LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC. v.

RAMOS

VOID v. INEXISTENT CONTRACTS

G.R. No. 127882. 1 December 2004

FACTS: The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1)
Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations
(DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30, 1995, executed by the
government with Western Mining Corporation (Philippines), Inc. (WMCP).

On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and declaring the
unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed
between the government and WMCP, mainly on the finding that FTAAs are service contracts prohibited by the
1987 Constitution.

The Decision struck down the subject FTAA for being similar to service contracts, which, though permitted
under the 1973 Constitution, were subsequently denounced for being antithetical to the principle of
sovereignty over our natural resources, because they allowed foreign control over the exploitation of our
natural resources, to the prejudice of the Filipino nation. The Decision quoted several legal scholars and authors
who had criticized service contracts for, inter alia, vesting in the foreign contractor exclusive management and
control of the enterprise, including operation of the field in the event petroleum was discovered; control of
production, expansion and development; nearly unfettered control over the disposition and sale of the
products discovered/extracted; effective ownership of the natural resource at the point of extraction; and
beneficial ownership of our economic resources. According to the Decision, the 1987 Constitution (Section 2 of
Article XII) effectively banned such service contracts.

ISSUE: Whether or not the FTAAs are void.

RULING: To bolster further their claim that the case is not moot, petitioners insist that the FTAA is void and,
hence cannot be transferred; and that its transfer does not operate to cure the constitutional infirmity that is
inherent in it; neither will a change in the circumstances of one of the parties serve to ratify the void contract.
Petitioners are confusing themselves. The present Petition has been filed, precisely because the grantee of the
FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be gainsaid that anyone would have
asserted that the same FTAA was void if it had at the outset been issued to a Filipino corporation. The FTAA,
therefore, is not per se defective or unconstitutional. It was questioned only because it had been issued to an
allegedly non-qualified, foreign-owned corporation. We believe that this case is clearly analogous to Halili, in
which the land acquired by a non-Filipino was re-conveyed to a qualified vendee and the original transaction
was thereby cured. Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the
invalidity of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a Filipino
corporation -- can no longer be assailed; the objective of the constitutional provision -- to keep the exploration,
development and utilization of our natural resources in Filipino hands -- has been served.

More accurately speaking, the present situation is one degree better than that obtaining in Halili, in which the
original sale to a non-Filipino was clearly and indisputably violative of the constitutional prohibition and thus
voidab initio. In the present case, the issuance/grant of the subject FTAA to the then foreign-owned WMCP
was notillegal, void or unconstitutional at the time. The matter had to be brought to court, precisely for
adjudication as to whether the FTAA and the Mining Law had indeed violated the Constitution. Since, up to
this point, the decision of this Court declaring the FTAA void has yet to become final, to all intents and
purposes, the FTAA must be deemed valid and constitutional.