La Bugal-Blaan Tribal Assn v Ramos

GR No. 127882, 27 Jan 2004, Carpio, J.

Law 102 Property
Topic: Property of State

FACTS
Action for mandamus and prohibition which assails the constitutionality of RA 7942
(Phil Mining Act of 1995) and its IRR issued by the DENR
Pres. Cory Aquino issued EO 279 authorizing the DENR Sec to accept, consider and
evaluate proposals from foreign-owned corporations or foreign investors for contracts of
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.
o 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
in a single mining unit project of at least Fifty Million Dollars in United States
currency (US $50,000,000.00).
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.
o R.A. No. 7942 defines the modes of mineral agreements for mining
operations, outlines the procedure for their filing and approval,
assignment/transfer and withdrawal, and fixes their terms. Similar provisions
govern financial or technical assistance agreements.
o The law prescribes the qualifications of contractors and grants them certain rights,
including timber, water and easement rights and the right to possess explosives
Shortly before the effectivity of RA 7942, FVR entered a Financial or Technical
Assistance Agreement (FTAA) with WMCP (owned by WMC Resources International
Pty, Ltd, a wholly owned subsidiary of Western Mining Corp Holdings, a publicly listed
major Australian mining and exploration company) covering 99,387 hectares of land in
South Cotobato, Sultan Kudarat, Davao del Sur and North Cotabato
DENR Sec. Ramos issued DENR Admin Order (DAO 95-23 (IRR of RA 7942). This was
later repealed by DAO 96-40 of 1996
PETs then sent letter to DENR to stop the implementation of the DAO. DENR has yet to
respond to the letter
PETs then filed present petition alleging that at the time of the filing of the petition, 100
FTAA applications had already been filed, covering and area of 8.4 million hectares, 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.
PETS claim that DENR Sec acted without or in excess of jurisdiction

ISSUES & HOLDING

1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-
owned corporations to exploit the Philippine mineral resources? YES
2. Whether or not the FTAA between the government and WMCP is a service contract
that permits fully foreign owned companies to exploit the Philippine mineral resources?
YES

RATIO 1

First Issue: RA 7942 is Unconstitutional

RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign
owned corporations to exploit the 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, the exploration and development and utilization of natural resources shall be
under the full control and supervision of the State.

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution 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 the
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 and the operation of the mining activities by foreign
contractors, the primary feature of the 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 non-Filipinos.
Therefore, RA 7942 is invalid insofar as the 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.

When parts of a 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, then if some parts are unconstitutional, all provisions that are thus dependent,
conditional or connected, must fail with them.

Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to
merely technical or financial assistance to the State for large scale exploration, development and
utilization of minerals, petroleum and other mineral oils.

Second Issue: RP Government-WMCP FTAA is a Service Contract

The FTAA between he 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 by-products that may be produced from
the contract area. Section 1.2 of the same agreement provides that EMCP 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 to suppress.
Consequently, the contract from which they spring must be struck down.
 DISPOSITIVE
PETITION GRANTED

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