Republic of the Philippines Congress of the Philippines Metro Manila geographicbased instruments for planners and decision-makers which
decision-makers which presents an
Republic Act No. 7942
AN ACT INSTITUTING A NEW SYSTEM OF MINERAL RESOURCES EXPLORATION,
DEVELOPMENT, UTILIZATION AND CONSERVATION
CHAPTER I INTRODUCTORY PROVISIONS
Section 1. Title. - This act shall be known as the Philippine Mining Act of 1995.
Section 2. Declaration of Policy. - All mineral resources in public and private lands
within the territory and exclusive economic zone of the Republic of the Philippines
are owned by the State. It shall be the responsibility of the State to promote their
rational exploration, development, utilization and conservation through the
combined efforts of government and the private sector in order to enhance national
growth in a way that effectively safeguards the environment and protect the rights
of affected communities. Section 3. Definition of Terms. - As used in and for
purposes of this Act, the following terms, whether in singular or plural, shall mean:
(a) "Ancestral lands" refers to all lands exclusively and actually possessed, occupied,
or utilized by indigenous cultural communities by themselves or through their
ancestors in accordance with their customs and traditions since time immemorial,
and as may be defined and delineated by law.
(b) "Block" or "meridional block" means an area bounded by one-half (1/2) minute
of latitude and one-half (1/2) minute of longitude, containing approximately
eightyone hectares (81 has).
(c) "Bureau" means the Mines and Geosciences Bureau under the Department of
Environment and Natural Resources. (d) "Carrying capacity" refers to the capacity
of natural and human environments to accommodate and absorb change without
experiencing conditions of instability and attendant degradation. (e) "Contiguous
zone" refers to water, sea bottom and substratum measured twenty-four nautical
miles (24 n.m.) seaward from the base line of the Philippine archipelago. (f)
"Contract area" means land or body of water delineated for purposes of
exploration, development, or utilization of the minerals found therein. (g)
"Contractor" means a qualified person acting alone or in consortium who is a party
to a mineral agreement or to a financial or technical assistance agreement. (h)
"Co-production agreement (CA)" means an agreement entered into between the
Government and one or more contractors in accordance with Section 26(b) hereof.
(I) "Department" means the Department of Environment and Natural Resources. (j)
"Development" means the work undertaken to explore and prepare an ore body or
a mineral deposit for mining, including the construction of necessary infrastructure
and related facilities. (k) "Director" means the Director of the Mines and
Geosciences Bureau. (l) "Ecological profile or eco-profile" refers to
evaluation of the environmental quality and carrying capacity of an area. (m)
"Environmental compliance certificate (ECC)" refers to the document issued by the
government agency concerned certifying that the project under consideration will
not bring about an unacceptable environmental impact and that the proponent has
complied with the requirements of the environmental impact statement system. (n)
"Environmental impact statement (EIS)" is the document which aims to identify,
predict, interpret, and communicate information regarding changes in
environmental quality associated with a proposed project and which examines the
range of alternatives for the objectives of the proposal and their impact on the
environment. (o) "Exclusive economic zone" means the water, sea bottom and
subsurface measured from the baseline of the Philippine archipelago up to two
hundred nautical miles (200 n.m.) offshore. (p) "Existing mining/quarrying right"
means a valid and subsisting mining claim or permit or quarry permit or any mining
lease contract or agreement covering a mineralized area granted/issued under
pertinent mining laws. (q) "Exploration" means the searching or prospecting for
mineral resources by geological, geochemical or geophysical surveys, remote
sensing, test pitting, trenching, drilling, shaft sinking, tunneling or any other means
for the purpose of determining the existence, extent, quantity and quality thereof
and the feasibility of mining them for profit. ( r ) "Financial or technical assistance
agreement" means a contract involving financial or technical assistance for large-
scale exploration, development, and utilization of mineral resources. (s) "Force
majeure" means acts or circumstances beyond the reasonable control of contractor
including, but not limited to, war, rebellion, insurrection, riots, civil disturbance,
blockade, sabotage, embargo, strike, lockout, any dispute with surface owners and
other labor disputes, epidemic, earthquake, storm, flood or other adverse weather
conditions, explosion, fire, adverse action by government or by any instrumentality
or subdivision thereof, act of God or any public enemy and any cause that herein
describe over which the affected party has no reasonable control. (t) "Foreign-
owned corporation" means any corporation, partnerships, association, or
cooperative duly registered in accordance with law in which less than fifty per
centum (50%) of the capital is owned by Filipino citizens. (u) "Government" means
the government of the Republic of the Philippines.
(v) "Gross output" means the actual market value of minerals or mineral products
from its mining area as defined in the National Internal Revenue Code. (w)
"Indigenous cultural community" means a group or tribe or indigenous Filipinos
who have continuously lived as communities on communally-bounded and defined
land since time immemorial and have succeeded in preserving, maintaining, and
sharing common bonds of languages, customs, traditions, and other distinctive
cultural traits, and as may be defined and delineated by law. (x) "Joint venture
agreement (JV)" means an agreement entered into between the Government and
one or more contractors in accordance with Section 26(c) hereof. (y) "Mineral
processing" means the milling, beneficiation or upgrading of ores or minerals and
rocks or by similar means to convert the same into marketable products. (z) "Mine
wastes and tailings" shall mean soil and rock materials from surface or underground
mining and milling operations with no economic value to the generator of the same.
(aa) "Minerals" refers to all naturally occurring inorganic substance in solid, gas,
liquid, or any intermediate state excluding energy materials such as coal, petroleum,
natural gas, radioactive materials, and geothermal energy. (ab) "Mineral
agreement" means a contract between the government and a contractor, involving
mineral production-sharing agreement, co-production agreement, or joint-venture
agreement. (ac) "Mineral land" means any area where mineral resources are
found. (ad) "Mineral Resource" means any concentration of minerals/rocks with
potential economic value. (ae) "Mining area" means a portion of the contract area
identified by the contractor for purposes of development, mining, utilization, and
sites for support facilities or in the immediate vicinity of the mining operations. (af)
"Mining operation" means mining activities involving exploration, feasibility,
development, utilization, and processing.
(ag) "Nongovernmental organization (NGO)" includes nonstock, nonprofit
organizations involved in activities dealing with resource and environmental
conservation, management and protection. (ah) "Net assets" refers to the
property, plant and equipment as reflected in the audited financial statement of the
contractor net of depreciation, as computed for tax purposes, excluding appraisal
increase and construction in progress. (ai) "Offshore" means the water, sea
bottom, and subsurface from the shore or coastline reckoned from the mean low
tide level up to the two hundred nautical miles (200 n.m.) exclusive economic zone
including the archipelagic sea and contiguous zone. (aj) "Onshore" means the
landward side from the mean tide elevation, including submerged lands in lakes,
rivers and creeks. (ak) "Ore" means a naturally occurring substance or material
from which a mineral or element can be mined and/or processed for profit. (al)
"Permittee" means the holder of an exploration permit. (am) "Pollution control and
infrastructure devices" refers to infrastructure, machinery, equipment and/or
improvements used for impounding, treating or neutralizing, precipitating, filtering,
conveying and cleansing mine industrial waste and tailings as well as eliminating or
reducing hazardous effects of solid particles, chemicals, liquids or other harmful
byproducts and gases emitted from any facility utilized in mining operations for their
disposal. (an) "President" means the President of the Republic of the Philippines.
(ao) "Private land" refers to any land belonging to any private person which
includes alienable and disposable land being claimed by a holder, claimant, or
occupant who has already acquired a vested right thereto under the law, although
the corresponding certificate or evidence of title or patent has not been actually
issued. (ap) "Public land" refers to lands of the public domain which have been
classified as agricultural lands and subject to management and disposition or
concession under existing laws.
(aq) "Qualified person" means any citizen of the Philippines with capacity to
contract, or a corporation, partnership, association, or cooperative organized or
authorized for the purpose of engaging in mining, with technical and financial
capability to undertake mineral resources development and duly registered in
accordance with law at least sixty per centum (60%) of the capital of which is owned
by citizens of the Philippines: 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. (ar) "Quarrying" means the process of extracting, removing and
disposing quarry resources found on or underneath the surface of private or public
land. (as) "Quarry permit" means a document granted to a qualified person for the
extraction and utilization of quarry resources on public or private lands. (at)
"Quarry resources" refers to any common rock or other mineral substances as the
Director of Mines and Geosciences Bureau may declare to be quarry resources such
as, but not limited to, andesite, basalt, conglomerate, coral sand, diatomaceous
earth, diorite, decorative stones, gabbro, granite, limestone, marble, marl, red
burning clays for potteries and bricks, rhyolite, rock phosphate, sandstone,
serpentine, shale, tuff, volcanic cinders, and volcanic glass: Provided, that such
quarry resources do not contain metals or metallic constituents and/or other
valuable minerals in economically workable quantities: Provided, further, That non-
metallic minerals such as kaolin, feldspar, bull quartz, quartz or silica, sand and
pebbles, bentonite, talc, asbestos, barite, gypsum, bauxite, magnesite, dolomite,
mica, precious and semi-precious stones, and other non-metallic minerals that may
later be discovered and which the Director declares the same to be of economically
workable quantities, shall not be classified under the category of quarry resources.
(au) "Regional director" means the regional director of any mines regional office
under the Department of Environment and Natural Resources.
(av) "Regional office" means any of the mines regional offices of the Department of
Environment and Natural Resources. (aw) "Secretary" means the Secretary of the
Department of Environment and Natural Resources. (ax) "Special allowance" refers
to payment to the claimowners or surface right-owners particularly during the
transition period from Presidential Decree No. 463 and Executive Order No. 279,
series of 1987. (ay) "State" means the Republic of the Philippines. (az) "Utilization"
means the extraction or disposition of minerals.
CHAPTER II GOVERNMENT MANAGEMENT
Section 4. Ownership of Mineral Resources. - Mineral resources are owned by the
State and the exploration, development, utilization, and processing thereof shall be
under its full control and supervision. The State may directly undertake such
activities or it may enter into mineral agreements with contractors.
 The State shall recognize and protect the rights of the indigenous cultural
communities to their ancestral lands as provided for by the Constitution.
Section 5. Mineral Reservations. - When the national interest so requires, such as
when there is a need to preserve strategic raw materials for industries critical to
national development, or certain minerals for scientific, cultural or ecological value,
the President may establish mineral reservations upon the recommendation of the
Director through the Secretary. Mining operations in existing mineral reservations
and such other reservations as may thereafter be established, shall be undertaken
by the Department or through a contractor: Provided, That a small scale-mining
cooperative covered by Republic Act No. 7076 shall be given preferential right to
apply for a small-scale mining agreement for a maximum aggregate area of twenty-
five percent (25%) of such mineral reservation, subject to valid existing
mining/quarrying rights as provided under Section 112 Chapter XX hereof. All
submerged lands within the contiguous zone and in the exclusive economic zone of
the Philippines are hereby declared to be mineral reservations.
A ten per centum (10%) share of all royalties and revenues to be derived by the
government from the development and utilization of the mineral resources within
mineral reservations as provided under this Act shall accrue to the Mines and
Geosciences Bureau to be allotted for special projects and other administrative
expenses related to the exploration and development of other mineral reservations
mentioned in Section 6 hereof.
Section 6. Other Reservations. - Mining operations in reserved lands other than
mineral reservations may be undertaken by the Department, subject to limitations
as herein provided. In the event that the Department cannot undertake such
activities, they may be undertaken by a qualified person in accordance with the
rules and regulations promulgated by the Secretary. The right to develop and utilize
the minerals found therein shall be awarded by the President under such terms and
conditions as recommended by the Director and approved by the Secretary:
Provided, That the party who undertook the exploration of said reservation shall be
given priority. The mineral land so awarded shall be automatically excluded from
the reservation during the term of the agreement: Provided, further, That the right
of the lessee of a valid mining contract existing within the reservation at the time of
its establishment shall not be prejudiced or impaired.
Section 7. Periodic Reviews of Existing Mineral Reservations. - The Secretary shall
periodically review existing mineral reservations for the purpose of determining
whether their continued existence is consistent with the national interest, and upon
his recommendation, the President may, by proclamation, alter or modify the
boundaries thereof or revert the same to the public domain without prejudice to
prior existing rights.
Section 8. Authority of the Department. - The Department shall be the primary
agency responsible for the conservation, management, development, and proper
use of the State's mineral resources including those in reservations, watershed
areas, and lands of the public domain. The Secretary shall have the authority to
enter into mineral agreements on behalf of the Government upon the
recommendation of the Director, promulgate such rules and regulations as may be
necessary to implement the intent and provisions of this Act.
Section 9. Authority of the Bureau. - The Bureau shall have direct charge in the
administration and disposition of mineral lands and mineral resources and shall
undertake geological, mining, metallurgical, chemical, and other researches as well
as geological and mineral exploration surveys. The Director shall recommend to the
Secretary the granting of mineral agreements to duly qualified persons and shall
monitor the compliance by the contractor of the terms and conditions of the
mineral agreements. The Bureau may confiscate surety, performance and guaranty
bonds posted through an order to be promulgated by the Director. The Director
may deputize, when necessary, any member or unit of the Philippine National
Police, barangay, duly registered nongovernmental organization (NGO) or any
qualified person to police all mining activities.
Section 10. Regional Offices. - There shall be as many regional offices in the
country as may be established by the Secretary, upon the recommendation of the
Director.
Section 11. Processing of Applications. - The system of processing applications for
mining rights shall be prescribed in the rules and regulations of this Act.
Section 12. Survey, Charting and Delineation of Mining Areas. - A sketch plan or
map of the contract or mining area prepared by a deputized geodetic engineer
suitable for publication purposes shall be required during the filing of a mineral
agreement or financial or technical assistance agreement application. Thereafter,
the contract or mining area shall be surveyed and monumented by a deputized
geodetic engineer and the survey plan shall be approved by the Director before the
approval of the mining feasibility.
Section 13. Meridional Blocks. - For purposes of the delineation of the contract or
mining areas under this Act, the Philippine territory and its exclusive economic zone
shall be divided into meridional blocks of one-half (1/2) minute of latitude and one-
half (1/2) minute of longitude.
Section 14. Recording System. - There shall be established a national and regional
filing and recording system. A mineral resource database system shall be set up in
the Bureau which shall include, among others, a mineral rights management system.
The Bureau shall publish at least annually, a mineral gazette of nationwide
circulation containing among others, a current list of mineral rights, their locations
in the map, mining rules and regulations, other official acts affecting mining, and
other information relevant to mineral resources development. A system and
publication fund shall be included in the regular budget of the Bureau.
CHAPTER III SCOPE OF APPLICATION
Section 15. Scope of Application. - This Act shall govern the exploration,
development, utilization and processing of all mineral resources.
Section 16. Opening of Ancestral Lands for Mining Operations. - No ancestral land
shall be opened for mining operations without the prior consent of the indigenous
cultural community concerned.
Section 17. Royalty Payments for Indigenous Cultural Communities. - In the event
of an agreement with an indigenous cultural community pursuant to the preceding
section, the royalty payment, upon utilization of the minerals shall be agreed upon
by the parties. The said royalty shall form part of a trust fund for the socioeconomic
well-being of the indigenous cultural community.
Section 18. Areas Open to Mining Operations. - Subject to any existing rights or
reservations and prior agreements of all parties, all mineral resources in public or
private lands, including timber or forestlands as defined in existing laws, shall be
open to mineral agreements or financial or technical assistance agreement
applications. Any conflict that may arise under this provision shall be heard and
resolved by the panel of arbitrators.
Section 19. Areas Closed to Mining Applications. - Mineral agreement or financial
or technical assistance agreement applications shall not be allowed:
(a) In military and other government reservations, except upon prior written
clearance by the government agency concerned; (b) Near or under public or
private buildings, cemeteries, archeological and historic sites, bridges, highways,
waterways, railroads, reservoirs, dams or other infrastructure projects, public or
private works including plantations or valuable crops, except upon written consent
of the government agency or private entity concerned; (c) In areas covered by valid
and existing mining rights; (d) In areas expressly prohibited by law; (e) In areas
covered by small-scale miners as defined by law unless with prior consent of the
small-scale miners, in which case a royalty payment upon the utilization of minerals
shall be agreed upon by the parties, said royalty forming a trust fund for the
socioeconomic development of the community concerned; and (f) Old growth or
virgin forests, proclaimed watershed forest reserves, wilderness area, mangrove
forests, mossy forests, national parks, provincial/municipal forests, parks,
greenbelts, game refuge and bird sanctuaries as defined by law and in areas
expressly prohibited under the National Integrated Protected Area System (NIPAS)
under Republic Act No. 7586, Department Administrative Order No. 25, series of
1992 and other laws.
CHAPTER IV EXPLORATION PERMIT
Section 20. Exploration Permit. - An exploration permit grants the right to conduct
exploration for all minerals in specified areas. The Bureau shall have the authority
to grant an exploration permit to a qualified person.
Section 21. Terms and Conditions of the Exploration Permit. - An exploration
permit shall be for a period of two (2) years, subject to annual review and
relinquishment or renewal upon the recommendation of the Director.
Section 22. Maximum Areas for Exploration Permit. The maximum area that a
qualified person may hold at any one time shall be:
(a) Onshore, in any one province - (1) For individuals, twenty (20) blocks; and (2)
For partnerships, corporations, cooperatives, or associations, two hundred (200)
blocks.
(b) Onshore, in the entire Philippines - (1) For individuals, forty (40) blocks; and
(2) For partnerships, corporations, cooperatives, or associations, four hundred (400)
blocks.
(c) Offshore, beyond five hundred meters (500m) from the mean low tide level -
(1) For individuals, one hundred (100) blocks; and (2) For partnerships,
corporations, cooperatives, or associations, one thousand (1,000) blocks.
Section 23. Rights and Obligations of the Permittee. - An exploration permit shall
grant to the permittee, his heirs or successors-in-interest, the right to enter, occupy
and explore the area: Provided, That if private or other parties are affected, the
permittee shall first discuss with the said parties the extent, necessity, and manner
of his entry, occupation and exploration and in case of disagreement, a panel of
arbitrators shall resolve the conflict or disagreement.
The permittee shall undertake an exploration work on the area as specified by its
permit based on an approved work program.
Any expenditure in excess of the yearly budget of the approved work program may
be carried forward and credited to the succeeding years covering the duration of the
permit. The Secretary, through the Director, shall promulgate rules and regulations
governing the terms and conditions of the permit.
The permittee may apply for a mineral production sharing agreement, joint venture
agreement, co-production agreement or financial or technical assistance agreement
over the permit area, which application shall be granted if the permittee meets the
necessary qualifications and the terms and conditions of any such agreement:
Provided, That the exploration period covered by the exploration permit shall be
included as part of the exploration period of the mineral agreement or financial or
technical assistance agreement.
Section 24. Declaration of Mining Project Feasibility. - A holder of an exploration
permit who determines the commercial viability of a project covering a mining area
may, within the term of the permit, file with the Bureau a declaration of mining
project feasibility accompanied by a work program for development. The approval
of the mining project feasibility and compliance with other requirements provided
in this Act shall entitle the holder to an exclusive right to a mineral production
sharing agreement or other mineral agreements or financial or technical assistance
agreement.
Section 25. Transfer or Assignment. - An exploration permit may be transferred or
assigned to a qualified person subject to the approval of the Secretary upon the
recommendation of the Director.
CHAPTER V MINERAL AGREEMENTS
Section 26. Modes of Mineral Agreement. - For purposes of mining operations, a
mineral agreement may take the following forms as herein defined:
(a) Mineral production sharing agreement - is an agreement where the Government
grants to the contractor the exclusive right to conduct mining operations within a
contract area and shares in the gross output. The contractor shall provide the
financing, technology, management and personnel necessary for the
implementation of this agreement. (b) Co-production agreement - is an agreement
between the Government and the contractor wherein the Government shall provide
inputs to the mining operations other than the mineral resource. (c) Joint-venture
agreement - is an agreement where a joint-venture company is organized by the
Government and the contractor with both parties having equity shares. Aside from
earnings in equity, the Government shall be entitled to a share in the gross output.
A mineral agreement shall grant to the contractor the exclusive right to conduct
mining operations and to extract all mineral resources found in the contract area. In
addition, the contractor may be allowed to convert his agreement into any of the
modes of mineral agreements or financial or technical assistance agreement
covering the remaining period of the original agreement subject to the approval of
the Secretary.
Section 27. Eligibility. - A qualified person may enter into any of the three (3)
modes of mineral agreement with the government for the exploration,
development and utilization of mineral resources: Provided, That in case the
applicant has been in the mining industry for any length of time, he should possess
a satisfactory environmental track record as determined by the Mines and
Geosciences Bureau and in consultation with the Environmental Management
Bureau of the Department.
Section 28. Maximum Areas for Mineral Agreement. - The maximum area that a
qualified person may hold at any time under a mineral agreement shall be: (a)
Onshore, in any one province - (1) For individuals, ten (10) blocks; and (2) For
partnerships, cooperatives, associations, or corporations, one hundred (100)
blocks. (b) Onshore, in the entire Philippines - (1) For individuals, twenty (20)
blocks; and (2) For partnerships, cooperatives, associations, or corporations, two
hundred (200) blocks. (c) Offshore, in the entire Philippines - (1) For individuals,
fifty (50) blocks; (2) For partnerships, cooperatives, associations, or corporations,
five hundred (500) blocks; and (3) For the exclusive economic zone, a larger area to
be determined by the Secretary.
The maximum areas mentioned above that a contractor may hold under a mineral
agreement shall not include mining/quarry areas under operating agreements
between the contractor and a claimowner/lessee/permittee/licensee entered into
under Presidential Decree No. 463.
Section 29. Filing and Approval of Mineral Agreements. - All proposed mineral
agreements shall be filed in the region where the areas of interest are located,
except in mineral reservations which shall be filed with the Bureau.
The filing of a proposal for a mineral agreement shall give the proponent the prior
right to areas covered by the same. The proposed mineral agreement will be
approved by the Secretary and copies thereof shall be submitted to the President.
Thereafter, the President shall provide a list to Congress of every approved mineral
agreement within thirty (30) days from its approval by the Secretary.
Section 30. Assignment/Transfer. - Any assignment or transfer of rights and
obligations under any mineral agreement except a financial or technical assistance
agreement shall be subject to the prior approval of the Secretary. Such assignment
or transfer shall be deemed automatically approved if not acted upon by the
Secretary within thirty (30) working days from official receipt thereof, unless
patently unconstitutional or illegal.
Section 31. Withdrawal from Mineral Agreements. - The contractor may, by giving
due notice at any time during the term of the agreement, apply for the cancellation
of the mineral agreement due to causes which, in the opinion of the contractor,
make continued mining operations no longer feasible or viable. The Secretary shall
consider the notice and issue its decision within a period of thirty (30) days:
Provided, That the contractor has met all its financial, fiscal and legal obligations.
 Section 32. Terms. - Mineral agreements shall have a term not exceeding twenty-
five (25) years to start from the date of execution thereof, and renewable for
another term not exceeding twenty-five (25) years under the same terms and
conditions thereof, without prejudice to changes mutually agreed upon by the
parties. After the renewal period, the operation of the mine may be undertaken by
the Government or through a contractor. The contract for the operation of a mine
shall be awarded to the highest bidder in a public bidding after due publication of
the notice thereof: Provided, That the contractor shall have the right to equal the
highest bid upon reimbursement of all reasonable expenses of the highest bidder.
CHAPTER VI FINANCIAL OR TECHNICAL ASSISTANCE AGREEMENT
Section 33. Eligibility. - Any qualified person with technical and financial capability
to undertake large-scale exploration, development, and utilization of mineral
resources in the Philippines may enter into a financial or technical assistance
agreement directly with the Government through the Department.
Section 34. Maximum Contract Area. - The maximum contract area that may be
granted per qualified person, subject to relinquishment shall be:
(a) 1,000 meridional blocks onshore; (b) 4,000 meridional blocks offshore; or (c)
Combinations of (a) and (b) provided that it shall not exceed the maximum limits for
onshore and offshore areas.
Section 35. Terms and Conditions. - The following terms, conditions, and
warranties shall be incorporated in the financial or technical assistance agreement,
to wit:
(a) A firm commitment in the form of a sworn statement, of an amount
corresponding to the expenditure obligation that will be invested in the contract
area: Provided, That such amount shall be subject to changes as may be provided
for in the rules and regulations of this Act; (b) A financial guarantee bond shall be
posted in favor of the Government in an amount equivalent to the expenditure
obligation of the applicant for any year; (c) Submission of proof of technical
competence, such as, but not limited to, its track record in mineral resource
exploration, development, and utilization; details of technology to be employed in
the proposed operation; and details of technical personnel to undertake the
operation;
(d) Representations and warranties that the applicant has all the qualifications and
none of the disqualifications for entering into the agreement; (e) Representation
and warranties that the contractor has or has access to all the financing, managerial
and technical expertise and, if circumstances demand, the technology required to
promptly and effectively carry out the objectives of the agreement with the
understanding to timely deploy these resources under its supervision pursuant to
the periodic work programs and related budgets, when proper, providing an
exploration period up to two (2) years, extendible for another two (2) years but
subject to annual review by the Secretary in accordance with the implementing
rules and regulations of this Act, and further, subject to the relinquishment
obligations; (f) Representations and warranties that, except for payments for
disposition for its equity, foreign investments in local enterprises which are qualified
for repatriation, and local supplier's credits and such other generally accepted and
permissible financial schemes for raising funds for valid business purposes, the
contractor shall not raise any form of financing from domestic sources of funds,
whether in Philippine or foreign currency, for conducting its mining operations for
and in the contract area; (g) The mining operations shall be conducted in
accordance with the provisions of this Act and its implementing rules and
regulations; (h) Work programs and minimum expenditures commitments; (I)
Preferential use of local goods and services to the maximum extent practicable; (j)
A stipulation that the contractors are obligated to give preference to Filipinos in all
types of mining employment for which they are qualified and that technology shall
be transferred to the same; (k) Requiring the proponent to effectively use
appropriate anti-pollution technology and facilities to protect the environment and
to restore or rehabilitate mined out areas and other areas affected by mine tailings
and other forms of pollution or destruction;
(l) The contractors shall furnish the Government records of geologic, accounting,
and other relevant data for its mining operations, and that book of accounts and
records shall be open for inspection by the government; (m) Requiring the
proponent to dispose of the minerals and byproducts produced under a financial or
technical assistance agreement at the highest price and more advantageous terms
and conditions as provided for under the rules and regulations of this Act; (n)
Provide for consultation and arbitration with respect to the interpretation and
implementation of the terms and conditions of the agreements; and (o) Such other
terms and conditions consistent with the Constitution and with this Act as the
Secretary may deem to be for the best interest of the State and the welfare of the
Filipino people.
Section 36. Negotiations. - A financial or technical assistance agreement shall be
negotiated by the Department and executed and approved by the President. The
President shall notify Congress of all financial or technical assistance agreements
within thirty (30) days from execution and approval thereof.
Section 37. Filing and Evaluation of Financial or Technical Assistance Agreement
Proposals. - All financial or technical assistance agreement proposals shall be filed
with the Bureau after payment of the required processing fees. If the proposal is
found to be sufficient and meritorious in form and substance after evaluation, it
shall be recorded with the appropriate government agency to give the proponent
the prior right to the area covered by such proposal: Provided, That existing mineral
agreements, financial or technical assistance agreements and other mining rights
are not impaired or prejudiced thereby. The Secretary shall recommend its approval
to the President. Section 38. Term of Financial or Technical Assistance Agreement.
- A financial or technical assistance agreement shall have a term not exceeding
twenty-five (25) years to start from the execution thereof, renewable for not more
than twenty-five (25) years under such terms and conditions as may be provided by
law.
Section 39. Option to Convert into a Mineral Agreement. - The contractor has the
option to convert the financial or technical assistance agreement to a mineral
agreement at any time during the term of the agreement, if the economic viability
of the contract area is found to be inadequate to justify large-scale mining
operations, after proper notice to the Secretary as provided for under the
implementing rules and regulations: Provided, That the mineral agreement shall
only be for the remaining period of the original agreement.
In case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the
corporation, partnership, association, or cooperative. Upon compliance with this
requirement by the contractor, the Secretary shall approve the conversion and
execute the mineral production-sharing agreement.
Section 40. Assignment/Transfer. - A financial or technical assistance agreement
may be assigned or transferred, in whole or in part, to a qualified person subject to
the prior approval of the President: Provided, That the President shall notify
Congress of every financial or technical assistance agreement assigned or converted
in accordance with this provision within thirty (30) days from the date of the
approval thereof. Section 41. Withdrawal from Financial or Technical Assistance
Agreement. - The contractor shall manifest in writing to the Secretary his
intentions to withdraw from the agreement, if in his judgment the mining project is
no longer economically feasible, even after he has exerted reasonable diligence to
remedy the cause or the situation. The Secretary may accept the withdrawal:
Provided, That the contractor has complied or satisfied all his financial, fiscal or legal
obligations.
CHAPTER VII SMALL-SCALE MINING
Section 42. Small-scale Mining. - Small-scale mining shall continue to be governed
by Republic Act No. 7076 and other pertinent laws.
CHAPTER VIII QUARRY RESOURCES
Section 43. Quarry Permit. - Any qualified person may apply to the provincial/city
mining regulatory board for a quarry permit on privately-owned lands and/or public
lands for building and construction materials such as marble, basalt, andesite,
conglomerate, tuff, adobe, granite, gabbro, serpentine, inset filling materials, clay
for ceramic tiles and building bricks, pumice, perlite and other similar materials that
are extracted by quarrying from the ground. The provincial governor shall grant the
permit after the applicant has complied with all the requirements as prescribed by
the rules and regulations.
The maximum area which a qualified person may hold at any one time shall be five
hectares (5 has): Provided, That in largescale quarry operations involving cement
raw materials, marble, granite, sand and gravel and construction aggregates, a
qualified person and the government may enter into a mineral agreement as
defined herein.
A quarry permit shall have a term of five (5) years, renewable for like periods but
not to exceed a total term of twentyfive (25) years. No quarry permit shall be
issued or granted on any area covered by a mineral agreement, or financial or
technical assistance agreement.
Section 44. Quarry Fee and Taxes. - A permittee shall, during the term of his
permit, pay a quarry fee as provided for under the implementing rules and
regulations. The permittee shall also pay the excise tax as provided by pertinent
laws.
Section 45. Cancellation of Quarry Permit. - A quarry permit may be canceled by
the provincial governor for violations of the provisions of this Act or its
implementing rules and regulations or the terms and conditions of said permit:
Provided, That before the cancellation of such permit, the holder thereof shall be
given the opportunity to be heard in an investigation conducted for the purpose.
Section 46. Commercial Sand and Gravel Permit. - Any qualified person may be
granted a permit by the provincial governor to extract and remove sand and gravel
or other loose or unconsolidated materials which are used in their natural state,
without undergoing processing from an area of not more than five hectares (5 has)
and in such quantities as may be specified in the permit.
Section 47. Industrial Sand and Gravel Permit. - Any qualified person may be
granted an industrial sand and gravel permit by the Bureau for the extraction of
sand and gravel and other loose or unconsolidated materials that necessitate the
use of mechanical processing covering an area of more than five hectares (5 has.) at
any one time. The permit shall have a term of five (5) years, renewable for a like
period but not to exceed a total term of twenty-five (25) years.
Section 48. Exclusive Sand and Gravel Permit. - Any qualified person may be
granted an exclusive sand and gravel permit by the provincial governor to quarry
and utilize sand and gravel or other loose or unconsolidated materials from public
lands for his use, provided that there will be no commercial disposition thereof.
 A mineral agreement or a financial technical assistance agreement contractor shall,
however, have the right to extract and remove sand and gravel and other loose
unconsolidated materials without need of a permit within the area covered by the
mining agreement for the exclusive use in the mining operations: Provided, That
monthly reports of the quantity of materials extracted therefrom shall be submitted
to the mines regional office concerned: Provided, further, That said right shall be
coterminous with the expiration of the agreement.
Holders of existing mining leases shall likewise have the same rights as that of a
contractor: Provided, That said right shall be coterminous with the expiry dates of
the lease.
Section 49. Government Gratuitous Permit. - Any government entity or
instrumentality may be granted a gratuitous permit by the provincial governor to
extract sand and gravel, quarry or loose unconsolidated materials needed in the
construction of building and/or infrastructure for public use or other purposes over
an area of not more than two hectares (2 has.) for a period coterminous with said
construction.
Section 50. Private Gratuitous Permit. - Any owner of land may be granted a
private gratuitous permit by the provincial governor.
Section 51. Guano Permit. - Any qualified person may be granted a guano permit
by the provincial governor to extract and utilize loose unconsolidated guano and
other organic fertilizer materials in any portion of a municipality where he has
established domicile. The permit shall be for specific caves and/or for confined sites
with locations verified by the Department's field officer in accordance with existing
rules and regulations.
Section 52. Gemstone Gathering Permit. - Any qualified person may be granted a
non-exclusive gemstone gathering permit by the provincial governor to gather loose
stones useful as gemstones in rivers and other locations.
CHAPTER IX TRANSPORT, SALE AND PROCESSING OF MINERALS
Section 53. Ore Transport Permit. - A permit specifying the origin and quantity of
non-processed mineral ores or minerals shall be required for their transport.
Transport permits shall be issued by the mines regional director who has jurisdiction
over the area where the ores were extracted. In the case of mineral ores or minerals
being transported from the small-scale mining areas to the custom mills or
processing plants, the Provincial Mining Regulatory Board (PMRB) concerned shall
formulate their own policies to govern such transport of ores produced by small-
scale miners. The absence of a permit shall be considered as prima facie evidence
of illegal mining and shall be sufficient cause for the Government to confiscate the
ores or minerals being transported, the tools and equipment utilized, and the
vehicle containing the same. Ore samples not exceeding two metric tons (2 m.t.) to
be used exclusively for assay or pilot test purposes shall be exempted from such
requirement.
Section 54. Mineral Trading Registration. - No person shall engage in the trading of
mineral products, either locally or internationally, unless registered with the
Department of Trade and Industry and accredited by the Department, with a copy of
said registration submitted to the Bureau.
Section 55. Minerals Processing Permit. - No person shall engage in the processing
of minerals without first securing a minerals processing permit from the Secretary.
Minerals processing permit shall be for a period of five (5) years renewable for like
periods but not to exceed a total term of twenty-five (25) years. In the case of
mineral ores or minerals produced by the small-scale miners, the processing thereof
as well as the licensing of their custom mills, or processing plants shall continue to
be governed by the provisions of Republic Act No. 7076.
Section 56. Eligibility of Foreign-owned/-controlled Corporation. - A foreign-
owned/-controlled corporation may be granted a mineral processing permit.
CHAPTER X DEVELOPMENT OF MINING COMMUNITIES, SCIENCE AND MINING
TECHNOLOGY
Section 57. Expenditure for Community Development and Science and Mining
Technology. - A contractor shall assist in the development of its mining community,
the promotion of the general welfare of its inhabitants, and the development of
science and mining technology.
Section 58. Credited Activities. - Activities that may be credited as expenditures for
development of mining communities, and science and mining technology are the
following:
(a) Any activity or expenditure intended to enhance the development of the mining
and neighboring communities of a mining operation other than those required or
provided for under existing laws, or collective bargaining agreements, and the like;
and (b) Any activity or expenditure directed towards the development of
geosciences and mining technology such as, but not limited to, institutional and
manpower development, and basic and applied researches. Appropriate
supervision and control mechanisms shall be prescribed in the implementing rules
and regulations of this Act.
Section 59. Training and Development. - A contractor shall maintain an effective
program of manpower training and development throughout the term of the
mineral agreement and shall encourage and train Filipinos to participate in all
aspects of the mining operations, including the management thereof. For highly-
technical and specialized mining operations, the contractor may, subject to the
necessary government clearances, employ qualified foreigners.
Section 60. Use of Indigenous Goods, Services and Technologies. - A contractor
shall give preference to the use of local goods, services and scientific and technical
resources in the mining operations, where the same are of equivalent quality, and
are available on equivalent terms as their imported counterparts.
Section 61. Donations/Turn Over of Facilities. - Prior to cessation of mining
operations occasioned by abandonment or withdrawal of operations, on public
lands by the contractor, the latter shall have a period of one (1) year therefrom
within which to remove his improvements; otherwise, all the social infrastructure
and facilities shall be turned over or donated tax-free to the proper government
authorities, national or local, to ensure that said infrastructure and facilities are
continuously maintained and utilized by the host and neighboring communities.
Section 62. Employment of Filipinos. - A contractor shall give preference to Filipino
citizens in all types of mining employment within the country insofar as such citizens
are qualified to perform the corresponding work with reasonable efficiency and
without hazard to the safety of the operations. The contractor, however, shall not
be hindered from hiring employees of his own selection, subject to the provisions of
Commonwealth Act No. 613, as amended, for technical and specialized work which,
in his judgment and with the approval of the Director, requires highly-specialized
training or long experience in exploration, development or utilization of mineral
resources: Provided, That in no case shall each employment exceed five (5) years or
the payback period as represented in original project study, whichever is longer:
Provided, further, That each foreigner employed as mine manager, vice-president
for operations or in an equivalent managerial position in charge of mining, milling,
quarrying or drilling operation shall:
(a) Present evidence of his qualification and work experience; or
(b) Shall pass the appropriate government licensure examination; or (c) In special
cases, may be permitted to work by the Director for a period not exceeding one (1)
year: Provided, however, That if reciprocal privileges are extended to Filipino
nationals in the country of domicile, the Director may grant waivers or exemptions.
CHAPTER XI SAFETY AND ENVIRONMENTAL PROTECTION
Section 63. Mines Safety and Environmental Protection. - All contractors and
permittees shall strictly comply with all the mines safety rules and regulations as
may be promulgated by the Secretary concerning the safe and sanitary upkeep of
the mining operations and achieve waste-free and efficient mine development.
Personnel of the Department involved in the implementation of mines safety, health
and environmental rules and regulations shall be covered under Republic Act No.
7305.
Section 64. Mine Labor. - No person under sixteen (16) years of age shall be
employed in any phase of mining operations and no person under eighteen (18)
years of age shall be employed underground in a mine.
Section 65. Mine Supervision. - All mining and quarrying operations that employ
more than fifty (50) workers shall have at least one (1) licensed mining engineer
with at least five (5) years of experience in mining operations, and one (1) registered
foreman.
Section 66. Mine Inspection. - The regional director shall have exclusive
jurisdiction over the safety inspection of all installations, surface or underground, in
mining operations at reasonable hours of the day or night and as much as possible
in a manner that will not impede or obstruct work in progress of a contractor or
permittee.
Section 67. Power to Issue Orders. - The mines regional director shall, in
consultation with the Environmental Management Bureau, forthwith or within such
time as specified in his order, require the contractor to remedy any practice
connected with mining or quarrying operations, which is not in accordance with
safety and anti-pollution laws and regulations. In case of imminent danger to life or
property, the mines regional director may summarily suspend the mining or
quarrying operations until the danger is removed, or appropriate measures are
taken by the contractor or permittee.
Section 68. Report of Accidents. - In case of any incident or accident, causing or
creating the danger of loss of life or serious physical injuries, the person in charge of
operations shall immediately report the same to the regional office where the
operations are situated. Failure to report the same without justifiable reason shall
be a cause for the imposition of administrative sanctions prescribed in the rules and
regulations implementing this Act.
Section 69. Environmental Protection. - Every contractor shall undertake an
environmental protection and enhancement program covering the period of the
mineral agreement or permit. Such environmental program shall be incorporated in
the work program which the contractor or permittee shall submit as an
accompanying document to the application for a mineral agreement or permit. The
work program shall include not only plans relative to mining operations but also to
rehabilitation, regeneration, revegetation and reforestation of mineralized areas,
slope stabilization of mined-out and tailings covered areas, aquaculture, watershed
development and water conservation; and socioeconomic development.
 Section 70. Environmental Impact Assessment (EIA). - Except during the
exploration period of a mineral agreement or financial or technical assistance
agreement or an exploration permit, and environmental clearance certificate shall
be required based on an environmental impact assessment and procedures under
the Philippine Environmental Impact Assessment System including Sections 26 and
27 of the Local Government Code of 1991 which require national agencies to
maintain ecological balance, and prior consultation with the local government units,
nongovernmental and people's organizations and other concerned sectors of the
community: Provided, That a completed ecological profile of the proposed mining
area shall also constitute part of the environmental impact assessment. People's
organizations and nongovernmental organizations shall be allowed and encouraged
to participate in ensuring that contractors/permittees shall observe all the
requirements of environmental protection.
Section 71. Rehabilitation. - Contractors and permittees shall technically and
biologically rehabilitate the excavated, minedout, tailings covered and disturbed
areas to the condition of environmental safety, as may be provided in the
implementing rules and regulations of this Act. A mine rehabilitation fund shall be
created, based on the contractor's approved work program, and shall be deposited
as a trust fund in a government depository bank and used for physical and social
rehabilitation of areas and communities affected by mining activities and for
research on the social, technical and preventive aspects of rehabilitation. Failure to
fulfill the above obligation shall mean immediate suspension or closure of the
mining activities of the contractor/permittee concerned.
CHAPTER XII AUXILIARY MINING RIGHTS
Section 72. Timber Rights. - Any provision of law to the contrary notwithstanding,
a contractor may be granted a right to cut trees or timber within his mining area as
may be necessary for his mining operations subject to forestry laws, rules and
regulations: Provided, That if the land covered by the mining area is already
covered by existing timber concessions, the volume of timber needed and the
manner of cutting and removal thereof shall be determined by the mines regional
director, upon consultation with the contractor, the timber
concessionaire/permittee and the Forest Management Bureau of the Department:
Provided, further, That in case of disagreement between the contractor and the
timber concessionaire, the matter shall be submitted to the Secretary whose
decision shall be final. The contractor shall perform reforestation work within his
mining area in accordance with forestry laws, rules and regulations.
Section 73. Water Rights. - A contractor shall have water rights for mining
operations upon approval of application with the appropriate government agency in
accordance with existing water laws, rules and regulations promulgated thereunder:
Provided, That water rights already granted or vested through long use, recognized
and acknowledged by local customs, laws, and decisions of courts shall not thereby
be impaired: Provided, further, That the Government reserves the right to regulate
water rights and the reasonable and equitable distribution of water supply so as to
prevent the monopoly of the use thereof.
Section 74. Right to Possess Explosives. - A contractor/exploration permittee have
the right to possess and use explosives within his contract/permit area as may be
necessary for his mining operations upon approval of an application with the
appropriate government agency in accordance with existing laws, rules and
regulations promulgated thereunder: Provided, That the Government reserves the
right to regulate and control the explosive accessories to ensure safe mining
operations.
Section 75. Easement Right. - When mining areas are so situated that for purposes
of more convenient mining operations it is necessary to build, construct or install on
the mining area or lands owned, occupied or leased by other persons, such
infrastructure as roads, railroads, mills, waste dump sites, tailings ponds,
warehouses, staging or storage areas and port facilities, tramways, runways,
airports, electric transmission, telephone or telegraph lines, dams and their normal
flood and catchment areas, sites for water wells, ditches, canals, new river beds,
pipelines, flumes, cuts, shafts, tunnels, or mills, the contractor, upon payment of just
compensation shall be entitled to enter and occupy said mining areas or lands.
Section 76. Entry into Private Lands and Concession Areas. - Subject to prior
notification, holders of mining rights shall not be prevented from entry into private
lands and concession areas by surface owners, occupants, or concessionaires when
conducting mining operations therein: Provided, That any damage done to the
property of the surface owner, occupant, or concessionaire as a consequence of
such operations shall be properly compensated as may be provided for in the
implementing rules and regulations: Provided, further, That to guarantee such
compensation, the person authorized to conduct mining operations shall, prior
thereto, post a bond with the regional director based on the type of properties, the
prevailing prices in and around the area where the mining operations are to be
conducted, with surety or sureties satisfactory to the regional director
CHAPTER XIII SETTLEMENT OF CONFLICTS Section 77. Panel of Arbitrators. - There
shall be a panel of arbitrators in the regional office of the Department composed of
three (3) members, two (2) of whom must be members of the Philippine Bar in good
standing and one a licensed mining engineer or a professional in a related field, and
duly designated by the Secretary as recommended by the Mines and Geosciences
Bureau Director. Those designated as members of the panel shall serve as such in
addition to their work in the Department without receiving any additional
compensation. As much as practicable, said members shall come from the different
bureaus of the Department in the region. The presiding officer thereof shall be
selected by the drawing of lots. His tenure as presiding officer shall be on a yearly
basis. The members of the panel shall perform their duties and obligations in
hearing and deciding cases until their designation is withdrawn or revoked by the
Secretary. Within thirty (30) working days, after the submission of the case by the
parties for decision, the panel shall have exclusive and original jurisdiction to hear
and decide on the following:
(a) Disputes involving rights to mining areas; (b) Disputes involving mineral
agreements or permit; (c) Disputes involving surface owners, occupants and
claimholders/ concessionaires; and (d) Disputes pending before the Bureau and the
Department at the date of the effectivity of this Act.
Section 78. Appellate Jurisdiction. - The decision or order of the panel of
arbitrators may be appealed by the party not satisfied thereto to the Mines
Adjudication Board within fifteen (15) days from receipt thereof which must decide
the case within thirty (30) days from submission thereof for decision.
Section 79. Mines Adjudication Board. - The Mines Adjudication Board shall be
composed of three (3) members. The Secretary shall be the chairman with the
Director of the Mines and Geosciences Bureau and the Undersecretary for
Operations of the Department as members thereof. The Board shall have the
following powers and functions:
(a) To promulgate rules and regulations governing the hearing and disposition of
cases before it, as well as those pertaining to its internal functions, and such rules
and regulations as may be necessary to carry out its functions; (b) To administer
oaths, summon the parties to a controversy, issue subpoena requiring the
attendance and testimony of witnesses or the production of such books, papers,
contracts, records, statement of accounts, agreements, and other documents as
may be material to a just determination of the matter under investigation, and to
testify in any investigation or hearing conducted in pursuance of this Act. (c) To
conduct hearings on all matters within its jurisdiction, proceed to hear and
determine the disputes in the absence of any party thereto who has been
summoned or served with notice to appear, conduct its proceedings or any part
thereof in public or in private, adjourn its hearings at any time and place, refer
technical matters or accounts to an expert and to accept his report as evidence after
hearing of the parties upon due notice, direct parties to be joined in or excluded
from the proceedings, correct, amend, or waive any error, defect or irregularity,
whether in substance or in form, give all such directions as it may deem necessary
or expedient in the determination of the dispute before it, and dismiss the mining
dispute as part thereof, where it is trivial or where further proceedings by the Board
are not necessary or desirable; (1) To hold any person in contempt, directly or
indirectly, and impose appropriate penalties therefor; and (2) To enjoin any or all
acts involving or arising from any case pending before it which, if not restrained
forthwith, may cause grave or irreparable damage to any of the parties to the case
or seriously affect social and economic stability.
In any proceeding before the Board, the rules of evidence prevailing in courts of law
or equity shall not be controlling and it is the spirit and intention of this Act that
shall govern. The Board shall use every and all reasonable means to ascertain the
facts in each case speedily and objectively and without regard to technicalities of
law or procedure, all in the interest of due process.
In any proceeding before the Board, the parties may be represented by legal
counsel. The findings of fact of the Board shall be conclusive and binding on the
parties and its decisions or order shall be final and executory.
A petition for review by certiorari and question of law may be filed by the aggrieved
party with the Supreme Court within thirty (30) days from receipt of the order or
decision of the Board.
CHAPTER XIV GOVERNMENT SHARE
Section 80. Government Share in Mineral Production Sharing Agreement. - The
total government share in a mineral production sharing agreement shall be the
excise tax on mineral products as provided in Republic Act No. 7729, amending
Section 151(a) of the National Internal Revenue Code, as amended.
Section 81. Government Share in Other Mineral Agreements. - The share of the
Government in co-production and joint-venture agreements shall be negotiated by
the Government and the contractor taking into consideration the: (a) capital
investment of the project, (b) risks involved, (c) contribution of the project to the
economy, (d) other factors that will provide for a fair and equitable sharing
between the Government and the contractor. The Government shall also be
entitled to compensations for its other contributions which shall be agreed upon by
the parties, and shall consist, among other things, the contractor's foreign
stockholders arising from dividend or interest payments to the said foreign
stockholders, in case of a foreign national, and all such other taxes, duties and fees
as provided for under existing laws.
The Government share in financial or technical assistance agreement shall consist
of, among other things, the contractor's corporate income tax, excise tax, special
allowance, withholding tax due from the contractor's foreign stockholders arising
from dividend or interest payments to the said foreign stockholder in case of a
foreign national and all such other taxes, duties and fees as provided for under
existing laws.
The collection of Government share in financial or technical assistance agreement
shall commence after the financial or technical assistance agreement contractor has
fully recovered its pre-operating expenses, exploration, and development
expenditures, inclusive.
Section 82. Allocation of Government Share. - The Government share as referred
to in the preceding sections shall be shared and allocated in accordance with
Sections 290 and 292 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991. In case the development and utilization of mineral
resources is undertaken by a government-owned or -controlled corporation, the
sharing and allocation shall be in accordance with Sections 291 and 292 of the said
Code.
CHAPTER XV TAXES AND FEES
Section 83. Income Taxes. - After the lapse of the income tax holiday as provided
for in the Omnibus Investments Code, the contractor shall be liable to pay income
tax as provided in the National Internal Revenue Code, as amended.
Section 84. Excise Tax on Mineral Products. - The contractor shall be liable to pay
the excise tax on mineral products as provided for under Section 151 of the National
Internal Revenue Code: Provided, however, That with respect to a mineral
production sharing agreement, the excise tax on mineral products shall be the
government share under said agreement.
Section 85. Mine Wastes and Tailings Fees. - A semiannual fee to be known as
mine wastes and tailings fee is hereby imposed on all operating mining companies in
accordance with the implementing rules and regulations. The mine wastes and
tailings fee shall accrue to a reserve fund to be used exclusively for payment for
damages to:
(a) Lives and personal safety; (b) Lands, agricultural crops and forest products,
marine life and aquatic resources, cultural resources; and (c) Infrastructure and the
revegetation and rehabilitation of silted farm lands and other areas devoted to
agriculture and fishing caused by mining pollution.
This is in addition to the suspension or closure of the activities of the contractor at
any time and the penal sanctions imposed upon the same. The Secretary is
authorized to increase mine wastes and tailings fees, when public interest so
requires, upon the recommendation of the Director.
Section 86. Occupation Fees. - There shall be collected from any holder of a
mineral agreement, financial or technical assistance agreement or exploration
permit on public or private lands, an annual occupation fee in accordance with the
following schedule:
(a) For exploration permit - Five pesos (P5.00) per hectare or fraction thereof per
annum. (b) For mineral agreements and financial or technical assistance
agreements - Fifty pesos (P50.00) per hectare or fraction thereof per annum; and
(c) For mineral reservation - One hundred pesos (P100.00) per hectare or fraction
thereof per annum.
The Secretary is authorized to increase the occupation fees provided herein when
the public interest so requires, upon recommendation of the Bureau Director.
Section 87. Manner of Payment of Fees. - The fees shall be paid on the date the
mining agreement is registered with the appropriate office and on the same date
every year thereafter. It shall be paid to the treasurer of the municipality or city
where the onshore mining areas are located, or to the Director in case of offshore
mining areas. For this purpose, the appropriate officer shall submit to the treasurer
of the municipality or city where the onshore mining area is located, a complete list
of all onshore mining rights registered with his office, indicating therein the names
of the holders, area in hectares, location, and date registered. If the fee is not paid
on the date specified, it shall be increased by twenty-five per centum (25%).
Section 88. Allocation of Occupation Fees. - Thirty per centum (30%) of all
occupational fees collected from the holders of mining rights in onshore mining
areas shall accrue to the province and seventy per centum (70%) to the municipality
in which the onshore mining areas are located. In a chartered city, the full amount
shall accrue to the city concerned.
Section 89. Filing Fees and Other Charges. - The Secretary is authorized to charge
reasonable filing fees and other charges as he may prescribe in accordance with the
implementing rules and regulations.
CHAPTER XVI INCENTIVES
Section 90. Incentives. - The contractors in mineral agreements, and financial or
technical assistance agreements shall be entitled to the applicable fiscal and non-
fiscal incentives as provided for under Executive Order No. 226, otherwise known as
the Omnibus Investments Code of 1987: Provided, That holders of exploration
permits may register with the Board of Investments and be entitled to the fiscal
incentives granted under the said Code for the duration of the permits or extensions
thereof: Provided, further, That mining activities shall always be included in the
investment priorities plan.
Section 91. Incentives for Pollution Control Devices. - Pollution control devices
acquired, constructed or installed by contractors shall not be considered as
improvements on the land or building where they are placed, and shall not be
subject to real property and other taxes or assessments: Provided, however, That
payment of mine wastes and tailings fees is not exempted.
 Section 92. Income Tax-Carry Forward of Losses. - A net operating loss without the
benefit of incentives incurred in any of the first ten (10) years of operations may be
carried over as a deduction from taxable income for the next five (5) years
immediately following the year of such loss. The entire amount of the loss shall be
carried over to the first of the five (5) taxable years following the loss, and any
portion of such loss which exceeds the taxable income of such first year shall be
deducted in like manner from the taxable income of the next remaining four (4)
years.
Section 93. Income Tax-Accelerated Depreciation. - Fixed assets may be
depreciated as follows:
(a) To the extent of not more than twice as fast as the normal rate of depreciation or
depreciated at normal rate of depreciation if the expected life is ten (10) years or
less; or (b) Depreciated over any number of years between five (5) years and the
expected life if the latter is more than ten (10) years, and the depreciation thereon
allowed as deduction from taxable income: Provided, That the contractor notifies
the Bureau of Internal Revenue at the beginning of the depreciation rate allowed by
this section will be used.
In computing for taxable income, unless otherwise provided in this Act, the
contractor may, at his option, deduct exploration and development expenditures
accumulated at cost as of the date of the prospecting or exploration and
development expenditures paid or incurred during the taxable year: Provided, That
the total amount deductible for exploration and development expenditures shall
not exceed twenty-five per centum (25%) of the net income from mining operations.
The actual exploration and development expenditures minus the twenty-five per
centum (25) net income from mining shall be carried forward to the succeeding
years until fully deducted.
Net income from mining operation is defined as gross income from operations less
allowable deductions which are necessary or related to mining operations.
Allowable deductions shall include mining, milling and marketing expenses,
depreciation of properties directly used in the mining operations. This paragraph
shall not apply to expenditures for the acquisition or improvement of property of a
character which is subject to the allowances for depreciation.
Section 94. Investment Guarantees. - The contractor shall be entitled to the basic
rights and guarantees provided in the Constitution and such other rights recognized
by the government as enumerated hereunder:
(a) Repatriation of investments - The right to repatriate the entire proceeds of the
liquidation of the foreign investment in the currency in which the investment was
originally made and at the exchange rate prevailing at the time of repatriation.
(b) Remittance of earnings - The right to remit earnings from the investment in the
currency in which the foreign investment was originally made and at the exchange
rate prevailing at the time of remittance. (c) Foreign loans and contracts - The right
to remit at the exchange rate prevailing at the time of remittance such sums as may
be necessary to meet the payments of interest and principal on foreign loans and
foreign obligations arising from financial or technical assistance contracts. (d)
Freedom from expropriation - The right to be free from expropriation by the
Government of the property represented by investments or loans, or of the
property of the enterprise except for public use or in the interest of national welfare
or defense and upon payment of just compensation. In such cases, foreign investors
or enterprises shall have the right to remit sums received as compensation for the
expropriated property in the currency in which the investment was originally made
and at the exchange rate prevailing at the time of remittance. (e) Requisition of
investment - The right to be free from requisition of the property represented by
the investment or of the property of the enterprises except in case of war or
national emergency and only for the duration thereof. Just compensation shall be
determined and paid either at the time or immediately after cessation of the state
of war or national emergency. Payments received as compensation for the
requisitioned property may be remitted in the currency in which the investments
were originally made and at the exchange rate prevailing at the time of remittance.
(f) Confidentiality - Any confidential information supplied by the contractor pursuant
to this Act and its implementing rules and regulations shall be treated as such by the
Department and the Government, and during the term of the project to which it
relates.
CHAPTER XVII GROUND FOR CANCELLATION, REVOCATION, AND TERMINATION
Section 95. Late or Non-filing of Requirements. - Failure of the permittee or
contractor to comply with any of the requirements provided in this Act or in its
implementing rules and regulations, without a valid reason, shall be sufficient
ground for the suspension of any permit or agreement provided under this Act.
Section 96. Violation of the Terms and Conditions of Permits or Agreements. -
Violation of the terms and conditions of the permits or agreements shall be
sufficient ground for cancellation of the same.
Section 97. Non-payment of Taxes and Fees. - Failure to pay the taxes and fees due
the Government for Two (2) consecutive years shall cause the cancellation of the
exploration permit, mineral agreement, financial or technical assistance agreement
and other agreements and the re-opening of the area subject thereof to new
applicants.
Section 98. Suspension or Cancellation of Tax Incentives and Credits. - Failure to
abide by the terms and conditions of tax incentives and credits shall cause the
suspension or cancellation of said incentives and credits.
 Section 99. Falsehood or Omission of Facts in the Statement. - All statements
made in the exploration permit, mining agreement and financial or technical
assistance agreement shall be considered as conditions and essential parts thereof
and any falsehood in said statements or omission of facts therein which may alter,
change or affect substantially the facts set forth in said statements may cause the
revocation and termination of the exploration permit, mining agreement and
financial or technical assistance agreement.
CHAPTER XVIII ORGANIZATIONAL AND INSTITUTIONAL ARRANGEMENTS
Section 100. From Staff Bureau to Line Bureau. - The Mines and Geosciences
Bureau is hereby transformed into a line bureau consistent with Section 9 of this
Act: Provided, That under the Mines and Geosciences Bureau shall be the necessary
mines regional, district and other pertinent offices - the number and specific
functions of which shall be provided in the implementing rules and regulations of
this Act.
CHAPTER XIX PENAL PROVISIONS
Section 101. False Statements. - Any person who knowingly presents any false
application, declaration, or evidence to the Government or publishes or causes to
be published any prospectus or other information containing any false statement
relating to mines, mining operations or mineral agreements, financial or technical
assistance agreements and permits shall, upon conviction, be penalized by a fine of
not exceeding Ten thousand pesos (P10,000.00).
Section 102. Illegal Exploration. - Any person undertaking exploration work
without the necessary exploration permit shall, upon conviction, be penalized by a
fine of not exceeding Fifty thousand pesos (P50,000.00).
Section 103. Theft of Minerals. - Any person extracting minerals and disposing the
same without a mining agreement, lease, permit, license, or steals minerals or ores
or the products thereof from mines or mills or processing plants shall, upon
conviction, be imprisoned from six (6) months to six (6) years or pay a fine from Ten
thousand pesos (P10,000.00) to Twenty thousand pesos (P20,000.00), or both, at
the discretion of the appropriate court. In addition, he shall be liable to pay
damages and compensation for the minerals removed, extracted, and disposed of.
In the case of associations, partnerships, or corporations, the president and each of
the directors thereof shall be responsible for the acts committed by such
association, corporation, or partnership.
Section 104. Destruction of Mining Structures. - Any person who willfully destroys
or damages structures in or on the mining area or on the mill sites shall, upon
conviction, be imprisoned for a period not to exceed five (5) years and shall, in
addition, pay compensation for the damages which may have been caused thereby.
Section 105. Mines Arson. - Any person who willfully sets fire to any mineral
stockpile, mine or workings, fittings or a mine, shall be guilty of arson and shall be
punished, upon conviction, by the appropriate court in accordance with the
provisions of the
Revised Penal Code and shall, in addition, pay compensation for the damages
caused thereby.
Section 106. Willful Damage to a Mine. - Any person who willfully damages
amine, unlawfully causes water to run into a mine, or obstructs any shaft or passage
to a mine, or renders useless, damages or destroys any machine, appliance,
apparatus, rope, chain, tackle, or any other things used in a mine, shall be punished,
upon conviction, by the appropriate court, by imprisonment not exceeding a period
of five (5) years and shall, in addition, pay compensation for the damages caused
thereby.
Section 107. Illegal Obstruction to Permittees or Contractors. - Any person who,
without justifiable cause, prevents or obstructs the holder of any permit, agreement
or lease from undertaking his mining operations shall be punished, upon conviction
by the appropriate court, by a fine not exceeding Five thousand pesos (P5,000.00)
or imprisonment not exceeding one (1) year, or both, at the discretion of the court.
Section 108. Violation of the Terms and Conditions of the Environmental
Compliance Certificate. - Any person who willfully violates or grossly neglects to
abide by the terms and conditions of the environmental compliance certificate
issued to said person and which causes environmental damage through pollution
shall suffer the penalty of imprisonment of six (6) months to six (6) years or a fine of
Fifty thousand pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00),
or both, at the discretion of the court.
Section 109. Illegal Obstruction to Government Officials. - Any person who illegally
prevents or obstructs the Secretary, the Director or any of their representatives in
the performance of their duties under the provisions of this Act and of the
regulations promulgated hereunder shall be punished, upon conviction, by the
appropriate court, by a fine not exceeding Five thousand pesos (P5,000.00) or by
imprisonment not exceeding one (1) year, or both, at the discretion of the court.
Section 110. Other Violations. - Any other violation of this Act and its
implementing rules and regulations shall constitute an offense punishable with a
fine not exceeding Five thousand pesos (P5,000.00).
Section 111. Fines. - The Secretary is authorized to charge fines for late or non-
submission of reports in accordance with the implementing rules and regulations of
this Act.
CHAPTER XX TRANSITORY AND MISCELLANEOUS PROVISIONS EDGARDO E. TUMANGAN CAMILO L. SABIO Secretary of the Senate
Secretary General House of
Section 112. Non-impairment of Existing Mining/Quarrying Rights. - All valid and Representatives
existing mining lease contracts, permits/licenses, leases pending renewal, mineral
productionsharing agreements granted under Executive Order No. 279, at the date Approved: Mar 03 1995
of effectivity of this Act, shall remain valid, shall not be impaired, and shall be
recognized by the Government: Provided, That the provisions of Chapter XIV on FIDEL V. RAMOS President of the
government share in mineral production-sharing agreement and Chapter XVI on Philippines
incentives of this Act shall immediately govern and apply to a mining lessee or
contractor indicates his intention to the secretary, in writing, not to avail of said
provisions: Provided, further, That no renewal of mining lease contracts shall be Republic of the Philippines
made after the expiration of its term: Provided, finally, That such leases, Congress of the Philippines
production-sharing agreements, financial or technical assistance agreements shall Metro Manila
comply with the applicable provisions of this Act and its implementing rules and
regulations. Eighth Congress
Republic Act No. 7076 June 27, 1991
Section 113. Recognition of Valid and Existing Mining Claims and Lease/Quarry
Applications. - Holders of valid and existing mining claims, lease/quarry AN ACT CREATING A PEOPLE'S SMALL-SCALE MINING PROGRAM AND FOR OTHER
applications shall be given preferential rights to enter into any mode of mineral PURPOSES
agreement with the government within two (2) years from the promulgation of the
rules and regulations implementing this Act. Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled::
Section 114. Separability Clause - If any of the provision of this Act is held or
declared to be unconstitutional or invalid by a competent court, the other Section 1. Title. This Act shall be known as the "People's Small-scale Mining Act of
provisions hereof shall continue to be in force as if the provision so annulled or 1991."
voided had never been incorporated in this Act.
Section 2. Declaration of Policy. It is hereby declared of the State to promote,
Section 115. Repealing and Amending Clause. All laws, executive orders, develop, protect and rationalize viable small-scale mining activities in order to
presidential decrees, rules and regulations or parts thereof which are inconsistent generate more employment opportunities and provide an equitable sharing of the
with any of the provisions of this Act are hereby repealed or amended accordingly. nation's wealth and natural resources, giving due regard to existing rights as herein
provided.
Section 116. Effectivity Clause. - This Act shall take effect thirty (30) days following
its complete publication in two (2) newspapers of general circulation in the Section 3. Definitions. For purposes of this Act, the following terms shall be
Philippines. defined as follows:
Approved,
(a) "Mineralized areas" refer to areas with naturally occurring mineral deposits of
EDGARDO J. ANGARA JOSE DE VENECIA, JR. President of the Senate gold, silver, chromite, kaolin, silica, marble, gravel, clay and like mineral resources;
Speaker of the House of Representatives
(b) "Small-scale mining" refers to mining activities which rely heavily on manual
This Act which is a consolidation of House Bill No. 10816 and Senate Bill No. 1639 labor using simple implement and methods and do not use explosives or heavy
was finally passed by the House of Representatives and the Senate on February 10, mining equipment;
1995.
(c) "Small-scale miners" refer to Filipino citizens who, individually or in the company
of other Filipino citizens, voluntarily form a cooperative duly licensed by the
Department of Environment and Natural Resources to engage, under the terms and
conditions of a contract, in the extraction or removal of minerals or ore-bearing
materials from the ground;
(d) "Small-scale mining contract" refers to co-production, joint venture or mineral
production sharing agreement between the State and a small-scale mining
contractor for the small-scale utilization of a plot of mineral land;
(e) "Small-scale mining contractor" refers to an individual or a cooperative of small-
scale miners, registered with the Securities and Exchange Commission or other
appropriate government agency, which has entered into an agreement with the
State for the small-scale utilization of a plot of mineral land within a people's small-
scale mining area;
(f) "Active mining area" refers to areas under actual exploration, development,
exploitation or commercial production as determined by the Secretary after the
necessary field investigation or verification including contiguous and geologically
related areas belonging to the same claimowner and/or under contract with an
operator, but in no case to exceed the maximum area allowed by law;
(g) "Existing mining right" refers to perfected and subsisting claim, lease, license or
permit covering a mineralized area prior to its declaration as a people's small-scale
mining area;
(h) "Claimowner" refers to a holder of an existing mining right;
(i) "Processor" refers to a person issued a license to engage in the treatment of
minerals or ore-bearing materials such as by gravity concentration, leaching
benefication, cyanidation, cutting, sizing, polishing and other similar activities;
(j) "License" refers to the privilege granted to a person to legitimately pursue his
occupation as a small-scale miner or processor under this Act;
(k) "Mining plan" refers to a two-year program of activities and methodologies
employed in the extraction and production of minerals or ore-bearing materials,
including the financial plan and other resources in support thereof;
(l) "Director" refers to the regional executive director of the Department of
Environment and Natural Resources; and
(m) "Secretary" refers to the Secretary of the Department of Environment and
Natural Resources.
Section 4. People's Small-scale Mining Program. For the purpose of carrying out
the declared policy provided in Section 2 hereof, there is hereby established a
People's Small-scale Mining Program to be implemented by the Secretary of the
Department of Environment and Natural Resources, hereinafter called the
Department, in coordination with other concerned government agencies, designed
to achieve an orderly, systematic and rational scheme for the small-scale
development and utilization of mineral resources in certain mineral areas in order to
address the social, economic, technical, and environmental connected with small-
scale mining activities.
The People's Small-scale Mining Program shall include the following features:
(a) The identification, segregation and reservation of certain mineral lands as
people's small-scale mining areas;
(b) The recognition of prior existing rights and productivity;
(c) The encouragement of the formation of cooperatives;
(d) The extension of technical and financial assistance, and other social services;
(e) The extension of assistance in processing and marketing;
(f) The generation of ancillary livelihood activities;
(g) The regulation of the small-scale mining industry with the view to encourage
growth and productivity; and
(h) The efficient collection of government revenue.
Section 5. Declaration of People's Small-scale Mining Areas. The Board is hereby
authorized to declare and set aside people's small-scale mining areas in sites
onshore suitable for small-scale mining, subject to review by the Secretary,
immediately giving priority to areas already occupied and actively mined by small-
scale miners before August 1, 1987: provided, that such areas are not considered as
active mining areas: provided, further, that the minerals found therein are
technically and commercially suitable for small-scale mining activities: provided,
finally, that the areas are not covered by existing forest rights or reservations and
have not been declared as tourist or marine reserved, parks and wildlife
reservations, unless their status as such is withdrawn by competent authority.
Section 6. Future People's Small-scale Mining Areas. The following lands, when
suitable for small-scale mining, may be declared by the Board as people's small scale
mining areas:

