pp. 563-564.
[301]
Civil Code, art. 8.
[302]
Const., art III, sec. 1.
[303]
Vide Note 223.
[304]
Rollo, p. 243.chanrobles virtuallaw libraryred
[305]
Civil Liberties Union v. Executive Secretary, supra.
[306]
Automotive Parts & Equipment Company, Inc. v. Lingad, 30 SCRA 248
(1969).
[307]
Ibid. |