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Grandfather Rule Rules When ! Bar2017

the Required 60-40 Filipino- " Bersamin

foreign Equity Ownership is In Cases

Doubt (Narra vs Redmont, 2014) ! Bar2016

" Velasco
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Full Text

Narra Nickel Mining vs Redmont Latest Cases

Case Digest GR 185590, Apr 21 2014

Facts: # 2016 - 2015

Redmont is a domestic corporation interested in the mining and # 2014 - 2013

exploration of some areas in Palawan. Upon learning that those
areas were covered by MPSA applications of other three Search
(allegedly Filipino) corporations Narra, Tesoro, and MacArthur, it
filed a petition before the Panel of Arbitrators of DENR seeking to
deny their permits on the ground that these corporations are in
reality foreign-owned. MBMI, a 100% Canadian corporation,
owns 40% of the shares of PLMC (which owns 5,997 shares of
Narra), 40% of the shares of MMC (which owns 5,997 shares of
McArthur) and 40% of the shares of SLMC (which, in turn, owns
Creative Commons
5,997 shares of Tesoro).

Aside from the MPSA, the three corporations also applied for
FTAA with the Oce of the President. In their answer, they Licensed under Creative
countered that (1) the liberal Control Test must be used in Commons Attribution-
determining the nationality of a corporation as based on Sec 3 of NonCommercial 4.0
the Foreign Investment Act which as they claimed admits of International License.
corporate layering schemes, and that (2) the nationality question
is no longer material because of their subsequent application for Email Address
FTAA.
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Commercial / Political Law

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Issue 1: W/N the Grandfather Rule must be applied in this case

Yes. It is the intention of the framers of the Constitution to apply

the Grandfather Rule in cases where corporate layering is
present.

First, as a rule in statutory construction, when there is conflict

between the Constitution and a statute, the Constitution will
prevail. In this instance, specifically pertaining to the provisions
under Art. XII of the Constitution on National Economy and
Patrimony, Sec. 3 of the FIA will have no place of application.
Corporate layering is admittedly allowed by the FIA, but if it is
used to circumvent the Constitution and other pertinent laws,
then it becomes illegal.

Second, under the SEC Rule1 and DOJ Opinion2 , the

Grandfather Rule must be applied when the 60-40 Filipino-foreign
equity ownership is in doubt. Doubt is present in the Filipino
equity ownership of Narra, Tesoro, and MacArthur since their
common investor, the 100% Canadian-owned corporation
MBMI, funded them.

Under the Grandfather Rule, it is not enough that the corporation

does have the required 60% Filipino stockholdings at face value.
To determine the percentage of the ultimate Filipino ownership, it
must first be traced to the level of the investing corporation and
added to the shares directly owned in the investee corporation.
Applying this rule, it turns out that the Canadian corporation owns
more than 60% of the equity interests of Narra, Tesoro and
MacArthur. Hence, the latter are disqualified to participate in the
exploration, development and utilization of the Philippines natural
resources.

1 DOJ Opinion No. 020 Series of 2005 (paragraph 7)

2 SEC Opinion May 13, 1990

Remedial Law

Issue 2: W/N the case has become moot as a result of the MPSA
conversion to FTAA

Full Text

Narra Nickel Mining vs Redmont, 2015: Grandfather Rule may

be Applied Cumulatively with the Control Test in Determining the
Ownership of Corporations Engaged in Nationalized Activities
Full Text l Digest

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