(a) Public lands not subject to any existing right;
(b) Public lands covered by existing mining rights which are not active mining areas;
and
(c) Private lands, subject to certain rights and conditions, except those with
substantial improvements or in bona fide and regular use as a yard, stockyard,
garden, plant nursery, plantation, cemetery or burial site, or land situated within
one hundred meters (100 m.) from such cemetery or burial site, water reservoir or a
separate parcel of land with an area of ten thousand square meters (10,000 sq. m.)
or less.
Section 7. Ancestral Lands. No ancestral land may be declared as a people's small-
scale mining area without the prior consent of the cultural communities concerned:
provided, that, if ancestral lands are declared as people's small-scale mining areas,
the members of the cultural communities therein shall be given priority in the
awarding of small-scale mining contracts.
Section 8. Registration of Small-scale Miners. All persons undertaking small-scale
mining activities shall register as miners with the Board and may organize
themselves into cooperatives in order to qualify for the awarding of a people's
small-scale mining contract.
Section 9. Award of People's Small-scale Mining Contracts. A people's small-scale
mining contract may be awarded by the Board to small-scale miners who have
voluntarily organized and have duly registered with the appropriate government
agency as an individual miner or cooperative; Provided, that only one (1) people's
small-scale mining contract may be awarded at any one time to a small-scale mining
operations within one (1) year from the date of award: provided, further, that
priority shall be given or city where the small-scale mining area is located.
Applications for a contract shall be subject to a reasonable fee to be paid to the
Department of Environment and Natural Resources regional office having
jurisdiction over the area.
Section 10. Extent of Contract Area. The Board shall determine the reasonable size
and shape of the contract area following the meridional block system established
under Presidential Decree No. 463, as amended, otherwise known as the Mineral
Resources Development Decree of 1974, but in no case shall the area exceed twenty
hectares (20 has.) per contractor and the depth or length of the tunnel or adit not
exceeding that recommended by the director taking into account the following
circumstances:
(a) Size of membership and capitalization of the cooperative;
(b) Size of mineralized area;
(c) Quantity of mineral deposits;
(d) Safety of miners;
(e) Environmental impact and other considerations; and
(f) Other related circumstances.
Section 11. Easement Rights. Upon the declaration of a people's small-scale
mining area, the director, in consultation with the operator, claimowner, landowner
or lessor of an affected area, shall determine the right of the small scale miners to
existing facilities such as mining and logging roads, private roads, port and
communication facilities, processing plants which are necessary for the effective
implementation of the People's Small-scale Mining Program, subject to payment of
reasonable fees to the operator, claimowner, landowner or lessor.
Section 12. Rights Under a People's Small-scale Mining Contract. A people's small-
scale mining contract entitles the small-scale mining contractor to the right to mine,
extract and dispose of mineral ores for commercial purposes. In no case shall a
small-scale mining contract be subcontracted, assigned or otherwise transferred.
Section 13. Terms and Conditions of the Contract. A contract shall have a term of
two (2) years, renewable subject to verification by the Board for like periods as long
as the contractor complies with the provisions set forth in this Act, and confers upon
the contractor the right to mine within the contract area: provided, that the holder
of a small-scale mining contract shall have the following duties and obligations:
(a) Undertake mining activities only in accordance with a mining plan duly approved
by the Board;
(b) Abide by the Mines and Geosciences Bureau and the small-scale Mining Safety
Rules and Regulations;
(c) Comply with his obligations to the holder of an existing mining right;
(d) Pay all taxes, royalties or government production share as are now or may
hereafter be provided by law;
(e) Comply with pertinent rules and regulations on environmental protection and
conservation, particularly those on tree-cutting mineral-processing and pollution
control;
(f) File under oath at the end of each month a detailed production and financial
report to the Board; and
(g) Assume responsibility for the safety of persons working in the mines.
Section 14. Rights of Claimowners. In case a site declared and set aside as a
people's-scale mining area is covered by an existing mining right, the claimowner
and the small-scale miners therein are encouraged to enter into a voluntary and
acceptable contractual agreement with respect to the small-scale utilization of the
mineral values from the area under claim. In case of disagreement, the claimowner
shall be entitled to the following rights and privileges:
(a) Exemption from the performance of annual work obligations and payment of
occupation fees, rental, and real property taxes;
(b) Subject to the approval of the Board, free access to the contract area to conduct
metallurgical tests, explorations and other activities, provided such activities do not
unduly interfere with the operations of the small-scale miners; and
(c) Royalty equivalent to one and one half percent (1 1/2%) of the gross value of the
metallic mineral output or one percent (1%) of the gross value of the nonmetallic
mineral output to be paid to the claimowner: provided, that such rights and
privileges shall be available only if he is not delinquent and other performance of his
annual work obligations and other requirements for the last two (2) years prior to
the effectivity of this Act.
Section 15. Rights of Private Landowners. The private landowner or lawful
possessor shall be notified of any plan or petition to declare his land as a people's
small-scale mining area. Said landowner may oppose such plan or petition in an
appropriate proceeding and hearing conducted before the Board.
If a private land is declared as a people's small-scale mining area, the owner and the
small-scale mining contractors are encouraged to enter into a voluntary and
acceptable contractual agreement for the small-scale utilization of the mineral
values from the private land: provided, that the owner shall in all cases be entitled
to the payment of actual damages which he may suffer as a result of such
declaration: provided, further, that royalties paid to the owner shall in no case
exceed one percent (1%) of the gross value of the minerals recovered as royalty.
Section 16. Ownership of Milllings. The small-scale mining contractor shall be the
owner of all milllings produced from the contract area. He may sell thelings or have
them processed in any custom mill in the area: provided, that, if the small-scale
mining contractor decide to sell its milllings, the claimowner shall have a preemptive
right to purchase said milllings at the prevailing market price.
Section 17. Sale of Gold. All gold produced by small-scale miners in any mineral
area shall be sold to the Central Bank, or its duly authorized representatives, which
shall buy it at prices competitive with those prevailing in the world market
regardless of volume or weight.
The Central Bank shall establish as many buying stations in gold-rush areas to fully
service the requirements of the small-scale minerals thereat.
Section 18. Custom Mills. The establishment and operation of safe and efficient
customs mills to process minerals or ore-bearing materials shall be limited to
mineral processing zones duly designated by the local government unit concerned
upon recommendation of the Board.
In mining areas where the private sector is unable to establish custom mills, the
Government shall construct such custom mills upon the recommendation of the
Board based on the viability of the project.
The Board shall issue licenses for the operation of custom mills and other processing
plants subject to pollution control and safety standards.
The Department shall establish assay laboratories to cross-check the integrity of
custom mills and to render metallurgical and laboratory services to mines.
Custom mills shall be constituted as withholding agents for the royalties, production
share or other taxes due the Government.
Section 19. Government Share and Allotment. The revenue to be derived by the
Government from the operation of the mining program herein established shall be
subject to the sharing provided in the Local Government Code.
Section 20. People's Small-scale Mining Protection Fund. There is hereby created a
People's Small-scale Mining Protection Fund which shall be fifteen percent (15%) of
the national government's share due the Government which shall be used primarily
for information dissemination and training of small-scale miners on safety, health
and environmental protection, and the establishment of mine rescue and recovery
teams including the procurement of rescue equipment necessary in cases of
emergencies such as landslides, tunnel collapse, or the like.
The fund shall also be made available to address the needs of the small-scale miners
brought about by accidents and/or fortuitous events.
Section 21. Rescission of Contracts and Administrative Fines. The noncompliance
with the terms and conditions of the contract or violation of the rules and
regulations issued by the Secretary pursuant to this Act, as well as the abandonment
of the mining site by the contractor, shall constitute a ground for the cancellation of
the contracts and the ejectment from the people's small-scale mining area of the
contractor. In addition, the Secretary may impose fines against the violator in an
amount of not less than Twenty thousand pesos (P20,000.00) and not more than
One hundred thousand pesos (P100,000.00). Nonpayment of the fine imposed shall
render the small-scale mining contractor ineligible for other small-scale mining
contracts.
Section 22. Reversion of People's Small-scale Mining Areas. The Secretary, upon
recommendation of the director, shall withdraw the status of the people's small-
scale mining area when it can no longer feasibly operated on a small-scale mining
basis or when the safety, health and environmental conditions warrant that the
same shall revert to the State for proper disposition.
Section 23. Actual Occupation by Small-scale Miners. Small-scale miners who have
been in actual operation of mineral lands on or before August 1, 1987 as
determined by the Board shall not be dispossessed, ejected or removed from said
areas: provided, that they comply with the provisions of this Act.
Section 24. Provincial/City Mining Regulatory Board. There is hereby created
under the direct supervision and control of the Secretary a provincial/city mining
regulatory board, herein called the Board, which shall be the implementing agency
of the Department, and shall exercise the following powers and functions, subject to
review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-scale mining;
(b) Reserve future gold and other mining areas for small-scale mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to small-scale mining;
(e) Settle disputes, conflicts or litigations over conflicting claims within a people's
small-scale mining area, an area that is declared a small-mining; and
(f) Perform such other functions as may be necessary to achieve the goals and
objectives of this Act.
Section 25. Composition of the Provincial/City Mining Regulatory Board. The
Board shall be composed of the Department of Environment and Natural Resources
representative as Chairman; and the representative of the governor or city mayor,
as the representative of the governor or city mayor, as the case may be, one (1)
small scale mining representative, one (1) big-scale mining representative, and the
representative from a nongovernment organization who shall come from an
environmental group, as members.
The representatives from the private sector shall be nominated by their respective
organizations and appointed by the Department regional director. The Department
shall provide the staff support to the Board.
Section 26. Administrative Supervision over the People's Small-scale Mining
Program. The Secretary through his representative shall exercise direct supervision
and control over the program and activities of the small-scale miners within the
people's small-scale mining area.
The Secretary shall within ninety (90) days from the effectivity of this Act
promulgate rules and regulations to effectively implement the provisions of the
same. Priority shall be given to such rules and regulations that will ensure the least
disruption in the operations of the small-scale miners.
Section 27. Penal Sanctions. Violations of the provisions of this Act or of the rules
and regulations issued pursuant hereto shall be penalized with imprisonment of not
less than six (6) months nor more than six (6) years and shall include the
confiscation and seizure of equipment, tools and instruments.
Section 28. Repealing Clause. All laws, decrees, letters of instruction, executive
orders, rules and regulations, and other issuances, or parts thereof, in conflict or
inconsistent with this Act are hereby repealed or modified accordingly.
Section 29. Separability Clause. Any section or provision of this Act which may be
declared unconstitutional shall not affect the other sections or provisions hereof.
Section 30. Effectivity. This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a national newspaper of general circulation.
Approved: June 27, 1991.
THIRD DIVISION
PICOP RESOURCES, INC., G.R. No. 163509
BASE METALS MINERAL RESOURCES CORPORATION, Promulgated:
and THE MINES ADJUDICATION
BOARD, December 6, 2006
DECISION
TINGA, J.:
PICOP Resources, Inc. (PICOP) assails the Decision[1] of the Court of Appeals dated
November 28, 2003 and its Resolution[2] dated May 5, 2004, which respectively
denied its petition for review and motion for reconsideration.
The undisputed facts quoted from the appellate courts Decision are as follows:
In 1987, the Central Mindanao Mining and Development Corporation (CMMCI for
brevity) entered into a Mines Operating Agreement (Agreement for brevity) with
Banahaw Mining and Development Corporation (Banahaw Mining for brevity)
whereby the latter agreed to act as Mine Operator for the exploration,
development, and eventual commercial operation of CMMCIs eighteen (18) mining
claims located in Agusan del Sur.
Pursuant to the terms of the Agreement, Banahaw Mining filed applications for
Mining Lease Contracts over the mining claims with the Bureau of Mines. On April
29, 1988, Banahaw Mining was issued a Mines Temporary Permit authorizing it to
extract and dispose of precious minerals found within its mining claims. Upon its
expiration, the temporary permit was subsequently renewed thrice by the Bureau of
Mines, the last being on June 28, 1991.
Since a portion of Banahaw Minings mining claims was located in petitioner PICOPs
logging concession in Agusan del Sur, Banahaw Mining and petitioner PICOP entered
into a Memorandum of Agreement, whereby, in mutual recognition of each others
right to the area concerned, petitioner PICOP allowed Banahaw Mining an
access/right of way to its mining claims.
In 1991, Banahaw Mining converted its mining claims to applications for Mineral
Production Sharing Agreements (MPSA for brevity).
While the MPSA were pending, Banahaw Mining, on December 18, 1996, decided to
sell/assign its rights and interests over thirty-seven (37) mining claims in favor of
private respondent Base Metals Mineral Resources Corporation (Base Metals for
brevity). The transfer included mining claims held by Banahaw Mining in its own
right as claim owner, as well as those covered by its mining operating agreement
with CMMCI.
Upon being informed of the development, CMMCI, as claim owner, immediately
approved the assignment made by Banahaw Mining in favor of private respondent
Base Metals, thereby recognizing private respondent Base Metals as the new
operator of its claims.
On March 10, 1997, private respondent Base Metals amended Banahaw Minings
pending MPSA applications with the Bureau of Mines to substitute itself as applicant
and to submit additional documents in support of the application. Area clearances
from the DENR Regional Director and Superintendent of the Agusan Marsh and
Wildlife Sanctuary were submitted, as required.
On October 7, 1997, private respondent Base Metals amended MPSA applications
were published in accordance with the requirements of the Mining Act of 1995.
On November 18, 1997, petitioner PICOP filed with the Mines Geo-Sciences Bureau
(MGB), Caraga Regional Office No. XIII an Adverse Claim and/or Opposition to
private respondent Base Metals application on the following grounds:
I. THE APPROVAL OF THE APPLICATION AND ISSUANCE OF THE MPSA OF BASE
METALS WILL VIOLATE THE CONSTITUTIONAL MANDATE AGAINST IMPAIRMENT OF
OBLIGATION IN A CONTRACT.
II. THE APPROVAL OF THE APPLICATION WILL DEFEAT THE RIGHTS OF THE HEREIN
ADVERSE CLAIMANT AND/OR OPPOSITOR.
In its Answer to the Adverse Claim and/or Opposition, private respondent Base
Metals alleged that:
a) the Adverse Claim was filed out of time;
b) petitioner PICOP has no rights over the mineral resources on their concession
area. PICOP is asserting a privilege which is not protected by the non-impairment
clause of the Constitution;
c) the grant of the MPSA will not impair the rights of PICOP nor create confusion,
chaos or conflict.
Petitioner PICOPs Reply to the Answer alleged that:
a) the Adverse Claim was filed within the reglementary period;
b) the grant of MPSA will impair the existing rights of petitioner PICOP;
c) the MOA between PICOP and Banahaw Mining provides for recognition by
Banahaw Mining of the Presidential Warranty awarded in favor of PICOP for the
exclusive possession and enjoyment of said areas.
As a Rejoinder, private respondent Base Metals stated that:
 1. it is seeking the right to extract the mineral resources in the applied areas. It is
not applying for any right to the forest resources within the concession areas of
PICOP;
2. timber or forest lands are open to Mining Applications;
3. the grant of the MPSA will not violate the so called presidential fiat;
4. the MPSA application of Base Metals does not require the consent of PICOP;
and
5. it signified its willingness to enter into a voluntary agreement with PICOP on
the matter of compensation for damages. In the absence of such agreement, the
matter will be brought to the Panel of Arbitration in accordance with law.
In refutation thereto, petitioner PICOP alleged in its Rejoinder that:
a) the Adverse Claim filed thru registered mail was sent on time and as prescribed
by existing mining laws and rules and regulations;
b) the right sought by private respondent Base Metals is not absolute but is subject
to existing rights, such as those which the adverse claimant had, that have to be
recognized and respected in a manner provided and prescribed by existing laws as
will be expounded fully later;
c) as a general rule, mining applications within timber or forest lands are subject to
existing rights as provided in Section 18 of RA 7942 or the Philippine Mining Act of
1995 and it is an admitted fact by the private respondent that petitioner PICOP had
forest rights as per Presidential Warranty;
d) while the Presidential Warranty did not expressly state exclusivity, P.D. 705
strengthened the right of occupation, possession and control over the concession
area;
e) the provisions of Section 19 of the Act and Section 15 of IRR expressly require
the written consent of the forest right holder, PICOP.
After the submission of their respective position paper, the Panel Arbitrator issued
an Order dated December 21, 1998, the dispositive portion of which reads as:
WHEREFORE, premises considered, Mineral Production Sharing Agreement
Application Nos. (XIII) 010, 011, 012 of Base Metal Resources Corporation should be
set aside.
The disapproval of private respondent Base Metals MPSA was due to the following
reasons:
Anent the first issue the Panel find (sic) and so hold (sic) that the adverse claim was
filed on time, it being mailed on November 19, 1997, at Metro Manila as evidenced
by Registry Receipt No. 26714. Under the law (sic) the date of mailing is considered
the date of filing.
As to whether or not an MPSA application can be granted on area subject of an
IFMA[3] or PTLA[4] which is covered by a Presidential Warranty, the panel believes it
can not, unless the grantee consents thereto. Without the grantees consent, the
area is considered closed to mining location (sec. 19) (b) (No. 2), DAO No. 96-40).
The Panel believe (sic) that mining location in forest or timberland is allowed only if
such forest or timberland is not leased by the government to a qualified person or
entity. If it is leased the consent of the lessor is necessary, in addition to the area
clearance to be issued by the agency concerned before it is subjected to mining
operation.
Plantation is considered closed to mining locations because it is off tangent to
mining. Both are extremes. They can not exist at the same time. The other must
necessarily stop before the other operate.
On the other hand, Base Metals Mineral Resources Corporation can not insist the
MPSA application as assignee of Banahaw. PICOP did not consent to the assignment
as embodied in the agreement. Neither did it ratify the Deed of Assignment.
Accordingly, it has no force and effect. Thus, for lack of consent, the MPSA must fall.
On January 11, 1999, private respondent Base Metals filed a Notice of Appeal with
public respondent MAB and alleged in its Appeal Memorandum the following
arguments:
1. THE CONSENT OF PICOP IS NOT NECESSARY FOR THE APPROVAL OF BASE
METALS MPSA APPLICATION.
2. EVEN ASSUMING SUCH CONSENT IS NECESSARY, PICOP HAD CONSENTED TO
BASE METALS MPSA APPLICATION.
In Answer thereto, petitioner PICOP alleged that:
1. Consent is necessary for the approval of private respondents MPSA
application;
2. Provisions of Memorandum Order No. 98-03 and IFMA 35 are not applicable
to the instant case;
3. Provisions of PD 705[5] connotes exclusivity for timber license holders; and
4. MOA between private respondents assignor and adverse claimant provided
for the recognition of the latters rightful claim over the disputed areas.
Private respondent Base Metals claimed in its Reply that:
1. The withholding of consent by PICOP derogates the States power to supervise
and control the exploration, utilization and development of all natural resources;
2. Memorandum Order No, 98-03, not being a statute but a mere guideline
imposed by the Secretary of the Department of Environment and Natural Resources
(DENR), can be applied retroactively to MPSA applications which have not yet been
finally resolved;
3. Even assuming that the consent of adverse claimant is necessary for the
approval of Base Metals application (which is denied), such consent had already
been given; and
4. The Memorandum of Agreement between adverse claimant and Banahaw
Mining proves that the Agusan-Surigao area had been used in the past both for
logging and mining operations.
After the filing of petitioner PICOPs Reply Memorandum, public respondent
rendered the assailed decision setting aside the Panel Arbitrators order. Accordingly,
private respondent Base Metals MPSAs were reinstated and given due course
subject to compliance with the pertinent requirements of the existing rules and
regulations.[6]
The Court of Appeals upheld the decision of the MAB, ruling that the Presidential
Warranty of September 25, 1968 issued by then President Ferdinand E. Marcos
merely confirmed the timber license granted to PICOP and warranted the latters
peaceful and adequate possession and enjoyment of its concession areas. It was
only given upon the request of the Board of Investments to establish the boundaries
of PICOPs timber license agreement. The Presidential Warranty did not convert
PICOPs timber license into a contract because it did not create any obligation on the
part of the government in favor of PICOP. Thus, the non-impairment clause finds no
application.
Neither did the Presidential Warranty grant PICOP the exclusive possession,
occupation and exploration of the concession areas covered. If that were so, the
government would have effectively surrendered its police power to control and
supervise the exploration, development and utilization of the countrys natural
resources.
On PICOPs contention that its consent is necessary for the grant of Base Metals
MPSA, the appellate court ruled that the amendment to PTLA No. 47 refers to the
grant of gratuitous permits, which the MPSA subject of this case is not. Further, the
amendment pertains to the cutting and extraction of timber for mining purposes
and not to the act of mining itself, the intention of the amendment being to protect
the timber found in PICOPs concession areas.
The Court of Appeals noted that the reinstatement of the MPSA does not ipso facto
revoke, amend, rescind or impair PICOPs timber license. Base Metals still has to
comply with the requirements for the grant of a mining permit. The fact, however,
that Base Metals had already secured the necessary Area Status and Clearance from
the DENR means that the areas applied for are not closed to mining operations.
In its Resolution[7] dated May 5, 2004, the appellate court denied PICOPs Motion
for Reconsideration. It ruled that PICOP failed to substantiate its allegation that the
area applied for is a forest reserve and is therefore closed to mining operations
because it did not identify the particular law which set aside the contested area as
one where mining is prohibited pursuant to applicable laws.
The case is now before us for review.
In its Memorandum[8] dated April 6, 2005, PICOP presents the following issues: (1)
the 2,756 hectares subject of Base Metals MPSA are closed to mining operations
except upon PICOPs written consent pursuant to existing laws, rules and regulations
and by virtue of the Presidential Warranty; (2) its Presidential Warranty is protected
by the non-impairment clause of the Constitution; and (3) it does not raise new
issues in its petition.
PICOP asserts that its concession areas are closed to mining operations as these are
within the Agusan-Surigao-Davao forest reserve established under Proclamation No.
369 of then Gov. Gen. Dwight Davis. The area is allegedly also part of permanent
forest established under Republic Act No. 3092 (RA 3092),[9] and overlaps the
wilderness area where mining applications are expressly prohibited under RA 7586.
[10] Hence, the area is closed to mining operations under Sec. 19(f) of RA 7942.[11]
PICOP further asserts that to allow mining over a forest or forest reserve would
allegedly be tantamount to changing the classification of the land from forest to
mineral land in violation of Sec. 4, Art. XII of the Constitution and Sec. 1 of RA 3092.
According to PICOP, in 1962 and 1963, blocks A, B and C within the Agusan-Surigao-
Davao forest reserve under Proclamation No. 369 were surveyed as permanent
forest blocks in accordance with RA 3092. These areas cover PICOPs PTLA No. 47,
part of which later became IFMA No. 35. In turn, the areas set aside as wilderness as
in PTLA No. 47 became the initial components of the NIPAS under Sec. 5(a) of RA
7586. When RA 7942 was signed into law, the areas covered by the NIPAS were
expressly determined as areas where mineral agreements or financial or technical
assistance agreement applications shall not be allowed. PICOP concludes that since
there is no evidence that the permanent forest areas within PTLA No. 47 and IFMA
No. 35 have been set aside for mining purposes, the MAB and the Court of Appeals
gravely erred in reinstating Base Metals MPSA and, in effect, allowing mining
exploration and mining-related activities in the protected areas.
PICOP further argues that under DENR Administrative Order (DAO) No. 96-40
implementing RA 7942, an exploration permit must be secured before mining
operations in government reservations may be undertaken. There being no
exploration permit issued to Banahaw Mining or appended to its MPSA, the MAB
and the Court of Appeals should not have reinstated its application.
PICOP brings to the Courts attention the case of PICOP Resources, Inc. v. Hon.
Heherson T. Alvarez,[12] wherein the Court of Appeals ruled that the Presidential
Warranty issued to PICOP for its TLA No. 43 dated July 29, 1969, a TLA distinct from
PTLA No. 47 involved in this case, is a valid contract involving mutual prestations on
the part of the Government and PICOP.
The Presidential Warranty in this case is allegedly not a mere confirmation of PICOPs
timber license but a commitment on the part of the Government that in
consideration of PICOPs investment in the wood-processing business, the
Government will assure the availability of the supply of raw materials at levels
adequate to meet projected utilization requirements. The guarantee that PICOP will
have peaceful and adequate possession and enjoyment of its concession areas is
impaired by the reinstatement of Base Metals MPSA in that the latters mining
activities underneath the area in dispute will surely undermine PICOPs supply of raw
materials on the surface.
Base Metals obtention of area status and clearance from the DENR is allegedly
immaterial, even misleading. The findings of the DENR Regional Disrector and the
superintendent of the Agusan Marsh and Wildlife Sanctuary are allegedly misplaced
because the area applied for is not inside the Agusan Marsh but in a permanent
forest. Moreover, the remarks in the area status itself should have been considered
by the MAB and the appellate court as they point out that the application
encroaches on surveyed timberland projects declared as permanent forests/forest
reserves.
Finally, PICOP insists that it has always maintained that the forest areas of PTLA No.
47 and IFMA No. 35 are closed to mining operations. The grounds relied upon in this
petition are thus not new issues but merely amplifications, clarifications and
detailed expositions of the relevant constitutional provisions and statutes regulating
the use and preservation of forest reserves, permanent forest, and protected
wilderness areas given that the areas subject of the MPSA are within and overlap
PICOPs PTLA No. 47 and IFMA No. 35 which have been classified and blocked not
only as permanent forest but also as protected wilderness area forming an integral
part of the Agusan-Davao-Surigao Forest Reserve.
In its undated Memorandum,[13] Base Metals contends that PICOP never made any
reference to land classification or the exclusion of the contested area from
exploration and mining activities except in the motion for reconsideration it filed
with the Court of Appeals. PICOPs object to the MPSA was allegedly based
exclusively on the ground that the application, if allowed to proceed, would
constitute a violation of the constitutional proscription against impairment of the
obligation of contracts. It was upon this issue that the appellate court hinged its
Decision in favor of Base Metals, ruling that the Presidential Warranty merely
confirmed PICOPs timber license. The instant petition, which raises new issues and
invokes RA 3092 and RA 7586, is an unwarranted departure from the settled rule
that only issues raised in the proceedings a quo may be elevated on appeal.
Base Metals notes that RA 7586 expressly requires that there be a prior presidential
decree, presidential proclamation, or executive order issued by the President of the
Philippines, expressly proclaiming, designating, and setting aside the wilderness
area before the same may be considered part of the NIPAS as a protected area.
Allegedly, PICOP has not shown that such an express presidential proclamation
exists setting aside the subject area as a forest reserve, and excluding the same from
the commerce of man.
PICOP also allegedly misquoted Sec. 19 of RA 7942 by placing a comma between the
words watershed and forest thereby giving an altogether different and misleading
interpretation of the cited provision. The cited provision, in fact, states that for an
area to be closed to mining applications, the same must be a watershed forest
reserve duly identified and proclaimed by the President of the Philippines. In this
case, no presidential proclamation exists setting aside the contested area as such.
Moreover, the Memorandum of Agreement between Banahaw Mining and PICOP is
allegedly a clear and tacit recognition by the latter that the area is open and
available for mining activities and that Banahaw Mining has a right to enter and
explore the areas covered by its mining claims.
Base Metals reiterates that the non-impairment clause is a limit on the exercise of
legislative power and not of judicial or quasi-judicial power. The Constitution
prohibits the passage of a law which enlarges, abridges or in any manner changes
the intention of the contracting parties. The decision of the MAB and the Court of
Appeals are not legislative acts within the purview of the constitutional proscription.
Besides, the Presidential Warranty is not a contract that may be impaired by the
reinstatement of the MPSA. It is a mere confirmation of PICOPs timber license and
draws its life from PTLA No. 47. Furthermore, PICOP fails to show how the
reinstatement of the MPSA will impair its timber license.
Following the regalian doctrine, Base Metals avers that the State may opt to enter
into contractual arrangements for the exploration, development, and extraction of
minerals even it the same should mean amending, revising, or even revoking PICOPs
timber license. To require the State to secure PICOPs prior consent before it can
enter into such contracts allegedly constitutes an undue delegation of sovereign
power.
Base Metals further notes that Presidential Decree No. 705 (PD 705), under which
PTLA No. 47, IFMA No. 35 and the Presidential Warranty were issued, requires
notice to PICOP rather than consent before any mining activity can be commenced
in the latters concession areas.
The Office of the Solicitor General (OSG) filed a Memorandum[14] dated April 21,
2005 on behalf of the MAB, contending that PICOPs attempt to raise new issues,
such as its argument that the contested area is classified as a permanent forest and
hence, closed to mining activities, is offensive to due process and should not be
allowed.
The OSG argues that a timber license is not a contract within the purview of the due
process and non-impairment clauses. The Presidential Warranty merely guarantees
PICOPs tenure over its concession area and covers only the right to cut, collect and
remove timber therein. It is a mere collateral undertaking and cannot amplify
PICOPs rights under its PTLA No. 47 and IFMA No. 35. To hold that the Presidential
Warranty is a contract separate from PICOPs timber license effectively gives the
latter PICOP an exclusive, perpetual and irrevocable right over its concession area
and impairs the States sovereign exercise of its power over the exploration,
development, and utilization of natural resources.
The case of PICOP Resources, Inc. v. Hon. Heherson T. Alvarez, supra, cited by PICOP
cannot be relied upon to buttress the latters claim that a presidential warranty is a
valid and subsisting contract between PICOP and the Government because the
decision of the appellate court in that case is still pending review before the Courts
Second Division.
The OSG further asserts that mining operations are legally permissible over PICOPs
concession areas. Allegedly, what is closed to mining applications under RA 7942 are
areas proclaimed as watershed forest reserves. The law does not totally prohibit
mining operations over forest reserves. On the contrary, Sec. 18 of RA 7942 permits
mining over forest lands subject to existing rights and reservations, and PD 705
allows mining over forest lands and forest reservations subject to State regulation
and mining laws. Sec. 19(a) of RA 7942 also provides that mineral activities may be
allowed even over military and other government reservations as long as there is a
prior written clearance by the government agency concerned.
The area status clearances obtained by Base Metals also allegedly show that the
area covered by the MPSA is within timberland, unclassified public forest, and
alienable and disposable land. Moreover, PICOP allegedly chose to cite portions of
Apex Mining Corporation v. Garcia,[15] to make it appear that the Court in that case
ruled that mining is absolutely prohibited in the Agusan-Surigao-Davao Forest
Reserve. In fact, the Court held that the area is not open to mining location because
the proper procedure is to file an application for a permit to prospect with the
Bureau of Forest and Development.
In addition, PICOPs claimed wilderness area has not been designated as a protected
area that would operate to bar mining operations therein. PICOP failed to prove that
the alleged wilderness area has been designated as an initial component of the
NIPAS pursuant to a law, presidential decree, presidential proclamation or executive
order. Hence, it cannot correctly claim that the same falls within the coverage of the
restrictive provisions of RA 7586.
The OSG points out that the Administrative Code of 1917 which RA 3092 amended
has been completely repealed by the Administrative Code of 1978. Sec. 4, Art. XII of
the 1987 Constitution, on the other hand, provides that Congress shall determine
the specific limits of forest lands and national parks, marking clearly their
boundaries on the ground. Once this is done, the area thus covered by said forest
lands and national parks may not be expanded or reduced except also by
congressional legislation. Since Congress has yet to enact a law determining the
specific limits of the forest lands covered by Proclamation No. 369 and marking
clearly its boundaries on the ground, there can be no occasion that could give rise to
a violation of the constitutional provision.
Moreover, Clauses 10 and 14 of PICOPs IFMA No. 35 specifically provides that the
area covered by the agreement is open for mining if public interest so requires.
Likewise, PTLA No. 47 provides that the area covered by the license agreement may
be opened for mining purposes.
Finally, the OSG maintains that pursuant to the States policy of multiple land use,
R.A. No. 7942 provides for appropriate measures for a harmonized utilization of the
forest resources and compensation for whatever damage done to the property of
the surface owner or concessionaire as a consequence of mining operations.
Multiple land use is best demonstrated by the Memorandum of Agreement
between PICOP and Banahaw Mining.
First, the procedural question of whether PICOP is raising new issues in the instant
petition. It is the contention of the OSG and Base Metals that PICOPs argument that
the area covered by the MPSA is classified as permanent forest and therefore closed
to mining activities was raised for the first time in PICOPs motion for reconsideration
with the Court of Appeals.
Our own perusal of the records of this case reveals that this is not entirely true.

