LA BUGAL BLAAN TRIBAL ASSOCIATION INC vs RAMOS Case Digest

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 (MGBDENR); RUBEN TORRES, Executive Secretary; and WMC (PHILIPPINES)
INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
The constitutional provision allowing the President to enter into FTAA is
a exception to the rule that participation in the nations natural
resources is reserved exclusively to Filipinos. Provision must be
construed strictly against their enjoyment by non-Filipinos.
FACTS: 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issued DENR Administrative Order 95-23, which was later repealed by DENR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.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA
between the government and WMCP 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.
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.
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 wither
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 the 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.
ISSUES:
1. Whether or not the Philippine Mining Act is unconstitutional for allowing
fully foreign-owned corporations to exploit the 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 the Philippine mineral resources.
HELD:
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 byproducts 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