LA BUGAL B'LAAN TRIBAL ASSOCIATION INC vs RAMOS

G.R. No. 127882. January 27, 2004

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was later repealed by DENR Administrative Order 96-40,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.

ISSUES:
Whether or not the Philippine Mining Act is unconstitutional for
allowing fully foreign-owned corporations to exploit the
Philippine mineral resources.

HELD:
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. The 1987 Constitution 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. 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.
LA BUGAL B'LAAN TRIBAL ASSOCIATION INC vs RAMOS
G.R. No. 127882. December 1, 2004

Facts:
The Petition for Prohibition and Mandamus before the Court
challenges the constitutionality of Republic Act 7942 (The
Philippine Mining Act of 1995); its Implementing Rules and
Regulations (DENR Administrative Order [DAO] 96-40)and the
Financial and Technical Assistance Agreement (FTAA) dated 30
March 1995, executed by the government with Western Mining
Corporation (Philippines), Inc. (WMCP).
On 27 January 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 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.
Subsequently, Victor O. Ramos, et al.
filed several motions for reconsideration.

Issue: Whether or not the R.A. 7942 is unconstitutional.

Held:
NO. The drafters whose ranks included many
academicians, economists, businessmen, lawyers, politicians
and government officials were not unfamiliar with the
practices of foreign corporations and multinationals. Neither
were they so nave as to believe that these entities would
provide assistance without conditionalities or some quid pro
quo. Definitely, as business persons well know and as a matter
of judicial notice, this matter is not just a question of signing a
promissory note or executing a technology transfer agreement.
Foreign corporations usually require that they be given a say in
the management, for instance, of day-to-day operations of the
joint venture. They would demand the appointment of their own
men as, for example, operations managers, technical experts,
quality control heads, internal auditors or comptrollers.
Furthermore, they would probably require seats on the Board of
Directors all these to ensure the success of the enterprise
and the repayment of the loans and other financial assistance
and to make certain that the funding and the technology they
supply would not go to waste. Ultimately, they would also want
to protect their business reputation and bottom lines. Full
control is not anathematic to day-to-day management
by the contractor, provided that the State retains the
power to direct overall strategy; and to set aside, reverse
or modify plans and actions of the contractor. The idea of full
control is similar to that which is exercised by the board of
directors of a private corporation, the performance of
managerial, operational, financial, marketing and other
functions may be delegated to subordinate officers or given to
contractual entities, but the board retains full residual
control of the business.
The Constitution of the Philippines is the supreme law of the
land. It is the repository of all the aspirations and hopes of all
the people. The Constitution should be read in broad, life-giving
strokes. It should not be used to strangulate economic growth
or to serve narrow, parochial interests. Rather, it should be
construed to grant the President and Congress sufficient
discretion and reasonable leeway to enable them to attract
foreign investments and expertise, as well as to secure for our
people and our posterity the blessings of prosperity and peace.
The Court fully sympathize with the plight of La Bugal Blaan
and other tribal groups, and commend their efforts to uplift
their communities. However, the Court cannot justify the
invalidation of an otherwise constitutional statute along with its
implementing rules, or the nullification of an otherwise legal
and binding FTAA contract. The Court believes that it is not
unconstitutional to allow a wide degree of discretion to the
Chief Executive, given the nature and complexity of such
agreements, the humongous amounts of capital and financing
required for large-scale mining operations, the complicated
technology needed, and the intricacies of international trade,
coupled with the States need to maintain flexibility in its
dealings, in order to preserve and enhance our countrys
competitiveness in world markets. On the basis of this control
standard, the Court upholds the constitutionality of the
Philippine Mining Law, its Implementing Rules and Regulations -
insofar as they relate to financial and technical agreements - as
well as the subject Financial and Technical Assistance
Agreement (FTAA).