In its Adverse Claim and/or Opposition[16] dated November 19, 1997 filed with the
MGB Panel of Arbitrators, PICOP already raised the argument that the area applied
for by Base Metals is classified as a permanent forest determined to be needed for
forest purposes pursuant to par. 6, Sec. 3 of PD 705, as amended. PICOP then
proceeded to claim that the area should remain forest land if the purpose of the
presidential fiat were to be followed. It stated:
Technically, the areas applied for by Base Metals are classified as a permanent forest
being land of the public domain determined to be needed for forest purposes
(Paragraph 6, Section 3 of Presidential Decree No. 705, as amended) If these areas
then are classified and determined to be needed for forest purpose then they
should be developed and should remain as forest lands. Identifying, delineating and
declaring them for other use or uses defeats the purpose of the aforecited
presidential fiats. Again, if these areas would be delineated from Oppositors forest
concession, the forest therein would be destroyed and be lost beyond recovery.[17]
Base Metals met this argument head on in its Answer[18] dated December 1, 1997,
in which it contended that PD 705 does not exclude mining operations in forest
lands but merely requires that there be proper notice to the licensees of the area.
Again in its Petition[19] dated January 25, 2003 assailing the reinstatement of Base
Metals MPSA, PICOP argued that RA 7942 expressly prohibits mining operations in
plantation areas such as PICOPs concession area. Hence, it posited that the MGB
Panel of Arbitrators did not commit grave abuse of discretion when it ruled that
without PICOPs consent, the area is closed to mining location.
It is true though that PICOP expounded on the applicability of RA 3092, RA 7586,
and RA 7942 for the first time in its motion for reconsideration of the appellate
courts Decision. It was only in its motion for reconsideration that PICOP argued that
the area covered by PTLA No. 47 and IFMA No. 35 are permanent forest lands
covered by RA 7586 which cannot be entered for mining purposes, and shall remain
indefinitely as such for forest uses and cannot be excluded or diverted for other
uses except after reclassification through a law enacted by Congress.
Even so, we hold that that the so-called new issues raised by PICOP are well within
the issues framed by the parties in the proceedings a quo. Thus, they are not,
strictly speaking, being raised for the first time on appeal.[20] Besides, Base Metals
and the OSG have been given ample opportunity, by way of the pleadings filed with
this Court, to respond to PICOPs arguments. It is in the best interest of justice that
we settle the crucial question of whether the concession area in dispute is open to
mining activities.
We should state at this juncture that the policy of multiple land use is enshrined in
our laws towards the end that the countrys natural resources may be rationally
explored, developed, utilized and conserved. The Whereas clauses and declaration
of policies of PD 705 state:
WHEREAS, proper classification, management and utilization of the lands of the
public domain to maximize their productivity to meet the demands of our increasing
population is urgently needed;
WHEREAS, to achieve the above purpose, it is necessary to reassess the multiple
uses of forest lands and resources before allowing any utilization thereof to optimize
the benefits that can be derived therefrom;
Sec. 2. Policies.The State hereby adopts the following policies:
a) The multiple uses of forest lands shall be oriented to the development and
progress requirements of the country, the advancement of science and technology,
and the public welfare;
In like manner, RA 7942, recognizing the equiponderance between mining and
timber rights, gives a mining contractor the right to enter a timber concession and
cut timber therein provided that the surface owner or concessionaire shall be
properly compensated for any damage done to the property as a consequence of
mining operations. The pertinent provisions on auxiliary mining rights state:
Sec. 72. Timber Rights.Any provision of law to the contrary notwithstanding, a
contractor may be granted a right to cut trees or timber within his mining areas as
may be necessary for his mining operations subject to forestry laws, rules and
regulations: Provided, That if the land covered by the mining area is already covered
by existing timber concessions, the volume of timber needed and the manner of
cutting and removal thereof shall be determined by the mines regional director,
upon consultation with the contractor, the timber concessionair/permittee and the
Forest Management Bureau of the Department: Provided, further, That in case of
disagreement between the contractor and the timber concessionaire, the matter
shall be submitted to the Secretary whose decision shall be final. The contractor
shall perform reforestation work within his mining area in accordance with forestry
laws, rules and regulations.
Sec. 76. Entry into Private Lands and Concession Areas.Subject to prior notification,
holders of mining rights shall not be prevented from entry into private lands and
concession areas by surface owners, occupants, or concessionaires when
conducting mining operations therein: Provided, That any damage done to the
property of the surface owner, occupant, or concessionaire as a consequence of
such operations shall be properly compensated as may be provided for in the
implementing rules and regulations: Provided, further, That to guarantee such
compensation, the person authorized to conduct mining operation shall, prior
thereto, post a bond with the regional director based on the type of properties, the
prevailing prices in and around the area where the mining operations are to be
conducted, with surety or sureties satisfactory to the regional director.
With the foregoing predicates, we shall now proceed to analyze PICOPs averments.
PICOP contends that its concession area is within the Agusan-Surigao-Davao Forest
Reserve established under Proclamation No. 369 and is closed to mining application
citing several paragraphs of Sec. 19 of RA 7942.
The cited provision states:
Sec. 19 Areas Closed to Mining Applications.Mineral agreement or financial or
technical assistance agreement applications shall not be allowed:
(a) In military and other government reservations, except upon prior written
clearance by the government agency concerned;
(d) In areas expressly prohibited by law;
(f) Old growth or virgin forests, proclaimed watershed forest reserves, wilderness
areas, mangrove forests, mossy forests, national parks, provincial/municipal forests,
parks, greenbelts, game refuge and bird sanctuaries as defined by law in areas
expressly prohibited under the National Ingrated Protected Areas System (NIPAS)
under Republic Act No. 7586, Department Administrative Order No. 25, series of
1992 and other laws. [emphasis supplied]
We analyzed each of the categories under which PICOP claims that its concession
area is closed to mining activities and conclude that PICOPs contention must fail.
Firstly, assuming that the area covered by Base Metals MPSA is a government
reservation, defined as proclaimed reserved lands for specific purposes other than
mineral reservations,[21] such does not necessarily preclude mining activities in the
area. Sec. 15(b) of DAO 96-40 provides that government reservations may be
opened for mining applications upon prior written clearance by the government
agency having jurisdiction over such reservation.
Sec. 6 of RA 7942 also provides that mining operations in reserved lands other than
mineral reservations may be undertaken by the DENR, subject to certain limitations.
It provides:
Sec. 6. Other Reservations.Mining operations in reserved lands other than mineral
reservations may be undertaken by the Department, subject to limitations as herein
provided. In the event that the Department cannot undertake such activities, they
may be undertaken by a qualified person in accordance with the rules and
regulations promulgated by the Secretary. The right to develop and utilize the
minerals found therein shall be awarded by the President under such terms and
conditions as recommended by the Director and approved by the Secretary:
Provided, That the party who undertook the exploration of said reservations shall be
given priority. The mineral land so awarded shall be automatically excluded from the
reservation during the term of the agreement: Provided, further, That the right of
the lessee of a valid mining contract existing within the reservation at the time of its
establishment shall not be prejudiced or impaired.
Secondly, RA 7942 does not disallow mining applications in all forest reserves but
only those proclaimed as watershed forest reserves. There is no evidence in this
case that the area covered by Base Metals MPSA has been proclaimed as watershed
forest reserves.
Even granting that the area covered by the MPSA is part of the Agusan-Davao-
Surigao Forest Reserve, such does not necessarily signify that the area is absolutely
closed to mining activities. Contrary to PICOPs obvious misreading of our decision in
Apex Mining Co., Inc. v. Garcia, supra, to the effect that mineral agreements are not
allowed in the forest reserve established under Proclamation 369, the Court in that
case actually ruled that pursuant to PD 463 as amended by PD 1385, one can
acquire mining rights within forest reserves, such as the Agusan-Davao-Surigao
Forest Reserve, by initially applying for a permit to prospect with the Bureau of
Forest and Development and subsequently for a permit to explore with the Bureau
of Mines and Geosciences.
Moreover, Sec. 18 RA 7942 allows mining even in timberland or forestty subject to
existing rights and reservations. It provides:
Sec. 18. Areas Open to Mining Operations.Subject to any existing rights or
reservations and prior agreements of all parties, all mineral resources in public or
private lands, including timber or forestlands as defined in existing laws, shall be
open to mineral agreements or financial or technical assistance agreement
applications. Any conflict that may arise under this provision shall be heard and
resolved by the panel of arbitrators.
Similarly, Sec. 47 of PD 705 permits mining operations in forest lands which include
the public forest, the permanent forest or forest reserves, and forest reservations.
[22] It states:
Sec. 47. Mining Operations.Mining operations in forest lands shall be regulated and
conducted with due regard to protection, development and utilization of other
surface resources. Location, prospecting, exploration, utilization or exploitation of
mineral resources in forest reservations shall be governed by mining laws, rules and
regulations. No location, prospecting, exploration, utilization, or exploitation of
mineral resources inside forest concessions shall be allowed unless proper notice
has been served upon the licensees thereof and the prior approval of the Director,
secured.
Significantly, the above-quoted provision does not require that the consent of
existing licensees be obtained but that they be notified before mining activities may
be commenced inside forest concessions.
DENR Memorandum Order No. 03-98, which provides the guidelines in the issuance
of area status and clearance or consent for mining applications pursuant to RA 7942,
provides that timber or forest lands, military and other government reservations,
forest reservations, forest reserves other than critical watershed forest reserves,
and existing DENR Project Areas within timber or forest lands, reservations and
reserves, among others, are open to mining applications subject to area status and
clearance.
To this end, area status clearances or land status certifications have been issued to
Base Metals relative to its mining right application, to wit:
II. MPSA No. 010
1. Portion colored green is the area covered by the aforestated Timberland
Project No. 31-E, Block A and Project No. 59-C, Block A, L.C. Map No. 2466 certified
as such on June 30, 1961; and
2. Shaded brown represent CADC claim.[23]
III. MPSA No. 011
1. The area applied covers the Timberland, portion of Project No. 31-E, Block-E,
L.C. Map No. 2468 and Project No. 36-A Block II, Alienable and Disposable Land, L.C.
Map No. 1822, certified as such on June 30, 1961 and January 1, 1955, respectively;
2. The green shade is the remaining portion of Timber Land Project;
3. The portion colored brown is an applied and CADC areas;
4. Red shade denotes alienable and disposable land.[24]
IV. MPSA No. 012
Respectfully returned herewith is the folder of Base Metals Mineral Resources
Corporation, applied under Mineral Production Sharing Agreement (MPSA (XIII)
012), referred to this office per memorandum dated August 5, 1997 for Land status
certification and the findings based on available references file this office, the site is
within the unclassified Public Forest of the LGU, Rosario, Agusan del Sur. The shaded
portion is the wilderness area of PICOP Resources Incorporated (PRI), Timber
License Agreement.[25]
V. MPSA No. 013
1. The area status shaded green falls within Timber Land, portion of Project No.
31-E, Block-A, Project No. 59-C, Block-A, L.C. Map No. 2468 certified as such on June
30, 1961;
2. Colored brown denotes a portion claimed as CADC areas;
3. Violet shade represent a part of reforestation project of PRI concession; and
4. The yellow color is identical to unclassified Public Forest of said LGU and the
area inclosed in Red is the wilderness area of PICOP Resources, Inc. (PRI), Timber
License Agreement.[26]
Thirdly, PICOP failed to present any evidence that the area covered by the MPSA is a
protected wilderness area designated as an initial component of the NIPAS pursuant
to a law, presidential decree, presidential proclamation or executive order as
required by RA 7586.
Sec. 5(a) of RA 7586 provides:
Sec. 5. Establishment and Extent of the System.The establishment and
operationalization of the System shall involve the following:
(a) All areas or islands in the Philippines proclaimed, designated or set aside,
pursuant to a law, presidential decree, presidential proclamation or executive order
as national park, game refuge, bird and wildlife sanctuary, wilderness area, strict
nature reserve, watershed, mangrove reserve, fish sanctuary, natural and historical
landmark, protected and managed landscape/seascape as well as identified virgin
forests before the effectivity of this Act are hereby designated as initial components
of the System. The initial components of the System shall be governed by existing
laws, rules and regulations, not inconsistent with this Act.
Although the above-cited area status and clearances, particularly those pertaining
to MPSA Nos. 012 and 013, state that portions thereof are within the wilderness
area of PICOP, there is no showing that this supposed wilderness area has been
proclaimed, designated or set aside as such, pursuant to a law, presidential decree,
presidential proclamation or executive order. It should be emphasized that it is only
when this area has been so designated that Sec. 20 of RA 7586, which prohibits
mineral locating within protected areas, becomes operational.
From the foregoing, there is clearly no merit to PICOPs contention that the area
covered by Base Metals MPSA is, by law, closed to mining activities.
Finally, we do not subscribe to PICOPs argument that the Presidential Warranty
dated September 25, 1968 is a contract protected by the non-impairment clause of
the 1987 Constitution.
An examination of the Presidential Warranty at once reveals that it simply reassures
PICOP of the governments commitment to uphold the terms and conditions of its
timber license and guarantees PICOPs peaceful and adequate possession and
enjoyment of the areas which are the basic sources of raw materials for its wood
processing complex. The warranty covers only the right to cut, collect, and remove
timber in its concession area, and does not extend to the utilization of other
resources, such as mineral resources, occurring within the concession.
The Presidential Warranty cannot be considered a contract distinct from PTLA No.
47 and IFMA No. 35. We agree with the OSGs position that it is merely a collateral
undertaking which cannot amplify PICOPs rights under its timber license. Our
definitive ruling in Oposa v. Factoran[27] that a timber license is not a contract
within the purview of the non-impairment clause is edifying. We declared:
Needless to say, all licenses may thus be revoked or rescinded by executive action. It
is not a contract, property or a property right protected by the due process clause of
the Constitution. In Tan vs. Director of Forestry, this Court held:
x x x A timber license is an instrument by which the State regulates the utilization
and disposition of forest resources to the end that public welfare is promoted. A
timber license is not a contract within the purview of the due process clause; it is
only a license or a privilege, which can be validly withdrawn whenever dictated by
public interest or public welfare as in this case.
A license is merely a permit or privilege to do what otherwise would be unlawful,
and is not a contract between the authority, federal, state, or municipal, granting it
and the person to whom it is granted; neither is it a property or a property right, nor
does it create a vested right; nor is it taxation (C.J. 168). Thus, this Court held that
the granting of license does not create irrevocable rights, neither is it property or
property rights (People vs. Ong Tin, 54 O.G. 7576). x x x
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy
Executive Secretary:
x x x Timber licenses, permits and license agreements are the principal instruments
by which the State regulates the utilization and disposition of forest resources to the
end that public welfare is promoted. And it can hardly be gainsaid that they merely
evidence a privilege granted by the State to qualified entities, and do not vest in the
latter a permanent or irrevocable right to the particular concession area and the
forest products therein. They may be validly amended, modified, replaced or
rescinded by the Chief Executive when national interests so require. Thus, they are
not deemed contracts within the purview of the due process of law clause [See
Sections 3(ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of
Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA 302].
Since timber licenses are not contracts, the non-impairment clause, which reads:
Sec. 10. No law impairing the obligation of contracts shall be passed.
cannot be invoked.[28] [emphasis supplied]
The Presidential Warranty cannot, in any manner, be construed as a contractual
undertaking assuring PICOP of exclusive possession and enjoyment of its concession
areas. Such an interpretation would result in the complete abdication by the State in
favor of PICOP of the sovereign power to control and supervise the exploration,
development and utilization of the natural resources in the area.
In closing, we should lay emphasis on the fact that the reinstatement of Base Metals
MPSA does not automatically result in its approval. Base Metals still has to comply
with the requirements outlined in DAO 96-40, including the
publication/posting/radio announcement of its mineral agreement application.
IN VIEW OF THE FOREGOING, the instant petition is DENIED. The Decision of the
Court of Appeals November 28, 2003 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
EN BANC
APEX MINING CO., INC.,
Petitioner,
- versus -
SOUTHEAST MINDANAO GOLD MINING CORP., THE MINES ADJUDICATION BOARD,
PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), MONKAYO INTEGRATED
SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE
COMMUNAL PORTAL MINING COOPERATIVE, DAVAO UNITED MINERS
COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE,
ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO,
FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ,
REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO,
JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and JOEL
BRILLANTES MANAGEMENT MINING CORPORATION,
Respondents.
x-------------------------x
BALITE COMMUNAL PORTAL MINING COOPERATIVE,
Petitioner,
- versus -
SOUTHEAST MINDANAO GOLD MINING CORP., APEX MINING CO., INC., THE MINES
ADJUDICATION BOARD, PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO),
MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO
VILLAFLOR, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-
BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS
GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN
ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY
ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN,
LETICIA ALQUEZA and JOEL BRILLANTES MANAGEMENT MINING CORPORATION,
Respondents.
x------------------------x
THE MINES ADJUDICATION BOARD AND ITS MEMBERS, THE HON. VICTOR O. RAMOS
(Chairman), UNDERSECRETARY VIRGILIO MARCELO (Member) and DIRECTOR
HORACIO RAMOS (Member),
Petitioners,
- versus -
SOUTHEAST MINDANAO GOLD MINING CORPORATION,
Respondent.
G.R. Nos. 152613 & 152628
G.R. No. 152619-20
G.R. No. 152870-71
Present:
CHICO-NAZARIO, J.:
This resolves the motion for reconsideration dated 12 July 2006, filed by Southeast
Mindanao Gold Mining Corporation (SEM), of this Courts Decision dated 23 June
2006 (Assailed Decision). The Assailed Decision held that the assignment of
Exploration Permit (EP) 133 in favor of SEM violated one of the conditions stipulated
in the permit, i.e., that the same shall be for the exclusive use and benefit of
Marcopper Mining Corporation (MMC) or its duly authorized agents. Since SEM did
not claim or submit evidence that it was a designated agent of MMC, the latter
cannot be considered as an agent of the former that can use EP 133 and benefit
from it. It also ruled that the transfer of EP 133 violated Presidential Decree No. 463,
which requires that the assignment of a mining right be made with the prior
approval of the Secretary of the Department of Environment and Natural Resources
(DENR). Moreover, the Assailed Decision pointed out that EP 133 expired by non-
renewal since it was not renewed before or after its expiration.
The Assailed Decision likewise upheld the validity of Proclamation No. 297 absent
any question against its validity. In view of this, and considering that under Section 5
of Republic Act No. 7942, otherwise known as the Mining Act of 1995, mining
operations in mineral reservations may be undertaken directly by the State or
through a contractor, the Court deemed the issue of ownership of priority right over
the contested Diwalwal Gold Rush Area as having been overtaken by the said
proclamation. Thus, it was held in the Assailed Decision that it is now within the
prerogative of the Executive Department to undertake directly the mining
operations of the disputed area or to award the operations to private entities
including petitioners Apex and Balite, subject to applicable laws, rules and
regulations, and provided that these private entities are qualified.
SEM also filed a Motion for Referral of Case to the Court En Banc and for Oral
Arguments dated 22 August 2006.
Apex, for its part, filed a Motion for Clarification of the Assailed Decision, praying
that the Court elucidate on the Decisions pronouncement that mining operations,
are now, therefore within the full control of the State through the executive branch.
Moreover, Apex asks this Court to order the Mines and Geosciences Board (MGB) to
accept its application for an exploration permit.
In its Manifestation and Motion dated 28 July 2006, Balite echoes the same concern
as that of Apex on the actual takeover by the State of the mining industry in the
disputed area to the exclusion of the private sector. In addition, Balite prays for this
Court to direct MGB to accept its application for an exploration permit.
Camilo Banad, et al., likewise filed a motion for reconsideration and prayed that the
disputed area be awarded to them.
In the Resolution dated 15 April 2008, the Court En Banc resolved to accept the
instant cases. The Court, in a resolution dated 29 April 2008, resolved to set the
cases for Oral Argument on 1 July 2008.
During the Oral Argument, the Court identified the following principal issues to be
discussed by the parties:
1. Whether the transfer or assignment of Exploration Permit (EP) 133 by MMC
to SEM was validly made without violating any of the terms and conditions set forth
in Presidential Decree No. 463 and EP 133 itself.
2. Whether Southeast Mindanao Mining Corp. acquired a vested right over the
disputed area, which constitutes a property right protected by the Constitution.
3. Whether the assailed Decision dated 23 June 2006 of the Third Division in
this case is contrary to and overturns the earlier Decision of this Court in Apex v.
Garcia (G.R. No. 92605, 16 July 1991, 199 SCRA 278).
4. Whether the issuance of Proclamation No. 297 declaring the disputed area
as mineral reservation outweighs the claims of SEM, Apex Mining Co. Inc. and Balite
Communal Portal Mining Cooperative over the Diwalwal Gold Rush Area.
5. Whether the issue of the legality/constitutionality of Proclamation No. 297
was belatedly raised.
6. Assuming that the legality/constitutionality of Proclamation No. 297 was
timely raised, whether said proclamation violates any of the following:
a. Article XII, Section 4 of the Constitution;
b. Section 1 of Republic Act No. 3092;
c. Section 14 of the Administrative Code of 1987;
d. Section 5(a) of Republic Act No. 7586;
e. Section 4(a) of Republic Act No. 6657; and
f. Section 2, Subsection 2.1.2 of Executive Order No. 318 dated 9 June 2004.
After hearing the arguments of the parties, the Court required them to submit their
respective memoranda. Memoranda were accordingly filed by SEM, Apex, Balite and
Mines Adjudication Board (MAB).
We shall resolve the second issue before dwelling on the first, third and the rest of
the issues.
MMC or SEM Did Not Have Vested Rights Over the Diwalwal Gold Rush Area
Petitioner SEM vigorously argues that Apex Mining Co., Inc. v. Garcia[1] vested in
MMC mining rights over the disputed area. It claims that the mining rights that
MMC acquired under the said case were the ones assigned to SEM, and not the
right to explore under MMCs EP 133. It insists that mining rights, once obtained,
continue to subsist regardless of the validity of the exploration permit; thus, mining
rights are independent of the exploration permit and therefore do not expire with
the permit. SEM insists that a mining right is a vested property right that not even
the government can take away. To support this thesis, SEM cites this Courts ruling in
McDaniel v. Apacible and Cuisia[2] and in Gold Creek Mining Corporation v.
Rodriguez,[3] which were decided in 1922 and 1938, respectively.
McDaniel and Gold Creek Mining Corporation are not in point.
In 1916, McDaniel, petitioner therein, located minerals, i.e., petroleum, on an
unoccupied public land and registered his mineral claims with the office of the
mining recorder pursuant to the Philippine Bill of 1902, where a mining claim
locator, soon after locating the mine, enjoyed possessory rights with respect to such
mining claim with or without a patent therefor. In that case, the Agriculture
Secretary, by virtue of Act No. 2932, approved in 1920, which provides that all
public lands may be leased by the then Secretary of Agriculture and Natural
Resources, was about to grant the application for lease of therein respondent,
overlapping the mining claims of the subject petitioner. Petitioner argued that,
being a valid locator, he had vested right over the public land where his mining
claims were located. There, the Court ruled that the mining claim perfected under
the Philippine Bill of 1902, is property in the highest sense of that term, which may
be sold and conveyed, and will pass by descent, and is not therefore subject to the
disposal of the Government. The Court then declared that since petitioner had
already perfected his mining claim under the Philippine Bill of 1902, a subsequent
statute, i.e., Act No. 2932, could not operate to deprive him of his already perfected
mining claim, without violating his property right.
Gold Creek Mining reiterated the ruling in McDaniel that a perfected mining claim
under the Philippine Bill of 1902 no longer formed part of the public domain; hence,
such mining claim does not come within the prohibition against the alienation of
natural resources under Section 1, Article XII of the 1935 Constitution.
Gleaned from the ruling on the foregoing cases is that for this law to apply, it must
be established that the mining claim must have been perfected when the Philippine
Bill of 1902 was still in force and effect. This is so because, unlike the subsequent
laws that prohibit the alienation of mining lands, the Philippine Bill of 1902
sanctioned the alienation of mining lands to private individuals. The Philippine Bill of
1902 contained provisions for, among many other things, the open and free
exploration, occupation and purchase of mineral deposits and the land where they
may be found. It declared all valuable mineral deposits in public lands in the
Philippine Islands, both surveyed and unsurveyed x x x to be free and open to
exploration, occupation, and purchase, and the land in which they are found to
occupation and purchase, by citizens of the United States, or of said Islands x x x.[4]
Pursuant to this law, the holder of the mineral claim is entitled to all the minerals
that may lie within his claim, provided he does three acts: First, he enters the mining
land and locates a plot of ground measuring, where possible, but not exceeding,
one thousand feet in length by one thousand feet in breadth, in as nearly a
rectangular form as possible.[5] Second, the mining locator has to record the
mineral claim in the mining recorder within thirty (30) days after the location
thereof.[6] Lastly, he must comply with the annual actual work requirement.[7]
Complete mining rights, namely, the rights to explore, develop and utilize, are
acquired by a mining locator by simply following the foregoing requirements.
With the effectivity of the 1935 Constitution, where the regalian doctrine was
adopted, it was declared that all natural resources of the Philippines, including
mineral lands and minerals, were property belonging to the State.[8] Excluded,
however, from the property of public domain were the mineral lands and minerals
that were located and perfected by virtue of the Philippine Bill of 1902, since they
were already considered private properties of the locators.[9]
Commonwealth Act No. 137 or the Mining Act of 1936, which expressly adopted the
regalian doctrine following the provision of the 1935 Constitution, also proscribed
the alienation of mining lands and granted only lease rights to mining claimants,
who were prohibited from purchasing the mining claim itself.
When Presidential Decree No. 463, which revised Commonwealth Act No. 137, was
in force in 1974, it likewise recognized the regalian doctrine embodied in the 1973
Constitution. It declared that all mineral deposits and public and private lands
belonged to the state while, nonetheless, recognizing mineral rights that had
already been existing under the Philippine Bill of 1902 as being beyond the purview
of the regalian doctrine.[10] The possessory rights of mining claim holders under
the Philippine Bill of 1902 remained intact and effective, and such rights were
recognized as property rights that the holders could convey or pass by descent.[11]
In the instant cases, SEM does not aver or prove that its mining rights had been
perfected and completed when the Philippine Bill of 1902 was still the operative
law. Surely, it is impossible for SEM to successfully assert that it acquired mining
rights over the disputed area in accordance with the same bill, since it was only in
1984 that MMC, SEMs predecessor-in-interest, filed its declaration of locations and
its prospecting permit application in compliance with Presidential Decree No. 463. It
was on 1 July 1985 and 10 March 1986 that a Prospecting Permit and EP 133,
respectively, were issued to MMC. Considering these facts, there is no possibility
that MMC or SEM could have acquired a perfected mining claim under the auspices
of the Philippine Bill of 1902. Whatever mining rights MMC had that it invalidly
transferred to SEM cannot, by any stretch of imagination, be considered mining
rights as contemplated under the Philippine Bill of 1902 and immortalized in
McDaniel and Gold Creek Mining.
SEM likens EP 133 with a building permit. SEM likewise equates its supposed rights
attached to the exploration permit with the rights that a private property land
owner has to said landholding. This analogy has no basis in law. As earlier discussed,
under the 1935, 1973 and 1987 Constitutions, national wealth, such as mineral
resources, are owned by the State and not by their discoverer. The discoverer or
locator can only develop and utilize said minerals for his own benefit if he has
complied with all the requirements set forth by applicable laws and if the State has
conferred on him such right through permits, concessions or agreements. In other
words, without the imprimatur of the State, any mining aspirant does not have any
definitive right over the mineral land because, unlike a private landholding, mineral
land is owned by the State, and the same cannot be alienated to any private person
as explicitly stated in Section 2, Article XIV of the 1987 Constitution:
All lands of public domain, waters, minerals x x x and all other natural resources are
owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. (Emphases supplied.)
Further, a closer scrutiny of the deed of assignment in favor of SEM reveals that
MMC assigned to the former the rights and interests it had in EP 133, thus:
1. That for ONE PESO (P1.00) and other valuable consideration received by the
ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and
CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in
the area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental,
identified as Exploration Permit No. 133 and Application for a Permit to Prospect in
Bunawan, Agusan del Sur respectively. (Emphasis supplied.)
It is evident that what MMC had over the disputed area during the assignment was
an exploration permit. Clearly, the right that SEM acquired was limited to
exploration, only because MMC was a mere holder of an exploration permit. As
previously explained, SEM did not acquire the rights inherent in the permit, as the
assignment by MMC to SEM was done in violation of the condition stipulated in the
permit, and the assignment was effected without the approval of the proper
authority in contravention of the provision of the mining law governing at that time.
In addition, the permit expired on 6 July 1994. It is, therefore, quite clear that SEM
has no right over the area.
Even assuming arguendo that SEM obtained the rights attached in EP 133, said
rights cannot be considered as property rights protected under the fundamental
law.
An exploration permit does not automatically ripen into a right to extract and utilize
the minerals; much less does it develop into a vested right. The holder of an
exploration permit only has the right to conduct exploration works on the area
awarded. Presidential Decree No. 463 defined exploration as the examination and
investigation of lands supposed to contain valuable minerals, by drilling, trenching,
shaft sinking, tunneling, test pitting and other means, for the purpose of probing the
presence of mineral deposits and the extent thereof. Exploration does not include
development and exploitation of the minerals found. Development is defined by the
same statute as the steps necessarily taken to reach an ore body or mineral deposit
so that it can be mined, whereas exploitation is defined as the extraction and
utilization of mineral deposits. An exploration permit is nothing more than a mere
right accorded to its holder to be given priority in the governments consideration in
the granting of the right to develop and utilize the minerals over the area. An
exploration permit is merely inchoate, in that the holder still has to comply with the
terms and conditions embodied in the permit. This is manifest in the language of
Presidential Decree No. 463, thus:
Sec. 8. x x x The right to exploit therein shall be awarded by the President under
such terms and conditions as recommended by the Director and approved by the
Secretary Provided, That the persons or corporations who undertook prospecting
and exploration of said area shall be given priority.
In La Bugal-Blaan Tribal Association, Inc. v. Ramos,[12] this Court emphasized:
Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a
qualified person the right to conduct exploration for all minerals in specified areas.
Such a permit does not amount to an authorization to extract and carry off the
mineral resources that may be discovered. x x x.
Pursuant to Section 24 of RA 7942, an exploration permit grantee who determines
the commercial viability of a mining area may, within the term of the permit, file
with the MGB a declaration of mining project feasibility accompanied by a work
program for development. The approval of the mining project feasibility and
compliance with other requirements of RA 7942 vests in the grantee the exclusive
right to an MPSA or any other mineral agreement, or to an FTAA. (Underscoring
ours.)
The non-acquisition by MMC or SEM of any vested right over the disputed area is
supported by this Courts ruling in Southeast Mindanao Gold Mining Corporation v.
Balite Portal Mining Cooperative[13]:
Clearly then, the Apex Mining case did not invest petitioner with any definite right
to the Diwalwal mines which it could now set up against respondent BCMC and
other mining groups.
Incidentally, it must likewise be pointed out that under no circumstances may
petitioners rights under EP No. 133 be regarded as total and absolute. As correctly
held by the Court of Appeals in its challenged decision, EP No. 133 merely evidences
a privilege granted by the State, which may be amended, modified or rescinded
when the national interest so requires. x x x. (Underscoring supplied.)
Unfortunately, SEM cannot be given priority to develop and exploit the area covered
by EP 133 because, as discussed in the assailed Decision, EP 133 expired by non-
renewal on 6 July 1994. Also, as already mentioned, the transfer of the said permit
to SEM was without legal effect because it was done in contravention of Presidential
Decree No. 463 which requires prior approval from the proper authority. Simply
told, SEM holds nothing for it to be entitled to conduct mining activities in the
disputed mineral land.
SEM wants to impress on this Court that its alleged mining rights, by virtue of its
being a transferee of EP 133, is similar to a Financial and Technical Assistance
Agreement (FTAA) of a foreign contractor, which merits protection by the due
process clause of the Constitution. SEM cites La Bugal-Blaan Tribal Association, Inc.
v. Ramos,[14] as follows:
To say that an FTAA is just like a mere timber license or permit and does not involve
contract or property rights which merit protection by the due process clause of the
Constitution, and may therefore be revoked or cancelled in the blink of an eye, is to
adopt a well-nigh confiscatory stance; at the very least, it is downright dismissive of
the property rights of businesspersons and corporate entities that have investments
in the mining industry, whose investments, operations and expenditures do
contribute to the general welfare of the people, the coffers of government, and the
strength of the economy. x x x.
Again, this argument is not meritorious. SEM did not acquire the rights attached to
EP 133, since their transfer was without legal effect. Granting for the sake of
argument that SEM was a valid transferee of the permit, its right is not that of a
mining contractor. An exploration permit grantee is vested with the right to conduct
exploration only, while an FTAA or MPSA contractor is authorized to extract and
carry off the mineral resources that may be discovered in the area.[15] An
exploration permit holder still has to comply with the mining project feasibility and
other requirements under the mining law. It has to obtain approval of such
accomplished requirements from the appropriate government agencies. Upon
obtaining this approval, the exploration permit holder has to file an application for
an FTAA or an MPSA and have it approved also. Until the MPSA application of SEM is
approved, it cannot lawfully claim that it possesses the rights of an MPSA or FTAA
holder, thus:
x x x prior to the issuance of such FTAA or mineral agreement, the exploration
permit grantee (or prospective contractor) cannot yet be deemed to have entered
into any contract or agreement with the State x x x.[16]
But again, SEM is not qualified to apply for an FTAA or any mineral agreement,
considering that it is not a holder of a valid exploration permit, since EP 133 expired
by non-renewal and the transfer to it of the same permit has no legal value.
More importantly, assuming arguendo that SEM has a valid exploration permit, it
cannot assert any mining right over the disputed area, since the State has taken
over the mining operations therein, pursuant to Proclamation No. 297 issued by the
President on 25 November 2002. The Court has consistently ruled that the nature of
a natural resource exploration permit is analogous to that of a license. In Republic v.
Rosemoor Mining and Development Corporation, this Court articulated:
Like timber permits, mining exploration permits do not vest in the grantee any
permanent or irrevocable right within the purview of the non-impairment of
contract and due process clauses of the Constitution, since the State, under its all-
encompassing police power, may alter, modify or amend the same, in accordance
with the demands of the general welfare.[17] (Emphasis supplied.)
As a mere license or privilege, an exploration permit can be validly amended by the
President of the Republic when national interests suitably necessitate. The Court
instructed thus:
Timber licenses, permits and license agreements are the principal instruments by
which the State regulates the utilization and disposition of forest resources to the
end that the public welfare is promoted. x x x They may be validly amended,
modified, replaced or rescinded by the Chief Executive when national interests so
require.[18]
Recognizing the importance of the countrys natural resources, not only for national
economic development, but also for its security and national defense, Section 5 of
Republic Act No. 7942 empowers the President, when the national interest so
requires, to establish mineral reservations where mining operations shall be
undertaken directly by the State or through a contractor, viz:
SEC 5. Mineral Reservations. When the national interest so requires, such as when
there is a need to preserve strategic raw materials for industries critical to national
development, or certain minerals for scientific, cultural or ecological value, the
President may establish mineral reservations upon the recommendation of the
Director through the Secretary. Mining operations in existing mineral reservations
and such other reservations as may thereafter be established, shall be undertaken
by the Department or through a contractor x x x. (Emphasis supplied.)
Due to the pressing concerns in the Diwalwal Gold Rush Area brought about by
unregulated small to medium-scale mining operations causing ecological, health and
peace and order problems, the President, on 25 November 2002, issued
Proclamation No. 297, which declared the area as a mineral reservation and as an
environmentally critical area. This executive fiat was aimed at preventing the further
dissipation of the natural environment and rationalizing the mining operations in
the area in order to attain an orderly balance between socio-economic growth and
environmental protection. The area being a mineral reservation, the Executive
Department has full control over it pursuant to Section 5 of Republic Act No. 7942. It
can either directly undertake the exploration, development and utilization of the
minerals found therein, or it can enter into agreements with qualified entities. Since
the Executive Department now has control over the exploration, development and
utilization of the resources in the disputed area, SEMs exploration permit, assuming
that it is still valid, has been effectively withdrawn. The exercise of such power
through Proclamation No. 297 is in accord with jura regalia, where the State
exercises its sovereign power as owner of lands of the public domain and the
mineral deposits found within. Thus, Article XII, Section 2 of the 1987 Constitution
emphasizes:
SEC. 2. All lands of the public domain, water, 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. With the exception
of agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under the full
control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or product-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. (Emphasis supplied.)
Furthermore, said proclamation cannot be denounced as offensive to the
fundamental law because the State is sanctioned to do so in the exercise of its
police power.[19] The issues on health and peace and order, as well the decadence
of the forest resources brought about by unregulated mining in the area, are
matters of national interest. The declaration of the Chief Executive making the area
a mineral reservation, therefore, is sanctioned by Section 5 of Republic Act No.
7942.
The Assignment of EP No. 133 by MMC in Favor of SEM Violated Section 97 of
Presidential Decree No. 463 and the Terms and Conditions Set Forth in the Permit
SEM claims that the approval requirement under Section 97 of Presidential Decree
No. 463 is not applicable to this case, because MMC neither applied for nor was
granted a mining lease contract. The said provision states:
SEC. 97. Assignment of Mining Rights. A mining lease contract or any interest
therein shall not be transferred, assigned, or subleased without the prior approval
of the Secretary: Provided, that such transfer, assignment or sublease may be made
only to a qualified person possessing the resources and capability to continue the
mining operations of the lessee and that the assignor has complied with all the
obligations of the lease: Provided, further, That such transfer or assignment shall be
duly registered with the office of the mining recorder concerned. (Emphasis
supplied.)
Exploration Permit 133 was issued in favor of MMC on 10 March 1986, when
Presidential Decree No. 463 was still the governing law. Presidential Decree No. 463
pertains to the old system of exploration, development and utilization of natural
resources through license, concession or lease.[20]
Pursuant to this law, a mining lease contract confers on the lessee or his successors
the right to extract, to remove, process and utilize the mineral deposits found on or
underneath the surface of his mining claims covered by the lease. The lessee may
also enter into a service contract for the exploration, development and exploitation
of the minerals from the lands covered by his lease, to wit:
SEC. 44. A mining lease contract shall grant to the lessee, his heirs, successors, and
assigns the right to extract all mineral deposits found on or underneath the surface
of his mining claims covered by the lease, continued vertically downward; to
remove, process, and otherwise utilize the mineral deposits for his own benefit; and
to use the lands covered by the lease for the purpose or purposes specified therein
x x x That a lessee may on his own or through the Government, enter into a service
contract for the exploration, development and exploitation of his claims and the
processing and marketing of the product thereof, subject to the rules and
regulations that shall be promulgated by the Director, with the approval of the
Secretary x x x. (Emphases supplied.)
In other words, the lessees interests are not only limited to the extraction or
utilization of the minerals in the contract area, but also to include the right to
explore and develop the same. This right to explore the mining claim or the contract
area is derived from the exploration permit duly issued by the proper authority. An
exploration permit is, thus, covered by the term any other interest therein. Section
97 is entitled, Assignment of Mining Rights. This alone gives a hint that before
mining rights -- namely, the rights to explore, develop and utilize -- are transferred
or assigned, prior approval must be obtained from the DENR Secretary. An
exploration permit, thus, cannot be assigned without the imprimatur of the
Secretary of the DENR.
It is instructive to note that under Section 13 of Presidential Decree No. 463, the
prospecting and exploration of minerals in government reservations, such as forest
reservations, are prohibited, except with the permission of the government agency
concerned. It is the government agency concerned that has the prerogative to
conduct prospecting, exploration and exploitation of such reserved lands.[21] It is
only in instances wherein said government agency, in this case the Bureau of Mines,
cannot undertake said mining operations that qualified persons may be allowed by
the government to undertake such operations. PNOC-EDC v. Veneracion, Jr.[22]
outlines the five requirements for acquiring mining rights in reserved lands under
Presidential Decree No. 463: (1) a prospecting permit from the agency that has
jurisdiction over the land; (2) an exploration permit from the Bureau of Mines and
Geo-Sciences (BMGS); (3) if the exploration reveals the presence of commercial
deposit, application to BMGS by the permit holder for the exclusion of the area from
the reservation; (4) a grant by the President of the application to exclude the area
from the reservation; and (5) a mining agreement (lease, license or concession)
approved by the DENR Secretary.
Here, MMC met the first and second requirements and obtained an exploration
permit over the disputed forest reserved land. Although MMC still has to prove to
the government that it is qualified to develop and utilize the subject mineral land, as
it has yet to go through the remaining process before it can secure a lease
agreement, nonetheless, it is bound to follow Section 97 of Presidential Decree No.
463. The logic is not hard to discern. If a lease holder, who has already
demonstrated to the government his capacity and qualifications to further develop
and utilize the minerals within the contract area, is prohibited from transferring his
mining rights (rights to explore, develop and utilize), with more reason will this
proscription apply with extra force to a mere exploration permit holder who is yet to
exhibit his qualifications in conducting mining operations. The rationale for the
approval requirement under Section 97 of Presidential Decree No. 463 is not hard to
see. Exploration permits are strictly granted to entities or individuals possessing the
resources and capability to undertake mining operations. Mining industry is a major
support of the national economy and the continuous and intensified exploration,
development and wise utilization of mining resources is vital for national
development. For this reason, Presidential Decree No. 463 makes it imperative that
in awarding mining operations, only persons possessing the financial resources and
technical skill for modern exploratory and development techniques are encouraged
to undertake the exploration, development and utilization of the countrys natural
resources. The preamble of Presidential Decree No. 463 provides thus:
WHEREAS, effective and continuous mining operations require considerable outlays
of capital and resources, and make it imperative that persons possessing the
financial resources and technical skills for modern exploratory and development
techniques be encouraged to undertake the exploration, development and
exploitation of our mineral resources;
The Court has said that a preamble is the key to understanding the statute, written
to open the minds of the makers to the mischiefs that are to be remedied, and the
purposes that are to be accomplished, by the provisions of the statute.[23] As such,
when the statute itself is ambiguous and difficult to interpret, the preamble may be
resorted to as a key to understanding the statute.
Indubitably, without the scrutiny by the government agency as to the qualifications
of the would-be transferee of an exploration permit, the same may fall into the
hands of non-qualified entities, which would be counter-productive to the
development of the mining industry. It cannot be overemphasized that the
exploration, development and utilization of the countrys natural resources are
matters vital to the public interest and the general welfare; hence, their regulation
must be of utmost concern to the government, since these natural resources are
not only critical to the nations security, but they also ensure the countrys survival as
a viable and sovereign republic.[24]
The approval requirement of the Secretary of the DENR for the assignment of
exploration permits is bolstered by Section 25 of Republic Act No. 7942 (otherwise
known as the Philippine Mining Act of 1995), which provides that:
Sec. 25. Transfer or Assignment. An exploration permit may be transferred or
assigned to a qualified person subject to the approval of the Secretary upon the
recommendation of the Director.
SEM further posits that Section 97 of Presidential Decree No. 463, which requires
the prior approval of the DENR when there is a transfer of mining rights, cannot be
applied to the assignment of EP 133 executed by MMC in favor of SEM because
during the execution of the Deed of Assignment on 16 February 1994, Executive
Order No. 279[25] became the governing statute, inasmuch as the latter abrogated
the old mining system -- i.e., license, concession or lease -- which was espoused by
the former.
This contention is not well taken. While Presidential Decree No. 463 has already
been repealed by Executive Order No. 279, the administrative aspect of the former
law nonetheless remains applicable. Hence, the transfer or assignment of
exploration permits still needs the prior approval of the Secretary of the DENR. As
ruled in Miners Association of the Philippines, Inc. v. Factoran, Jr.[26]:
Presidential Decree No. 463, as amended, pertains to the old system of exploration,
development and utilization of natural resources through license, concession or
lease which, however, has been disallowed by Article XII, Section 2 of the 1987
Constitution. By virtue of the said constitutional mandate and its implementing law,
Executive Order No. 279, which superseded Executive Order No. 211, the provisions
dealing on license, concession, or lease of mineral resources under Presidential
Decree No. 463, as amended, and other existing mining laws are deemed repealed
and, therefore, ceased to operate as the governing law. In other words, in all other
areas of administration and management of mineral lands, the provisions of
Presidential Decree No. 463, as amended, and other existing mining laws, still
govern. (Emphasis supplied.)
Not only did the assignment of EP 133 to SEM violate Section 97 of Presidential
Decree No. 463, it likewise transgressed one of the conditions stipulated in the grant
of the said permit. The following terms and conditions attached to EP 133 are as
follows:[27]
1. That the permittee shall abide by the work program submitted with the
application or statements made later in support thereof, and which shall be
considered as conditions and essential parts of this permit;
2. That permittee shall maintain a complete record of all activities and accounting of
all expenditures incurred therein subject to periodic inspection and verification at
reasonable intervals by the Bureau of Mines at the expense of the applicant;
3. That the permittee shall submit to the Director of Mines within 15 days after the
end of each calendar quarter a report under oath of a full and complete statement
of the work done in the area covered by the permit;
4. That the term of this permit shall be for two (2) years to be effective from this
date, renewable for the same period at the discretion of the Director of Mines and
upon request of the applicant;
5. That the Director of Mines may at any time cancel this permit for violation of its
provision or in case of trouble or breach of peace arising in the area subject hereof
by reason of conflicting interests without any responsibility on the part of the
government as to expenditures for exploration that might have been incurred, or as
to other damages that might have been suffered by the permittee;
6. That this permit shall be for the exclusive use and benefit of the permittee or his
duly authorized agents and shall be used for mineral exploration purposes only and
for no other purpose.
It must be noted that under Section 90[28] of Presidential Decree No. 463, which
was the applicable statute during the issuance of EP 133, the DENR Secretary,
through the Director of the Bureau of Mines and Geosciences, was charged with
carrying out the said law. Also, under Commonwealth Act No. 136, also known as An
Act Creating the Bureau of Mines, which was approved on 7 November 1936, the
Director of Mines had the direct charge of the administration of the mineral lands
and minerals; and of the survey, classification, lease or any other form of concession
or disposition thereof under the Mining Act.[29] This power of administration
included the power to prescribe terms and conditions in granting exploration
permits to qualified entities.
Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted
within his power in laying down the terms and conditions attendant thereto. MMC
and SEM did not dispute the reasonableness of said conditions.
Quite conspicuous is the fact that neither MMC nor SEM denied that they were
unaware of the terms and conditions attached to EP 133. MMC and SEM did not
present any evidence that they objected to these conditions. Indubitably, MMC
wholeheartedly accepted these terms and conditions, which formed part of the
grant of the permit. MMC agreed to abide by these conditions. It must be
accentuated that a party to a contract cannot deny its validity, without outrage to
ones sense of justice and fairness, after enjoying its benefits.[30] Where parties
have entered into a well-defined contractual relationship, it is imperative that they
should honor and adhere to their rights and obligations as stated in their contracts,
because obligations arising from these have the force of law between the
contracting parties and should be complied with in good faith.[31] Condition
Number 6 categorically states that the permit shall be for the exclusive use and
benefit of MMC or its duly authorized agents. While it may be true that SEM, the
assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of
any evidence showing that the former is the duly authorized agent of the latter. This
Court cannot condone such utter disregard on the part of MMC to honor its
obligations under the permit. Undoubtedly, having violated this condition, the
assignment of EP 133 to SEM is void and has no legal effect.
To boot, SEM squandered whatever rights it assumed it had under EP 133. On 6 July
1993, EP 133 was extended for twelve more months or until 6 July 1994. MMC or
SEM, however, never renewed EP 133 either prior to or after its expiration. Thus, EP
133 expired by non-renewal on 6 July 1994. With the expiration of EP 133 on 6 July
1994, MMC lost any right to the Diwalwal Gold Rush Area.
The Assailed Decision Resolved Facts and Issues That Transpired after the
Promulgation of Apex Mining Co., Inc. v. Garcia
SEM asserts that the 23 June 2006 Decision reversed the 16 July 1991 Decision of
the Court en banc entitled, Apex Mining Co., Inc. v. Garcia.[32]
The assailed Decision DID NOT overturn the 16 July 1991 Decision in Apex Mining
Co., Inc. v. Garcia.
It must be pointed out that what Apex Mining Co., Inc. v. Garcia resolved was the
issue of which, between Apex and MMC, availed itself of the proper procedure in
acquiring the right to prospect and to explore in the Agusan-Davao-Surigao Forest
Reserve. Apex registered its Declarations of Location (DOL) with the then BMGS,
while MMC was granted a permit to prospect by the Bureau of Forest Development
(BFD) and was subsequently granted an exploration permit by the BMGS. Taking into
consideration Presidential Decree No. 463, which provides that mining rights within
forest reservation can be acquired by initially applying for a permit to prospect with
the BFD and subsequently for a permit to explore with the BMGS, the Court therein
ruled that MMC availed itself of the proper procedure to validly operate within the
forest reserve or reservation.

