LA BUGAL BLAAN TRIBAL ASSOCIATION

INC., ET AL. V. VICTOR O. RAMOS,

SECRETARY DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES;

HORACIO RAMOS, DIRECTOR, MINES AND

GEOSCIENCES BUREAU (MGB-DENR);

OVERVIEW

RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942, or on March 30, 1995, the President signed a Financial and Technical Assistance Agreement (FTAA) with WMCP, a corporation organized under Philippine laws, covering close to 100, 000 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August 15, 1995, the Environment Secretary Victor Ramos issued DENR Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-40, adopted on December 20, 1996.

FACTS

1. Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and WMCP (Western Mining Corporation (Philippines)inc.) be declared unconstitutional on ground that they allow fully foreign owned corporations like WMCP to exploit, explore and develop Philippine mineral resources in contravention of Article XII Section 2 paragraphs 2 and 4 of the Charter

FACTS

On January 10, 1997, counsels for petitioner sent a letter to Ramos demanding DENR to stop implementing RA7942 and DAO 96-40. No response, thus the petition for Mandamus and Prohibition with prayer of TRO and preliminary injunction(denied) claiming that petitioner Ramos acted without or in excess of jurisdiction in implementing the assailed Constitutionality of RA 7942 [1], of DENR Administrative Order 96-40 [2], and of the Financial and Technical Assistance Agreement entered into on 30 March 1995 between the Republic of the Philippines and WMC(Philippines) , Inc.

FACTS

In January 2001, WMC a publicly listed Australian mining and exploration company sold its whole stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is owned by Indophil Resources, an Australian company. DENR approved the transfer and registration of the FTAA in Sagittarius name but Lepanto Consolidated assailed the same. The latter case is still pending before the Court of Appeals.

FACTS
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR 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 (DENR) Secretary, the president may execute with foreign proponent. WMCP likewise contended that the annulment of the FTAA would violate a treaty between the Philippines and Australia which provides for the protection of Australian investments.

1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreignowned corporations to exploit Philippine mineral resources 2. Whether or not the FTAA between the government and WMCP is a service contract that permits fully foreign owned companies to exploit Philippine mineral resources 3. Whether the Court has a role in the exercise of the power of control over the EDU of our natural resources

1. RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned corporations to exploit Philippine natural resources. Article XII Section 2 of the 1987 Constitution retained the Regalian doctrine which states that All lands of the public domain, waters, minerals, coal, petroleum, and other 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. The same section also states that, exploration and development and utilization of natural resources shall be under the full control and supervision of the State.

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.With such omission, the utilization of inalienable lands of public domain through license, concession or lease is no longer allowed under the 1987 Constitution

Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area. The concession amounts to complete control by the concessionaire over the countrys natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction. The 1987 Constitution, moreover, has deleted the phrase management or other forms of assistance in the 1973 Charter. The present Constitution now allows only technical and financial assistance. The management or operation of mining activities by foreign contractors, the primary feature of service contracts was precisely the evil the drafters of the 1987 Constitution sought to avoid.

The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that participation in the nations natural resources is reserved exclusively to Filipinos. Accordingly such provision must be construed strictly against their enjoyment by nonFilipinos. Therefore RA 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, its pertinent provisions actually treat these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law

The underlying assumption in the provisions of the law is that the foreign contractor manages the mineral resources just like the foreign contractor in a service contract. By allowing foreign contractors to manage or operate all the aspects of the mining operation, RA 7942 has in effect conveyed beneficial ownership over the nations mineral resources to these contractors, leaving the State with nothing but bare title thereto. 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.

The Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the Constitution and hereby declares unconstitutional and void: (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. (2) Section 23, 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, which enumerates the terms and conditions for every financial or technical assistance agreement; (5) Section 39, which allows the contractor in a financial and technical assistance agreement to convert the same into a mineral production-sharing agreement;

(6) Section 56, 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), which defines the term "contractor," insofar as it applies to a financial or technical assistance agreement. Section 34, which prescribes the maximum contract area in a financial or technical assistance agreements; Section 36, which allows negotiations for financial or technical assistance agreements;

Section 37, which prescribes the procedure for filing and evaluation of financial or technical assistance agreement proposals; Section 38, which limits the term of financial or technical assistance agreements; Section 40, which allows the assignment or transfer of financial or technical assistance agreements;

Section 41, which allows the withdrawal of the contractor in an FTAA; The second and third paragraphs of Section 81, which provide for the Government's share in a financial and technical assistance agreement; and
Section 90, 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.

Ruling
2. The FTAA between WMCP and the Philippine

government is likewise unconstitutional since the agreement itself is a service contract.

Section 1.3 of the FTAA grants WMCP, a fully foreign

owned corporation, the exclusive right to explore, exploit, utilize and dispose of all minerals and byproducts that may be produced from the contract area. Section 1.2 of the same agreement provides that WMCP shall provide all financing, technology, management, and personnel necessary for the Mining Operations.

These contractual stipulations and related provisions

in the FTAA 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

 The Chief Executive is the official constitutionally

mandated to enter into agreements with foreign owned corporations. On the other hand, Congress may review the action of the President once it is notified of every contract entered into in accordance with this [constitutional] provision within thirty days from its execution. In contrast to this express mandate of the President and Congress in the exploration, development and utilization (EDU) of natural resources, Article XII of the Constitution is silent on the role of the judiciary. However, should the President and/or Congress gravely abuse their discretion in this regard, the courts may -- in a proper case -- exercise their residual duty under Article VIII. Clearly then, the judiciary should not inordinately interfere in the exercise of this presidential power of control over the EDU of our natural resources.