La Bugal Tribal Association, INC., vs.

Victor Ramos
December 1, 2004

FACTS:

1. A petition for Prohibition and Mandamus before the court challenges

the constitutionality of Financial and Technical Assistance Agreement
executed by the government with Western Mining Corporation
(Philippines) Inc. dated March 30, 1995.
2. On January 27, 2004, the court en banc promulgated its decision
granting the petition and declaring the unconstitutionality of the FTAA
executed between the government and WMCP.
3. WMCP at the time it entered into an agreement happened to be
wholly owned by WMC Resources International Pty., Ltd. (WMC)
which in turn was a wholly owned subsidiary of Western Mining
Corporation Holdings Ltd., a publicly listed major Australian mining
and exploration company which later on WMC had sold all its shares
to Sagitarius Mines, Inc and likewise the assailed FTAA been
transferred to Sagitarius Mines, Inc., 60% of whose equity was held by
Filipinos.
4. Petitioners contends that the FTAA had been executed is in violation
of Section 2 of Article XII of the 1987 Constitution which only allows
agreements involving technical or financial assistance for large scales
exploration, development, and utilization of minerals, petroleum, and
other mineral oils. Furthermore, the FTAA in question permits the
allegedly foreign contractor to fully manage and control the mining
operations.
5. Respondent contends that the FTAA authorizes the foreign contractor
rendition of a whole range of integrated and comprehensive services
ranging from discovery and utilization and production of minerals or
petroleum products.
6. The petitioner further contends that the clause of the FTAA gives the
contractor to change its equity structure at anytime and any change
would mean that such percentage would either stay unaltered o
decreased Filipino ownership.
ISSUE/S:
1. Whether or Not the FTAA violates Section 2 Article XII of the 1987
Constitution.
2. Whether or not the FTAA violates the Filipino ownership rule.
RULLING:
1. No. The drafter’s choice of words involving either technical or financial
assistance does not indicate the intent to exclude other modes of
assistance. The use of the word signifies the possibility of the inclusion
of other forms of assistance or activities having to do with, otherwise
related to or compatible with financial or technical assistance. The
concept of control adopted in Section 2 Article XII must be taken out to
mean less than dictatorial, all-encompassing control but nevertheless
sufficient to give the power to direct, restrain, regulate, and govern the
affairs of the extractive enterprises. Control by the state may be on a
macro level through establishment of policies, guidelines and
regulations that would enable the government to control the conduct
of affairs in various enterprises.

In other words, the FTAA contractors is not free to do whatever it

pleases and get away with it. It will have to follow the government line
if it wants to stay in the enterprise. Ineluctably then, RA 7942 and DAO
96-40 vested government more than sufficient degree of control and
supervision over the conduct of its mining operations.
2. No. Pursuant to paragraph 4 section 2 of Article XII of the 1987
Constitution, the FTAA is limited to large scale projects only for
minerals, petroleum, and other mineral oils. Here, the constitution
removes the 40% cap on foreign ownership and allows foreign
corporation to own up to 100% of the equity. Filipino capital may not
be sufficient on account of the size of the project so the foreign entity
may have to ante up all the risk capital.