While it is true that Apex Mining Co., Inc. v. Garcia settled the issue of which
between Apex and MMC was legally entitled to explore in the disputed area, such
rights, though, were extinguished by subsequent events that transpired after the
decision was promulgated. These subsequent events, which were not attendant in
Apex Mining Co., Inc. v. Garcia[33] dated 16 July 1991, are the following:
(1) the expiration of EP 133 by non-renewal on 6 July 1994;
(2) the transfer/assignment of EP 133 to SEM on 16 February 1994 which was done
in violation to the condition of EP 133 proscribing its transfer;
(3) the transfer/assignment of EP 133 to SEM is without legal effect for violating PD
463 which mandates that the assignment of mining rights must be with the prior
approval of the Secretary of the DENR.
Moreover, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining
Cooperative,[34] the Court, through Associate Justice Consuelo Ynares-Santiago
(now retired), declared that Apex Mining Co., Inc. v. Garcia did not deal with the
issues of the expiration of EP 133 and the validity of the transfer of EP 133 to SEM,
viz:
Neither can the Apex Mining case foreclose any question pertaining to the
continuing validity of EP No. 133 on grounds which arose after the judgment in said
case was promulgated. While it is true that the Apex Mining case settled the issue of
who between Apex and Marcopper validly acquired mining rights over the disputed
area by availing of the proper procedural requisites mandated by law, it certainly did
not deal with the question raised by the oppositors in the Consolidated Mines cases,
i.e., whether EP No. 133 had already expired and remained valid subsequent to its
transfer by Marcopper to petitioner. (Emphasis supplied.)
What is more revealing is that in the Resolution dated 26 November 1992, resolving
the motion for reconsideration of Apex Mining Co., Inc. v. Garcia, the Court clarified
that the ruling on the said decision was binding only between Apex and MMC and
with respect the particular issue raised therein. Facts and issues not attendant to
the said decision, as in these cases, are not settled by the same. A portion of the
disposition of the Apex Mining Co., Inc. v. Garcia Resolution dated 26 November
1992 decrees:
x x x The decision rendered in this case is conclusive only between the parties with
respect to the particular issue herein raised and under the set of circumstances
herein prevailing. In no case should the decision be considered as a precedent to
resolve or settle claims of persons/entities not parties hereto. Neither is it intended
to unsettle rights of persons/entities which have been acquired or which may have
accrued upon reliance on laws passed by the appropriate agencies. (Emphasis
supplied.)
The Issue of the Constitutionality of Proclamation Is Raised Belatedly
In its last-ditch effort to salvage its case, SEM contends that Proclamation No. 297,
issued by President Gloria Macapagal-Arroyo and declaring the Diwalwal Gold Rush
Area as a mineral reservation, is invalid on the ground that it lacks the concurrence
of Congress as mandated by Section 4, Article XII of the Constitution; Section 1 of
Republic Act No. 3092; Section 14 of Executive Order No. 292, otherwise known as
the Administrative Code of 1987; Section 5(a) of Republic Act No. 7586, and Section
4(a) of Republic Act No. 6657.
It is well-settled that when questions of constitutionality are raised, the court can
exercise its power of judicial review only if the following requisites are present: (1)
an actual and appropriate case exists; (2) there is a personal and substantial interest
of the party raising the constitutional question; (3) the exercise of judicial review is
pleaded at the earliest opportunity; and (4) the constitutional question is the lis
mota of the case.
Taking into consideration the foregoing requisites of judicial review, it is readily clear
that the third requisite is absent. The general rule is that the question of
constitutionality must be raised at the earliest opportunity, so that if it is not raised
in the pleadings, ordinarily it may not be raised at the trial; and if not raised in the
trial court, it will not be considered on appeal.[35]
In the instant case, it must be pointed out that in the Reply to Respondent SEMs
Consolidated Comment filed on 20 May 2003, MAB mentioned Proclamation No.
297, which was issued on 25 November 2002. This proclamation, according to the
MAB, has rendered SEMs claim over the contested area moot, as the President has
already declared the same as a mineral reservation and as an environmentally
critical area. SEM did not put to issue the validity of said proclamation in any of its
pleadings despite numerous opportunities to question the same. It was only after
the assailed Decision was promulgated -- i.e., in SEMs Motion for Reconsideration of
the questioned Decision filed on 13 July 2006 and its Motion for Referral of the Case
to the Court En Banc and for Oral Arguments filed on 22 August 2006 -- that it
assailed the validity of said proclamation.
Certainly, posing the question on the constitutionality of Proclamation No. 297 for
the first time in its Motion for Reconsideration is, indeed, too late.[36]
In fact, this Court, when it rendered the Decision it merely recognized that the
questioned proclamation came from a co-equal branch of government, which
entitled it to a strong presumption of constitutionality.[37] The presumption of its
constitutionality stands inasmuch as the parties in the instant cases did not question
its validity, much less present any evidence to prove that the same is
unconstitutional. This is in line with the precept that administrative issuances have
the force and effect of law and that they benefit from the same presumption of
validity and constitutionality enjoyed by statutes.[38]
Proclamation No. 297 Is in Harmony with Article XII, Section 4, of the Constitution
At any rate, even if this Court were to consider the arguments belatedly raised by
SEM, said arguments are not meritorious.
SEM asserts that Article XII, Section 4 of the Constitution, bars the President from
excluding forest reserves/reservations and proclaiming the same as mineral
reservations, since the power to de-classify them resides in Congress.
Section 4, Article XII of the Constitution reads:
The Congress shall as soon as possible, determine by law the specific limits of forest
lands and national parks, marking clearly their boundaries on the ground.
Thereafter, such forest lands and national parks shall be conserved and may not be
increased nor diminished, except by law. The Congress shall provide, for such
periods as it may determine, measures to prohibit logging in endangered forests
and in watershed areas.
The above-quoted provision says that the area covered by forest lands and national
parks may not be expanded or reduced, unless pursuant to a law enacted by
Congress. Clear in the language of the constitutional provision is its prospective
tenor, since it speaks in this manner: Congress shall as soon as possible. It is only
after the specific limits of the forest lands shall have been determined by the
legislature will this constitutional restriction apply. SEM does not allege nor present
any evidence that Congress had already enacted a statute determining with specific
limits forest lands and national parks. Considering the absence of such law,
Proclamation No. 297 could not have violated Section 4, Article XII of the 1987
Constitution. In PICOP Resources, Inc. v. Base Metals Mineral Resources
Corporation,[39] the Court had the occasion to similarly rule in this fashion:
x x x Sec. 4, Art. XII of the 1987 Constitution, on the other hand, provides that
Congress shall determine the specific limits of forest lands and national parks,
marking clearly their boundaries on the ground. Once this is done, the area thus
covered by said forest lands and national parks may not be expanded or reduced
except also by congressional legislation. Since Congress has yet to enact a law
determining the specific limits of the forest lands covered by Proclamation No. 369
and marking clearly its boundaries on the ground, there can be no occasion that
could give rise to a violation of the constitutional provision.
Section 4, Article XII of the Constitution, addresses the concern of the drafters of the
1987 Constitution about forests and the preservation of national parks. This was
brought about by the drafters awareness and fear of the continuing destruction of
this countrys forests.[40] In view of this concern, Congress is tasked to fix by law the
specific limits of forest lands and national parks, after which the trees in these areas
are to be taken care of.[41] Hence, these forest lands and national parks that
Congress is to delimit through a law could be changed only by Congress.
In addition, there is nothing in the constitutional provision that prohibits the
President from declaring a forest land as an environmentally critical area and from
regulating the mining operations therein by declaring it as a mineral reservation in
order to prevent the further degradation of the forest environment and to resolve
the health and peace and order problems that beset the area.
A closer examination of Section 4, Article XII of the Constitution and Proclamation
No. 297 reveals that there is nothing contradictory between the two. Proclamation
No. 297, a measure to attain and maintain a rational and orderly balance between
socio-economic growth and environmental protection, jibes with the constitutional
policy of preserving and protecting the forest lands from being further devastated
by denudation. In other words, the proclamation in question is in line with Section
4, Article XII of the Constitution, as the former fosters the preservation of the forest
environment of the Diwalwal area and is aimed at preventing the further
degradation of the same. These objectives are the very same reasons why the
subject constitutional provision is in place.
What is more, jurisprudence has recognized the policy of multiple land use in our
laws towards the end that the countrys precious natural resources may be rationally
explored, developed, utilized and conserved.[42] It has been held that forest
reserves or reservations can at the same time be open to mining operations,
provided a prior written clearance by the government agency having jurisdiction
over such reservation is obtained. In other words mineral lands can exist within
forest reservations. These two terms are not anti-thetical. This is made manifest if
we read Section 47 of Presidential Decree No. 705 or the Revised Forestry Code of
the Philippines, which provides:
Mining operations in forest lands shall be regulated and conducted with due regard
to protection, development and utilization of other surface resources. Location,
prospecting, exploration, utilization or exploitation of mineral resources in forest
reservations shall be governed by mining laws, rules and regulations. (Emphasis
supplied.)
Also, Section 6 of Republic Act No. 7942 or the Mining Act of 1995, states that
mining operations in reserved lands other than mineral reservations, such as forest
reserves/reservations, are allowed, viz:
Mining operations in reserved lands other than mineral reservations may be
undertaken by the Department, subject to limitations as herein provided. In the
event that the Department cannot undertake such activities, they may be
undertaken by a qualified person in accordance with the rules and regulations
promulgated by the Secretary. (Emphasis supplied.)
Since forest reservations can be made mineral lands where mining operations are
conducted, then there is no argument that the disputed land, which lies within a
forest reservation, can be declared as a mineral reservation as well.
Republic Act No. 7942 Otherwise Known as the Philippine Mining Act of 1995, is the
Applicable Law
Determined to rivet its crumbling cause, SEM then argues that Proclamation No.
297 is invalid, as it transgressed the statutes governing the exclusion of areas
already declared as forest reserves, such as Section 1 of Republic Act No. 3092,[43]
Section 14 of the Administrative Code of 1987, Section 5(a) of Republic Act No.
7586,[44] and Section 4(a) of Republic Act No. 6657.[45]
Citing Section 1 of Republic Act No. 3092, which provides as follows:
Upon the recommendation of the Director of Forestry, with the approval of the
Department Head, the President of the Philippines shall set apart forest reserves
which shall include denuded forest lands from the public lands and he shall by
proclamation declare the establishment of such forest reserves and the boundaries
thereof, and thereafter such forest reserves shall not be entered, or otherwise
disposed of, but shall remain indefinitely as such for forest uses.
The President of the Philippines may, in like manner upon the recommendation of
the Director of Forestry, with the approval of the Department head, by
proclamation, modify the boundaries of any such forest reserve to conform with
subsequent precise survey but not to exclude any portion thereof except with the
concurrence of Congress. (Underscoring supplied.)
SEM submits that the foregoing provision is the governing statute on the exclusion
of areas already declared as forest reserves. Thus, areas already set aside by law as
forest reserves are no longer within the proclamation powers of the President to
modify or set aside for any other purposes such as mineral reservation.
To bolster its contention that the President cannot disestablish forest reserves into
mineral reservations, SEM makes reference to Section 14, Chapter 4, Title I, Book III
of the Administrative Code of 1987, which partly recites:
The President shall have the power to reserve for settlement or public use, and for
specific public purposes, any of the lands of the public domain, the use of which is
not otherwise directed by law. The reserved land shall thereafter remain subject to
the specific public purpose indicated until otherwise provided by law or
proclamation. (Emphases supplied.)
SEM further contends that Section 7 of Republic Act No. 7586,[46] which declares
that the disestablishment of a protected area shall be done by Congress, and
Section 4(a) of Republic Act No. 6657,[47] which in turn requires a law passed by
Congress before any forest reserve can be reclassified, militate against the validity of
Proclamation No. 297.
Proclamation No. 297, declaring a certain portion of land located in Monkayo,
Compostela Valley, with an area of 8,100 hectares, more or less, as a mineral
reservation, was issued by the President pursuant to Section 5 of Republic Act No.
7942, also known as the Philippine Mining Act of 1995.
Proclamation No. 297 did not modify the boundaries of the Agusan-Davao-Surigao
Forest Reserve since, as earlier discussed, mineral reservations can exist within
forest reserves because of the multiple land use policy. The metes and bounds of a
forest reservation remain intact even if, within the said area, a mineral land is
located and thereafter declared as a mineral reservation.
More to the point, a perusal of Republic Act No. 3092, An Act to Amend Certain
Sections of the Revised Administrative Code of 1917, which was approved on 17
August 1961, and the Administrative Code of 1987, shows that only those public
lands declared by the President as reserved pursuant to these two statutes are to
remain subject to the specific purpose. The tenor of the cited provisions, namely:
the President of the Philippines shall set apart forest reserves and the reserved land
shall thereafter remain, speaks of future public reservations to be declared,
pursuant to these two statutes. These provisions do not apply to forest reservations
earlier declared as such, as in this case, which was proclaimed way back on 27
February 1931, by Governor General Dwight F. Davis under Proclamation No. 369.
Over and above that, Section 5 of Republic Act No. 7942 authorizes the President to
establish mineral reservations, to wit:
Sec. 5. Mineral Reservations. - When the national interest so requires, such as when
there is a need to preserve strategic raw materials for industries critical to national
development, or certain minerals for scientific, cultural or ecological value, the
President may establish mineral reservations upon the recommendation of the
Director through the Secretary. Mining operations in existing mineral reservations
and such other reservations as may thereafter be established, shall be undertaken
by the Department or through a contractor x x x. (Emphasis supplied.)
It is a rudimentary principle in legal hermeneutics that where there are two acts or
provisions, one of which is special and particular and certainly involves the matter in
question, the other general, which, if standing alone, would include the matter and
thus conflict with the special act or provision, the special act must as intended be
taken as constituting an exception to the general act or provision, especially when
such general and special acts or provisions are contemporaneous, as the Legislature
is not to be presumed to have intended a conflict.
Hence, it has become an established rule of statutory construction that where one
statute deals with a subject in general terms, and another deals with a part of the
same subject in a more detailed way, the two should be harmonized if possible; but
if there is any conflict, the latter shall prevail regardless of whether it was passed
prior to the general statute. Or where two statutes are of contrary tenor or of
different dates but are of equal theoretical application to a particular case, the one
specially designed therefor should prevail over the other.
It must be observed that Republic Act No. 3092, An Act to Amend Certain Sections
of the Revised Administrative Code of 1917, and the Administrative Code of 1987,
are general laws. Section 1 of Republic Act No. 3092 and Section 14 of the
Administrative Code of 1987 require the concurrence of Congress before any
portion of a forest reserve can be validly excluded therefrom. These provisions are
broad since they deal with all kinds of exclusion or reclassification relative to forest
reserves, i.e., forest reserve areas can be transformed into all kinds of public
purposes, not only the establishment of a mineral reservation. Section 5 of Republic
Act No. 7942 is a special provision, as it specifically treats of the establishment of
mineral reservations only. Said provision grants the President the power to proclaim
a mineral land as a mineral reservation, regardless of whether such land is also an
existing forest reservation.
Sec. 5(a) of Republic Act No. 7586 provides:
Sec. 5. Establishment and Extent of the System. The establishment and
operationalization of the System shall involve the following:
(a) All areas or islands in the Philippines proclaimed, designated or set aside,
pursuant to a law, presidential decree, presidential proclamation or executive order
as national park, game refuge, bird and wildlife sanctuary, wilderness area, strict
nature reserve, watershed, mangrove reserve, fish sanctuary, natural and historical
landmark, protected and managed landscape/seascape as well as identified virgin
forests before the effectivity of this Act are hereby designated as initial components
of the System. The initial components of the System shall be governed by existing
laws, rules and regulations, not inconsistent with this Act.
Glaring in the foregoing enumeration of areas comprising the initial component of
the NIPAS System under Republic Act No. 7586 is the absence of forest reserves.
Only protected areas enumerated under said provision cannot be modified. Since
the subject matter of Proclamation No. 297 is a forest reservation proclaimed as a
mineral reserve, Republic Act No. 7586 cannot possibly be made applicable. Neither
can Proclamation No. 297 possibly violate said law.
Similarly, Section 4(a) of Republic Act No. 6657 cannot be made applicable to the
instant case.
Section 4(a) of Republic Act No. 6657 reads:
All alienable and disposable lands of the public domain devoted to or suitable for
agriculture. No reclassification of forest or mineral lands to agricultural lands shall
be undertaken after the approval of this Act until Congress, taking into account
ecological, developmental and equity considerations, shall have determined by law,
the specific limits of the public domain. (Underscoring supplied.)
Section 4(a) of Republic Act No. 6657 prohibits the reclassification of forest or
mineral lands into agricultural lands until Congress shall have determined by law the
specific limits of the public domain. A cursory reading of this provision will readily
show that the same is not relevant to the instant controversy, as there has been no
reclassification of a forest or mineral land into an agricultural land.
Furthermore, the settled rule of statutory construction is that if two or more laws of
different dates and of contrary tenors are of equal theoretical application to a
particular case, the statute of later date must prevail being a later expression of
legislative will.[48]
In the case at bar, there is no question that Republic Act No. 7942 was signed into
law later than Republic Act No. 3092, the Administrative Code of 1987,[49] Republic
Act No. 7586 and Republic Act No. 6657. Applying the cited principle, the provisions
of Republic Act No. 3092, the Administrative Code of 1987, Republic Act No. 7586
and Republic Act No. 6657 cited by SEM must yield to Section 5 of Republic Act No.
7942.
Camilo Banad, et al., Cannot Seek Relief from This Court
Camilo Banad and his group admit that they are members of the Balite Cooperative.
They, however, claim that they are distinct from Balite and move that this Court
recognize them as prior mining locators.
Unfortunately for them, this Court cannot grant any relief they seek. Records reveal
that although they were parties to the instant cases before the Court of Appeals,
they did not file a petition for review before this Court to contest the decision of the
appellate court. The only petitioners in the instant cases are the MAB, SEM, Balite
and Apex. Consequently, having no personality in the instant cases, they cannot
seek any relief from this Court.
Apexs Motion for Clarification and Balites Manifestation and Motion
In its Motion for Clarification, Apex desires that the Court elucidate the assailed
Decisions pronouncement that mining operations, are now, therefore within the full
control of the State through the executive branch and place the said
pronouncement in the proper perspective as the declaration in La Bugal-BLaan,
which states that
The concept of control adopted in Section 2 of Article XII must be taken to mean less
than dictatorial, all-encompassing control; but nevertheless sufficient to give the
State the power to direct, restrain, regulate and govern the affairs of the extractive
enterprise.[50]
Apex states that the subject portion of the assailed Decision could send a chilling
effect to potential investors in the mining industry, who may be of the impression
that the State has taken over the mining industry, not as regulator but as an
operator. It is of the opinion that the State cannot directly undertake mining
operations.
Moreover, Apex is apprehensive of the following portion in the questioned Decision
The State can also opt to award mining operations in the mineral reservation to
private entities including petitioner Apex and Balite, if it wishes. It avers that the
phrase if it wishes may whimsically be interpreted to mean a blanket authority of
the administrative authority to reject the formers application for an exploration
permit even though it complies with the prescribed policies, rules and regulations.
Apex likewise asks this Court to order the MGB to accept its application for an
exploration permit.
Balite echoes the same concern as that of Apex on the actual take-over by the State
of the mining industry in the disputed area to the exclusion of the private sector. In
addition, Balite prays that this Court direct MGB to accept Balites application for an
exploration permit.
Contrary to the contention of Apex and Balite, the fourth paragraph of Section 2,
Article XII of the Constitution and Section 5 of Republic Act No. 7942 sanctions the
State, through the executive department, to undertake mining operations directly,
as an operator and not as a mere regulator of mineral undertakings. This is made
clearer by the fourth paragraph of Section 2, Article XII of the 1987 Constitution,
which provides in part:
SEC. 2. x x x The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned
by such citizens. x x x. (Emphasis supplied.)
Also, Section 5 of Republic Act No. 7942 states that the mining operations in mineral
reservations shall be undertaken by the Department of Environment and Natural
Resources or a contractor, to wit:
SEC. 5. Mineral Reservations. When the national interest so requires, such as when
there is a need to preserve strategic raw materials for industries critical to national
development, or certain minerals for scientific, cultural or ecological value, the
President may establish mineral reservations upon the recommendation of the
Director through the Secretary. Mining operations in existing mineral reservations
and such other reservations as may thereafter be established, shall be undertaken
by the Department or through a contractor x x x. (Emphasis supplied.)
Undoubtedly, the Constitution, as well as Republic Act No. 7942, allows the
executive department to undertake mining operations. Besides, La Bugal-BLaan,
cited by Apex, did not refer to the fourth sentence of Section 2, Article XII of the
Constitution, but to the third sentence of the said provision, which states:
SEC. 2. x x x The exploration, development, and utilization of natural resources shall
be under the full control and supervision of the State. x x x.

Pursuant to Section 5 of Republic Act No. 7942, the executive department has the
option to undertake directly the mining operations in the Diwalwal Gold Rush Area
or to award mining operations therein to private entities. The phrase if it wishes
must be understood within the context of this provision. Hence, the Court cannot
dictate this co-equal branch to choose which of the two options to select. It is the
sole prerogative of the executive department to undertake directly or to award the
mining operations of the contested area.
Even assuming that the proper authority may decide to award the mining
operations of the disputed area, this Court cannot arrogate unto itself the task of
determining who, among the applicants, is qualified. It is the duty of the
appropriate administrative body to determine the qualifications of the applicants. It
is only when this administrative body whimsically denies the applications of
qualified applicants that the Court may interfere. But until then, the Court has no
power to direct said administrative body to accept the application of any qualified
applicant.
In view of this, the Court cannot grant the prayer of Apex and Balite asking the
Court to direct the MGB to accept their applications pending before the MGB.
SEMs Manifestation and Motion dated 25 January 2007
SEM wants to emphasize that its predecessor-in-interest, Marcopper or MMC,
complied with the mandatory exploration work program, required under EP 133, by
attaching therewith quarterly reports on exploration work from 20 June 1986 to
March 1994.
It must be observed that this is the very first time at this very late stage that SEM
has presented the quarterly exploration reports. From the early phase of this
controversy, SEM did not disprove the arguments of the other parties that
Marcopper violated the terms under EP 133, among other violations, by not
complying with the mandatory exploration work program. Neither did it present
evidence for the appreciation of the lower tribunals. Hence, the non-compliance
with the mandatory exploration work program was not made an issue in any stage
of the proceedings. The rule is that an issue that was not raised in the lower court or
tribunal cannot be raised for the first time on appeal, as this would violate the basic
rules of fair play, justice and due process.[51] Thus, this Court cannot take
cognizance of the issue of whether or not MMC complied with the mandatory work
program.
In sum, this Court finds:
1. The assailed Decision did not overturn the 16 July 1991 Decision in Apex
Mining Co., Inc. v. Garcia. The former was decided on facts and issues that were not
attendant in the latter, such as the expiration of EP 133, the violation of the
condition embodied in EP 133 prohibiting its assignment, and the unauthorized and
invalid assignment of EP 133 by MMC to SEM, since this assignment was effected
without the approval of the Secretary of DENR;
2. SEM did not acquire vested right over the disputed area because its
supposed right was extinguished by the expiration of its exploration permit and by
its violation of the condition prohibiting the assignment of EP 133 by MMC to SEM.
In addition, even assuming that SEM has a valid exploration permit, such is a mere
license that can be withdrawn by the State. In fact, the same has been withdrawn by
the issuance of Proclamation No. 297, which places the disputed area under the full
control of the State through the Executive Department;
3. The approval requirement under Section 97 of Presidential Decree No.
463 applies to the assignment of EP 133 by MMC to SEM, since the exploration
permit is an interest in a mining lease contract;
4. The issue of the constitutionality and the legality of Proclamation No.
297 was raised belatedly, as SEM questions the same for the first time in its Motion
for Reconsideration. Even if the issue were to be entertained, the said proclamation
is found to be in harmony with the Constitution and other existing statutes;
5. The motion for reconsideration of Camilo Banad, et al. cannot be passed
upon because they are not parties to the instant cases;
6. The prayers of Apex and Balite asking the Court to direct the MGB to
accept their applications for exploration permits cannot be granted, since it is the
Executive Department that has the prerogative to accept such applications, if ever it
decides to award the mining operations in the disputed area to a private entity;
7. The Court cannot pass upon the issue of whether or not MMC complied
with the mandatory exploration work program, as such was a non-issue and was not
raised before the Court of Appeals and the lower tribunals.
WHEREFORE, premises considered, the Court holds:
1. The Motions for Reconsideration filed by Camilo Banad, et al. and Southeast
Mindanao Gold Mining Corporation are DENIED for lack of merit;
2. The Motion for Clarification of Apex Mining Co., Inc. and the Manifestation and
Motion of the Balite Communal Portal Mining Cooperative, insofar as these
motions/manifestation ask the Court to direct the Mines and Geo-Sciences Bureau
to accept their respective applications for exploration permits, are DENIED;
3. The Manifestation and Urgent Motion dated 25 January 2007 of Southeast
Mindanao Gold Mining Corporation is DENIED.
4. The State, through the Executive Department, should it so desire, may now award
mining operations in the disputed area to any qualified entities it may determine.
The Mines and Geosciences Bureau may process exploration permits pending
before it, taking into consideration the applicable mining laws, rules and regulations
relative thereto.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 127882 January 27, 2004
LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC.,
.
DECISION
CARPIO-MORALES, J.:
The present petition for mandamus and prohibition assails the constitutionality of
Republic Act No. 7942,5 otherwise known as the PHILIPPINE MINING ACT OF 1995,
along with the Implementing Rules and Regulations issued pursuant thereto,
Department of Environment and Natural Resources (DENR) Administrative Order 96-
40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on
March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc.
(WMCP), a corporation organized under Philippine laws.
On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.)
No. 2796 authorizing the DENR Secretary 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 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. 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 investment in a single
mining unit project of at least Fifty Million Dollars in United States Currency (US
$50,000,000.00).7
On 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."8
R.A. No. 7942 defines the modes of mineral agreements for mining operations,9
outlines the procedure for their filing and approval,10 assignment/transfer11 and
withdrawal,12 and fixes their terms.13 Similar provisions govern financial or
technical assistance agreements.14
The law prescribes the qualifications of contractors15 and grants them certain
rights, including timber,16 water17 and easement18 rights, and the right to possess
explosives.19 Surface owners, occupants, or concessionaires are forbidden from
preventing holders of mining rights from entering private lands and concession
areas.20 A procedure for the settlement of conflicts is likewise provided for.21
The Act restricts the conditions for exploration,22 quarry23 and other24 permits. It
regulates the transport, sale and processing of minerals,25 and promotes the
development of mining communities, science and mining technology,26 and safety
and environmental protection.27
The government's share in the agreements is spelled out and allocated,28 taxes and
fees are imposed,29 incentives granted.30 Aside from penalizing certain acts,31 the
law likewise specifies grounds for the cancellation, revocation and termination of
agreements and permits.32
On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and
Manila Times, two newspapers of general circulation, R.A. No. 7942 took effect.33
Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the
President entered into an FTAA with WMCP covering 99,387 hectares of land in
South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato.34
On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR
Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the
Implementing Rules and Regulations of R.A. No. 7942. This was later repealed by
DAO No. 96-40, s. 1996 which was adopted on December 20, 1996.
On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary
demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No.
96-40,35 giving the DENR fifteen days from receipt36 to act thereon. The DENR,
however, has yet to respond or act on petitioners' letter.37
Petitioners thus filed the present petition for prohibition and mandamus, with a
prayer for a temporary restraining order. They allege that at the time of the filing of
the petition, 100 FTAA applications had already been filed, covering an area of 8.4
million hectares,38 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.39
Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:
I VII
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in that it
allows fully foreign owned corporations to explore, develop, utilize and exploit
mineral resources in a manner contrary to Section 2, paragraph 4, Article XII of the
Constitution;
II
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in that it
allows the taking of private property without the determination of public use and
for just compensation;
III
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in that it
violates Sec. 1, Art. III of the Constitution;
IV
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in that it
allows enjoyment by foreign citizens as well as fully foreign owned corporations of
the nation's marine wealth contrary to Section 2, paragraph 2 of Article XII of the
Constitution;
V a 100% owned subsidiary of WMC LIMITED."43
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in that it
allows priority to foreign and fully foreign owned corporations in the exploration,
development and utilization of mineral resources contrary to Article XII of the
Constitution;
VI
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in that it
allows the inequitable sharing of wealth contrary to Sections [sic] 1, paragraph 1,
and Section 2, paragraph 4[,] [Article XII] of the Constitution;
x x x in recommending approval of and implementing the Financial and Technical
Assistance Agreement between the President of the Republic of the Philippines and
Western Mining Corporation Philippines Inc. because the same is illegal and
unconstitutional.40
They pray that the Court issue an order:
(a) Permanently enjoining respondents from acting on any application for Financial
or Technical Assistance Agreements;
(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as
unconstitutional and null and void;
(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act
contained in DENR Administrative Order No. 96-40 and all other similar
administrative issuances as unconstitutional and null and void; and
(d) Cancelling the Financial and Technical Assistance Agreement issued to Western
Mining Philippines, Inc. as unconstitutional, illegal and null and void.41
Impleaded as public respondents are Ruben Torres, the then Executive Secretary,
Victor O. Ramos, the then DENR Secretary, and Horacio Ramos, Director of the
Mines and Geosciences Bureau of the DENR. Also impleaded is private respondent
WMCP, which entered into the assailed FTAA with the Philippine Government.
WMCP is owned by WMC Resources International Pty., Ltd. (WMC), "a wholly
owned subsidiary of Western Mining Corporation Holdings Limited, a publicly listed
major Australian mining and exploration company."42 By WMCP's information, "it is

Respondents, aside from meeting petitioners' contentions, argue that the requisites
for judicial inquiry have not been met and that the petition does not comply with
the criteria for prohibition and mandamus. Additionally, respondent WMCP argues
that there has been a violation of the rule on hierarchy of courts.
After petitioners filed their reply, this Court granted due course to the petition. The
parties have since filed their respective memoranda.
WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that
on January 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc.
(Sagittarius), a corporation organized under Philippine laws.44 WMCP was
subsequently renamed "Tampakan Mineral Resources Corporation."45 WMCP
claims that at least 60% of the equity of Sagittarius is owned by Filipinos and/or
Filipino-owned corporations while about 40% is owned by Indophil Resources NL, an
Australian company.46 It further claims that by such sale and transfer of shares,
"WMCP has ceased to be connected in any way with WMC."47
By virtue of such sale and transfer, the DENR Secretary, by Order of December 18,
2001,48 approved the transfer and registration of the subject FTAA from WMCP to
Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co.
(Lepanto) to the Office of the President which upheld it by Decision of July 23,
2002.49 Its motion for reconsideration having been denied by the Office of the
President by Resolution of November 12, 2002,50 Lepanto filed a petition for
review51 before the Court of Appeals. Incidentally, two other petitions for review
related to the approval of the transfer and registration of the FTAA to Sagittarius
were recently resolved by this Court.52
It bears stressing that this case has not been rendered moot either by the transfer
and registration of the FTAA to a Filipino-owned corporation or by the non-issuance
of a temporary restraining order or a preliminary injunction to stay the above-said
July 23, 2002 decision of the Office of the President.53 The validity of the transfer
remains in dispute and awaits final judicial determination. This assumes, of course,
that such transfer cures the FTAA's alleged unconstitutionality, on which question
judgment is reserved.
WMCP also points out that the original claimowners of the major mineralized areas
included in the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and
Southcot Mining Corporation, are all Filipino-owned corporations,54 each of which
was a holder of an approved Mineral Production Sharing Agreement awarded in
1994, albeit their respective mineral claims were subsumed in the WMCP FTAA;55
and that these three companies are the same companies that consolidated their
interests in Sagittarius to whom WMC sold its 100% equity in WMCP.56 WMCP
concludes that in the event that the FTAA is invalidated, the MPSAs of the three
corporations would be revived and the mineral claims would revert to their original
claimants.57
These circumstances, while informative, are hardly significant in the resolution of
this case, it involving the validity of the FTAA, not the possible consequences of its
invalidation.
Of the above-enumerated seven grounds cited by petitioners, as will be shown later,
only the first and the last need be delved into; in the latter, the discussion shall
dwell only insofar as it questions the effectivity of E. O. No. 279 by virtue of which
order the questioned FTAA was forged.
I
Before going into the substantive issues, the procedural questions posed by
respondents shall first be tackled.
REQUISITES FOR JUDICIAL REVIEW
When an issue of constitutionality is raised, this Court can exercise its power of
judicial review only if the following requisites are present:
(1) The existence of an actual and appropriate case;
(2) A personal and substantial interest of the party raising the constitutional
question;
(3) The exercise of judicial review is pleaded at the earliest opportunity; and
(4) The constitutional question is the lis mota of the case. 58
Respondents claim that the first three requisites are not present.
Section 1, Article VIII of the Constitution states that "(j)udicial power includes the
duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable." The power of judicial review, therefore, is
limited to the determination of actual cases and controversies.59
An actual case or controversy means an existing case or controversy that is
appropriate or ripe for determination, not conjectural or anticipatory,60 lest the
decision of the court would amount to an advisory opinion.61 The power does not
extend to hypothetical questions62 since any attempt at abstraction could only lead
to dialectics and barren legal questions and to sterile conclusions unrelated to
actualities.63

"Legal standing" or locus standi has been defined as a personal and substantial
interest in the case such that the party has sustained or will sustain direct injury as a
result of the governmental act that is being challenged,64 alleging more than a
generalized grievance.65 The gist of the question of standing is whether a party
alleges "such personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues upon which the
court depends for illumination of difficult constitutional questions."66 Unless a
person is injuriously affected in any of his constitutional rights by the operation of
statute or ordinance, he has no standing.67
Petitioners traverse a wide range of sectors. Among them are La Bugal B'laan Tribal
Association, Inc., a farmers and indigenous people's cooperative organized under
Philippine laws representing a community actually affected by the mining activities
of WMCP, members of said cooperative,68 as well as other residents of areas also
affected by the mining activities of WMCP.69 These petitioners have standing to
raise the constitutionality of the questioned FTAA as they allege a personal and
substantial injury. They claim that they would suffer "irremediable displacement"70
as a result of the implementation of the FTAA allowing WMCP to conduct mining
activities in their area of residence. They thus meet the appropriate case
requirement as they assert an interest adverse to that of respondents who, on the
other hand, insist on the FTAA's validity.
In view of the alleged impending injury, petitioners also have standing to assail the
validity of E.O. No. 279, by authority of which the FTAA was executed.
Public respondents maintain that petitioners, being strangers to the FTAA, cannot
sue either or both contracting parties to annul it.71 In other words, they contend
that petitioners are not real parties in interest in an action for the annulment of
contract.
Public respondents' contention fails. The present action is not merely one for
annulment of contract but for prohibition and mandamus. Petitioners allege that
public respondents acted without or in excess of jurisdiction in implementing the
FTAA, which they submit is unconstitutional. As the case involves constitutional
questions, this Court is not concerned with whether petitioners are real parties in
interest, but with whether they have legal standing. As held in Kilosbayan v.
Morato:72
x x x. "It is important to note . . . that standing because of its constitutional and
public policy underpinnings, is very different from questions relating to whether a
particular plaintiff is the real party in interest or has capacity to sue. Although all
three requirements are directed towards ensuring that only certain parties can
maintain an action, standing restrictions require a partial consideration of the
merits, as well as broader policy concerns relating to the proper role of the judiciary
in certain areas.["] (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328
[1985])
Standing is a special concern in constitutional law because in some cases suits are
brought not by parties who have been personally injured by the operation of a law
or by official action taken, but by concerned citizens, taxpayers or voters who
actually sue in the public interest. Hence, the question in standing is whether such
parties have "alleged such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon
which the court so largely depends for illumination of difficult constitutional
questions." (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962].)
As earlier stated, petitioners meet this requirement.
The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40
likewise fulfills the requisites of justiciability. Although these laws were not in force
when the subject FTAA was entered into, the question as to their validity is ripe for
adjudication.
The WMCP FTAA provides:
14.3 Future Legislation
Any term and condition more favourable to Financial &Technical Assistance
Agreement contractors resulting from repeal or amendment of any existing law or
regulation or from the enactment of a law, regulation or administrative order shall
be considered a part of this Agreement.
It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are
more favorable to WMCP, hence, these laws, to the extent that they are favorable to
WMCP, govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing
agreements.
SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. x x x That the
provisions of Chapter XIV on government share in mineral production-sharing
agreement and of Chapter XVI on incentives of this Act shall immediately govern
and apply to a mining lessee or contractor unless the mining lessee or contractor
indicates his intention to the secretary, in writing, not to avail of said provisions x x x
Provided, finally, That such leases, production-sharing agreements, financial or
technical assistance agreements shall comply with the applicable provisions of this
Act and its implementing rules and regulations.
As there is no suggestion that WMCP has indicated its intention not to avail of the
provisions of Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply
to the WMCP FTAA.
Misconstruing the application of the third requisite for judicial review that the
exercise of the review is pleaded at the earliest opportunity WMCP points out that
the petition was filed only almost two years after the execution of the FTAA, hence,
not raised at the earliest opportunity.
The third requisite should not be taken to mean that the question of
constitutionality must be raised immediately after the execution of the state action
complained of. That the question of constitutionality has not been raised before is
not a valid reason for refusing to allow it to be raised later.73 A contrary rule would
mean that a law, otherwise unconstitutional, would lapse into constitutionality by
the mere failure of the proper party to promptly file a case to challenge the same.
PROPRIETY OF PROHIBITION AND MANDAMUS
Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2
of Rule 65 read:
SEC. 2. Petition for prohibition. When the proceedings of any tribunal,
corporation, board, or person, whether exercising functions judicial or ministerial,
are without or in excess of its or his jurisdiction, or with grave abuse of discretion,
and there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court alleging the facts with certainty and praying that judgment be
rendered commanding the defendant to desist from further proceeding in the
action or matter specified therein.
Prohibition is a preventive remedy.74 It seeks a judgment ordering the defendant to
desist from continuing with the commission of an act perceived to be illegal.75
The petition for prohibition at bar is thus an appropriate remedy. While the
execution of the contract itself may be fait accompli, its implementation is not.
Public respondents, in behalf of the Government, have obligations to fulfill under
said contract. Petitioners seek to prevent them from fulfilling such obligations on
the theory that the contract is unconstitutional and, therefore, void.
The propriety of a petition for prohibition being upheld, discussion of the propriety
of the mandamus aspect of the petition is rendered unnecessary.
HIERARCHY OF COURTS
The contention that the filing of this petition violated the rule on hierarchy of courts
does not likewise lie. The rule has been explained thus:
Between two courts of concurrent original jurisdiction, it is the lower court that
should initially pass upon the issues of a case. That way, as a particular case goes
through the hierarchy of courts, it is shorn of all but the important legal issues or
those of first impression, which are the proper subject of attention of the appellate
court. This is a procedural rule borne of experience and adopted to improve the
administration of justice.
This Court has consistently enjoined litigants to respect the hierarchy of courts.
Although this Court has concurrent jurisdiction with the Regional Trial Courts and
the Court of Appeals to issue writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction, such concurrence does not give a party
unrestricted freedom of choice of court forum. The resort to this Court's primary
jurisdiction to issue said writs shall be allowed only where the redress desired
cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify such invocation. We held in People v. Cuaresma that:
A becoming regard for judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts should be
filed with the Regional Trial Court, and those against the latter, with the Court of
Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue
these writs should be allowed only where there are special and important reasons
therefor, clearly and specifically set out in the petition. This is established policy. It is
a policy necessary to prevent inordinate demands upon the Court's time and
attention which are better devoted to those matters within its exclusive jurisdiction,
and to prevent further over-crowding of the Court's docket x x x.76 [Emphasis
supplied.]
The repercussions of the issues in this case on the Philippine mining industry, if not
the national economy, as well as the novelty thereof, constitute exceptional and
compelling circumstances to justify resort to this Court in the first instance.
In all events, this Court has the discretion to take cognizance of a suit which does
not satisfy the requirements of an actual case or legal standing when paramount
public interest is involved.77 When the issues raised are of paramount importance
to the public, this Court may brush aside technicalities of procedure.78
II
Petitioners contend that E.O. No. 279 did not take effect because its supposed date
of effectivity came after President Aquino had already lost her legislative powers
under the Provisional Constitution.
And they likewise claim that the WMC FTAA, which was entered into pursuant to
E.O. No. 279, violates Section 2, Article XII of the Constitution because, among other
reasons:
(1) It allows foreign-owned companies to extend more than mere financial or
technical assistance to the State in the exploitation, development, and utilization of
minerals, petroleum, and other mineral oils, and even permits foreign owned
companies to "operate and manage mining activities."
(2) It allows foreign-owned companies to extend both technical and financial
assistance, instead of "either technical or financial assistance."
To appreciate the import of these issues, a visit to the history of the pertinent
constitutional provision, the concepts contained therein, and the laws enacted
pursuant thereto, is in order.
Section 2, Article XII reads in full:
Sec. 2. All lands of the public domain, waters, 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. With the exception
of agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under the full
control and supervision of the State. The State may directly undertake such activities
or it may enter into co-production, joint venture, or production-sharing agreements
with Filipino citizens, or corporations or associations at least sixty per centum of
whose capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law. In cases of water rights
for irrigation, water supply, fisheries, or industrial uses other than the development
of water power, beneficial use may be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters,
territorial sea, and exclusive economic zone, and reserve its use and enjoyment
exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations
involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of local scientific and
technical resources.
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
THE SPANISH REGIME AND THE REGALIAN DOCTRINE
The first sentence of Section 2 embodies the Regalian doctrine or jura regalia.
Introduced by Spain into these Islands, this feudal concept is based on the State's
power of dominium, which is the capacity of the State to own or acquire
property.79
In its broad sense, the term "jura regalia" refers to royal rights, or those rights which
the King has by virtue of his prerogatives. In Spanish law, it refers to a right which
the sovereign has over anything in which a subject has a right of property or
propriedad. These were rights enjoyed during feudal times by the king as the
sovereign.
The theory of the feudal system was that title to all lands was originally held by the
King, and while the use of lands was granted out to others who were permitted to
hold them under certain conditions, the King theoretically retained the title. By
fiction of law, the King was regarded as the original proprietor of all lands, and the
true and only source of title, and from him all lands were held. The theory of jura
regalia was therefore nothing more than a natural fruit of conquest.80
The Philippines having passed to Spain by virtue of discovery and conquest,81
earlier Spanish decrees declared that "all lands were held from the Crown."82
The Regalian doctrine extends not only to land but also to "all natural wealth that
may be found in the bowels of the earth."83 Spain, in particular, recognized the
unique value of natural resources, viewing them, especially minerals, as an
abundant source of revenue to finance its wars against other nations.84 Mining laws
during the Spanish regime reflected this perspective.85
THE AMERICAN OCCUPATION AND THE CONCESSION REGIME
By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago known as
the Philippine Islands" to the United States. The Philippines was hence governed by
means of organic acts that were in the nature of charters serving as a Constitution
of the occupied territory from 1900 to 1935.86 Among the principal organic acts of
the Philippines was the Act of Congress of July 1, 1902, more commonly known as
the Philippine Bill of 1902, through which the United States Congress assumed the
administration of the Philippine Islands.87 Section 20 of said Bill reserved the
disposition of mineral lands of the public domain from sale. Section 21 thereof
allowed the free and open exploration, occupation and purchase of mineral deposits
not only to citizens of the Philippine Islands but to those of the United States as
well:
Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands,
both surveyed and unsurveyed, are hereby declared to be free and open to
exploration, occupation and purchase, and the land in which they are found, to
occupation and purchase, by citizens of the United States or of said Islands:
Provided, That when on any lands in said Islands entered and occupied as
agricultural lands under the provisions of this Act, but not patented, mineral
deposits have been found, the working of such mineral deposits is forbidden until
the person, association, or corporation who or which has entered and is occupying
such lands shall have paid to the Government of said Islands such additional sum or
sums as will make the total amount paid for the mineral claim or claims in which
said deposits are located equal to the amount charged by the Government for the
same as mineral claims.
Unlike Spain, the United States considered natural resources as a source of wealth
for its nationals and saw fit to allow both Filipino and American citizens to explore
and exploit minerals in public lands, and to grant patents to private mineral lands.88
A person who acquired ownership over a parcel of private mineral land pursuant to
the laws then prevailing could exclude other persons, even the State, from
exploiting minerals within his property.89 Thus, earlier jurisprudence90 held that:
A valid and subsisting location of mineral land, made and kept up in accordance with
the provisions of the statutes of the United States, has the effect of a grant by the
United States of the present and exclusive possession of the lands located, and this
exclusive right of possession and enjoyment continues during the entire life of the
location. x x x.
x x x.
The discovery of minerals in the ground by one who has a valid mineral location
perfects his claim and his location not only against third persons, but also against
the Government. x x x. [Italics in the original.]
The Regalian doctrine and the American system, therefore, differ in one essential
respect. Under the Regalian theory, mineral rights are not included in a grant of land
by the state; under the American doctrine, mineral rights are included in a grant of
land by the government.91
Section 21 also made possible the concession (frequently styled "permit", license"
or "lease")92 system.93 This was the traditional regime imposed by the colonial
administrators for the exploitation of natural resources in the extractive sector
(petroleum, hard minerals, timber, etc.).94
Under the concession system, the concessionaire makes a direct equity investment
for the purpose of exploiting a particular natural resource within a given area.95
Thus, the concession amounts to complete control by the concessionaire over the
country's natural resource, for it is given exclusive and plenary rights to exploit a
particular resource at the point of extraction.96 In consideration for the right to
exploit a natural resource, the concessionaire either pays rent or royalty, which is a
fixed percentage of the gross proceeds.97
Later statutory enactments by the legislative bodies set up in the Philippines
adopted the contractual framework of the concession.98 For instance, Act No.
2932,99 approved on August 31, 1920, which provided for the exploration, location,
and lease of lands containing petroleum and other mineral oils and gas in the
Philippines, and Act No. 2719,100 approved on May 14, 1917, which provided for
the leasing and development of coal lands in the Philippines, both utilized the
concession system.101
THE 1935 CONSTITUTION AND THE NATIONALIZATION OF NATURAL RESOURCES
By the Act of United States Congress of March 24, 1934, popularly known as the
Tydings-McDuffie Law, the People of the Philippine Islands were authorized to adopt
a constitution.102 On July 30, 1934, the Constitutional Convention met for the
purpose of drafting a constitution, and the Constitution subsequently drafted was
approved by the Convention on February 8, 1935.103 The Constitution was
submitted to the President of the United States on March 18, 1935.104 On March
23, 1935, the President of the United States certified that the Constitution
conformed substantially with the provisions of the Act of Congress approved on
March 24, 1934.105 On May 14, 1935, the Constitution was ratified by the Filipino
people.106
The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources
of the Philippines, including mineral lands and minerals, to be property belonging to
the State.107 As adopted in a republican system, the medieval concept of jura
regalia is stripped of royal overtones and ownership of the land is vested in the
State.108
Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the
1935 Constitution provided:
SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and
other natural resources of the Philippines belong to the State, and their disposition,
exploitation, development, or utilization shall be limited to citizens of the
Philippines, or to corporations or associations at least sixty per centum of the capital
of which is owned by such citizens, subject to any existing right, grant, lease, or
concession at the time of the inauguration of the Government established under
this Constitution. Natural resources, with the exception of public agricultural land,
shall not be alienated, and no license, concession, or lease for the exploitation,
development, or utilization of any of the natural resources shall be granted for a
period exceeding twenty-five years, except as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power, in
which cases beneficial use may be the measure and the limit of the grant.
The nationalization and conservation of the natural resources of the country was
one of the fixed and dominating objectives of the 1935 Constitutional
Convention.109 One delegate relates:
There was an overwhelming sentiment in the Convention in favor of the principle of
state ownership of natural resources and the adoption of the Regalian doctrine.
State ownership of natural resources was seen as a necessary starting point to
secure recognition of the state's power to control their disposition, exploitation,
development, or utilization. The delegates of the Constitutional Convention very
well knew that the concept of State ownership of land and natural resources was
introduced by the Spaniards, however, they were not certain whether it was
continued and applied by the Americans. To remove all doubts, the Convention
approved the provision in the Constitution affirming the Regalian doctrine.
The adoption of the principle of state ownership of the natural resources and of the
Regalian doctrine was considered to be a necessary starting point for the plan of
nationalizing and conserving the natural resources of the country. For with the
establishment of the principle of state ownership of the natural resources, it would
not be hard to secure the recognition of the power of the State to control their
disposition, exploitation, development or utilization.110
The nationalization of the natural resources was intended (1) to insure their
conservation for Filipino posterity; (2) to serve as an instrument of national defense,
helping prevent the extension to the country of foreign control through peaceful
economic penetration; and (3) to avoid making the Philippines a source of
international conflicts with the consequent danger to its internal security and
independence.111
The same Section 1, Article XIII also adopted the concession system, expressly
permitting the State to grant licenses, concessions, or leases for the exploitation,
development, or utilization of any of the natural resources. Grants, however, were
limited to Filipinos or entities at least 60% of the capital of which is owned by
Filipinos.lawph!l.ne+
The swell of nationalism that suffused the 1935 Constitution was radically diluted
when on November 1946, the Parity Amendment, which came in the form of an
"Ordinance Appended to the Constitution," was ratified in a plebiscite.112 The
Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and
exploit our natural resources to citizens of the United States and business
enterprises owned or controlled, directly or indirectly, by citizens of the United
States:113
Notwithstanding the provision of section one, Article Thirteen, and section eight,
Article Fourteen, of the foregoing Constitution, during the effectivity of the
Executive Agreement entered into by the President of the Philippines with the
President of the United States on the fourth of July, nineteen hundred and forty-six,
pursuant to the provisions of Commonwealth Act Numbered Seven hundred and
thirty-three, but in no case to extend beyond the third of July, nineteen hundred
and seventy-four, the disposition, exploitation, development, and utilization of all
agricultural, timber, and mineral lands of the public domain, waters, minerals, coals,
petroleum, and other mineral oils, all forces and sources of potential energy, and
other natural resources of the Philippines, and the operation of public utilities, shall,
if open to any person, be open to citizens of the United States and to all forms of
business enterprise owned or controlled, directly or indirectly, by citizens of the
United States in the same manner as to, and under the same conditions imposed
upon, citizens of the Philippines or corporations or associations owned or controlled
by citizens of the Philippines.
The Parity Amendment was subsequently modified by the 1954 Revised Trade
Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act
No. 1355.114
THE PETROLEUM ACT OF 1949 AND THE CONCESSION SYSTEM
In the meantime, Republic Act No. 387,115 also known as the Petroleum Act of
1949, was approved on June 18, 1949.
The Petroleum Act of 1949 employed the concession system for the exploitation of
the nation's petroleum resources. Among the kinds of concessions it sanctioned
were exploration and exploitation concessions, which respectively granted to the
concessionaire the exclusive right to explore for116 or develop117 petroleum within
specified areas.
Concessions may be granted only to duly qualified persons118 who have sufficient
finances, organization, resources, technical competence, and skills necessary to
conduct the operations to be undertaken.119
Nevertheless, the Government reserved the right to undertake such work itself.120
This proceeded from the theory that all natural deposits or occurrences of
petroleum or natural gas in public and/or private lands in the Philippines belong to
the State.121 Exploration and exploitation concessions did not confer upon the
concessionaire ownership over the petroleum lands and petroleum deposits.122
However, they did grant concessionaires the right to explore, develop, exploit, and
utilize them for the period and under the conditions determined by the law.123
Concessions were granted at the complete risk of the concessionaire; the
Government did not guarantee the existence of petroleum or undertake, in any
case, title warranty.124
Concessionaires were required to submit information as maybe required by the
Secretary of Agriculture and Natural Resources, including reports of geological and
geophysical examinations, as well as production reports.125 Exploration126 and
exploitation127 concessionaires were also required to submit work
programs.lavvphi1.net
Exploitation concessionaires, in particular, were obliged to pay an annual
exploitation tax,128 the object of which is to induce the concessionaire to actually
produce petroleum, and not simply to sit on the concession without developing or
exploiting it.129 These concessionaires were also bound to pay the Government
royalty, which was not less than 12% of the petroleum produced and saved, less
that consumed in the operations of the concessionaire.130 Under Article 66, R.A.
No. 387, the exploitation tax may be credited against the royalties so that if the
concessionaire shall be actually producing enough oil, it would not actually be
paying the exploitation tax.131
Failure to pay the annual exploitation tax for two consecutive years,132 or the
royalty due to the Government within one year from the date it becomes due,133
constituted grounds for the cancellation of the concession. In case of delay in the
payment of the taxes or royalty imposed by the law or by the concession, a
surcharge of 1% per month is exacted until the same are paid.134
As a rule, title rights to all equipment and structures that the concessionaire placed
on the land belong to the exploration or exploitation concessionaire.135 Upon
termination of such concession, the concessionaire had a right to remove the
same.136
The Secretary of Agriculture and Natural Resources was tasked with carrying out the
provisions of the law, through the Director of Mines, who acted under the
Secretary's immediate supervision and control.137 The Act granted the Secretary
the authority to inspect any operation of the concessionaire and to examine all the
books and accounts pertaining to operations or conditions related to payment of
taxes and royalties.138
The same law authorized the Secretary to create an Administration Unit and a
Technical Board.139 The Administration Unit was charged, inter alia, with the
enforcement of the provisions of the law.140 The Technical Board had, among other
functions, the duty to check on the performance of concessionaires and to
determine whether the obligations imposed by the Act and its implementing
regulations were being complied with.141
Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy
Development, analyzed the benefits and drawbacks of the concession system
insofar as it applied to the petroleum industry:
Advantages of Concession. Whether it emphasizes income tax or royalty, the most
positive aspect of the concession system is that the State's financial involvement is
virtually risk free and administration is simple and comparatively low in cost.
Furthermore, if there is a competitive allocation of the resource leading to
substantial bonuses and/or greater royalty coupled with a relatively high level of
taxation, revenue accruing to the State under the concession system may compare
favorably with other financial arrangements.
Disadvantages of Concession. There are, however, major negative aspects to this
system. Because the Government's role in the traditional concession is passive, it is
at a distinct disadvantage in managing and developing policy for the nation's
petroleum resource. This is true for several reasons. First, even though most
concession agreements contain covenants requiring diligence in operations and
production, this establishes only an indirect and passive control of the host country
in resource development. Second, and more importantly, the fact that the host
country does not directly participate in resource management decisions inhibits its
ability to train and employ its nationals in petroleum development. This factor could
delay or prevent the country from effectively engaging in the development of its
resources. Lastly, a direct role in management is usually necessary in order to obtain
a knowledge of the international petroleum industry which is important to an
appreciation of the host country's resources in relation to those of other
countries.142
Other liabilities of the system have also been noted:
x x x there are functional implications which give the concessionaire great economic
power arising from its exclusive equity holding. This includes, first, appropriation of
the returns of the undertaking, subject to a modest royalty; second, exclusive
management of the project; third, control of production of the natural resource,
such as volume of production, expansion, research and development; and fourth,
exclusive responsibility for downstream operations, like processing, marketing, and
distribution. In short, even if nominally, the state is the sovereign and owner of the
natural resource being exploited, it has been shorn of all elements of control over
such natural resource because of the exclusive nature of the contractual regime of
the concession. The concession system, investing as it does ownership of natural
resources, constitutes a consistent inconsistency with the principle embodied in our
Constitution that natural resources belong to the state and shall not be alienated,
not to mention the fact that the concession was the bedrock of the colonial system
in the exploitation of natural resources.143
Eventually, the concession system failed for reasons explained by Dimagiba:
Notwithstanding the good intentions of the Petroleum Act of 1949, the concession
system could not have properly spurred sustained oil exploration activities in the
country, since it assumed that such a capital-intensive, high risk venture could be
successfully undertaken by a single individual or a small company. In effect,
concessionaires' funds were easily exhausted. Moreover, since the concession
system practically closed its doors to interested foreign investors, local capital was
stretched to the limits. The old system also failed to consider the highly
sophisticated technology and expertise required, which would be available only to
multinational companies.144
A shift to a new regime for the development of natural resources thus seemed
imminent.
PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND THE SERVICE
CONTRACT SYSTEM
The promulgation on December 31, 1972 of Presidential Decree No. 87,145
otherwise known as The Oil Exploration and Development Act of 1972 signaled such
a transformation. P.D. No. 87 permitted the government to explore for and produce
indigenous petroleum through "service contracts."146
"Service contracts" is a term that assumes varying meanings to different people, and
it has carried many names in different countries, like "work contracts" in Indonesia,
"concession agreements" in Africa, "production-sharing agreements" in the Middle
East, and "participation agreements" in Latin America.147 A functional definition of
"service contracts" in the Philippines is provided as follows:
A service contract is a contractual arrangement for engaging in the exploitation and
development of petroleum, mineral, energy, land and other natural resources by
which a government or its agency, or a private person granted a right or privilege by
the government authorizes the other party (service contractor) to engage or
participate in the exercise of such right or the enjoyment of the privilege, in that the
latter provides financial or technical resources, undertakes the exploitation or
production of a given resource, or directly manages the productive enterprise,
operations of the exploration and exploitation of the resources or the disposition of
marketing or resources.148
In a service contract under P.D. No. 87, service and technology are furnished by the
service contractor for which it shall be entitled to the stipulated service fee.149 The
contractor must be technically competent and financially capable to undertake the
operations required in the contract.150
Financing is supposed to be provided by the Government to which all petroleum
produced belongs.151 In case the Government is unable to finance petroleum
exploration operations, the contractor may furnish services, technology and
financing, and the proceeds of sale of the petroleum produced under the contract
shall be the source of funds for payment of the service fee and the operating
expenses due the contractor.152 The contractor shall undertake, manage and
execute petroleum operations, subject to the government overseeing the
management of the operations.153 The contractor provides all necessary services
and technology and the requisite financing, performs the exploration work
obligations, and assumes all exploration risks such that if no petroleum is produced,
it will not be entitled to reimbursement.154 Once petroleum in commercial quantity
is discovered, the contractor shall operate the field on behalf of the
government.155
P.D. No. 87 prescribed minimum terms and conditions for every service contract.156
It also granted the contractor certain privileges, including exemption from taxes and
payment of tariff duties,157 and permitted the repatriation of capital and retention
of profits abroad.158
Ostensibly, the service contract system had certain advantages over the concession
regime.159 It has been opined, though, that, in the Philippines, our concept of a
service contract, at least in the petroleum industry, was basically a concession
regime with a production-sharing element.160
On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification
of a new Constitution.161 Article XIV on the National Economy and Patrimony
contained provisions similar to the 1935 Constitution with regard to Filipino
participation in the nation's natural resources. Section 8, Article XIV thereof
provides:
Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural
resources of the Philippines belong to the State. With the exception of agricultural,
industrial or commercial, residential and resettlement lands of the public domain,
natural resources shall not be alienated, and no license, concession, or lease for the
exploration, development, exploitation, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years, renewable for not more
than twenty-five years, except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, in which
cases beneficial use may be the measure and the limit of the grant.
While Section 9 of the same Article maintained the Filipino-only policy in the
enjoyment of natural resources, it also allowed Filipinos, upon authority of the
Batasang Pambansa, to enter into service contracts with any person or entity for the
exploration or utilization of natural resources.
Sec. 9. The disposition, exploration, development, exploitation, or utilization of any
of the natural resources of the Philippines shall be limited to citizens, or to
corporations or associations at least sixty per centum of which is owned by such
citizens. The Batasang Pambansa, in the national interest, may allow such citizens,
corporations or associations to enter into service contracts for financial, technical,
management, or other forms of assistance with any person or entity for the
exploration, or utilization of any of the natural resources. Existing valid and binding
service contracts for financial, technical, management, or other forms of assistance
are hereby recognized as such. [Emphasis supplied.]
The concept of service contracts, according to one delegate, was borrowed from the
methods followed by India, Pakistan and especially Indonesia in the exploration of
petroleum and mineral oils.162 The provision allowing such contracts, according to
another, was intended to "enhance the proper development of our natural
resources since Filipino citizens lack the needed capital and technical know-how
which are essential in the proper exploration, development and exploitation of the
natural resources of the country."163
The original idea was to authorize the government, not private entities, to enter into
service contracts with foreign entities.164 As finally approved, however, a citizen or
private entity could be allowed by the National Assembly to enter into such service
contract.165 The prior approval of the National Assembly was deemed sufficient to
protect the national interest.166 Notably, none of the laws allowing service
contracts were passed by the Batasang Pambansa. Indeed, all of them were enacted
by presidential decree.
On March 13, 1973, shortly after the ratification of the new Constitution, the
President promulgated Presidential Decree No. 151.167 The law allowed Filipino
citizens or entities which have acquired lands of the public domain or which own,
hold or control such lands to enter into service contracts for financial, technical,
management or other forms of assistance with any foreign persons or entity for the
exploration, development, exploitation or utilization of said lands.168
Presidential Decree No. 463,169 also known as The Mineral Resources Development
Decree of 1974, was enacted on May 17, 1974. Section 44 of the decree, as
amended, provided that a lessee of a mining claim may enter into a service contract
with a qualified domestic or foreign contractor for the exploration, development
and exploitation of his claims and the processing and marketing of the product
thereof.
Presidential Decree No. 704170 (The Fisheries Decree of 1975), approved on May
16, 1975, allowed Filipinos engaged in commercial fishing to enter into contracts for
financial, technical or other forms of assistance with any foreign person, corporation
or entity for the production, storage, marketing and processing of fish and
fishery/aquatic products.171
Presidential Decree No. 705172 (The Revised Forestry Code of the Philippines),
approved on May 19, 1975, allowed "forest products licensees, lessees, or
permitees to enter into service contracts for financial, technical, management, or
other forms of assistance . . . with any foreign person or entity for the exploration,
development, exploitation or utilization of the forest resources."173
Yet another law allowing service contracts, this time for geothermal resources, was
Presidential Decree No. 1442,174 which was signed into law on June 11, 1978.
Section 1 thereof authorized the Government to enter into service contracts for the
exploration, exploitation and development of geothermal resources with a foreign
contractor who must be technically and financially capable of undertaking the
operations required in the service contract.
Thus, virtually the entire range of the country's natural resources from petroleum
and minerals to geothermal energy, from public lands and forest resources to fishery
products was well covered by apparent legal authority to engage in the direct
participation or involvement of foreign persons or corporations (otherwise
disqualified) in the exploration and utilization of natural resources through service
contracts.175
THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS

After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power
under a revolutionary government. On March 25, 1986, President Aquino issued
Proclamation No. 3,176 promulgating the Provisional Constitution, more popularly
referred to as the Freedom Constitution. By authority of the same Proclamation, the
President created a Constitutional Commission (CONCOM) to draft a new
constitution, which took effect on the date of its ratification on February 2,
1987.177
The 1987 Constitution retained the Regalian doctrine. The first sentence of Section
2, Article XII states: "All lands of the public domain, waters, 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."
Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second
sentence of the same provision, prohibits the alienation of natural resources, except
agricultural lands.
The third sentence of the same paragraph is new: "The exploration, development
and utilization of natural resources shall be under the full control and supervision of
the State." The constitutional policy of the State's "full control and supervision" over
natural resources proceeds from the concept of jura regalia, as well as the
recognition of the importance of the country's natural resources, not only for
national economic development, but also for its security and national defense.178
Under this provision, the State assumes "a more dynamic role" in the exploration,
development and utilization of natural resources.179
Conspicuously 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. By such
omission, the utilization of inalienable lands of public domain through "license,
concession or lease" is no longer allowed under the 1987 Constitution.180
Having omitted the provision on the concession system, Section 2 proceeded to
introduce "unfamiliar language":181
The State may directly undertake such activities or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by
such citizens.
Consonant with the State's "full supervision and control" over natural resources,
Section 2 offers the State two "options."182 One, the State may directly undertake
these activities itself; or two, it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or entities at least 60% of
whose capital is owned by such citizens.
A third option is found in the third paragraph of the same section:
The Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fish-workers in rivers, lakes, bays, and lagoons.
While the second and third options are limited only to Filipino citizens or, in the case
of the former, to corporations or associations at least 60% of the capital of which is
owned by Filipinos, a fourth allows the participation of foreign-owned corporations.
The fourth and fifth paragraphs of Section 2 provide:
The President may enter into agreements with foreign-owned corporations
involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of local scientific and
technical resources.
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
Although Section 2 sanctions the participation of foreign-owned corporations in the
exploration, development, and utilization of natural resources, it imposes certain
limitations or conditions to agreements with such corporations.
First, the parties to FTAAs. Only the President, in behalf of the State, may enter into
these agreements, and only with corporations. By contrast, under the 1973
Constitution, a Filipino citizen, corporation or association may enter into a service
contract with a "foreign person or entity."
Second, the size of the activities: only large-scale exploration, development, and
utilization is allowed. The term "large-scale usually refers to very capital-intensive
activities."183
Third, the natural resources subject of the activities is restricted to minerals,
petroleum and other mineral oils, the intent being to limit service contracts to those
areas where Filipino capital may not be sufficient.184
Fourth, consistency with the provisions of statute. The agreements must be in
accordance with the terms and conditions provided by law.
Fifth, Section 2 prescribes certain standards for entering into such agreements. The
agreements must be based on real contributions to economic growth and general
welfare of the country.
Sixth, the agreements must contain rudimentary stipulations for the promotion of
the development and use of local scientific and technical resources.
Seventh, the notification requirement. The President shall notify Congress of every
financial or technical assistance agreement entered into within thirty days from its
execution.
Finally, the scope of the agreements. While the 1973 Constitution referred to
"service contracts for financial, technical, management, or other forms of
assistance" the 1987 Constitution provides for "agreements. . . involving either
financial or technical assistance." It bears noting that the phrases "service contracts"
and "management or other forms of assistance" in the earlier constitution have
been omitted.
By virtue of her legislative powers under the Provisional Constitution,185 President
Aquino, on July 10, 1987, signed into law E.O. No. 211 prescribing the interim
procedures in the processing and approval of applications for the exploration,
development and utilization of minerals. The omission in the 1987 Constitution of
the term "service contracts" notwithstanding, the said E.O. still referred to them in
Section 2 thereof:
Sec. 2. Applications for the exploration, development and utilization of mineral
resources, including renewal applications and applications for approval of operating
agreements and mining service contracts, shall be accepted and processed and may
be approved x x x. [Emphasis supplied.]
The same law provided in its Section 3 that the "processing, evaluation and approval
of all mining applications . . . operating agreements and service contracts . . . shall
be governed by Presidential Decree No. 463, as amended, other existing mining
laws, and their implementing rules and regulations. . . ."
As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by
authority of which the subject WMCP FTAA was executed on March 30, 1995.
On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15
thereof declares that the Act "shall govern the exploration, development, utilization,
and processing of all mineral resources." Such declaration notwithstanding, R.A. No.
7942 does not actually cover all the modes through which the State may undertake
the exploration, development, and utilization of natural resources.
The State, being the owner of the natural resources, is accorded the primary power
and responsibility in the exploration, development and utilization thereof. As such, it
may undertake these activities through four modes:
The State may directly undertake such activities.
(2) The State may enter into co-production, joint venture or production-sharing
agreements with Filipino citizens or qualified corporations.
(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens.
(4) For the large-scale exploration, development and utilization of minerals,
petroleum and other mineral oils, the President may enter into agreements with
foreign-owned corporations involving technical or financial assistance.186
Except to charge the Mines and Geosciences Bureau of the DENR with performing
researches and surveys,187 and a passing mention of government-owned or
controlled corporations,188 R.A. No. 7942 does not specify how the State should go
about the first mode. The third mode, on the other hand, is governed by Republic
Act No. 7076189 (the People's Small-Scale Mining Act of 1991) and other pertinent
laws.190 R.A. No. 7942 primarily concerns itself with the second and fourth modes.
Mineral production sharing, co-production and joint venture agreements are
collectively classified by R.A. No. 7942 as "mineral agreements."191 The
Government participates the least in a mineral production sharing agreement
(MPSA). In an MPSA, the Government grants the contractor192 the exclusive right
to conduct mining operations within a contract area193 and shares in the gross
output.194 The MPSA contractor provides the financing, technology, management
and personnel necessary for the agreement's implementation.195 The total
government share in an MPSA is the excise tax on mineral products under Republic
Act No. 7729,196 amending Section 151(a) of the National Internal Revenue Code,
as amended.197
In a co-production agreement (CA),198 the Government provides inputs to the
mining operations other than the mineral resource,199 while in a joint venture
agreement (JVA), where the Government enjoys the greatest participation, the
Government and the JVA contractor organize a company with both parties having
equity shares.200 Aside from earnings in equity, the Government in a JVA is also
entitled to a share in the gross output.201 The Government may enter into a CA202
or JVA203 with one or more contractors. The Government's share in a CA or JVA is
set out in Section 81 of the law:
The share of the Government in co-production and joint venture agreements shall
be negotiated by the Government and the contractor taking into consideration the:
(a) capital investment of the project, (b) the risks involved, (c) contribution of the
project to the economy, and (d) other factors that will provide for a fair and
equitable sharing between the Government and the contractor. The Government
shall also be entitled to compensations for its other contributions which shall be
agreed upon by the parties, and shall consist, among other things, the contractor's
income tax, excise tax, special allowance, withholding tax due from the contractor's
foreign stockholders arising from dividend or interest payments to the said foreign
stockholders, in case of a foreign national and all such other taxes, duties and fees
as provided for under existing laws.
All mineral agreements grant the respective contractors the exclusive right to
conduct mining operations and to extract all mineral resources found in the contract
area.204 A "qualified person" may enter into any of the mineral agreements with
the Government.205 A "qualified person" is
any citizen of the Philippines with capacity to contract, or a corporation,
partnership, association, or cooperative organized or authorized for the purpose of
engaging in mining, with technical and financial capability to undertake mineral
resources development and duly registered in accordance with law at least sixty per
centum (60%) of the capital of which is owned by citizens of the Philippines x x
x.206
The fourth mode involves "financial or technical assistance agreements." An FTAA is
defined as "a contract involving financial or technical assistance for large-scale
exploration, development, and utilization of natural resources."207 Any qualified
person with technical and financial capability to undertake large-scale exploration,
development, and utilization of natural resources in the Philippines may enter into
such agreement directly with the Government through the DENR.208 For the
purpose of granting an FTAA, a legally organized foreign-owned corporation (any
corporation, partnership, association, or cooperative duly registered in accordance
with law in which less than 50% of the capital is owned by Filipino citizens)209 is
deemed a "qualified person."210
Other than the difference in contractors' qualifications, the principal distinction
between mineral agreements and FTAAs is the maximum contract area to which a
qualified person may hold or be granted.211 "Large-scale" under R.A. No. 7942 is
determined by the size of the contract area, as opposed to the amount invested (US
$50,000,000.00), which was the standard under E.O. 279.
Like a CA or a JVA, an FTAA is subject to negotiation.212 The Government's
contributions, in the form of taxes, in an FTAA is identical to its contributions in the
two mineral agreements, save that in an FTAA:
The collection of Government share in financial or technical assistance agreement
shall commence after the financial or technical assistance agreement contractor has
fully recovered its pre-operating expenses, exploration, and development
expenditures, inclusive.213
III
Having examined the history of the constitutional provision and statutes enacted
pursuant thereto, a consideration of the substantive issues presented by the
petition is now in order.
THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279
Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was
executed, did not come into effect.
E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two
days before the opening of Congress on July 27, 1987.214 Section 8 of the E.O.
states that the same "shall take effect immediately." This provision, according to
petitioners, runs counter to Section 1 of E.O. No. 200,215 which provides:
SECTION 1. Laws shall take effect after fifteen days following the completion of their
publication either in the Official Gazette or in a newspaper of general circulation in
the Philippines, unless it is otherwise provided.216 [Emphasis supplied.]
On that premise, petitioners contend that E.O. No. 279 could have only taken effect
fifteen days after its publication at which time Congress had already convened and
the President's power to legislate had ceased.
Respondents, on the other hand, counter that the validity of E.O. No. 279 was
settled in Miners Association of the Philippines v. Factoran, supra. This is of course
incorrect for the issue in Miners Association was not the validity of E.O. No. 279 but
that of DAO Nos. 57 and 82 which were issued pursuant thereto.
Nevertheless, petitioners' contentions have no merit.
It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking
effect on a date other than even before the 15-day period after its publication.
Where a law provides for its own date of effectivity, such date prevails over that
prescribed by E.O. No. 200. Indeed, this is the very essence of the phrase "unless it
is otherwise provided" in Section 1 thereof. Section 1, E.O. No. 200, therefore,
applies only when a statute does not provide for its own date of effectivity.
What is mandatory under E.O. No. 200, and what due process requires, as this Court
held in Taada v. Tuvera,217 is the publication of the law for without such notice
and publication, there would be no basis for the application of the maxim
"ignorantia legis n[eminem] excusat." It would be the height of injustice to punish or
otherwise burden a citizen for the transgression of a law of which he had no notice
whatsoever, not even a constructive one.
While the effectivity clause of E.O. No. 279 does not require its publication, it is not
a ground for its invalidation since the Constitution, being "the fundamental,
paramount and supreme law of the nation," is deemed written in the law.218
Hence, the due process clause,219 which, so Taada held, mandates the publication
of statutes, is read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No.
200 which provides for publication "either in the Official Gazette or in a newspaper
of general circulation in the Philippines," finds suppletory application. It is significant
to note that E.O. No. 279 was actually published in the Official Gazette220 on
August 3, 1987.
From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and
Taada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately
upon its publication in the Official Gazette on August 3, 1987.
That such effectivity took place after the convening of the first Congress is
irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she
was still validly exercising legislative powers under the Provisional Constitution.221
Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states:
Sec. 6. The incumbent President shall continue to exercise legislative powers until
the first Congress is convened.
The convening of the first Congress merely precluded the exercise of legislative
powers by President Aquino; it did not prevent the effectivity of laws she had
previously enacted.
There can be no question, therefore, that E.O. No. 279 is an effective, and a validly
enacted, statute.
THE CONSTITUTIONALITY OF THE WMCP FTAA
Petitioners submit that, in accordance with the text of Section 2, Article XII of the
Constitution, FTAAs should be limited to "technical or financial assistance" only.
They observe, however, that, contrary to the language of the Constitution, the
WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to extend
more than mere financial or technical assistance to the State, for it permits WMCP
to manage and operate every aspect of the mining activity. 222
Petitioners' submission is well-taken. It is a cardinal rule in the interpretation of
constitutions that the instrument must be so construed as to give effect to the
intention of the people who adopted it.223 This intention is to be sought in the
constitution itself, and the apparent meaning of the words is to be taken as
expressing it, except in cases where that assumption would lead to absurdity,
ambiguity, or contradiction.224 What the Constitution says according to the text of
the provision, therefore, compels acceptance and negates the power of the courts
to alter it, based on the postulate that the framers and the people mean what they
say.225 Accordingly, following the literal text of the Constitution, assistance
accorded by foreign-owned corporations in the large-scale exploration,
development, and utilization of petroleum, minerals and mineral oils should be
limited to "technical" or "financial" assistance only.
WMCP nevertheless submits that the word "technical" in the fourth paragraph of
Section 2 of E.O. No. 279 encompasses a "broad number of possible services,"
perhaps, "scientific and/or technological in basis."226 It thus posits that it may also
well include "the area of management or operations . . . so long as such assistance
requires specialized knowledge or skills, and are related to the exploration,
development and utilization of mineral resources."227
This Court is not persuaded. As priorly pointed out, the phrase "management or
other forms of assistance" in the 1973 Constitution was deleted in the 1987
Constitution, which allows only "technical or financial assistance." Casus omisus pro
omisso habendus est. A person, object or thing omitted from an enumeration must
be held to have been omitted intentionally.228 As will be shown later, the
management or operation of mining activities by foreign contractors, which is the
primary feature of service contracts, was precisely the evil that the drafters of the
1987 Constitution sought to eradicate.
Respondents insist that "agreements involving technical or financial assistance" is
just another term for service contracts. They contend that the proceedings of the
CONCOM indicate "that although the terminology 'service contract' was avoided [by
the Constitution], the concept it represented was not." They add that "[t]he concept
is embodied in the phrase 'agreements involving financial or technical
assistance.'"229 And point out how members of the CONCOM referred to these
agreements as "service contracts." For instance:
SR. TAN. Am I correct in thinking that the only difference between these future
service contracts and the past service contracts under Mr. Marcos is the general law
to be enacted by the legislature and the notification of Congress by the President?
That is the only difference, is it not?
MR. VILLEGAS. That is right.
SR. TAN. So those are the safeguards[?]
MR. VILLEGAS. Yes. There was no law at all governing service contracts before.
SR. TAN. Thank you, Madam President.230 [Emphasis supplied.]
WMCP also cites the following statements of Commissioners Gascon, Garcia,
Nolledo and Tadeo who alluded to service contracts as they explained their
respective votes in the approval of the draft Article:
MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons: One,
the provision on service contracts. I felt that if we would constitutionalize any
provision on service contracts, this should always be with the concurrence of
Congress and not guided only by a general law to be promulgated by Congress. x x
x.231 [Emphasis supplied.]
x x x.
MR. GARCIA. Thank you.
I vote no. x x x.
Service contracts are given constitutional legitimization in Section 3, even when they
have been proven to be inimical to the interests of the nation, providing as they do
the legal loophole for the exploitation of our natural resources for the benefit of
foreign interests. They constitute a serious negation of Filipino control on the use
and disposition of the nation's natural resources, especially with regard to those
which are nonrenewable.232 [Emphasis supplied.]
xxx
MR. NOLLEDO. While there are objectionable provisions in the Article on National
Economy and Patrimony, going over said provisions meticulously, setting aside
prejudice and personalities will reveal that the article contains a balanced set of
provisions. I hope the forthcoming Congress will implement such provisions taking
into account that Filipinos should have real control over our economy and
patrimony, and if foreign equity is permitted, the same must be subordinated to the
imperative demands of the national interest.
x x x.
It is also my understanding that service contracts involving foreign corporations or
entities are resorted to only when no Filipino enterprise or Filipino-controlled
enterprise could possibly undertake the exploration or exploitation of our natural
resources and that compensation under such contracts cannot and should not equal
what should pertain to ownership of capital. In other words, the service contract
should not be an instrument to circumvent the basic provision, that the exploration
and exploitation of natural resources should be truly for the benefit of Filipinos.
Thank you, and I vote yes.233 [Emphasis supplied.]
x x x.
MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.
Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang
salitang "imperyalismo." Ang ibig sabihin nito ay ang sistema ng lipunang
pinaghaharian ng iilang monopolyong kapitalista at ang salitang "imperyalismo" ay
buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa
pamamagitan ng salitang "based on," naroroon na ang free trade sapagkat tayo ay
mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring produkto.
Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang 60-40 equity
sa natural resources. Habang naghihirap ang sambayanang Pilipino, ginagalugad
naman ng mga dayuhan ang ating likas na yaman. Kailan man ang Article on
National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating
ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng bansa ay dalawa
lamang: ang pagpapatupad ng tunay na reporma sa lupa at ang national
industrialization. Ito ang tinatawag naming pagsikat ng araw sa Silangan. Ngunit ang
mga landlords and big businessmen at ang mga komprador ay nagsasabi na ang free
trade na ito, ang kahulugan para sa amin, ay ipinipilit sa ating sambayanan na ang
araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang araw sa
Kanluran. I vote no.234 [Emphasis supplied.]
This Court is likewise not persuaded.
As earlier noted, the phrase "service contracts" has been deleted in the 1987
Constitution's Article on National Economy and Patrimony. If the CONCOM intended
to retain the concept of service contracts under the 1973 Constitution, it could have
simply adopted the old terminology ("service contracts") instead of employing new
and unfamiliar terms ("agreements . . . involving either technical or financial
assistance"). Such a difference between the language of a provision in a revised
constitution and that of a similar provision in the preceding constitution is viewed as
indicative of a difference in purpose.235 If, as respondents suggest, the concept of
"technical or financial assistance" agreements is identical to that of "service
contracts," the CONCOM would not have bothered to fit the same dog with a new
collar. To uphold respondents' theory would reduce the first to a mere euphemism
for the second and render the change in phraseology meaningless.
An examination of the reason behind the change confirms that technical or financial
assistance agreements are not synonymous to service contracts.
[T]he Court in construing a Constitution should bear in mind the object sought to be
accomplished by its adoption, and the evils, if any, sought to be prevented or
remedied. A doubtful provision will be examined in light of the history of the times,
and the condition and circumstances under which the Constitution was framed. The
object is to ascertain the reason which induced the framers of the Constitution to
enact the particular provision and the purpose sought to be accomplished thereby,
in order to construe the whole as to make the words consonant to that reason and
calculated to effect that purpose.236
As the following question of Commissioner Quesada and Commissioner Villegas'
answer shows the drafters intended to do away with service contracts which were
used to circumvent the capitalization (60%-40%) requirement:
MS. QUESADA. The 1973 Constitution used the words "service contracts." In this
particular Section 3, is there a safeguard against the possible control of foreign
interests if the Filipinos go into coproduction with them?
MR. VILLEGAS. Yes. In fact, the deletion of the phrase "service contracts" was our
first attempt to avoid some of the abuses in the past regime in the use of service
contracts to go around the 60-40 arrangement. The safeguard that has been
introduced and this, of course can be refined is found in Section 3, lines 25 to 30,
where Congress will have to concur with the President on any agreement entered
into between a foreign-owned corporation and the government involving technical
or financial assistance for large-scale exploration, development and utilization of
natural resources.237 [Emphasis supplied.]
In a subsequent discussion, Commissioner Villegas allayed the fears of
Commissioner Quesada regarding the participation of foreign interests in Philippine
natural resources, which was supposed to be restricted to Filipinos.
MS. QUESADA. Another point of clarification is the phrase "and utilization of natural
resources shall be under the full control and supervision of the State." In the 1973
Constitution, this was limited to citizens of the Philippines; but it was removed and
substituted by "shall be under the full control and supervision of the State." Was the
concept changed so that these particular resources would be limited to citizens of
the Philippines? Or would these resources only be under the full control and
supervision of the State; meaning, noncitizens would have access to these natural
resources? Is that the understanding?
MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence,
it states:
Such activities may be directly undertaken by the State, or it may enter into co-
production, joint venture, production-sharing agreements with Filipino citizens.
So we are still limiting it only to Filipino citizens.
x x x.
MS. QUESADA. Going back to Section 3, the section suggests that:
The exploration, development, and utilization of natural resources may be directly
undertaken by the State, or it may enter into co-production, joint venture or
production-sharing agreement with . . . corporations or associations at least sixty
per cent of whose voting stock or controlling interest is owned by such citizens.
Lines 25 to 30, on the other hand, suggest that in the large-scale exploration,
development and utilization of natural resources, the President with the
concurrence of Congress may enter into agreements with foreign-owned
corporations even for technical or financial assistance.
I wonder if this part of Section 3 contradicts the second part. I am raising this point
for fear that foreign investors will use their enormous capital resources to facilitate
the actual exploitation or exploration, development and effective disposition of our
natural resources to the detriment of Filipino investors. I am not saying that we
should not consider borrowing money from foreign sources. What I refer to is that
foreign interest should be allowed to participate only to the extent that they lend us
money and give us technical assistance with the appropriate government permit. In
this way, we can insure the enjoyment of our natural resources by our own people.
MR. VILLEGAS. Actually, the second provision about the President does not permit
foreign investors to participate. It is only technical or financial assistance they do
not own anything but on conditions that have to be determined by law with the
concurrence of Congress. So, it is very restrictive.
If the Commissioner will remember, this removes the possibility for service contracts
which we said yesterday were avenues used in the previous regime to go around the
60-40 requirement.238 [Emphasis supplied.]
The present Chief Justice, then a member of the CONCOM, also referred to this
limitation in scope in proposing an amendment to the 60-40 requirement:
MR. DAVIDE. May I be allowed to explain the proposal?
MR. MAAMBONG. Subject to the three-minute rule, Madam President.
MR. DAVIDE. It will not take three minutes.
The Commission had just approved the Preamble. In the Preamble we clearly stated
that the Filipino people are sovereign and that one of the objectives for the creation
or establishment of a government is to conserve and develop the national
patrimony. The implication is that the national patrimony or our natural resources
are exclusively reserved for the Filipino people. No alien must be allowed to enjoy,
exploit and develop our natural resources. As a matter of fact, that principle
proceeds from the fact that our natural resources are gifts from God to the Filipino
people and it would be a breach of that special blessing from God if we will allow
aliens to exploit our natural resources.
I voted in favor of the Jamir proposal because it is not really exploitation that we
granted to the alien corporations but only for them to render financial or technical
assistance. It is not for them to enjoy our natural resources. Madam President, our
natural resources are depleting; our population is increasing by leaps and bounds.
Fifty years from now, if we will allow these aliens to exploit our natural resources,
there will be no more natural resources for the next generations of Filipinos. It may
last long if we will begin now. Since 1935 the aliens have been allowed to enjoy to a
certain extent the exploitation of our natural resources, and we became victims of
foreign dominance and control. The aliens are interested in coming to the
Philippines because they would like to enjoy the bounty of nature exclusively
intended for Filipinos by God.
And so I appeal to all, for the sake of the future generations, that if we have to pray
in the Preamble "to preserve and develop the national patrimony for the sovereign
Filipino people and for the generations to come," we must at this time decide once
and for all that our natural resources must be reserved only to Filipino citizens.
Thank you.239 [Emphasis supplied.]
The opinion of another member of the CONCOM is persuasive240 and leaves no
doubt as to the intention of the framers to eliminate service contracts altogether. He
writes:
Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological
undertakings for which the President may enter into contracts with foreign-owned
corporations, and enunciates strict conditions that should govern such contracts. x x
x.
This provision balances the need for foreign capital and technology with the need to
maintain the national sovereignty. It recognizes the fact that as long as Filipinos can
formulate their own terms in their own territory, there is no danger of relinquishing
sovereignty to foreign interests.
Are service contracts allowed under the new Constitution? No. Under the new
Constitution, foreign investors (fully alien-owned) can NOT participate in Filipino
enterprises except to provide: (1) Technical Assistance for highly technical
enterprises; and (2) Financial Assistance for large-scale enterprises.
The intent of this provision, as well as other provisions on foreign investments, is to
prevent the practice (prevalent in the Marcos government) of skirting the 60/40
equation using the cover of service contracts.241 [Emphasis supplied.]
Furthermore, it appears that Proposed Resolution No. 496,242 which was the draft
Article on National Economy and Patrimony, adopted the concept of
"agreements . . . involving either technical or financial assistance" contained in the
"Draft of the 1986 U.P. Law Constitution Project" (U.P. Law draft) which was taken
into consideration during the deliberation of the CONCOM.243 The former, as well
as Article XII, as adopted, employed the same terminology, as the comparative table
below shows:
DRAFT OF THE UP LAW CONSTITUTION PROJECT PROPOSED RESOLUTION NO.
496 OF THE CONSTITUTIONAL COMMISSIONARTICLE XII OF THE 1987
CONSTITUTION
Sec. 1. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, flora and fauna and other
natural resources of the Philippines are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development and utilization of natural resources shall be under the full control and
supervision of the State. Such activities may be directly undertaken by the state, or
it may enter into co-production, joint venture, production sharing agreements with
Filipino citizens or corporations or associations sixty per cent of whose voting stock
or controlling interest is owned by such citizens for a period of not more than
twenty-five years, renewable for not more than twenty-five years and under such
terms and conditions as may be provided by law. In case as to water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of
water power, beneficial use may be the measure and limit of the grant.
The National Assembly may by law allow small scale utilization of natural resources
by Filipino citizens.
The National Assembly, may, by two-thirds vote of all its members by special law
provide the terms and conditions under which a foreign-owned corporation may
enter into agreements with the government involving either technical or financial
assistance for large-scale exploration, development, or utilization of natural
resources. [Emphasis supplied.]
Sec. 3. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, forests, flora and fauna, and
other natural resources are owned by the State. With the exception of agricultural
lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. Such activities may be directly undertaken by the State, or
it may enter into co-production, joint venture, production-sharing agreements with
Filipino citizens or corporations or associations at least sixty per cent of whose
voting stock or controlling interest is owned by such citizens. Such agreements shall
be for a period of twenty-five years, renewable for not more than twenty-five years,
and under such term and conditions as may be provided by law. In cases of water
rights for irrigation, water supply, fisheries or industrial uses other than the
development for water power, beneficial use may be the measure and limit of the
grant.
The Congress may by law allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming in rivers, lakes, bays, and lagoons.
The President with the concurrence of Congress, by special law, shall provide the
terms and conditions under which a foreign-owned corporation may enter into
agreements with the government involving either technical or financial assistance
for large-scale exploration, development, and utilization of natural resources.
[Emphasis supplied.]
Sec. 2. All lands of the public domain, waters, 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. With the exception
of agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under the full
control and supervision of the State. The State may directly undertake such activities
or it may enter into co-production, joint venture, or production-sharing agreements
with Filipino citizens, or corporations or associations at least sixty per centum of
whose capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law. In case of water rights
for irrigation, water supply, fisheries, or industrial uses other than the development
of water power, beneficial use may be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters,
territorial sea, and exclusive economic zone, and reserve its use and enjoyment
exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations
involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of local scientific and
technical resources. [Emphasis supplied.]
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
The insights of the proponents of the U.P. Law draft are, therefore, instructive in
interpreting the phrase "technical or financial assistance."
In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor
Pacifico A. Agabin, who was a member of the working group that prepared the U.P.
Law draft, criticized service contracts for they "lodge exclusive management and
control of the enterprise to the service contractor, which is reminiscent of the old
concession regime. Thus, notwithstanding the provision of the Constitution that
natural resources belong to the State, and that these shall not be alienated, the
service contract system renders nugatory the constitutional provisions cited."244 He
elaborates:
Looking at the Philippine model, we can discern the following vestiges of the
concession regime, thus:
1. Bidding of a selected area, or leasing the choice of the area to the interested
party and then negotiating the terms and conditions of the contract; (Sec. 5, P.D. 87)
2. Management of the enterprise vested on the contractor, including operation of
the field if petroleum is discovered; (Sec. 8, P.D. 87)
3. Control of production and other matters such as expansion and development;
(Sec. 8)
4. Responsibility for downstream operations marketing, distribution, and
processing may be with the contractor (Sec. 8);
5. Ownership of equipment, machinery, fixed assets, and other properties remain
with contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of profits abroad guaranteed to the
contractor (Sec. 13, P.D. 87); and
7. While title to the petroleum discovered may nominally be in the name of the
government, the contractor has almost unfettered control over its disposition and
sale, and even the domestic requirements of the country is relegated to a pro rata
basis (Sec. 8).
In short, our version of the service contract is just a rehash of the old concession
regime x x x. Some people have pulled an old rabbit out of a magician's hat, and
foisted it upon us as a new and different animal.
The service contract as we know it here is antithetical to the principle of sovereignty
over our natural resources restated in the same article of the [1973] Constitution
containing the provision for service contracts. If the service contractor happens to
be a foreign corporation, the contract would also run counter to the constitutional
provision on nationalization or Filipinization, of the exploitation of our natural
resources.245 [Emphasis supplied. Underscoring in the original.]
Professor Merlin M. Magallona, also a member of the working group, was harsher in
his reproach of the system:
x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the
[1973] Charter, but the essence of nationalism was reduced to hollow rhetoric. The
1973 Charter still provided that the exploitation or development of the country's
natural resources be limited to Filipino citizens or corporations owned or controlled
by them. However, the martial-law Constitution allowed them, once these resources
are in their name, to enter into service contracts with foreign investors for financial,
technical, management, or other forms of assistance. Since foreign investors have
the capital resources, the actual exploitation and development, as well as the
effective disposition, of the country's natural resources, would be under their
direction, and control, relegating the Filipino investors to the role of second-rate
partners in joint ventures.
Through the instrumentality of the service contract, the 1973 Constitution had
legitimized at the highest level of state policy that which was prohibited under the
1973 Constitution, namely: the exploitation of the country's natural resources by
foreign nationals. The drastic impact of [this] constitutional change becomes more
pronounced when it is considered that the active party to any service contract may
be a corporation wholly owned by foreign interests. In such a case, the citizenship
requirement is completely set aside, permitting foreign corporations to obtain
actual possession, control, and [enjoyment] of the country's natural resources.246
[Emphasis supplied.]
Accordingly, Professor Agabin recommends that:
Recognizing the service contract for what it is, we have to expunge it from the
Constitution and reaffirm ownership over our natural resources. That is the only way
we can exercise effective control over our natural resources.
This should not mean complete isolation of the country's natural resources from
foreign investment. Other contract forms which are less derogatory to our
sovereignty and control over natural resources like technical assistance
agreements, financial assistance [agreements], co-production agreements, joint
ventures, production-sharing could still be utilized and adopted without violating
constitutional provisions. In other words, we can adopt contract forms which
recognize and assert our sovereignty and ownership over natural resources, and
where the foreign entity is just a pure contractor instead of the beneficial owner of
our economic resources.247 [Emphasis supplied.]
Still another member of the working group, Professor Eduardo Labitag, proposed
that:
2. Service contracts as practiced under the 1973 Constitution should be
discouraged, instead the government may be allowed, subject to authorization by
special law passed by an extraordinary majority to enter into either technical or
financial assistance. This is justified by the fact that as presently worded in the 1973
Constitution, a service contract gives full control over the contract area to the
service contractor, for him to work, manage and dispose of the proceeds or
production. It was a subterfuge to get around the nationality requirement of the
constitution.248 [Emphasis supplied.]
In the annotations on the proposed Article on National Economy and Patrimony, the
U.P. Law draft summarized the rationale therefor, thus:
5. The last paragraph is a modification of the service contract provision found in
Section 9, Article XIV of the 1973 Constitution as amended. This 1973 provision
shattered the framework of nationalism in our fundamental law (see Magallona,
"Nationalism and its Subversion in the Constitution"). Through the service contract,
the 1973 Constitution had legitimized that which was prohibited under the 1935
constitutionthe exploitation of the country's natural resources by foreign
nationals. Through the service contract, acts prohibited by the Anti-Dummy Law
were recognized as legitimate arrangements. Service contracts lodge exclusive
management and control of the enterprise to the service contractor, not unlike the
old concession regime where the concessionaire had complete control over the
country's natural resources, having been given exclusive and plenary rights to
exploit a particular resource and, in effect, having been assured of ownership of that
resource at the point of extraction (see Agabin, "Service Contracts: Old Wine in New
Bottles"). Service contracts, hence, are antithetical to the principle of sovereignty
over our natural resources, as well as the constitutional provision on nationalization
or Filipinization of the exploitation of our natural resources.
Under the proposed provision, only technical assistance or financial assistance
agreements may be entered into, and only for large-scale activities. These are
contract forms which recognize and assert our sovereignty and ownership over
natural resources since the foreign entity is just a pure contractor and not a
beneficial owner of our economic resources. The proposal recognizes the need for
capital and technology to develop our natural resources without sacrificing our
sovereignty and control over such resources by the safeguard of a special law which
requires two-thirds vote of all the members of the Legislature. This will ensure that
such agreements will be debated upon exhaustively and thoroughly in the National
Assembly to avert prejudice to the nation.249 [Emphasis supplied.]
The U.P. Law draft proponents viewed service contracts under the 1973 Constitution
as grants of beneficial ownership of the country's natural resources to foreign
owned corporations. While, in theory, the State owns these natural resources and
Filipino citizens, their beneficiaries service contracts actually vested foreigners
with the right to dispose, explore for, develop, exploit, and utilize the same.
Foreigners, not Filipinos, became the beneficiaries of Philippine natural resources.
This arrangement is clearly incompatible with the constitutional ideal of
nationalization of natural resources, with the Regalian doctrine, and on a broader
perspective, with Philippine sovereignty.
The proponents nevertheless acknowledged the need for capital and technical
know-how in the large-scale exploitation, development and utilization of natural
resources the second paragraph of the proposed draft itself being an admission of
such scarcity. Hence, they recommended a compromise to reconcile the
nationalistic provisions dating back to the 1935 Constitution, which reserved all
natural resources exclusively to Filipinos, and the more liberal 1973 Constitution,
which allowed foreigners to participate in these resources through service contracts.
Such a compromise called for the adoption of a new system in the exploration,
development, and utilization of natural resources in the form of technical
agreements or financial agreements which, necessarily, are distinct concepts from
service contracts.
The replacement of "service contracts" with "agreements involving either
technical or financial assistance," as well as the deletion of the phrase
"management or other forms of assistance," assumes greater significance when
note is taken that the U.P. Law draft proposed other equally crucial changes that
were obviously heeded by the CONCOM. These include the abrogation of the
concession system and the adoption of new "options" for the State in the
exploration, development, and utilization of natural resources. The proponents
deemed these changes to be more consistent with the State's ownership of, and its
"full control and supervision" (a phrase also employed by the framers) over, such
resources. The Project explained:
3. In line with the State ownership of natural resources, the State should take a
more active role in the exploration, development, and utilization of natural
resources, than the present practice of granting licenses, concessions, or leases
hence the provision that said activities shall be under the full control and
supervision of the State. There are three major schemes by which the State could
undertake these activities: first, directly by itself; second, by virtue of co-production,
joint venture, production sharing agreements with Filipino citizens or corporations
or associations sixty per cent (60%) of the voting stock or controlling interests of
which are owned by such citizens; or third, with a foreign-owned corporation, in
cases of large-scale exploration, development, or utilization of natural resources
through agreements involving either technical or financial assistance only. x x x.
At present, under the licensing concession or lease schemes, the government
benefits from such benefits only through fees, charges, ad valorem taxes and
income taxes of the exploiters of our natural resources. Such benefits are very
minimal compared with the enormous profits reaped by theses licensees, grantees,
concessionaires. Moreover, some of them disregard the conservation of natural
resources and do not protect the environment from degradation. The proposed role
of the State will enable it to a greater share in the profits it can also actively
husband its natural resources and engage in developmental programs that will be
beneficial to them.
4. Aside from the three major schemes for the exploration, development, and
utilization of our natural resources, the State may, by law, allow Filipino citizens to
explore, develop, utilize natural resources in small-scale. This is in recognition of the
plight of marginal fishermen, forest dwellers, gold panners, and others similarly
situated who exploit our natural resources for their daily sustenance and
survival.250
Professor Agabin, in particular, after taking pains to illustrate the similarities
between the two systems, concluded that the service contract regime was but a
"rehash" of the concession system. "Old wine in new bottles," as he put it. The
rejection of the service contract regime, therefore, is in consonance with the
abolition of the concession system.
In light of the deliberations of the CONCOM, the text of the Constitution, and the
adoption of other proposed changes, there is no doubt that the framers considered
and shared the intent of the U.P. Law proponents in employing the phrase
"agreements . . . involving either technical or financial assistance."
While certain commissioners may have mentioned the term "service contracts"
during the CONCOM deliberations, they may not have been necessarily referring to
the concept of service contracts under the 1973 Constitution. As noted earlier,
"service contracts" is a term that assumes different meanings to different
people.251 The commissioners may have been using the term loosely, and not in its
technical and legal sense, to refer, in general, to agreements concerning natural
resources entered into by the Government with foreign corporations. These loose
statements do not necessarily translate to the adoption of the 1973 Constitution
provision allowing service contracts.
It is true that, as shown in the earlier quoted portions of the proceedings in
CONCOM, in response to Sr. Tan's question, Commissioner Villegas commented that,
other than congressional notification, the only difference between "future" and
"past" "service contracts" is the requirement of a general law as there were no laws
previously authorizing the same.252 However, such remark is far outweighed by his
more categorical statement in his exchange with Commissioner Quesada that the
draft article "does not permit foreign investors to participate" in the nation's natural
resources which was exactly what service contracts did except to provide
"technical or financial assistance."253
In the case of the other commissioners, Commissioner Nolledo himself clarified in
his work that the present charter prohibits service contracts.254 Commissioner
Gascon was not totally averse to foreign participation, but favored stricter
restrictions in the form of majority congressional concurrence.255 On the other
hand, Commissioners Garcia and Tadeo may have veered to the extreme side of the
spectrum and their objections may be interpreted as votes against any foreign
participation in our natural resources whatsoever.
WMCP cites Opinion No. 75, s. 1987,256 and Opinion No. 175, s. 1990257 of the
Secretary of Justice, expressing the view that a financial or technical assistance
agreement "is no different in concept" from the service contract allowed under the
1973 Constitution. This Court is not, however, bound by this interpretation. When
an administrative or executive agency renders an opinion or issues a statement of
policy, it merely interprets a pre-existing law; and the administrative interpretation
of the law is at best advisory, for it is the courts that finally determine what the law
means.258
In any case, the constitutional provision allowing the President to enter into FTAAs
with foreign-owned corporations is an exception to the rule that participation in the
nation's natural resources is reserved exclusively to Filipinos. Accordingly, such
provision must be construed strictly against their enjoyment by non-Filipinos. As
Commissioner Villegas emphasized, the provision is "very restrictive."259
Commissioner Nolledo also remarked that "entering into service contracts is an
exception to the rule on protection of natural resources for the interest of the
nation and, therefore, being an exception, it should be subject, whenever possible,
to stringent rules."260 Indeed, exceptions should be strictly but reasonably
construed; they extend only so far as their language fairly warrants and all doubts
should be resolved in favor of the general provision rather than the exception.261
With the foregoing discussion in mind, this Court finds that R.A. No. 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, it actually treats these agreements as service contracts that grant
beneficial ownership to foreign contractors contrary to the fundamental law.
Section 33, which is found under Chapter VI (Financial or Technical Assistance
Agreement) of R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with technical and financial capability to
undertake large-scale exploration, development, and utilization of mineral resources
in the Philippines may enter into a financial or technical assistance agreement
directly with the Government through the Department. [Emphasis supplied.]
"Exploration," as defined by R.A. No. 7942,
means the searching or prospecting for mineral resources by geological,
geochemical or geophysical surveys, remote sensing, test pitting, trending, drilling,
shaft sinking, tunneling or any other means for the purpose of determining the
existence, extent, quantity and quality thereof and the feasibility of mining them for
profit.262
A legally organized foreign-owned corporation may be granted an exploration
permit,263 which vests it with the right to conduct exploration for all minerals in
specified areas,264 i.e., to enter, occupy and explore the same.265 Eventually, the
foreign-owned corporation, as such permittee, may apply for a financial and
technical assistance agreement.266
"Development" is the work undertaken to explore and prepare an ore body or a
mineral deposit for mining, including the construction of necessary infrastructure
and related facilities.267

"Utilization" "means the extraction or disposition of minerals."268 A stipulation that
the proponent shall dispose of the minerals and byproducts produced at the highest
price and more advantageous terms and conditions as provided for under the
implementing rules and regulations is required to be incorporated in every FTAA.269
A foreign-owned/-controlled corporation may likewise be granted a mineral
processing permit.270 "Mineral processing" is the milling, beneficiation or
upgrading of ores or minerals and rocks or by similar means to convert the same
into marketable products.271
An FTAA contractor makes a warranty that the mining operations shall be conducted
in accordance with the provisions of R.A. No. 7942 and its implementing rules272
and for work programs and minimum expenditures and commitments.273 And it
obliges itself to furnish the Government records of geologic, accounting, and other
relevant data for its mining operation.274
"Mining operation," as the law defines it, means mining activities involving
exploration, feasibility, development, utilization, and processing.275
The underlying assumption in all these provisions is that the foreign contractor
manages the mineral resources, just like the foreign contractor in a service contract.
Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same
auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA
and JV).276 Parenthetically, Sections 72 to 75 use the term "contractor," without
distinguishing between FTAA and mineral agreement contractors. And so does
"holders of mining rights" in Section 76. A foreign contractor may even convert its
FTAA into a mineral agreement if the economic viability of the contract area is found
to be inadequate to justify large-scale mining operations,277 provided that it
reduces its equity in the corporation, partnership, association or cooperative to
forty percent (40%).278
Finally, under the Act, an FTAA contractor warrants that it "has or has access to all
the financing, managerial, and technical expertise. . . ."279 This suggests that an
FTAA contractor is bound to provide some management assistance a form of
assistance that has been eliminated and, therefore, proscribed by the present
Charter.
By allowing foreign contractors to manage or operate all the aspects of the mining
operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed
beneficial ownership over the nation's mineral resources to these contractors,
leaving the State with nothing but bare title thereto.
Moreover, 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.
In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of
Section 2, Article XII of the Constitution:
(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 23,280 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 35,281 which enumerates the terms and conditions for every financial or
technical assistance agreement;
(5) Section 39,282 which allows the contractor in a financial and technical assistance
agreement to convert the same into a mineral production-sharing agreement;
(6) Section 56,283 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),284 which defines the term "contractor," insofar as it applies to a
financial or technical assistance agreement.
Section 34,285 which prescribes the maximum contract area in a financial or
technical assistance agreements;
Section 36,286 which allows negotiations for financial or technical assistance
agreements;
Section 37,287 which prescribes the procedure for filing and evaluation of financial
or technical assistance agreement proposals;

Section 38,288 which limits the term of financial or technical assistance agreements;
Section 40,289 which allows the assignment or transfer of financial or technical
assistance agreements;
Section 41,290 which allows the withdrawal of the contractor in an FTAA;
The second and third paragraphs of Section 81,291 which provide for the
Government's share in a financial and technical assistance agreement; and
Section 90,292 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.293
There can be little doubt that the WMCP FTAA itself is a service contract.
Section 1.3 of the WMCP FTAA grants WMCP "the exclusive right to explore, exploit,
utilise[,] process and dispose of all Minerals products and by-products thereof that
may be produced from the Contract Area."294 The FTAA also imbues WMCP with
the following rights:
(b) to extract and carry away any Mineral samples from the Contract area for the
purpose of conducting tests and studies in respect thereof;
(c) to determine the mining and treatment processes to be utilised during the
Development/Operating Period and the project facilities to be constructed during
the Development and Construction Period;
(d) have the right of possession of the Contract Area, with full right of ingress and
egress and the right to occupy the same, subject to the provisions of Presidential
Decree No. 512 (if applicable) and not be prevented from entry into private ands by
surface owners and/or occupants thereof when prospecting, exploring and
exploiting for minerals therein;
xxx
(f) to construct roadways, mining, drainage, power generation and transmission
facilities and all other types of works on the Contract Area;
(g) to erect, install or place any type of improvements, supplies, machinery and
other equipment relating to the Mining Operations and to use, sell or otherwise
dispose of, modify, remove or diminish any and all parts thereof;
(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third
Parties, easement rights and the use of timber, sand, clay, stone, water and other
natural resources in the Contract Area without cost for the purposes of the Mining
Operations;
xxx
(i) have the right to mortgage, charge or encumber all or part of its interest and
obligations under this Agreement, the plant, equipment and infrastructure and the
Minerals produced from the Mining Operations;
x x x. 295
All materials, equipment, plant and other installations erected or placed on the
Contract Area remain the property of WMCP, which has the right to deal with and
remove such items within twelve months from the termination of the FTAA.296
Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing,
technology, management and personnel necessary for the Mining Operations." The
mining company binds itself to "perform all Mining Operations . . . providing all
necessary services, technology and financing in connection therewith,"297 and to
"furnish all materials, labour, equipment and other installations that may be
required for carrying on all Mining Operations."298> WMCP may make expansions,
improvements and replacements of the mining facilities and may add such new
facilities as it considers necessary for the mining operations.299
These contractual stipulations, 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.
In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the
Promotion and Protection of Investments between the Philippine and Australian
Governments, which was signed in Manila on January 25, 1995 and which entered
into force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies to investments whenever made
and thus the fact that [WMCP's] FTAA was entered into prior to the entry into force
of the treaty does not preclude the Philippine Government from protecting
[WMCP's] investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides
that "Each Party shall encourage and promote investments in its area by investors of
the other Party and shall [admit] such investments in accordance with its
Constitution, Laws, regulations and investment policies" and in Article 3 (2), it states
that "Each Party shall ensure that investments are accorded fair and equitable
treatment." The latter stipulation indicates that it was intended to impose an
obligation upon a Party to afford fair and equitable treatment to the investments of
the other Party and that a failure to provide such treatment by or under the laws of
the Party may constitute a breach of the treaty. Simply stated, the Philippines could
not, under said treaty, rely upon the inadequacies of its own laws to deprive an
Australian investor (like [WMCP]) of fair and equitable treatment by invalidating
[WMCP's] FTAA without likewise nullifying the service contracts entered into before
the enactment of RA 7942 such as those mentioned in PD 87 or EO 279.
This becomes more significant in the light of the fact that [WMCP's] FTAA was
executed not by a mere Filipino citizen, but by the Philippine Government itself,
through its President no less, which, in entering into said treaty is assumed to be
aware of the existing Philippine laws on service contracts over the exploration,
development and utilization of natural resources. The execution of the FTAA by the
Philippine Government assures the Australian Government that the FTAA is in
accordance with existing Philippine laws.300 [Emphasis and italics by private
respondents.]
The invalidation of the subject FTAA, it is argued, would constitute a breach of said
treaty which, in turn, would amount to a violation of Section 3, Article II of the
Constitution adopting the generally accepted principles of international law as part
of the law of the land. One of these generally accepted principles is pacta sunt
servanda, which requires the performance in good faith of treaty obligations.
Even assuming arguendo that WMCP is correct in its interpretation of the treaty and
its assertion that "the Philippines could not . . . deprive an Australian investor (like
[WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without
likewise nullifying the service contracts entered into before the enactment of RA
7942 . . .," the annulment of the FTAA would not constitute a breach of the treaty
invoked. For this decision herein invalidating the subject FTAA forms part of the legal
system of the Philippines.301 The equal protection clause302 guarantees that such
decision shall apply to all contracts belonging to the same class, hence, upholding
rather than violating, the "fair and equitable treatment" stipulation in said treaty.
One other matter requires clarification. Petitioners contend that, consistent with the
provisions of Section 2, Article XII of the Constitution, the President may enter into
agreements involving "either technical or financial assistance" only. The agreement
in question, however, is a technical and financial assistance agreement.
Petitioners' contention does not lie. To adhere to the literal language of the
Constitution would lead to absurd consequences.303 As WMCP correctly put it:
x x x such a theory of petitioners would compel the government (through the
President) to enter into contract with two (2) foreign-owned corporations, one for
financial assistance agreement and with the other, for technical assistance over one
and the same mining area or land; or to execute two (2) contracts with only one
foreign-owned corporation which has the capability to provide both financial and
technical assistance, one for financial assistance and another for technical
assistance, over the same mining area. Such an absurd result is definitely not
sanctioned under the canons of constitutional construction.304 [Underscoring in
the original.]
Surely, the framers of the 1987 Charter did not contemplate such an absurd result
from their use of "either/or." A constitution is not to be interpreted as demanding
the impossible or the impracticable; and unreasonable or absurd consequences, if
possible, should be avoided.305 Courts are not to give words a meaning that would
lead to absurd or unreasonable consequences and a literal interpretation is to be
rejected if it would be unjust or lead to absurd results.306 That is a strong argument
against its adoption.307 Accordingly, petitioners' interpretation must be rejected.
The foregoing discussion has rendered unnecessary the resolution of the other
issues raised by the petition.
WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional
and void:
(1) The following provisions of Republic Act No. 7942:
(a) The proviso in Section 3 (aq),
(b) Section 23,
(c) Section 33 to 41,
(d) Section 56,
(e) The second and third paragraphs of Section 81, and
(f) Section 90.
(2) All provisions of Department of Environment and Natural Resources
Administrative Order 96-40, s. 1996 which are not in conformity with this Decision,
and
(3) The Financial and Technical Assistance Agreement between the Government of
the Republic of the Philippines and WMC Philippines, Inc.
SO ORDERED.
The Facts
On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty
was acknowledged as the owner of four mining claims respectively named as
Bonito-I, Bonito-II, Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares,
situated in Barangay Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban,
Camarines Norte. The parties also executed a Supplemental Agreement[5] dated
June 1, 1987. The mining claims were covered by MPSA Application No. APSA-V-
0009 jointly filed by J.G. Realty as claimowner and Benguet as operator.

Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga. JJ., concur. In the RAWOP, Benguet obligated itself to perfect the rights to the mining claims
Vitug, J., see Separate Opinion. and/or otherwise acquire the mining rights to the mineral claims. Within 24 months
Panganiban, J., see Separate Opinion. from the execution of the RAWOP, Benguet should also cause the examination of
Ynares-Santiago, Sandoval-Gutierrez and Austria-Martinez, JJ., joins J., Panganiban's the mining claims for the purpose of determining whether or not they are worth
separate opinion. developing with reasonable probability of profitable production. Benguet undertook
Azcuna, no part, one of the parties was a client. also to furnish J.G. Realty with a report on the examination, within a reasonable
time after the completion of the examination. Moreover, also within the
examination period, Benguet shall conduct all necessary exploration in accordance
with a prepared exploration program. If it chooses to do so and before the
Republic of the Philippines expiration of the examination period, Benguet may undertake to develop the mining
SUPREME COURT claims upon written notice to J.G. Realty. Benguet must then place the mining claims
Manila into commercial productive stage within 24 months from the written notice.[6] It is
SECOND DIVISION also provided in the RAWOP that if the mining claims were placed in commercial
production by Benguet, J.G. Realty should be entitled to a royalty of five percent
BENGUET CORPORATION, G.R. No. 163101 (5%) of net realizable value, and to royalty for any production done by Benguet
Petitioner, whether during the examination or development periods.
Present:
- versus - QUISUMBING, J., Chairperson, Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N.
DECISION Tachuling, issued a letter informing J.G. Realty of its intention to develop the mining
VELASCO, JR., J.: claims. However, on February 9, 1999, J.G. Realty, through its President, Johnny L.
Tan, then sent a letter to the President of Benguet informing the latter that it was
The instant petition under Rule 65 of the Rules of Court seeks the annulment of the terminating the RAWOP on the following grounds:
December 2, 2002 Decision[1] and March 17, 2004 Resolution[2] of the Department
of Environment and Natural Resources-Mining Adjudication Board (DENR-MAB) in a. The fact that your company has failed to perform the obligations set forth in
MAB Case No. 0124-01 (Mines Administrative Case No. R-M-2000-01) entitled the RAWOP, i.e., to undertake development works within 2 years from the execution
Benguet Corporation (Benguet) v. J.G. Realty and Mining Corporation (J.G. Realty). of the Agreement;
The December 2, 2002 Decision upheld the March 19, 2001 Decision[3] of the MAB
Panel of Arbitrators (POA) which canceled the Royalty Agreement with Option to b. Violation of the Contract by allowing high graders to operate on our claim.
Purchase (RAWOP) dated June 1, 1987[4] between Benguet and J.G. Realty, and
excluded Benguet from the joint Mineral Production Sharing Agreement (MPSA)
c. No stipulation was provided with respect to the term limit of the RAWOP.
application over four mining claims. The March 17, 2004 Resolution denied
Benguets Motion for Reconsideration.
d. Non-payment of the royalties thereon as provided in the RAWOP.[7]

In response, Benguets Manager for Legal Services, Reynaldo P. Mendoza, wrote J.G.
Realty a letter dated March 8, 1999,[8] therein alleging that Benguet complied with
its obligations under the RAWOP by investing PhP 42.4 million to rehabilitate the
mines, and that the commercial operation was hampered by the non-issuance of a
Mines Temporary Permit by the Mines and Geosciences Bureau (MGB) which must
be considered as force majeure, entitling Benguet to an extension of time to
prosecute such permit. Benguet further claimed that the high graders mentioned by
J.G. Realty were already operating prior to Benguets taking over of the premises,
and that J.G. Realty had the obligation of ejecting such small scale miners. Benguet
also alleged that the nature of the mining business made it difficult to specify a time
limit for the RAWOP. Benguet then argued that the royalties due to J.G. Realty were
in fact in its office and ready to be picked up at any time. It appeared that,
previously, the practice by J.G. Realty was to pick-up checks from Benguet
representing such royalties. However, starting August 1994, J.G. Realty allegedly
refused to collect such checks from Benguet. Thus, Benguet posited that there was
no valid ground for the termination of the RAWOP. It also reminded J.G. Realty that
it should submit the disagreement to arbitration rather than unilaterally terminating
the RAWOP.
On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of
the RAWOP[9] with the Legaspi City POA, Region V, docketed as DENR Case No.
2000-01 and entitled J.G. Realty v. Benguet.
On March 19, 2001, the POA issued a Decision,[10] dwelling upon the issues of (1)
whether the arbitrators had jurisdiction over the case; and (2) whether Benguet
violated the RAWOP justifying the unilateral cancellation of the RAWOP by J.G.
Realty. The dispositive portion stated:
WHEREFORE, premises considered, the June 01, 1987 [RAWOP] and its
Supplemental Agreement is hereby declared cancelled and without effect. BENGUET
is hereby excluded from the joint MPSA Application over the mineral claims
denominated as BONITO-I, BONITO-II, BONITO-III and BONITO-IV.
SO ORDERED.
Therefrom, Benguet filed a Notice of Appeal[11] with the MAB on April 23, 2001,
docketed as Mines Administrative Case No. R-M-2000-01. Thereafter, the MAB
issued the assailed December 2, 2002 Decision. Benguet then filed a Motion for
Reconsideration of the assailed Decision which was denied in the March 17, 2004
Resolution of the MAB. Hence, Benguet filed the instant petition.
The Issues
1. There was serious and palpable error when the Honorable Board failed to rule
that the contractual obligation of the parties to arbitrate under the Royalty
Agreement is mandatory.
2. The Honorable Board exceeded its jurisdiction when it sustained the
cancellation of the Royalty Agreement for alleged breach of contract despite the
absence of evidence.
3. The Questioned Decision of the Honorable Board in cancelling the RAWOP
prejudice[d] the substantial rights of Benguet under the contract to the unjust
enrichment of JG Realty.[12]
Restated, the issues are: (1) Should the controversy have first been submitted to
arbitration before the POA took cognizance of the case?; (2) Was the cancellation of
the RAWOP supported by evidence?; and (3) Did the cancellation of the RAWOP
amount to unjust enrichment of J.G. Realty at the expense of Benguet?
The Courts Ruling
Before we dwell on the substantive issues, we find that the instant petition can be
denied outright as Benguet resorted to an improper remedy.
The last paragraph of Section 79 of Republic Act No. (RA) 7942 or the Philippine
Mining Act of 1995 states, A petition for review by certiorari and question of law
may be filed by the aggrieved party with the Supreme Court within thirty (30) days
from receipt of the order or decision of the [MAB].
However, this Court has already invalidated such provision in Carpio v. Sulu
Resources Development Corp.,[13] ruling that a decision of the MAB must first be
appealed to the Court of Appeals (CA) under Rule 43 of the Rules of Court, before
recourse to this Court may be had. We held, thus:
To summarize, there are sufficient legal footings authorizing a review of the MAB
Decision under Rule 43 of the Rules of Court. First, Section 30 of Article VI of the
1987 Constitution, mandates that [n]o law shall be passed increasing the appellate
jurisdiction of the Supreme Court as provided in this Constitution without its advice
and consent. On the other hand, Section 79 of RA No. 7942 provides that decisions
of the MAB may be reviewed by this Court on a petition for review by certiorari. This
provision is obviously an expansion of the Courts appellate jurisdiction, an
expansion to which this Court has not consented. Indiscriminate enactment of
legislation enlarging the appellate jurisdiction of this Court would unnecessarily
burden it.
Second, when the Supreme Court, in the exercise of its rule-making power, transfers
to the CA pending cases involving a review of a quasi-judicial bodys decisions, such
transfer relates only to procedure; hence, it does not impair the substantive and
vested rights of the parties. The aggrieved partys right to appeal is preserved; what
is changed is only the procedure by which the appeal is to be made or decided. The
parties still have a remedy and a competent tribunal to grant this remedy.
Third, the Revised Rules of Civil Procedure included Rule 43 to provide a uniform
rule on appeals from quasi-judicial agencies. Under the rule, appeals from their
judgments and final orders are now required to be brought to the CA on a verified
petition for review. A quasi-judicial agency or body has been defined as an organ of
government, other than a court or legislature, which affects the rights of private
parties through either adjudication or rule-making. MAB falls under this definition;
hence, it is no different from the other quasi-judicial bodies enumerated under Rule
43. Besides, the introductory words in Section 1 of Circular No. 1-91among these
agencies areindicate that the enumeration is not exclusive or conclusive and
acknowledge the existence of other quasi-judicial agencies which, though not
expressly listed, should be deemed included therein.
Fourth, the Court realizes that under Batas Pambansa (BP) Blg. 129 as amended by
RA No. 7902, factual controversies are usually involved in decisions of quasi-judicial
bodies; and the CA, which is likewise tasked to resolve questions of fact, has more
elbow room to resolve them. By including questions of fact among the issues that
may be raised in an appeal from quasi-judicial agencies to the CA, Section 3 of
Revised Administrative Circular No. 1-95 and Section 3 of Rule 43 explicitly
expanded the list of such issues.
According to Section 3 of Rule 43, [a]n appeal under this Rule may be taken to the
Court of Appeals within the period and in the manner herein provided whether the
appeal involves questions of fact, of law, or mixed questions of fact and law. Hence,
appeals from quasi-judicial agencies even only on questions of law may be brought
to the CA.
Fifth, the judicial policy of observing the hierarchy of courts dictates that direct
resort from administrative agencies to this Court will not be entertained, unless the
redress desired cannot be obtained from the appropriate lower tribunals, or unless
exceptional and compelling circumstances justify availment of a remedy falling
within and calling for the exercise of our primary jurisdiction.[14]
The above principle was reiterated in Asaphil Construction and Development
Corporation v. Tuason, Jr. (Asaphil).[15] However, the Carpio ruling was not applied
to Asaphil as the petition in the latter case was filed in 1999 or three years before
the promulgation of Carpio in 2002. Here, the petition was filed on April 28, 2004
when the Carpio decision was already applicable, thus Benguet should have filed
the appeal with the CA.
Petitioner having failed to properly appeal to the CA under Rule 43, the decision of
the MAB has become final and executory. On this ground alone, the instant petition
must be denied.
Even if we entertain the petition although Benguet skirted the appeal to the CA via
Rule 43, still, the December 2, 2002 Decision and March 17, 2004 Resolution of the
DENR-MAB in MAB Case No. 0124-01 should be maintained.
First Issue: The case should have first been brought to
voluntary arbitration before the POA
Secs. 11.01 and 11.02 of the RAWOP pertinently provide:
11.01 Arbitration
Any disputes, differences or disagreements between BENGUET and the OWNER with
reference to anything whatsoever pertaining to this Agreement that cannot be
amicably settled by them shall not be cause of any action of any kind whatsoever in
any court or administrative agency but shall, upon notice of one party to the other,
be referred to a Board of Arbitrators consisting of three (3) members, one to be
selected by BENGUET, another to be selected by the OWNER and the third to be
selected by the aforementioned two arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as to any matter in dispute as hereinabove
stated, except to enforce the decision of the majority of the Arbitrators.[16]
Thus, Benguet argues that the POA should have first referred the case to voluntary
arbitration before taking cognizance of the case, citing Sec. 2 of RA 876 on persons
and matters subject to arbitration.
On the other hand, in denying such argument, the POA ruled that:
While the parties may establish such stipulations clauses, terms and conditions as
they may deem convenient, the same must not be contrary to law and public policy.
At a glance, there is nothing wrong with the terms and conditions of the agreement.
But to state that an aggrieved party cannot initiate an action without going to
arbitration would be tying ones hand even if there is a law which allows him to do
so.[17]
The MAB, meanwhile, denied Benguets contention on the ground of estoppel,
stating:
Besides, by its own act, Benguet is already estopped in questioning the jurisdiction
of the Panel of Arbitrators to hear and decide the case. As pointed out in the
appealed Decision, Benguet initiated and filed an Adverse Claim docketed as MAC-
R-M-2000-02 over the same mining claims without undergoing contractual
arbitration. In this particular case (MAC-R-M-2000-02) now subject of the appeal,
Benguet is likewise in estoppel from questioning the competence of the Panel of
Arbitrators to hear and decide in the summary proceedings J.G. Realtys petition,
when Benguet itself did not merely move for the dismissal of the case but also filed
an Answer with counterclaim seeking affirmative reliefs from the Panel of
Arbitrators.[18]
Moreover, the MAB ruled that the contractual provision on arbitration merely
provides for an additional forum or venue and does not divest the POA of the
jurisdiction to hear the case.[19]
In its July 20, 2004 Comment,[20] J.G. Realty reiterated the above rulings of the POA
and MAB. It argued that RA 7942 or the Philippine Mining Act of 1995 is a special
law which should prevail over the stipulations of the parties and over a general law,
such as RA 876. It also argued that the POA cannot be considered as a court under
the contemplation of RA 876 and that jurisprudence saying that there must be prior
resort to arbitration before filing a case with the courts is inapplicable to the instant
case as the POA is itself already engaged in arbitration.
On this issue, we rule for Benguet.
Sec. 2 of RA 876 elucidates the scope of arbitration:
Section 2. Persons and matters subject to arbitration.Two or more persons or parties
may submit to the arbitration of one or more arbitrators any controversy existing
between them at the time of the submission and which may be the subject of an
action, or the parties to any contract may in such contract agree to settle by
arbitration a controversy thereafter arising between them. Such submission or
contract shall be valid, enforceable and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.
Such submission or contract may include question[s] arising out of valuations,
appraisals or other controversies which may be collateral, incidental, precedent or
subsequent to any issue between the parties. (Emphasis supplied.)
In RA 9285 or the Alternative Dispute Resolution Act of 2004, the Congress
reiterated the efficacy of arbitration as an alternative mode of dispute resolution by
stating in Sec. 32 thereof that domestic arbitration shall still be governed by RA 876.
Clearly, a contractual stipulation that requires prior resort to voluntary arbitration
before the parties can go directly to court is not illegal and is in fact promoted by
the State. Thus, petitioner correctly cites several cases whereby arbitration clauses
have been upheld by this Court.[21]
Moreover, the contention that RA 7942 prevails over RA 876 presupposes a conflict
between the two laws. Such is not the case here. To reiterate, availment of
voluntary arbitration before resort is made to the courts or quasi-judicial agencies of
the government is a valid contractual stipulation that must be adhered to by the
parties. As stated in Secs. 6 and 7 of RA 876:
Section 6. Hearing by court.A party aggrieved by the failure, neglect or refusal of
another to perform under an agreement in writing providing for arbitration may
petition the court for an order directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in writing of the hearing of such
application shall be served either personally or by registered mail upon the party in
default. The court shall hear the parties, and upon being satisfied that the making of
the agreement or such failure to comply therewith is not in issue, shall make an
order directing the parties to proceed to arbitration in accordance with the terms of
the agreement. If the making of the agreement or default be in issue the court shall
proceed to summarily hear such issue. If the finding be that no agreement in writing
providing for arbitration was made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the finding be that a written
provision for arbitration was made and there is a default in proceeding thereunder,
an order shall be made summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
xxxx
Section 7. Stay of civil action.If any suit or proceeding be brought upon an issue
arising out of an agreement providing for the arbitration thereof, the court in which
such suit or proceeding is pending, upon being satisfied that the issue involved in
such suit or proceeding is referable to arbitration, shall stay the action or proceeding
until an arbitration has been had in accordance with the terms of the agreement:
Provided, That the applicant, for the stay is not in default in proceeding with such
arbitration. (Emphasis supplied.)
In other words, in the event a case that should properly be the subject of voluntary
arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion
of the defendant, the court or quasi-judicial agency shall determine whether such
contractual provision for arbitration is sufficient and effective. If in affirmative, the
court or quasi-judicial agency shall then order the enforcement of said provision.
Besides, in BF Corporation v. Court of Appeals, we already ruled:
In this connection, it bears stressing that the lower court has not lost its jurisdiction
over the case. Section 7 of Republic Act No. 876 provides that proceedings therein
have only been stayed. After the special proceeding of arbitration has been pursued
and completed, then the lower court may confirm the award made by the arbitrator.
[22]
J.G. Realtys contention, that prior resort to arbitration is unavailing in the instant
case because the POAs mandate is to arbitrate disputes involving mineral
agreements, is misplaced. A distinction must be made between voluntary and
compulsory arbitration. In Ludo and Luym Corporation v. Saordino, the Court had
the occasion to distinguish between the two types of arbitrations:
Comparatively, in Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory
arbitration has been defined both as the process of settlement of labor disputes by
a government agency which has the authority to investigate and to make an award
which is binding on all the parties, and as a mode of arbitration where the parties
are compelled to accept the resolution of their dispute through arbitration by a
third party. While a voluntary arbitrator is not part of the governmental unit or labor
departments personnel, said arbitrator renders arbitration services provided for
under labor laws.[23] (Emphasis supplied.)
There is a clear distinction between compulsory and voluntary arbitration. The
arbitration provided by the POA is compulsory, while the nature of the arbitration
provision in the RAWOP is voluntary, not involving any government agency. Thus,
J.G. Realtys argument on this matter must fail.
As to J.G. Realtys contention that the provisions of RA 876 cannot apply to the
instant case which involves an administrative agency, it must be pointed out that
Section 11.01 of the RAWOP states that:
[Any controversy with regard to the contract] shall not be cause of any action of any
kind whatsoever in any court or administrative agency but shall, upon notice of one
party to the other, be referred to a Board of Arbitrators consisting of three (3)
members, one to be selected by BENGUET, another to be selected by the OWNER
and the third to be selected by the aforementioned two arbiters so appointed.[24]
(Emphasis supplied.)
There can be no quibbling that POA is a quasi-judicial body which forms part of the
DENR, an administrative agency. Hence, the provision on mandatory resort to
arbitration, freely entered into by the parties, must be held binding against them.
[25]
In sum, on the issue of whether POA should have referred the case to voluntary
arbitration, we find that, indeed, POA has no jurisdiction over the dispute which is
governed by RA 876, the arbitration law.
However, we find that Benguet is already estopped from questioning the POAs
jurisdiction. As it were, when J.G. Realty filed DENR Case No. 2000-01, Benguet filed
its answer and participated in the proceedings before the POA, Region V. Secondly,
when the adverse March 19, 2001 POA Decision was rendered, it filed an appeal
with the MAB in Mines Administrative Case No. R-M-2000-01 and again participated
in the MAB proceedings. When the adverse December 2, 2002 MAB Decision was
promulgated, it filed a motion for reconsideration with the MAB. When the adverse
March 17, 2004 MAB Resolution was issued, Benguet filed a petition with this Court
pursuant to Sec. 79 of RA 7942 impliedly recognizing MABs jurisdiction. In this
factual milieu, the Court rules that the jurisdiction of POA and that of MAB can no
longer be questioned by Benguet at this late hour. What Benguet should have done
was to immediately challenge the POAs jurisdiction by a special civil action for
certiorari when POA ruled that it has jurisdiction over the dispute. To redo the
proceedings fully participated in by the parties after the lapse of seven years from
date of institution of the original action with the POA would be anathema to the
speedy and efficient administration of justice.
Second Issue: The cancellation of the RAWOP
was supported by evidence
The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguets
failure to pay J.G. Realtys royalties for the mining claims; and (2) Benguets failure to
seriously pursue MPSA Application No. APSA-V-0009 over the mining claims.
As to the royalties, Benguet claims that the checks representing payments for the
royalties of J.G. Realty were available for pick-up in its office and it is the latter which
refused to claim them. Benguet then thus concludes that it did not violate the
RAWOP for nonpayment of royalties. Further, Benguet reasons that J.G. Realty has
the burden of proving that the former did not pay such royalties following the
principle that the complainants must prove their affirmative allegations.
With regard to the failure to pursue the MPSA application, Benguet claims that the
lengthy time of approval of the application is due to the failure of the MGB to
approve it. In other words, Benguet argues that the approval of the application is
solely in the hands of the MGB.
Benguets arguments are bereft of merit.
Sec. 14.05 of the RAWOP provides:
14.05 Bank Account
OWNER shall maintain a bank account at ___________ or any other bank from time
to time selected by OWNER with notice in writing to BENGUET where BENGUET
shall deposit to the OWNERs credit any and all advances and payments which may
become due the OWNER under this Agreement as well as the purchase price herein
agreed upon in the event that BENGUET shall exercise the option to purchase
provided for in the Agreement. Any and all deposits so made by BENGUET shall be a
full and complete acquittance and release to [sic] BENGUET from any further liability
to the OWNER of the amounts represented by such deposits. (Emphasis supplied.)
Evidently, the RAWOP itself provides for the mode of royalty payment by Benguet.
The fact that there was the previous practice whereby J.G. Realty picked-up the
checks from Benguet is unavailing. The mode of payment is embodied in a contract
between the parties. As such, the contract must be considered as the law between
the parties and binding on both.[26] Thus, after J.G. Realty informed Benguet of the
bank account where deposits of its royalties may be made, Benguet had the
obligation to deposit the checks. J.G. Realty had no obligation to furnish Benguet
with a Board Resolution considering that the RAWOP itself provided for such
payment scheme.
Notably, Benguets claim that J.G. Realty must prove nonpayment of its royalties is
both illogical and unsupported by law and jurisprudence.
The allegation of nonpayment is not a positive allegation as claimed by Benguet.
Rather, such is a negative allegation that does not require proof and in fact transfers
the burden of proof to Benguet. Thus, this Court ruled in Jimenez v. National Labor
Relations Commission:
As a general rule, one who pleads payment has the burden of proving it. Even where
the plaintiff must allege non-payment, the general rule is that the burden rests on
the defendant to prove payment, rather than on the plaintiff to prove non-payment.
The debtor has the burden of showing with legal certainty that the obligation has
been discharged by payment.[27] (Emphasis supplied.)
In the instant case, the obligation of Benguet to pay royalties to J.G. Realty has been
admitted and supported by the provisions of the RAWOP. Thus, the burden to prove
such obligation rests on Benguet.
It should also be borne in mind that MPSA Application No. APSA-V-0009 has been
pending with the MGB for a considerable length of time. Benguet, in the RAWOP,
obligated itself to perfect the rights to the mining claims and/or otherwise acquire
the mining rights to the mineral claims but failed to present any evidence showing
that it exerted efforts to speed up and have the application approved. In fact,
Benguet never even alleged that it continuously followed-up the application with
the MGB and that it was in constant communication with the government agency
for the expeditious resolution of the application. Such allegations would show that,
indeed, Benguet was remiss in prosecuting the MPSA application and clearly failed
to comply with its obligation in the RAWOP.
Third Issue: There is no unjust enrichment in the instant case
Based on the foregoing discussion, the cancellation of the RAWOP was based on
valid grounds and is, therefore, justified. The necessary implication of the
cancellation is the cessation of Benguets right to prosecute MPSA Application No.
APSA-V-0009 and to further develop such mining claims.
In Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation, we
defined unjust enrichment, as follows:
We have held that [t]here is unjust enrichment when a person unjustly retains a
benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good conscience.
Article 22 of the Civil Code provides that [e]very person who through an act of
performance by another, or any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall return the
same to him. The principle of unjust enrichment under Article 22 requires two
conditions: (1) that a person is benefited without a valid basis or justification, and
(2) that such benefit is derived at anothers expense or damage.
There is no unjust enrichment when the person who will benefit has a valid claim to
such benefit.[28] (Emphasis supplied.)
Clearly, there is no unjust enrichment in the instant case as the cancellation of the
RAWOP, which left Benguet without any legal right to participate in further
developing the mining claims, was brought about by its violation of the RAWOP.
Hence, Benguet has no one to blame but itself for its predicament.
WHEREFORE, we DISMISS the petition, and AFFIRM the December 2, 2002 Decision
and March 17, 2004 Resolution of the DENR-MAB in MAB Case No. 0124-01
upholding the cancellation of the June 1, 1987 RAWOP. No costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 148267. August 8, 2002]
ARMANDO C. CARPIO, petitioner, vs. SULU RESOURCES DEVELOPMENT
CORPORATION, respondent.
DECISION
PANGANIBAN, J.:
Decisions and final orders of the Mines Adjudication Board (MAB) are appealable to
the Court of Appeals under Rule 43 of the 1997 Rules of Court. Although not
expressly included in the Rule, the MAB is unquestionably a quasi-judicial agency
and stands in the same category as those enumerated in its provisions.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the August 31, 2000 Decision[1] and May 3, 2001 Resolution[2] of the
Court of Appeals (CA) in CA-GR SP No. 46830. The Assailed Decision disposed as
follows:
WHEREFORE, premises considered, the petition for review is hereby DENIED.[3]
Reconsideration was denied in the assailed Resolution.
The Facts
In the challenged Decision, the CA summarized the facts of this case as follows:
This case originated from a petition filed by respondent [Sulu Resources
Development Corporation] for Mines Production Sharing Agreement (MPSA) No.
MPSA-IV-131, covering certain areas in Antipolo, Rizal. Petitioner [Armando C.
Carpio] filed an opposition/adverse claim thereto, alleging, inter alia, that his
landholdings in Cupang and Antipolo, Rizal will be covered by respondents claim,
thus he enjoys a preferential right to explore and extract the quarry resources on his
properties.
After due proceedings were held, the Panel of Arbitrators of the Mines and Geo-
Sciences Bureau of the DENR rendered a Resolution dated September 26, 1996,
upholding petitioners opposition/adverse claim. This dispositive portion of said
Resolution reads:
x x x. WHEREFORE, the opposition/adverse claims of ARMANDO C. CARPIO is hereby
UPHELD. Accordingly, the properties of CARPIO are ordered excluded from the area
of PMPSA-IV-131 of SULU RESOURCES DEVELOPMENT CORPORATION, and the area
not covered by the adverse claim as subject to mining locations in accordance with
existing laws, rules and regulations.
SO ORDERED.
Respondent appealed the foregoing Resolution to the Mines Adjudication Board.
Meanwhile, petitioner filed a motion to dismiss appeal on the ground of
respondents failure to comply with the requirements of the New Mining Acts
Implementing Rules and Regulations.
On June 20, 1997, the Mines Adjudication Board rendered the assailed Order
dismissing petitioners opposition/adverse claim. The dispositive portion of the
assailed Order provides:
WHEREFORE, in view of the foregoing premises, this Resolution of the Panel of
Arbitrators of Region IV dated September 26, 1996, is hereby SET ASIDE and the
adverse claim/opposition of CARPIO DISMISSED. Accordingly, the PMSPA of SULU
should be given due process and evaluated subject to the pertinent provisions of RA
7942 and DAO 96-40.
SO ORDERED.
Petitioner filed a motion for reconsideration of said Order which was denied by the
Board per Order dated November 24, 1997, the decretal portion of which provides:
WHEREFORE, the Motion for Reconsideration is hereby DENIED for lack of merit.[4]
Ruling of the Court of Appeals
Citing Section 79 of Chapter XIII of the Philippine Mining Act of 1995 (RA 7942), the
CA ruled that it did not have jurisdiction to review the Decision of the Mines
Adjudication Board (MAB). The adjudication of conflicting mining claims is
completely administrative in nature, as held in Pearson v. Intermediate Appellate
Court.[5] Under RA 7942, the settlement of disputes involving rights to mining
areas, mineral agreements, and surface owners, occupants and
claimholders/concessionaires shall pertain exclusively to a Panel of Arbitrators in the
regional office of the Department of Environment and Natural Resources, whose
decisions are appealable to the Mines Adjudication Board. Under Section 79 of RA
7942, the findings of fact by the MAB as well as its decision or order shall be final
and executory.
Inasmuch as the issue raised by petitioner relates to whether an overlap or a
conflict between his properties and the area covered by the application of
respondent has been proven, MABs finding thereon was binding and conclusive,
and the Boards Decision was already final and executory.
Hence, this Petition.[6]
Issue
In his Memorandum, petitioner raises this sole issue for our consideration:
Whether or not appeals from the Decision or Final Orders of the Mines Adjudication
Board should be made directly to the Supreme Court as contended by the
respondent and the Court of Appeals, or such appeals be first made to the Court of
Appeals as contended by herein petitioner.[7]
This Courts Ruling
The Petition is meritorious.
Sole Issue:
Appellate Jurisdiction over MAB Decisions
Petitioner submits that appeals from the decisions of the MAB should be filed with
the CA. First, the Supreme Court has authority, under Section 5(5) of Article VIII of
the Philippine Constitution, to promulgate rules of procedure in all courts, including
all quasi-judicial agencies such as the MAB. Second, Section 3 of Rule 43 of the 1997
Rules of Civil Procedure authorizes appeals to the CA from judgments or final orders
of quasi-judicial tribunals by means of petitions for review. Third, the MAB gravely
abused its discretion in deliberately, willfully and unlawfully disregarding petitioners
rights to the land unduly included in the questioned application for a Mines
Productive Sharing Agreement (MPSA).
En contrario, the CA ruled and respondent agrees that the settlement of disputes
involving rights to mining areas and overlapping or conflicting claim is a purely
administrative matter, over which the MAB has appellate jurisdiction. The latters
factual findings, decisions and final orders on such matters are final and executory
as provided in Section 79 of Chapter XIII of the Philippine Mining Act of 1995 and as
held in Pearson v. IAC. Since the appeal of petitioner pertains to the factual matter
of whether he was able to prove the existence of the overlap or conflict between his
claimed area and that covered by respondents application, then the findings of the
MAB should be deemed final and executory.
The CA refused to take jurisdiction over the case because, under Section 79 of the
Philippine Mining Act of 1995, petitions for review of MAB decisions are to be
brought directly to the Supreme Court. The provision reads in part:
xxx xxx xxx
A petition for review by certiorari and question of law may be filed by the aggrieved
party with the Supreme Court within thirty (30) days from receipt of the order or
decision of the Board.
We hold that respondents reliance on Pearson is misplaced. The claimant therein
sued in the then Court of First Instance (CFI) to prevent the execution of a Decision
rendered by the panel of investigators of the Bureau of Mines and the Office of the
President. Despite a Motion to Dismiss filed by the mining companies, the CFI
ordered the creation of a committee to determine the correct tie-point of their
claims. So, the mining companies went to the then Intermediate Appellate Court
(IAC) via a Petition for Certiorari under Rule 65. The claimants averred that the
appellate court had no jurisdiction.
In the case at bar, petitioner went to the CA through a Petition for Review on
Certiorari under Rule 43, seeking a reversal of the MAB Decision. Given the
difference in the reason for and the mode of appeal, it is obvious that Pearson is not
applicable here.
Still, we can draw one lesson. Far from dismissing the case on the ground of lack of
jurisdiction, Pearson expressly held that the CA had jurisdiction over the petition for
certiorari, because Section 9 of BP Blg. 129 (The Judiciary Reorganization Act of
1980), now incorporated in Section 4, Rule 65 of the 1997 Rules of Civil Procedure,
vested the then IAC with original jurisdiction to issue writs of certiorari and
prohibition, among other auxillary writs x x x. However, even though the Supreme
Court has concurrent jurisdiction with the CA and the Regional Trial Courts to issue a
writ of mandamus, prohibition or certiorari, litigants are well advised against taking
a direct recourse to this Court without initially seeking proper relief from the lower
courts, in accordance with the hierarchy of courts.[8]
In Pearson, what was under review was the ruling of the CFI to take cognizance of
the case which had been earlier decided by the MAB, not the MAB Decision itself
which was promulgated by the CA under Rule 43. The present petitioner seeks a
review of the latter.
Pearson held that the nature of the primary powers granted by law to the then
secretary of agriculture and natural resources as well as to the director of mines
were executive or administrative, such as granting of license, permits, lease and
contracts[;] or approving, rejecting, reinstating or canceling applications[;] or
deciding conflicting applications. These powers should be distinguished from
litigants disagreements or controversies that are civil or contractual in nature, which
may be adjudicated only by the courts of justice. The findings of fact of the MAB,
which exercises appellate jurisdiction over decisions or orders of the panel of
arbitrators, are conclusive and binding on the parties; its decisions or orders on
these are final and executory. But petitions for certiorari may be filed with the
appropriate courts.[9] In short, the Court held that the appellate jurisdiction of the
IAC (now the CA) in Pearson fell under Rule 65 -- not 43 -- because what was being
impugned was grave abuse of discretion on the part of the CFI.
Pearson, however, should be understood in the light of other equally relevant
jurisprudence. In Fabian v. Desierto,[10] the Court clarified that appeals from
judgments and final orders of quasi-judicial agencies are now required to be
brought to the CA, under the requirements and conditions set forth in Rule 43. This
Rule was adopted precisely to provide a uniform rule of appellate procedure from
quasi-judicial agencies.[11]
Section 27 of RA 6770[12] which is similarly worded as Section 79 of the Philippine
Mining Act, was struck down by Fabian as unconstitutional, because it had
broadened the appellate jurisdiction of the Supreme Court without its consent, in
violation of Section 30 of Article VI of the Constitution.[13] In short, Section 27 of RA
6770 which provides that all administrative decisions of the Office of the
Ombudsman may be appealed to the Supreme Court, was unconstitutional.
In another case, held invalid in the light of Rule 43 of the 1997 Rules of Court was
Section 3(2) of Executive Order No. 561, which had declared that decisions of the
Commission on Settlement of Land Problems (COSLAP) were appealable exclusively
to the Supreme Court.[14] There is no convincing reason why appeals from the
COSLAP should be treated differently from those arising from other quasi-judicial
bodies, the decisions of which are directly appealable to the CA under Rule 43 of
the 1997 Rules.
Finally, Metro Construction, Inc. v. Chat ham Properties, Inc.[15] held that Section 19
of Executive Order No. 1008 -- which had deemed arbitral awards of the
Construction Industry Arbitration Commission (CIAC) to be appealable to the
Supreme Court on questions of law -- was modified by Circular No. 1-91, Batas
Pambansa Blg. 129 as amended by RA 7902, Revised Administrative Circular 1-95,
and Rule 43 of the Rules of Court. Reiterating Fabian, the Court ruled that appeals
were procedural and remedial in nature; hence, constitutionally subject to this
Courts rule-making power.
In the present case, it is claimed that a petition for review is improper because
petitioners challenge is purely factual, bearing only on the MAB ruling that there
was no overlap or conflict between the litigants claims.
We clarify. Factual controversies are usually involved in administrative actions; and
the CA is prepared to handle such issues because, unlike this Court, it is mandated
to rule on questions of fact.[16] In Metro Construction, we observed that not only
did the CA have appellate jurisdiction over CIAC decisions and orders, but the review
of such decisions included questions of fact and law.[17] At the very least when
factual findings of the MAB are challenged or alleged to have been made in grave
abuse of discretion as in the present case, the CA may review them, consistent with
the constitutional duty[18] of the judiciary.
To summarize, there are sufficient legal footings authorizing a review of the MAB
Decision under Rule 43 of the Rules of Court. First, Section 30 of Article VI of the
1987 Constitution, mandates that [n]o law shall be passed increasing the appellate
jurisdiction of the Supreme Court as provided in this Constitution without its advice
and consent. On the other hand, Section 79 of RA No. 7942 provides that decisions
of the MAB may be reviewed by this Court on a petition for review by certiorari. This
provision is obviously an expansion of the Courts appellate jurisdiction, an
expansion to which this Court has not consented. Indiscriminate enactment of
legislation enlarging the appellate jurisdiction of this Court would unnecessarily
burden it.[19]
Second, when the Supreme Court, in the exercise of its rule-making power, transfers
to the CA pending cases involving a review of a quasi-judicial bodys decisions, such
transfer relates only to procedure; hence, it does not impair the substantive and
vested rights of the parties. The aggrieved partys right to appeal is preserved; what
is changed is only the procedure by which the appeal is to be made or decided.[20]
The parties still have a remedy and a competent tribunal to grant this remedy.
Third, the Revised Rules of Civil Procedure included Rule 43 to provide a uniform
rule on appeals from quasi-judicial agencies.[21] Under the rule, appeals from their
judgments and final orders are now required to be brought to the CA on a verified
petition for review.[22] A quasi-judicial agency or body has been defined as an organ
of government, other than a court or legislature, which affects the rights of private
parties through either adjudication or rule-making.[23] MAB falls under this SECOND DIVISION
definition; hence, it is no different from the other quasi-judicial bodies enumerated
under Rule 43. Besides, the introductory words in Section 1 of Circular No. 1-91 --
among these agencies are -- indicate that the enumeration is not exclusive or CELESTIAL NICKEL MINING G.R. No. 169080
conclusive and acknowledge the existence of other quasi-judicial agencies which, EXPLORATION CORPORATION,
though not expressly listed, should be deemed included therein.[24] Petitioner,
Present:
Fourth, the Court realizes that under Batas Pambansa (BP) Blg. 129[25] as amended - versus -
by RA No. 7902,[26] factual controversies are usually involved in decisions of quasi- QUISUMBING, J., Chairperson,
judicial bodies; and the CA, which is likewise tasked to resolve questions of fact, has BLUE RIDGE MINERAL G.R. No. 172936
more elbow room to resolve them. By including questions of fact[27] among the CORPORATION,
issues that may be raised in an appeal from quasi-judicial agencies to the CA, Petitioner,
Section 3 of Revised Administrative Circular No. 1-95 and Section 3 of Rule 43
explicitly expanded the list of such issues.
- versus -
According to Section 3 of Rule 43, [a]n appeal under this Rule may be taken to the
Court of Appeals within the period and in the manner herein provided whether the
appeal involves questions of fact, of law, or mixed questions of fact and law. Hence,
appeals from quasi-judicial agencies even only on questions of law may be brought HON. ANGELO REYES in his
to the CA. capacity as SECRETARY of
Fifth, the judicial policy of observing the hierarchy of courts dictates that direct the DEPARTMENT OF
resort from administrative agencies to this Court will not be entertained, unless the ENVIRONMENT AND NATURAL
redress desired cannot be obtained from the appropriate lower tribunals, or unless
exceptional and compelling circumstances justify availment of a remedy falling x ---------------------------------------------- x
within and calling for the exercise of our primary jurisdiction.[28]
CELESTIAL NICKEL MINING G.R. No. 176226
Consistent with these rulings and legal bases, we therefore hold that Section 79 of EXPLORATION CORPORATION,
RA 7942 is likewise to be understood as having been modified by Circular No. 1-91, Petitioner,
BP Blg. 129 as amended by RA 7902, Revised Administrative Circular 1-95, and Rule
43 of the Rules of Court. In brief, appeals from decisions of the MAB shall be taken - versus -
to the CA through petitions for review in accordance with the provisions of Rule 43
of the 1997 Rules of Court.
BLUE RIDGE MINERAL
WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution CORPORATION and MACROASIA
REVERSED and SET ASIDE. The Petition in CA-GR SP No. 46830 is REINSTATED, and CORPORATION (formerly INFANTA
the CA is ordered to RESOLVE it on the merits with deliberate dispatch. No costs. MINERAL AND INDUSTRIAL
CORPORATION),
SO ORDERED. Respondents.
x ---------------------------------------------- x

Republic of the Philippines MACROASIA CORPORATION G.R. No. 176319

SUPREME COURT (formerly INFANTA MINERAL AND
Manila
INDUSTRIAL CORPORATION),
Petitioner,
- versus -
BLUE RIDGE MINERAL
CORPORATION and CELESTIAL
NICKEL MINING EXPLORATION
CORPORATION,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
Before us are four (4) petitions. The first is a Petition for Review on Certiorari[1]
under Rule 45 docketed as G.R. No. 169080, wherein petitioner Celestial Nickel
Mining Exploration Corporation (Celestial) seeks to set aside the April 15, 2005
Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 87931. The CA affirmed
the November 26, 2004 Resolution of the Mines Adjudication Board (MAB) in MAB
Case Nos. 056-97 and 057-97 (DENR Case Nos. 97-01 and 97-02), upholding the
authority of the Department of Environment and Natural Resources (DENR)
Secretary to grant and cancel mineral agreements. Also assailed is the August 3,
2005 Resolution[3] of the CA denying the Motion for Reconsideration of the assailed
Decision.
The second is a Petition for Certiorari[4] under Rule 65 docketed as G.R. No. 172936,
wherein petitioner Blue Ridge Mineral Corporation (Blue Ridge) seeks to annul and
set aside the action of then Secretary Michael T. Defensor, in his capacity as DENR
Secretary, approving and signing two Mineral Production Sharing Agreements
(MPSAs) in favor of Macroasia Corporation (Macroasia) denominated as MPSA Nos.
220-2005-IVB and 221-2005-IVB.
And the third and fourth are petitions for review on certiorari[5] under Rule 45
docketed as G.R. No. 176226 and G.R. No. 176319, wherein petitioners Celestial and
Macroasia, respectively, seek to set aside the May 18, 2006 Decision[6] of the CA in
CA-G.R. SP No. 90828. The CA reversed and set aside the November 26, 2004 and
July 12, 2005 Resolutions of the MAB, and reinstated the October 24, 2000 Decision
in MAB Case Nos. 056-97 and 057-97, granting Blue Ridge the prior and preferential
right to file its application over the mining claims of Macroasia. These petitions
likewise seek to set aside the January 19, 2007 Resolution[7] of the CA denying
petitioners motions for reconsideration of the assailed Decision.
Through our July 5, 2006 Resolution,[8] we consolidated the first two cases. While in
our subsequent April 23, 2007[9] and July 11, 2007[10] Resolutions, we
consolidated the four cases as they arose from the same facts.
The undisputed facts as found by the CA in CA-G.R. SP No. 87931 are as follows:
On September 24, 1973, the then Secretary of Agriculture and Natural Resources
and Infanta Mineral and Industrial Corporation (Infanta) entered into a Mining Lease
Contract (V-1050) for a term of 25 years up to September 23, 1998 for mining lode
claims covering an area of 216 hectares at Sitio Linao, Ipilan, Brookes Point,
Palawan. The mining claims of Infanta covered by lode/lease contracts were as
follows:
Contract No. Area Date of Issuance
LLC-V-941 18 hectares January 17, 1972
LC-V-1050 216 hectares September 24, 1973
LLC-V-1060 16 hectares October 30, 1973
LLC-V-1061 144 hectares October 30, 1973
LLC-V-1073 144 hectares April 18, 1973
MLC-MRD-52 306 hectares April 26, 1978
MLC-MRC-53 72 hectares April 26, 1978
Infantas corporate name was changed to Cobertson Holdings Corporation on
January 26, 1994 and subsequently to its present name, Macroasia Corporation, on
November 6, 1995.
Sometime in 1997, Celestial filed a Petition to Cancel the subject mining lease
contracts and other mining claims of Macroasia including those covered by Mining
Lease Contract No. V-1050, before the Panel of Arbitrators (POA) of the Mines and
Geo-Sciences Bureau (MGB) of the DENR. The petition was docketed as DENR Case
No. 97-01.
Blue Ridge, in an earlier letter-petition, also wrote the Director of Mines to seek
cancellation of mining lease contracts and other mining rights of Macroasia and
another entity, Lebach Mining Corporation (Lebach), in mining areas in Brookes
Point. The petition was eventually docketed as DENR Case No. 97-02.
Celestial is the assignee of 144 mining claims covering such areas contiguous to
Infantas (now Macroasia) mining lode claims. Said area was involved in protracted
administrative disputes with Infanta (now Macroasia), Lecar & Sons, Inc., and
Palawan Nickel Mining Corporation. Celestial also holds an MPSA with the
government which covers 2,835 hectares located at Ipilan/Maasin, Brookes Point,
Palawan and two pending applications covering another 4,040 hectares in Barangay
Mainit also in Brookes Point.
Celestial sought the cancellation of Macroasias lease contracts on the following
grounds: (1) the nonpayment of Macroasia of required occupational fees and
municipal taxes; (2) the non-filing of Macroasia of Affidavits of Annual Work
Obligations; (3) the failure of Macroasia to provide improvements on subject mining
claims; (4) the concentration of Macroasia on logging; (5) the encroachment,
mining, and extraction by Macroasia of nickel ore from Celestials property; (6) the
ability of Celestial to subject the mining areas to commercial production; and (7) the
willingness of Celestial to pay fees and back taxes of Macroasia.
In the later part of the proceedings, Macroasia intervened in the case and submitted
its position paper refuting the grounds for cancellation invoked by Celestial.[11]
The Ruling of the Panel of Arbitrators in
DENR Case Nos. 97-01 and 97-02
Based on the records of the Bureau of Mines and findings of the field investigations,
the POA found that Macroasia and Lebach not only automatically abandoned their
areas/mining claims but likewise had lost all their rights to the mining claims. The
POA granted the petition of Celestial to cancel the following Mining Lease Contracts
of Macroasia: LLC-V-941, LLC-V-1050, LLC-V-1060, LLC-V-1061, LLC-V-1073, MLC-
MRD-52, and MLC-MRC-53; and found the claims of the others indubitably
meritorious. It gave Celestial the preferential right to Macroasias mining areas.[12] It
upheld Blue Ridges petition regarding DENR Case No. 97-02, but only as against the
Mining Lease Contract areas of Lebach (LLC-V-1153, LLC-V-1154, and LLC-V-1155),
and the said leased areas were declared automatically abandoned. It gave Blue
Ridge priority right to the aforesaid Lebachs areas/mining claims.[13]
Blue Ridge and Macroasia appealed before the MAB, and the cases were docketed
as MAB Case Nos. 056-97 and 057-97, respectively.
Lebach did not file any notice of appeal with the required memorandum of appeal;
thus, with respect to Lebach, the above resolution became final and executory.
The Rulings of the Mines Adjudication Board in
MAB Case Nos. 056-97 and 057-97 (DENR Case Nos. 97-01 and 97-02)
The MAB resolved the issues of timeliness and perfection of Macroasias appeal;
Macroasias abandonment of its mining claims; and the preferential right over the
abandoned mining claims of Macroasia.
Conformably with Section 51 of Consolidated Mines Administrative Order (CMAO)
[14] implementing Presidential Decree No. (PD) 463[15] and our ruling in Medrana
v. Office of the President (OP),[16] the MAB affirmed the POA findings that
Macroasia abandoned its mining claims. The MAB found that Macroasia did not
comply with its work obligations from 1986 to 1991. It based its conclusion on the
field verifications conducted by the MGB, Region IV and validated by the Special
Team tasked by the MAB.[17] However, contrary to the findings of the POA, the
MAB found that it was Blue Ridge that had prior and preferential rights over the
mining claims of Macroasia, and not Celestial.
Thus, on October 24, 2000, the MAB promulgated its Decision upholding the
Decision of the POA to cancel the Mining Lode/Lease Contracts of Macroasia;
declaring abandoned the subject mining claims; and opening the mining area with
prior and preferential rights to Blue Ridge for mining applications, subject to strict
compliance with the procedure and requirements provided by law. In case Blue
Ridge defaults, Celestial could exercise the secondary priority and preferential
rights, and subsequently, in case Celestial also defaults, other qualified applicants
could file.[18]
Both Celestial and Macroasia moved for reconsideration.[19] Celestial asserted that
it had better rights than Blue Ridge over the mining claims of Macroasia as it had
correctly filed its petition, and filed its MPSA application after Macroasias lease
contract expired on January 17, 1997 and after the POAs resolution was issued on
September 1, 1997. Moreover, it argued that priority was not an issue when the
contested area had not yet been declared abandoned. Thus, Blue Ridges MPSA
application filed on June 17, 1996 had no effect and should not be considered
superior since Macroasias lease contracts were still valid and subsisting and could
not have been canceled by Macroasias mere failure to perform annual work
obligations and pay corresponding royalties/taxes to the government.
Macroasia, in its Motion for Reconsideration, reiterated that it did not abandon its
mining claims, and even if mining was not listed among its purposes in its amended
Articles of Incorporation, its mining activities were acts that were only ultra vires but
were ratified as a secondary purpose by its stockholders in subsequent amendments
of its Articles of Incorporation.
Before the MAB could resolve the motions for reconsideration, on March 16, 2001,
Macroasia filed its Supplemental Motion for Reconsideration[20] questioning the
jurisdiction of the POA in canceling mining lease contracts and mining claims.
Macroasia averred that the power and authority to grant, cancel, and revoke
mineral agreements is exclusively lodged with the DENR Secretary. Macroasia
further pointed out that in arrogating upon itself such power, the POA whimsically
and capriciously discarded the procedure on conferment of mining rights laid down
in Republic Act No. (RA) 7942, The Philippine Mining Act of 1995, and DENR
Administrative Order No. (AO) 96-40,[21] and perfunctorily and improperly awarded
its mining rights to Blue Ridge and Celestial.
Subsequently, on November 26, 2004, the MAB issued a Resolution[22] vacating its
October 24, 2000 Decision, holding that neither the POA nor the MAB had the
power to revoke a mineral agreement duly entered into by the DENR Secretary,
ratiocinating that there was no provision giving the POA and MAB the concurrent
power to manage or develop mineral resources. The MAB further held that the
power to cancel or revoke a mineral agreement was exclusively lodged with the
DENR Secretary; that a petition for cancellation is not a mining dispute under the
exclusive jurisdiction of the POA pursuant to Sec. 77 of RA 7942; and that the POA
could only adjudicate claims or contests during the MPSA application and not when
the claims and leases were already granted and subsisting.
Moreover, the MAB held that there was no abandonment by Macroasia because the
DENR Secretary had not decided to release Macroasia from its obligations. The
Secretary may choose not to release a contractor from its obligations on grounds of
public interest. Thus, through its said resolution, the MAB rendered its disposition,
as follows:
WHEREFORE, premises considered, the assailed Decision of October 24, 2000 is
hereby VACATED. The seven (7) mining lease contracts of Macroasia Corporation
(formerly Infanta Mineral & Industrial Corporation) are DECLARED SUBSISTING prior
to their expirations without prejudice to any Decision or Order that the Secretary
may render on the same. NO PREFERENTIAL RIGHT over the same mining claims is
accorded to Blue Ridge Mineral Corporation or Celestial Nickel Mining Exploration
Corporation also without prejudice to the determination by the Secretary over the
matter at the proper time.[23]
After the issuance of the MAB Resolution, Celestial and Blue Ridge went through
divergent paths in their quest to protect their individual interests.
On January 10, 2005, Celestial assailed the November 26, 2004 MAB Resolution
before the CA in a petition for review[24] under Rule 43 of the Rules of Court. The
petition entitled Celestial Nickel Mining Exploration Corporation v. Macroasia
Corporation, et al. was docketed as CA-G.R. SP No. 87931.
On the other hand, Blue Ridge first filed a Motion for Reconsideration[25] which
was denied.[26] On August 26, 2005, Blue Ridge questioned the MABs November
26, 2004 and July 12, 2005 Resolutions before the CA in a petition for review[27]
entitled Blue Ridge Mineral Corporation v. Mines Adjudication Board, et al. docketed
as CA-G.R. SP No. 90828.
CA-G.R. SP No. 87931 filed by Celestial was heard by the 12th Division of the CA;
while Blue Ridges CA-G.R. SP No. 90828 was heard by the Special 10th Division.
Ironically, the two divisions rendered two (2) diametrically opposing decisions.
The Ruling of the Court of Appeals Twelfth Division
On April 15, 2005, in CA-G.R. SP No. 87931, the CA 12th Division affirmed the
November 26, 2004 MAB Resolution which declared Macroasias seven mining lease
contracts as subsisting; rejected Blue Ridges claim for preferential right over said
mining claims; and upheld the exclusive authority of the DENR Secretary to approve,
cancel, and revoke mineral agreements. The CA also denied Celestials Motion for
Reconsideration[28] of the assailed August 3, 2005 Resolution.[29]
Hence, Celestial filed its Petition for Review on Certiorari[30] docketed as G.R. No.
169080, before this Court.
The Ruling of the Court of Appeals Special Tenth Division
On May 18, 2006, the CA Special 10th Division in CA-G.R. SP No. 90828 granted Blue
Ridges petition; reversed and set aside the November 26, 2004 and July 12, 2005
Resolutions of the MAB; and reinstated the October 24, 2000 Decision in MAB Case
Nos. 056-97 and 057-97. The Special Tenth Division canceled Macroasias lease
contracts; granted Blue Ridge prior and preferential rights; and treated the
cancellation of a mining lease agreement as a mining dispute within the exclusive
jurisdiction of the POA under Sec. 77 of RA 7942, explaining that the power to
resolve mining disputes, which is the greater power, necessarily includes the lesser
power to cancel mining agreements.
On February 20, 2006, Celestial filed a Most Urgent Motion for Issuance of a
Temporary Restraining Order/Preliminary Prohibitory Injunction/Mandatory
Injunction[31] to defer and preclude the issuance of MPSA to Macroasia by the MGB
and the DENR Secretary. We denied this motion in our February 22, 2006
Resolution.[32]
Upon inquiry with the DENR, Blue Ridge discovered that sometime in December
2005 two MPSAs, duly approved and signed by the DENR Secretary, had been issued
in favor of Macroasia. Thus, we have the instant Petition for Certiorari[33] filed by
Blue Ridge docketed as G.R. No. 172936 under Rule 65, seeking to invalidate the
two MPSAs issued to Macroasia.
In the meantime, on June 7, 2006, Celestial filed its Motion for Partial
Reconsideration[34] of the May 18, 2006 CA Decision in CA-G.R. SP No. 90828, while
Macroasia filed its motion for reconsideration of the same CA decision on July 7,
2006. The motions were denied in the assailed January 19, 2007 CA Resolution.
Hence, on March 8, 2007, Celestial filed the third petition[35] docketed as G.R. No.
176226, assailing the CAs May 18, 2006 Decision and January 19, 2007 Resolution,
insofar as these granted Blue Ridges prior and preferential rights. While on March 9,
2007, Macroasia filed the fourth petition[36] docketed as G.R. No. 176319, also
assailing the CAs May 18, 2006 Decision and January 19, 2007 Resolution.
The Issues
In G.R. No. 169080, petitioner Celestial raises the following issues for our
consideration:
(1) Whether or not Macroasia, for reasons of public policy is estopped from assailing
the alleged lack of jurisdiction of the Panel of Arbitrators and the Mines
Adjudication Board only after receiving an adverse judgment therefrom? [sic]
(2) Whether or not it is only the Secretary of the DENR who has the jurisdiction to
cancel mining contracts and privileges? [sic]
(3) Whether or not a petition for the cancellation of a mining lease contract or
privilege is a mining dispute within the meaning of the law? [sic]
(4) Whether or not Infantas (Macroasia) mining lease contract areas were deemed
abandoned warranting the cancellation of the lease contracts and the opening of
the areas to other qualified applicants? [sic]
(5) Whether or not Macroasia/Infanta had lost its right to participate in this case
after it failed to seasonably file its appeal and after its lease contracts had been
declared abandoned and expired without having been renewed by the government?
[sic]
(6) Whether or not Celestial has the preferential right to apply for the 23 DE LARA
claims which were included in Infantas (Macroasia) expired lease contract (LLC-V-
941) and the other areas declared as lapsed or abandoned by MGB-Region 4 and
the Panel of Arbitrators?[37] [sic]
In G.R. No. 172936, petitioner Blue Ridge raises the following grounds for the
allowance of the petition:
I
At the outset, the instant petition must be given due course and taken cognizance of
by the Honorable Court considering that exceptional and compelling circumstances
justify the availment of the instant petition and the call for the exercise of the
Honorable Courts primary jurisdiction.
A. The exploration, development and utilization of minerals, petroleum and other
mineral oils are imbued with public interest. The action of then Secretary Defensor,
maintained and continued by public respondent Secretary Reyes, was tainted with
grave abuse of discretion, has far-reaching consequences because of the magnitude
of the effect created thereby.
B. The issues in the instant petition have already been put to fore by Celestial with
the First Division of the Honorable Court, and hence, this circumstance justifies the
cognizance by the Honorable Court of the instant petition.
II
It was grave abuse of discretion amounting to lack and/or excess of jurisdiction for
then Secretary Defensor to have issued the subject MPSAs in favor of private
respondent Macroasia, considering that:
A. Non-compliance of the mandatory requirements by private respondent
Macroasia prior to approval of the subject MPSAs should have precluded then
Secretary Defensor from approving subject MPSAs.
B. Petitioner Blue Ridge has the prior and preferential right to file its mining
application over the mining claims covered by the subject MPSAs, pursuant to the
Decision dated 24 October 2000 of the Board and as affirmed by the Decision dated
18 May 2006 of the Court of Appeals in CA-G.R. SP No. 90828.[38]
In G.R. No. 176226, petitioner Celestial ascribes the following errors to the CA for
our consideration:
(1) That in reinstating and adopting as its own the Decision of the Mine Adjudication
Board affirming the abandonment and cancellation of the mining areas/claims of
Macroasia (Infanta) but awarding the prior or preferential rights to Blue Ridge, the
Hon. Court of Appeals had decided a question of substance in a way not in accord
with the Law (RA 7942) or with the applicable decisions of the Supreme Court; in
other words, errors of law had been committed by the Hon. Court of Appeals in
granting preferential rights to Blue Ridge;
(2) That the Hon. Court of Appeals has so far departed from the accepted and usual
course of judicial proceedings or so far sanctioned such departure by the Mines
Adjudication Board in its Decision of May 18, 2006 and Resolution of January 19,
2007 because:
(A) The findings of fact of the Hon. Court of Appeals are contradictory or
inconsistent with the findings of the Panel of Arbitrators;
(B) There is grave abuse of discretion on the part of the Hon. Court of Appeals in its
appreciation of the facts, the evidence and the law thereby leading it to make the
erroneous conclusion that Blue Ridge, not Celestial, is entitled to the Award of
prior/preferential rights over the mining areas declared as abandoned by
Macroasia;
(C) There is likewise, a grave abuse of discretion on the part of the Hon. Court of
Appeals in that the said Court did not even consider some of the issues raised by
Celestial;
(D) That the findings of the Hon. Court of Appeals are mere conclusions not
supported by substantial evidence and without citation of the specific evidence
upon which they are based; they were arrived at arbitrarily or in disregard of
contradiction of the evidence on record and findings of the Panel of Arbitrators in
the Resolution of September 1, 1997;
(E) That the findings of the Hon. Court of Appeals are premised on the absence of
evidence but such findings are contradicted by the evidence on record and are
violative of the provisions of RA 7942 and its Implementing Rules and Regulations.
[39]
In G.R. No. 176319, petitioner Macroasia raises the following grounds for the
allowance of the petition:
I.
The Court of Appeals (Special Tenth Division) should have dismissed the Petition of
Blue Ridge outright since the issues, facts and matters involved in the said Petition
are identical to those which had already been painstakingly passed upon, reviewed
and resolved by the Court of Appeals Twelfth Division in CA-G.R. SP No. 87931
II.
The Court of Appeals (Special Tenth Division) gravely erred in denying Macroasias
Motion to Inhibit Associate Justice Rosmari Carandang from hearing and deciding
the Petition
III.
There were no factual nor legal bases for the Court of Appeals to rule that
Macroasia had waived its right to question the jurisdiction of the Mines
Adjudication Board
IV.
Republic Act No. 7942 contains provisions which unequivocally indicate that only
the Secretary of the Department of Environment and Natural Resources has the
power and authority to cancel mining lease agreements
V.
The Court of Appeals (Special Tenth Division) gravely erred in perfunctorily
transferring Macroasias mining lease agreements to Blue Ridge without observing
the required procedure nor providing any basis therefor[40]
The Courts Ruling
The petitions under G.R. Nos. 169080, 172936, and 176226 are bereft of merit,
while the petition under G.R. No. 176319 is meritorious.
The pith of the controversy, upon which the other issues are hinged is, who has
authority and jurisdiction to cancel existing mineral agreements under RA 7942 in
relation to PD 463 and pertinent rules and regulations.
G.R. Nos. 169080, 176226 and 176319
We will jointly tackle G.R. Nos. 169080, 176266, and 176319 as the issues and
arguments of these three are inextricably intertwined.

Core Issue: Jurisdiction over Cancellation of Mineral Agreements
Petitioner Celestial maintains that while the jurisdiction to approve mining lease
contracts or mineral agreements is conferred on the DENR Secretary, Sec. 77(a) of
RA 7942 by implication granted to the POA and MAB the authority to cancel existing
mining lease contracts or mineral agreements.
On the other hand, respondent Macroasia strongly asserts that it is the DENR
Secretary who has the exclusive and primary jurisdiction to grant and cancel existing
mining lease contracts; thus, the POA and MAB have no jurisdiction to cancel much
less to grant any preferential rights to other mining firms.
Before we resolve this core issue of jurisdiction over cancellation of mining lease
contracts, we first need to look back at previous mining laws pertinent to this issue.
Under PD 463, The Mineral Resources Development Decree of 1974, which took
effect on May 17, 1974, applications for lease of mining claims were required to be
filed with the Director of the Bureau of Mines, within two (2) days from the date of
their recording.[41] Sec. 40 of PD 463 provided that if no adverse claim was filed
within (15) days after the first date of publication, it was conclusively presumed that
no adverse claim existed and thereafter no objection from third parties to the grant
of the lease could be heard, except protests pending at the time of publication. The
Secretary would then approve and issue the corresponding mining lease contract. In
case of any protest or adverse claim relating to any mining claim and lease
application, Secs. 48 and 50 of PD 463 prescribed the procedure. Under Sec. 48, the
protest should be filed with the Bureau of Mines. Under Sec. 50, any party not
satisfied with the decision or order of the Director could, within five (5) days from
receipt of the decision or order, appeal to the Secretary. The decisions of the
Secretary were likewise appealable within five (5) days from receipts by the affected
party to the President of the Philippines whose decision shall be final and executory.
PD 463 was, however, silent as to who was authorized to cancel the mineral
agreements.
On July 10, 1987, President Corazon C. Aquino issued Executive Order No. (EO) 211.
Under Sec. 2 of EO 211, the processing, evaluation, and approval of all mining
applications, declarations of locations, operating agreements, and service contracts
were governed by PD 463, as amended. EO 211 likewise did not contain any
provision on the authority to cancel operating agreements and service contracts.
On July 25, 1987, EO 279 was issued by President Aquino. It authorized the DENR
Secretary to negotiate and enter into, for and in behalf of the Government, joint
venture, co-production, or production-sharing agreements for the exploration,
development, and utilization of mineral resources with any Filipino citizen,
corporation, or association, at least 60% of whose capital was owned by Filipino
citizens.[42] The contract or agreement was subject to the approval of the
President.[43] With respect to contracts of foreign-owned corporations or foreign
investors involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, the DENR Secretary could recommend
approval of said contracts to the President.[44] EO 279 provided that PD 463 and its
implementing rules and regulations, which were not inconsistent with EO 279,
continued in force and effect.[45] Again, EO 279 was silent on the authority to
cancel mineral agreements.
RA 7942, The Philippine Mining Act of 1995 enacted on March 3, 1995, repealed the
provisions of PD 463 inconsistent with RA 7942. Unlike PD 463, where the
application was filed with the Bureau of Mines Director, the applications for mineral
agreements are now required to be filed with the Regional Director as provided by
Sec. 29 of RA 7942. The proper filing gave the proponent the prior right to be
approved by the Secretary and thereafter to be submitted to the President. The
President shall provide a list to Congress of every approved mineral agreement
within 30 days from its approval by the Secretary. Again, RA 7942 is silent on who
has authority to cancel the agreement.
Compared to PD 463 where disputes were decided by the Bureau of Mines Director
whose decisions were appealable to the DENR Secretary and then to the President,
RA 7942 now provides for the creation of quasi-judicial bodies (POA and MAB) that
would have jurisdiction over conflicts arising from the applications and mineral
agreements. Secs. 77, 78, and 79 lay down the procedure, thus:
SEC. 77. Panel of Arbitrators.There shall be a panel of arbitrators in the regional
office of the Department composed of three (3) members, two (2) of whom must be
members of the Philippine Bar in good standing and one [1] licensed mining
engineer or a professional in a related field, and duly designated by the Secretary as
recommended by the Mines and Geosciences Bureau Director. Those designated as
members of the panel shall serve as such in addition to their work in the
Department without receiving any additional compensation. As much as practicable,
said members shall come from the different bureaus of the Department in the
region. The presiding officer thereof shall be selected by the drawing of lots. His
tenure as presiding officer shall be on a yearly basis. The members of the panel shall
perform their duties and obligations in hearing and deciding cases until their
designation is withdrawn or revoked by the Secretary. Within thirty (30) working
days, after the submission of the case by the parties for decision, the panel shall
have exclusive and original jurisdiction to hear and decide on the following:
(a) Disputes involving rights to mining areas;
(b) Disputes involving mineral agreements or permits;
(c) Disputes involving surface owners, occupants and claimholders/concessionaires;
and
(d) Disputes pending before the Bureau and the Department at the date of the
effectivity of this Act.
SEC. 78. Appellate Jurisdiction.The decision or order of the panel of arbitrators may
be appealed by the party not satisfied thereto to the Mines Adjudication Board
within fifteen (15) days from receipt thereof which must decide the case within
thirty (30) days from submission thereof for decision.
SEC. 79. Mines Adjudication Board.The Mines Adjudication Board shall be composed
of three (3) members. The Secretary shall be the chairman with the Director of the
Mines and Geosciences Bureau and the Undersecretary for Operations of the
Department as members thereof.
xxxx
A petition for review by certiorari and question of law may be filed by the aggrieved
party with the Supreme Court within thirty (30) days from receipt of the order or
decision of the Board.
RA 7942 is also silent as to who is empowered to cancel existing lease contracts and
mineral agreements.
Meanwhile, in Southeast Mindanao Gold Mining Corp. v. MAB, we explained that
the decision of the MAB can first be appealed, via a petition for review, to the CA
before elevating the case to this Court.[46]
After a scrutiny of the provisions of PD 463, EO 211, EO 279, RA 7942 and its
implementing rules and regulations, executive issuances, and case law, we rule that
the DENR Secretary, not the POA, has the jurisdiction to cancel existing mineral
lease contracts or mineral agreements based on the following reasons:
1. The power of the DENR Secretary to cancel mineral agreements emanates from
his administrative authority, supervision, management, and control over mineral
resources under Chapter I, Title XIV of Book IV of the Revised Administrative Code of
1987, viz:
Chapter 1General Provisions
Section 1. Declaration of Policy.(1) The State shall ensure, for the benefit of the
Filipino people, the full exploration and development as well as the judicious
disposition, utilization, management, renewal and conservation of the countrys
forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural
resources x x x
Sec. 2. Mandate.(1) The Department of Environment and Natural Resources shall be
primarily responsible for the implementation of the foregoing policy. (2) It shall,
subject to law and higher authority, be in charge of carrying out the States
constitutional mandate to control and supervise the exploration, development,
utilization, and conservation of the countrys natural resources.
xxxx
Sec. 4. Powers and Functions.The Department shall:
xxxx
(2) Formulate, implement and supervise the implementation of the governments
policies, plans, and programs pertaining to the management, conservation,
development, use and replenishment of the countrys natural resources;
xxxx
(4) Exercise supervision and control over forest lands, alienable and disposable
public lands, mineral resources x x x
xxxx
(12) Regulate the development, disposition, extraction, exploration and use of the
countrys forest, land, water and mineral resources;
(13) Assume responsibility for the assessment, development, protection, licensing
and regulation as provided for by law, where applicable, of all energy and natural
resources; the regulation and monitoring of service contractors, licensees, lessees,
and permit for the extraction, exploration, development and use of natural
resources products; x x x
xxxx

(15) Exercise exclusive jurisdiction on the management and disposition of all lands
of the public domain x x x
Chapter 2The Department Proper
xxxx
Sec. 8. The Secretary.The Secretary shall:
xxxx
(3) Promulgate rules, regulations and other issuances necessary in carrying out the
Departments mandate, objectives, policies, plans, programs and projects.
(4) Exercise supervision and control over all functions and activities of the
Department;
(5) Delegate authority for the performance of any administrative or substantive
function to subordinate officials of the Department x x x (Emphasis supplied.)
It is the DENR, through the Secretary, that manages, supervises, and regulates the
use and development of all mineral resources of the country. It has exclusive
jurisdiction over the management of all lands of public domain, which covers
mineral resources and deposits from said lands. It has the power to oversee,
supervise, and police our natural resources which include mineral resources.
Derived from the broad and explicit powers of the DENR and its Secretary under the
Administrative Code of 1987 is the power to approve mineral agreements and
necessarily to cancel or cause to cancel said agreements.
2. RA 7942 confers to the DENR Secretary specific authority over mineral resources.
Secs. 8 and 29 of RA 7942 pertinently provide:
SEC. 8. Authority of the Department.The Department shall be the primary
government agency responsible for the conservation, management, development,
and proper use of the States mineral resources including those in reservations,
watershed areas, and lands of the public domain. The Secretary shall have the
authority to enter into mineral agreements on behalf of the Government upon the
recommendation of the Director, promulgate such rules and regulations as may be
necessary to implement the intent and provisions of this Act.
SEC. 29. Filing and approval of Mineral Agreements.x x x.
The filing of a proposal for a mineral agreement shall give the proponent the prior
right to areas covered by the same. The proposed mineral agreement will be
approved by the Secretary and copies thereof shall be submitted to the President.
Thereafter, the President shall provide a list to Congress of every approved mineral
agreement within thirty (30) days from its approval by the Secretary. (Emphasis
supplied.)
Sec. 29 is a carry over of Sec. 40 of PD 463 which granted jurisdiction to the DENR
Secretary to approve mining lease contracts on behalf of the government, thus:
SEC. 40. Issuance of Mining Lease Contract.If no adverse claim is filed within fifteen
(15) days after the first date of publication, it shall be conclusively presumed that no
such adverse claim exists and thereafter no objection from third parties to the grant
of the lease shall be heard, except protest pending at the time of publication, and
the Secretary shall approve and issue the corresponding mining lease x x x.
To enforce PD 463, the CMAO containing the rules and regulations implementing PD
463 was issued. Sec. 44 of the CMAO provides:
SEC. 44. Procedure for Cancellation.Before any mining lease contract is cancelled for
any cause enumerated in Section 43 above, the mining lessee shall first be notified
in writing of such cause or causes, and shall be given an opportunity to be heard,
and to show cause why the lease shall not be cancelled.
If, upon investigation, the Secretary shall find the lessee to be in default, the former
may warn the lessee, suspend his operations or cancel the lease contract (emphasis
supplied).
Sec. 4 of EO 279 provided that the provisions of PD 463 and its implementing rules
and regulations, not inconsistent with the executive order, continue in force and
effect.
When RA 7942 took effect on March 3, 1995, there was no provision on who could
cancel mineral agreements. However, since the aforequoted Sec. 44 of the CMAO
implementing PD 463 was not repealed by RA 7942 and DENR AO 96-40, not being
contrary to any of the provisions in them, then it follows that Sec. 44 serves as basis
for the DENR Secretarys authority to cancel mineral agreements.
Since the DENR Secretary had the power to approve and cancel mineral agreements
under PD 463, and the power to cancel them under the CMAO implementing PD
463, EO 211, and EO 279, then there was no recall of the power of the DENR
Secretary under RA 7942. Historically, the DENR Secretary has the express power to
approve mineral agreements or contracts and the implied power to cancel said
agreements.
It is a well-established principle that in the interpretation of an ambiguous provision
of law, the history of the enactment of the law may be used as an extrinsic aid to
determine the import of the legal provision or the law.[47] History of the enactment
of the statute constitutes prior laws on the same subject matter. Legislative history
necessitates review of the origin, antecedents and derivation of the law in question
to discover the legislative purpose or intent.[48] It can be assumed that the new
legislation has been enacted as continuation of the existing legislative policy or as a
new effort to perpetuate it or further advance it.[49]
We rule, therefore, that based on the grant of implied power to terminate mining or
mineral contracts under previous laws or executive issuances like PD 463, EO 211,
and EO 279, RA 7942 should be construed as a continuation of the legislative intent
to authorize the DENR Secretary to cancel mineral agreements on account of
violations of the terms and conditions thereof.
3. Under RA 7942, the power of control and supervision of the DENR Secretary over
the MGB to cancel or recommend cancellation of mineral rights clearly
demonstrates the authority of the DENR Secretary to cancel or approve the
cancellation of mineral agreements.
Under Sec. 9 of RA 7942, the MGB was given the power of direct supervision of
mineral lands and resources, thus:
Sec. 9. Authority of the Bureau.The Bureau shall have direct charge in the
administration and disposition of mineral lands and mineral resources and shall
undertake geological, mining, metallurgical, chemical, and other researches as well
as geological and mineral exploration surveys. The Director shall recommend to the
Secretary the granting of mineral agreements to duly qualified persons and shall
monitor the compliance by the contractor of the terms and conditions of the
mineral agreements. The Bureau may confiscate surety, performance and guaranty
bonds posted through an order to be promulgated by the Director. The Director may
deputize, when necessary, any member or unit of the Philippine National Police,
barangay, duly registered nongovernmental organization (NGO) or any qualified
person to police all mining activities. (Emphasis supplied.)
Corollary to the power of the MGB Director to recommend approval of mineral
agreements is his power to cancel or recommend cancellation of mining rights
covered by said agreements under Sec. 7 of DENR AO 96-40, containing the revised
Implementing Rules and Regulations of RA 7942. Sec. 7 reads:
Sec. 7. Organization and Authority of the Bureau.
xxxx
The Bureau shall have the following authority, among others:
a. To have direct charge in the administration and disposition of mineral land and
mineral resources;
xxxx
d. To recommend to the Secretary the granting of mineral agreements or to endorse
to the Secretary for action by the President the grant of FTAAs [Financial and
Technical Assistance Agreements], in favor of qualified persons and to monitor
compliance by the Contractor with the terms and conditions of the mineral
agreements and FTAAs.
e. To cancel or to recommend cancellation after due process, mining rights, mining
applications and mining claims for non-compliance with pertinent laws, rules and
regulations.
It is explicit from the foregoing provision that the DENR Secretary has the authority
to cancel mineral agreements based on the recommendation of the MGB Director.
As a matter of fact, the power to cancel mining rights can even be delegated by the
DENR Secretary to the MGB Director. Clearly, it is the Secretary, not the POA, that
has authority and jurisdiction over cancellation of existing mining contracts or
mineral agreements.
4. The DENR Secretarys power to cancel mining rights or agreements through the
MGB can be inferred from Sec. 230, Chapter XXIV of DENR AO 96-40 on cancellation,
revocation, and termination of a permit/mineral agreement/FTAA. Sec. 230
provides:

Section 230. Grounds Thus, the government represented by the then Secretary of Agriculture and Natural
Resources (now the DENR Secretary) has the power to cancel the lease contracts for
The following grounds for cancellation revocation and termination of a Mining violations of existing laws, rules and regulations and the terms and conditions of the
Permit Mineral Agreement/FTAA. contracts. Celestial and Blue Ridge are now estopped from challenging the power
and authority of the DENR Secretary to cancel mineral agreements.
a. Violation of any of the terms and conditions of the Permits or Agreements;
However, Celestial and Blue Ridge insist that the power to cancel mineral
b. Nonpayment of taxes and fees due the government for two (2) consecutive agreements is also lodged with the POA under the explicit provisions of Sec. 77 of
years; and RA 7942.

c. Falsehood or omission of facts in the application for exploration [or Mining] This postulation is incorrect.
Permit Mineral Agreement/FTAA or other permits which may later, change or affect
substantially the facts set forth in said statements. Sec. 77 of RA 7942 lays down the jurisdiction of POA, to wit:

Though Sec. 230 is silent as to who can order the cancellation, revocation, and Within thirty (30) days, after the submission of the case by the parties for the
termination of a permit/mineral agreement/FTAA, it has to be correlated with the decision, the panel shall have exclusive and original jurisdiction to hear and decide
power of the MGB under Sec. 7 of AO 96-40 to cancel or to recommend the following:
cancellation, after due process, mining rights, mining applications and mining claims
for noncompliance with pertinent laws, rules and regulations. As the MGB is under (a) Disputes involving rights to mining areas
the supervision of the DENR Secretary, then the logical conclusion is that it is the
DENR Secretary who can cancel the mineral agreements and not the POA nor the (b) Disputes involving mineral agreements or permits
MAB.

5. Celestial and Blue Ridge are not unaware of the stipulations in the Mining Lease
Contract Nos. V-1050 and MRD-52,[50] the cancellation of which they sought from
The phrase disputes involving rights to mining areas refers to any adverse claim,
the POA. It is clear from said lease contracts that the parties are the Republic of the
protest, or opposition to an application for mineral agreement. The POA therefore
Philippines represented by the Secretary of Agriculture and Natural Resources (now
has the jurisdiction to resolve any adverse claim, protest, or opposition to a pending
DENR Secretary) as lessor, and Infanta (Macroasia) as lessee. Paragraph 18 of said
application for a mineral agreement filed with the concerned Regional Office of the
lease contracts provides:
MGB. This is clear from Secs. 38 and 41 of DENR AO 96-40, which provide:
Whenever the LESSEE fails to comply with any provision of [PD 463, and]
Commonwealth Acts Nos. 137, 466 and 470, [both as amended,] and/or the rules
and regulations promulgated thereunder, or any of the covenants therein, the Sec. 38.
LESSOR may declare this lease cancelled and, after having given thirty (30) days
notice in writing to the LESSEE, may enter and take possession of the said premises, xxxx
and said lessee shall be liable for all unpaid rentals, royalties and taxes due the
Government on the lease up to the time of the forfeiture or cancellation, in which Within thirty (30) calendar days from the last date of publication/posting/radio
event, the LESSEE hereby covenants and agrees to give up the possession of the announcements, the authorized officer(s) of the concerned office(s) shall issue a
property leased. (Emphasis supplied.) certification(s) that the publication/posting/radio announcement have been
complied with. Any adverse claim, protest or opposition shall be filed directly, within
thirty (30) calendar days from the last date of publication/posting/radio
announcement, with the concerned Regional Office or through any concerned
PENRO or CENRO for filing in the concerned Regional Office for purposes of its
resolution by the Panel of Arbitrators pursuant to the provisions of this Act and
these implementing rules and regulations. Upon final resolution of any adverse
claim, protest or opposition, the Panel of Arbitrators shall likewise issue a
certification to that effect within five (5) working days from the date of finality of
resolution thereof. Where there is no adverse claim, protest or opposition, the Panel
of Arbitrators shall likewise issue a Certification to that effect within five working
days therefrom.
xxxx
No Mineral Agreement shall be approved unless the requirements under this
Section are fully complied with and any adverse claim/protest/opposition is finally
resolved by the Panel of Arbitrators.
Sec. 41.
xxxx
Within fifteen (15) working days from the receipt of the Certification issued by the
Panel of Arbitrators as provided in Section 38 hereof, the concerned Regional
Director shall initially evaluate the Mineral Agreement applications in areas outside
Mineral reservations. He/She shall thereafter endorse his/her findings to the Bureau
for further evaluation by the Director within fifteen (15) working days from receipt
of forwarded documents. Thereafter, the Director shall endorse the same to the
secretary for consideration/approval within fifteen working days from receipt of
such endorsement.
In case of Mineral Agreement applications in areas with Mineral Reservations,
within fifteen (15) working days from receipt of the Certification issued by the Panel
of Arbitrators as provided for in Section 38 hereof, the same shall be evaluated and
endorsed by the Director to the Secretary for consideration/approval within fifteen
days from receipt of such endorsement. (Emphasis supplied.)
It has been made clear from the aforecited provisions that the disputes involving
rights to mining areas under Sec. 77(a) specifically refer only to those disputes
relative to the applications for a mineral agreement or conferment of mining rights.
The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining
right application is further elucidated by Secs. 219 and 43 of DENR AO 95-936,
which read:
Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.Notwithstanding the
provisions of Sections 28, 43 and 57 above, any adverse claim, protest or opposition
specified in said sections may also be filed directly with the Panel of Arbitrators
within the concerned periods for filing such claim, protest or opposition as specified
in said Sections.
Sec. 43. Publication/Posting of Mineral Agreement Application.
xxxx
The Regional Director or concerned Regional Director shall also cause the posting of
the application on the bulletin boards of the Bureau, concerned Regional office(s)
and in the concerned province(s) and municipality(ies), copy furnished the
barangays where the proposed contract area is located once a week for two (2)
consecutive weeks in a language generally understood in the locality. After forty-five
(45) days from the last date of publication/posting has been made and no adverse
claim, protest or opposition was filed within the said forty-five (45) days, the
concerned offices shall issue a certification that publication/posting has been made
and that no adverse claim, protest or opposition of whatever nature has been filed.
On the other hand, if there be any adverse claim, protest or opposition, the same
shall be filed within forty-five (45) days from the last date of publication/posting,
with the Regional Offices concerned, or through the Departments Community
Environment and Natural Resources Officers (CENRO) or Provincial Environment and
Natural Resources Officers (PENRO), to be filed at the Regional Office for resolution
of the Panel of Arbitrators. However previously published valid and subsisting
mining claims are exempted from posted/posting required under this Section.
No mineral agreement shall be approved unless the requirements under this section
are fully complied with and any opposition/adverse claim is dealt with in writing by
the Director and resolved by the Panel of Arbitrators. (Emphasis supplied.)
These provisions lead us to conclude that the power of the POA to resolve any
adverse claim, opposition, or protest relative to mining rights under Sec. 77(a) of RA
7942 is confined only to adverse claims, conflicts and oppositions relating to
applications for the grant of mineral rights. POAs jurisdiction is confined only to
resolutions of such adverse claims, conflicts and oppositions and it has no authority
to approve or reject said applications. Such power is vested in the DENR Secretary
upon recommendation of the MGB Director. Clearly, POAs jurisdiction over disputes
involving rights to mining areas has nothing to do with the cancellation of existing
mineral agreements.
On the other hand, Celestial and Blue Ridge contend that POA has jurisdiction over
their petitions for the cancellation of Macroasias lease agreements banking on POAs
jurisdiction over disputes involving mineral agreements or permits under Sec. 77 (b)
of RA 7942.
Such position is bereft of merit.
As earlier discussed, the DENR Secretary, by virtue of his powers as administrative
head of his department in charge of the management and supervision of the natural
resources of the country under the 1987 Administrative Code, RA 7942, and other
laws, rules, and regulations, can cancel a mineral agreement for violation of its
terms, even without a petition or request filed for its cancellation, provided there is
compliance with due process. Since the cancellation of the mineral agreement is
approved by the DENR Secretary, then the recourse of the contractor is to elevate
the matter to the OP pursuant to AO 18, Series of 1987 but not with the POA.
Matched with the legal provisions empowering the DENR Secretary to cancel a
mineral agreement is Sec. 77 (b) of RA 7942 which grants POA jurisdiction over
disputes involving mineral agreements.
A dispute is defined as a conflict or controversy; a conflict of claims or rights; an
assertion of a right, claim or demand on one side; met by contrary claims or
allegations on the other.[51] It is synonymous to a cause of action which is an act or
omission by which a party violates a right of another.[52]
A petition or complaint originating from a dispute can be filed or initiated only by a
real party-in-interest. The rules of court define a real party-in-interest as the party
who stands to be benefited or injured by the judgment in the suit or the party
entitled to the avails of the suit.[53] Every action, therefore, can only be prosecuted
in the name of the real party-in-interest.[54] It has been explained that a real party-
in-interest plaintiff is one who has a legal right, while a real party-in-interest-
defendant is one who has a correlative legal obligation whose act or omission
violates the legal right of the former.[55]
On the other hand, interest means material interest, an interest in issue and to be
affected by the decree, as distinguished from mere interest in the question involved,
or a mere incidental interest. It is settled in this jurisdiction that one having no right
or interest to protect cannot invoke the jurisdiction of the court as a party-plaintiff
in an action.[56] Real interest is defined as a present substantial interest, as
distinguished from a mere expectancy, or a future, contingent, subordinate or
consequential interest.[57]
From the foregoing, a petition for the cancellation of an existing mineral agreement
covering an area applied for by an applicant based on the alleged violation of any of
the terms thereof, is not a dispute involving a mineral agreement under Sec. 77 (b)
of RA 7942. It does not pertain to a violation by a party of the right of another. The
applicant is not a real party-in-interest as he does not have a material or substantial
interest in the mineral agreement but only a prospective or expectant right or
interest in the mining area. He has no legal right to such mining claim and hence no
dispute can arise between the applicant and the parties to the mineral agreement.
The court rules therefore that a petition for cancellation of a mineral agreement
anchored on the breach thereof even if filed by an applicant to a mining claim, like
Celestial and Blue Ridge, falls within the jurisdiction of the DENR Secretary and not
POA. Such petition is excluded from the coverage of the POAs jurisdiction over
disputes involving mineral agreements under Sec. 77 (b) of RA 7942.
Macroasia not estopped from raising the issue of jurisdiction on appeal
On the related issue of estoppel, petitioner Celestial argues that Macroasia is
estopped from raising and questioning the issue of the jurisdiction of the POA and
MAB over the petition for cancellation of its mining lease contracts, when Macroasia
raised it only in its Supplemental Motion for Reconsideration.
We rule that the principle of estoppel does not apply.
Indeed, Macroasia was not the one that initiated the instant case before the POA,
and thus was not the one that invoked the jurisdiction of the POA. Hence, on
appeal, Macroasia is not precluded from raising the issue of jurisdiction as it may be
invoked even on appeal.[58] As a matter of fact, a party can raise the issue of
jurisdiction at any stage of the proceedings.
Petitioner Celestials reliance on Villela v. Gozun[59] to support the contention that
the POA has jurisdiction to hear and decide a petition to cancel existing mining lease
contracts, is misplaced. In said case, we dismissed the petition on the ground of
non-exhaustion of administrative remedies and disregarded judicial hierarchy as no
compelling reason was shown to warrant otherwise. While we pointed out the
authority of the POA, there was no categorical pronouncement on the jurisdictional
issue.
No valid pronouncement of abandonment due to lack of jurisdiction over petition to
cancel
As we are not a trier of facts, we need not make any finding on the various
investigations done by the MGB and MAB on the issue of Macroasias non-
compliance with its work obligations and nonpayment of taxes and fees. Verily, the
law does not impose automatic cancellation of an existing mining lease contract, as
it is a question of fact which must be determined by the MGB which can
recommend the cancellation of the mineral or lease agreements to the DENR
Secretary. Be that as it may, since the POA and MAB have no jurisdiction over the
petition for cancellation of existing mining lease contracts of Macroasia, they could
not have made any binding pronouncement that Macroasia had indeed abandoned
the subject mining claims. Besides, it is the DENR Secretary who has the authority to
cancel Macroasias existing mining lease contracts whether on grounds of
abandonment or any valid grounds for cancellation.
Decision in CA-G.R. SP No. 90828 not in accord with the law
With our resolution of the issue on the lack of jurisdiction of the POA and the MAB
over petitions to cancel existing mining lease contracts or mineral agreements, it is
thus clear that the May 18, 2006 Decision in CA-G.R. SP No. 90828 must be nullified
for being not in accord with the law and the April 15, 2005 Decision in CA-G.R. SP
No. 87931 must be upheld.
Notwithstanding the nullification of the May 18, 2006 Decision of the Special Tenth
Division in CA-G.R. SP No. 90828, the rendition of two conflicting decisions of the
two CA Divisions over the same challenged resolutions of the MAB should be
avoided in the future as this is anathema to stability of judicial decisions and orderly
administration of justice.
The chronology of events reveals the following:
1. January 10, 2005 petitioner Celestial filed its petition docketed as CA-G.R. SP No.
87931 with the CA.
2. April 15, 2005 the CA through its Twelfth Division rendered its Decision in CA-G.R.
SP No. 87931 affirming the November 26, 2004 MAB Resolution.
3. July 12, 2005 respondent Blue Ridge filed its petition docketed as CA-G.R. SP No.
90828 with the CA. It is clear that the Blue Ridge petition was filed with the CA three
months after the decision in CA-G.R. SP No. 87931 was promulgated.
4. May 18, 2006 the CA through its Special Tenth Division rendered its Decision
setting aside the November 26, 2004 and July 12, 2005 Resolutions of the MAB and
reinstating the October 24, 2000 MAB Decision.
From these facts, the CA Special Tenth Division should have ordered the
consolidation of the petition in CA-G.R. SP No. 90828 by CA-G.R. SP No. 87931
pursuant to the Internal Rules of the CA, the latter having the earlier docket number.
Had it done so, then the occurrence of the conflicting decisions could have been
prevented. The CA Special Tenth Division should have abided by our ruling in
Nacuray v. NLRC, where we held, Consequently, a division cannot and should not
review a case already passed upon by another Division of this Court. It is only
proper, to allow the case to take its rest after having attained finality.[60]
The CA should take the appropriate steps, including the adoption or amendment of
the rules, to see to it that cases or petitions arising from the same questioned
decision, order, or resolution are consolidated to steer clear of contrary or opposing
decisions of the different CA Divisions and ensure that incidents of similar nature
will not be replicated.
G.R. No. 172936
No showing that the DENR Secretary gravely abused his discretion
Now, going to the substance of the petition in G.R. No. 172936. A scrutiny of the
records shows that the DENR Secretary did not gravely abuse his discretion in
approving and signing MPSA Nos. 220-2005-IVB and 221-2005-IVB in favor of
Macroasia.
Petitioner Blue Ridge anchors its rights on the May 18, 2006 Decision in CA-G.R. SP
No. 90828, which we have unfortunately struck down. Blue Ridges argument in
assailing the approval and issuance of the subject MPSAs that it has been accorded
preferential right by the CA has no leg to stand on.
The October 24, 2000 MAB Decision, nullified by the subsequent November 26,
2004 Resolution, is unequivocal that Blue Ridge was granted only prior and
preferential rights to FILE its mining application over the same mining claims.[61]
What was accorded Blue Ridge was only the right to file the mining application but
with no assurance that the application will be recommended for approval by the
MGB and finally approved by the DENR Secretary.
Moreover, a preferential right would at most be an inchoate right to be given
priority in the grant of a mining agreement. It has not yet been transformed into a
legal and vested right unless approved by the MGB or DENR Secretary. Even if Blue
Ridge has a preferential right over the subject mining claims, it is still within the
competence and discretion of the DENR Secretary to grant mineral agreements to
whomever he deems best to pursue the mining claims over and above the
preferential status given to Blue Ridge. Besides, being simply a preferential right, it is
ineffective to dissolve the pre-existing or subsisting mining lease contracts of
Macroasia.
The DENR Secretary has full discretion in the grant of mineral agreements
Blue Ridge also argues that the Secretary gravely abused his discretion in approving
the subject MPSAs without Macroasia complying with the mandatory requirements
for mineral agreement applications under Sec. 35 of DENR AO 96-40. Petitioner
specifically cited Sec. 36 of DENR AO 96-40 to the effect that no Mineral Agreement
shall be approved unless the requirements under this section are fully complied
with and any adverse claim/protest/opposition thereto is finally resolved by the
Panel of Arbitrators. Moreover, Blue Ridge contends that the MPSAs were approved
even prior to the issuance of the Compliance Certificate[62] by the National
Commission on Indigenous Peoples under the OP, which is a requisite pre-condition
for the issuance of an MPSA.
We are not persuaded.
Blue Ridge cites Sec. 38 (not Sec. 36) of DENR AO 96-40 as basis for claiming that
then DENR Secretary Defensor committed grave abuse of discretion in granting
MPSA Nos. 220-2005-IVB and 221-2005-IVB to Macroasia. Petitioners postulation
cannot be entertained for the reason that the issuance of the mining agreements
was not raised before the MGB Director and DENR Secretary, nor was it amply
presented before the CA. There is even a counter-charge that Blue Ridge has not
complied with the legal requirements for a mining application. The rule is
established that questions raised for the first time on appeal before this Court are
not proper and have to be rejected. Furthermore, the resolution of these factual
issues would relegate the Court to a trier of facts. The Blue Ridge plea is hindered by
the factual issue bar rule where factual questions are proscribed under Rule 65.
Lastly, there was no exhaustion of administrative remedies before the MGB and
DENR. Thus, Blue Ridges petition must fail.
Primary jurisdiction of the DENR Secretary in determining whether to grant or not a
mineral agreement
Verily, RA 7942, similar to PD 463, confers exclusive and primary jurisdiction on the
DENR Secretary to approve mineral agreements, which is purely an administrative
function within the scope of his powers and authority. In exercising such exclusive
primary jurisdiction, the DENR Secretary, through the MGB, has the best
competence to determine to whom mineral agreements are granted. Settled is the
rule that the courts will defer to the decisions of the administrative offices and
agencies by reason of their expertise and experience in the matters assigned to
them pursuant to the doctrine of primary jurisdiction. Administrative decisions on
matter within the jurisdiction of administrative bodies are to be respected and can
only be set aside on proof of grave abuse of discretion, fraud, or error of law.[63]
Unless it is shown that the then DENR Secretary has acted in a wanton, whimsical,
or oppressive manner, giving undue advantage to a party or for an illegal
consideration and similar reasons, this Court cannot look into or review the wisdom
of the exercise of such discretion. Blue Ridge failed in this regard.
Delineation of powers and functions is accorded the three branches of government
for the smooth functioning of the different governmental services. We will not
disturb nor interfere in the exercise of purely administrative functions of the
executive branch absent a clear showing of grave abuse of discretion.
Without a restraining order or injunction, litigation will not deter the DENR from
exercising its functions
While it is true that the subject mining claims are under litigation, this does not
preclude the DENR and its Secretary from carrying out their functions and duties
without a restraining order or an injunctive writ. Otherwise, public interest and
public service would unduly suffer by mere litigation of particular issues where
government interests would be unduly affected. In the instant case, it must be
borne in mind that the government has a stake in the subject mining claims. Also,
Macroasia had various valid existing mining lease contracts over the subject mining
lode claims issued by the DENR. Thus, Macroasia has an advantage over Blue Ridge
and Celestial insofar as the administrative aspect of pursuing the mineral
agreements is concerned.
WHEREFORE, the petitions under G.R. Nos. 169080, 172936, and 176229 are
DISMISSED for lack of merit, while the petition under G.R. No. 176319 is hereby
GRANTED. The assailed April 15, 2005 Decision and August 3, 2005 Resolution of the
CA in CA-G.R. SP No. 87931 are hereby AFFIRMED IN TOTO. And the May 18, 2006
Decision and January 19, 2007 Resolution of the CA in CA-G.R. SP No. 90828 are
hereby REVERSED and SET ASIDE. In view of the foregoing considerations, we find
no grave abuse of discretion on the part of the then DENR Secretary in the approval
and issuance of MPSA Nos. 220-2005-IVB and 221-2005-IVB. Costs against Celestial
Nickel Mining Exploration Corporation and Blue Ridge Mineral Corporation.
SO ORDERED.
FIRST DIVISION
DIDIPIO EARTH-SAVERS MULTI-PURPOSE ASSOCIATION, INCORPORATED (DESAMA),
MANUEL BUTIC, CESAR MARIANO, LAURO ABANCE, BEN TAYABAN, ANTONIO
DINGCOG, TEDDY B. KIMAYONG, ALONZO ANANAYO, ANTONIO MALAN-UYA, JOSE
BAHAG, ANDRES INLAB, RUFINO LICYAYO, ALFREDO CULHI, CATALILNA INABYUHAN,
GUAY DUMMANG, GINA PULIDO, EDWIN ANSIBEY, CORAZON SICUAN, LOPEZ
DUMULAG, FREDDIE AYDINON, VILMA JOSE, FLORENTINA MADDAWAT, LINDA
DINGCOG, ELMER SICUAN, GARY ANSIBEY, JIMMY MADDAWAT, JIMMY GUAY,
ALFREDO CUT-ING, ANGELINA UDAN, OSCAR INLAB, JUANITA CUT-ING, ALBERT
PINKIHAN, CECILIA TAYABAN, CRISTA BINWAK, PEDRO DUGAY, SR., EDUARDO
ANANAYO, ROBIN INLAB, JR., LORENZO PULIDO, TOMAS BINWAG, EVELYN BUYA,
JAIME DINGCOG, DINAOAN CUT-ING, PEDRO DONATO, MYRNA GUAY, FLORA
ANSIBEY, GRACE DINAMLING, EDUARDO MENCIAS, ROSENDA JACOB, SIONITA
DINGCOG, GLORIA JACOB, MAXIMA GUAY, RODRIGO PAGGADUT, MARINA ANSIBEY,
TOLENTINO INLAB, RUBEN DULNUAN, GERONIMO LICYAYO, LEONCIO CUMTI, MARY
DULNUAN, FELISA BALANBAN, MYRNA DUYAN, MARY MALAN-UYA, PRUDENCIO
ANSIBEY, GUILLERMO GUAY, MARGARITA CULHI, ALADIN ANSIBEY, PABLO DUYAN,
PEDRO PUGUON, JULIAN INLAB, JOSEPH NACULON, ROGER BAJITA, DINAON GUAY,
JAIME ANANAYO, MARY ANSIBEY, LINA ANANAYO, MAURA DUYAPAT, ARTEMEO
ANANAYO, MARY BABLING, NORA ANSIBEY, DAVID DULNUAN, AVELINO PUGUON,
LUCAS GUMAWI, LUISA ABBAC, CATHRIN GUWAY, CLARITA TAYABAN, FLORA JAVERA,
RANDY SICOAN, FELIZA PUTAKI, CORAZON P. DULNUAN, NENA D. BULLONG,
ERMELYN GUWAY, GILBERT BUTALE, JOSEPH B. BULLONG, FRANCISCO PATNAAN, JR.,
SHERWIN DUGAY, TIRSO GULLINGAY, BENEDICT T. NABALLIN, RAMON PUN-ADWAN,
ALFONSO DULNUAN, CARMEN D. BUTALE, LOLITA ANSIBEY, ABRAHAM DULNUAN,
ARLYNDA BUTALE, MODESTO A. ANSIBEY, EDUARDO LUGAY, ANTONIO HUMIWAT,
ALFREDO PUMIHIC, MIKE TINO, TONY CABARROGUIS, BASILIO TAMLIWOK, JR.,
NESTOR TANGID, ALEJO TUGUINAY, BENITO LORENZO, RUDY BAHIWAG, ANALIZA
BUTALE, NALLEM LUBYOC, JOSEPH DUHAYON, RAFAEL CAMPOL, MANUEL PUMALO,
DELFIN AGALOOS, PABLO CAYANGA, PERFECTO SISON, ELIAS NATAMA, LITO
PUMALO, SEVERINA DUGAY, GABRIEL PAKAYAO, JEOFFREY SINDAP, FELIX TICUAN,
MARIANO S. MADDELA, MENZI TICAWA, DOMINGA DUGAY, JOE BOLINEY, JASON
ASANG, TOMMY ATENYAYO, ALEJO AGMALIW, DIZON AGMALIW, EDDIE ATOS,
FELIMON BLANCO, DARRIL DIGOY, LUCAS BUAY, ARTEMIO BRAZIL, NICANOR MODI,
LUIS REDULFIN, NESTOR JUSTINO, JAIME CUMILA, BENEDICT GUINID, EDITHA ANIN,
INOH-YABAN BANDAO, LUIS BAYWONG, FELIPE DUHALNGON, PETER BENNEL,
JOSEPH T. BUNGGALAN, JIMMY B. KIMAYONG, HENRY PUGUON, PEDRO BUHONG,
BUGAN NADIAHAN, SR., MARIA EDEN ORLINO, SPC, PERLA VISSORO, and BISHOP
RAMON VILLENA,
Petitioners,
- versus -
ELISEA GOZUN, in her capacity as SECRETARY of the DEPARTMENT OF
ENVIRONMENT and NATURAL RESOURCES (DENR), HORACIO RAMOS, in his capacity
as Director of the Mines and Geosciences Bureau (MGB-DENR), ALBERTO ROMULO,
in his capacity as the Executive Secretary of the Office of the President, RICHARD N.
FERRER, in his capacity as Acting Undersecretary of the Office of the President, IAN
HEATH SANDERCOCK, in his capacity as President of CLIMAX-ARIMCO MINING
CORPORATION.
Respondents.
G.R. No. 157882
Present:
PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
Promulgated:
March 30, 2006
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DECISION
CHICO-NAZARIO, J.:
This petition for prohibition and mandamus under Rule 65 of the Rules of Court
assails the constitutionality of Republic Act No. 7942 otherwise known as the
Philippine Mining Act of 1995, together with the Implementing Rules and
Regulations issued pursuant thereto, Department of Environment and Natural
Resources (DENR) Administrative Order No. 96-40, s. 1996 (DAO 96-40) and of the
Financial and Technical Assistance Agreement (FTAA) entered into on 20 June 1994
by the Republic of the Philippines and Arimco Mining Corporation (AMC), a
corporation established under the laws of Australia and owned by its nationals.
.
On 25 July 1987, then President Corazon C. Aquino promulgated Executive Order
No. 279 which authorized the DENR Secretary 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.
On 3 March 1995, then President Fidel V. Ramos signed into law Rep. Act No. 7942
entitled, An Act Instituting A New System of Mineral Resources Exploration,
Development, Utilization and Conservation, otherwise known as the Philippine
Mining Act of 1995.
On 15 August 1995, then DENR Secretary Victor O. Ramos issued DENR
Administrative Order (DAO) No. 23, Series of 1995, containing the implementing
guidelines of Rep. Act No. 7942. This was soon superseded by DAO No. 96-40, s.
1996, which took effect on 23 January 1997 after due publication.
Previously, however, or specifically on 20 June 1994, President Ramos executed an
FTAA with AMC over a total land area of 37,000 hectares covering the provinces of
Nueva Vizcaya and Quirino. Included in this area is Barangay Dipidio, Kasibu, Nueva
Vizcaya.
Subsequently, AMC consolidated with Climax Mining Limited to form a single
company that now goes under the new name of Climax-Arimco Mining Corporation
(CAMC), the controlling 99% of stockholders of which are Australian nationals.
On 7 September 2001, counsels for petitioners filed a demand letter addressed to
then DENR Secretary Heherson Alvarez, for the cancellation of the CAMC FTAA for
the primary reason that Rep. Act No. 7942 and its Implementing Rules and
Regulations DAO 96-40 are unconstitutional. The Office of the Executive Secretary
was also furnished a copy of the said letter. There being no response to both letters,
another letter of the same content dated 17 June 2002 was sent to President Gloria
Macapagal Arroyo. This letter was indorsed to the DENR Secretary and eventually
referred to the Panel of Arbitrators of the Mines and Geosciences Bureau (MGB),
Regional Office No. 02, Tuguegarao, Cagayan, for further action.
On 12 November 2002, counsels for petitioners received a letter from the Panel of
Arbitrators of the MGB requiring the petitioners to comply with the Rules of the
Panel of Arbitrators before the letter may be acted upon.
Yet again, counsels for petitioners sent President Arroyo another demand letter
dated 8 November 2002. Said letter was again forwarded to the DENR Secretary
who referred the same to the MGB, Quezon City.
In a letter dated 19 February 2003, the MGB rejected the demand of counsels for
petitioners for the cancellation of the CAMC FTAA.
Petitioners thus filed the present petition for prohibition and mandamus, with a
prayer for a temporary restraining order. They pray that the Court issue an order:
1. enjoining public respondents from acting on any application for FTAA;
2. declaring unconstitutional the Philippine Mining Act of 1995 and its
Implementing Rules and Regulations;
3. canceling the FTAA issued to CAMC.
In their memorandum petitioners pose the following issues:
I
WHETHER OR NOT REPUBLIC ACT NO. 7942 AND THE CAMC FTAA ARE VOID
BECAUSE THEY ALLOW THE UNJUST AND UNLAWFUL TAKING OF PROPERTY
WITHOUT PAYMENT OF JUST COMPENSATION , IN VIOLATION OF SECTION 9,
ARTICLE III OF THE CONSTITUTION.
II

WHETHER OR NOT THE MINING ACT AND ITS IMPLEMENTING RULES AND
REGULATIONS ARE VOID AND UNCONSTITUTIONAL FOR SANCTIONING AN
UNCONSTITUTIONAL ADMINISTRATIVE PROCESS OF DETERMINING JUST
COMPENSATION.
III
WHETHER OR NOT THE STATE, THROUGH REPUBLIC ACT NO. 7942 AND THE CAMC
FTAA, ABDICATED ITS PRIMARY RESPONSIBILITY TO THE FULL CONTROL AND
SUPERVISION OVER NATURAL RESOURCES.
IV
WHETHER OR NOT THE RESPONDENTS INTERPRETATION OF THE ROLE OF WHOLLY
FOREIGN AND FOREIGN-OWNED CORPORATIONS IN THEIR INVOLVEMENT IN
MINING ENTERPRISES, VIOLATES PARAGRAPH 4, SECTION 2, ARTICLE XII OF THE
CONSTITUTION.
V
WHETHER OR NOT THE 1987 CONSTITUTION PROHIBITS SERVICE CONTRACTS.[1]
Before going to the substantive issues, the procedural question raised by public
respondents shall first be dealt with. Public respondents are of the view that
petitioners eminent domain claim is not ripe for adjudication as they fail to allege
that CAMC has actually taken their properties nor do they allege that their property
rights have been endangered or are in danger on account of CAMCs FTAA. In effect,
public respondents insist that the issue of eminent domain is not a justiciable
controversy which this Court can take cognizance of.
A justiciable controversy is defined as a definite and concrete dispute touching on
the legal relations of parties having adverse legal interests which may be resolved by
a court of law through the application of a law.[2] Thus, courts have no judicial
power to review cases involving political questions and as a rule, will desist from
taking cognizance of speculative or hypothetical cases, advisory opinions and cases
that have become moot.[3] The Constitution is quite explicit on this matter.[4] It
provides that judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable.
Pursuant to this constitutional mandate, courts, through the power of judicial
review, are to entertain only real disputes between conflicting parties through the
application of law. For the courts to exercise the power of judicial review, the
following must be extant (1) there must be an actual case calling for the exercise of
judicial power; (2) the question must be ripe for adjudication; and (3) the person
challenging must have the standing.[5]
An actual case or controversy involves a conflict of legal rights, an assertion of
opposite legal claims, susceptible of judicial resolution as distinguished from a
hypothetical or abstract difference or dispute.[6] There must be a contrariety of
legal rights that can be interpreted and enforced on the basis of existing law and
jurisprudence.
Closely related to the second requisite is that the question must be ripe for
adjudication. A question is considered ripe for adjudication when the act being
challenged has had a direct adverse effect on the individual challenging it.[7]
The third requisite is legal standing or locus standi. It is defined as a personal or
substantial interest in the case such that the party has sustained or will sustain
direct injury as a result of the governmental act that is being challenged, alleging
more than a generalized grievance.[8] The gist of the question of standing is
whether a party alleges such personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions.[9]
Unless a person is injuriously affected in any of his constitutional rights by the
operation of statute or ordinance, he has no standing.[10]
In the instant case, there exists a live controversy involving a clash of legal rights as
Rep. Act No. 7942 has been enacted, DAO 96-40 has been approved and an FTAAs
have been entered into. The FTAA holders have already been operating in various
provinces of the country. Among them is CAMC which operates in the provinces of
Nueva Vizcaya and Quirino where numerous individuals including the petitioners are
imperiled of being ousted from their landholdings in view of the CAMC FTAA. In light
of this, the court cannot await the adverse consequences of the law in order to
consider the controversy actual and ripe for judicial intervention.[11] Actual eviction
of the land owners and occupants need not happen for this Court to intervene. As
held in Pimentel, Jr. v. Hon. Aguirre[12]:
By the mere enactment of the questioned law or the approval of the challenged act,
the dispute is said to have ripened into a judicial controversy even without any
other overt act. Indeed, even a singular violation of the Constitution and/or the law
is enough to awaken judicial duty.[13]
Petitioners embrace various segments of the society. These include Didipio Earth-
Savers Multi-Purpose Association, Inc., an organization of farmers and indigenous
peoples organized under Philippine laws, representing a community actually
affected by the mining activities of CAMC, as well as other residents of areas
affected by the mining activities of CAMC. These petitioners have the standing to
raise the constitutionality of the questioned FTAA as they allege a personal and
substantial injury.[14] They assert that they are affected by the mining activities of
CAMC. Likewise, they are under imminent threat of being displaced from their
landholdings as a result of the implementation of the questioned FTAA. They thus
meet the appropriate case requirement as they assert an interest adverse to that of
respondents who, on the other hand, claim the validity of the assailed statute and
the FTAA of CAMC.
Besides, the transcendental importance of the issues raised and the magnitude of
the public interest involved will have a bearing on the countrys economy which is to
a greater extent dependent upon the mining industry. Also affected by the
resolution of this case are the proprietary rights of numerous residents in the
mining contract areas as well as the social existence of indigenous peoples which
are threatened. Based on these considerations, this Court deems it proper to take
cognizance of the instant petition.
Having resolved the procedural question, the constitutionality of the law under
attack must be addressed squarely.
First Substantive Issue: Validity of Section 76 of Rep. Act No. 7942 and DAO 96-40
In seeking to nullify Rep. Act No. 7942 and its implementing rules DAO 96-40 as
unconstitutional, petitioners set their sight on Section 76 of Rep. Act No. 7942 and
Section 107 of DAO 96-40 which they claim allow the unlawful and unjust taking of
private property for private purpose in contradiction with Section 9, Article III of the
1987 Constitution mandating that private property shall not be taken except for
public use and the corresponding payment of just compensation. They assert that
public respondent DENR, through the Mining Act and its Implementing Rules and
Regulations, cannot, on its own, permit entry into a private property and allow
taking of land without payment of just compensation.
Interpreting Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40,
juxtaposed with the concept of taking of property for purposes of eminent domain
in the case of Republic v. Vda. de Castellvi,[15] petitioners assert that there is indeed
a taking upon entry into private lands and concession areas.
Republic v. Vda. de Castellvi defines taking under the concept of eminent domain as
entering upon private property for more than a momentary period, and, under the
warrant or color of legal authority, devoting it to a public use, or otherwise
informally appropriating or injuriously affecting it in such a way as to substantially
oust the owner and deprive him of all beneficial enjoyment thereof.
From the criteria set forth in the cited case, petitioners claim that the entry into a
private property by CAMC, pursuant to its FTAA, is for more than a momentary
period, i.e., for 25 years, and renewable for another 25 years; that the entry into the
property is under the warrant or color of legal authority pursuant to the FTAA
executed between the government and CAMC; and that the entry substantially
ousts the owner or possessor and deprives him of all beneficial enjoyment of the
property. These facts, according to the petitioners, amount to taking. As such,
petitioners question the exercise of the power of eminent domain as unwarranted
because respondents failed to prove that the entry into private property is devoted
for public use.
Petitioners also stress that even without the doctrine in the Castellvi case, the
nature of the mining activity, the extent of the land area covered by the CAMC FTAA
and the various rights granted to the proponent or the FTAA holder, such as (a) the
right of possession of the Exploration Contract Area, with full right of ingress and
egress and the right to occupy the same; (b) the right not to be prevented from
entry into private lands by surface owners and/or occupants thereof when
prospecting, exploring and exploiting for minerals therein; (c) the right to enjoy
easement rights, the use of timber, water and other natural resources in the
Exploration Contract Area; (d) the right of possession of the Mining Area, with full
right of ingress and egress and the right to occupy the same; and (e) the right to
enjoy easement rights, water and other natural resources in the Mining Area, result
in a taking of private property.
Petitioners quickly add that even assuming arguendo that there is no absolute,
physical taking, at the very least, Section 76 establishes a legal easement upon the
surface owners, occupants and concessionaires of a mining contract area sufficient
to deprive them of enjoyment and use of the property and that such burden
imposed by the legal easement falls within the purview of eminent domain.
To further bolster their claim that the legal easement established is equivalent to
taking, petitioners cite the case of National Power Corporation v. Gutierrez[16]
holding that the easement of right-of-way imposed against the use of the land for
an indefinite period is a taking under the power of eminent domain.
Traversing petitioners assertion, public respondents argue that Section 76 is not a
taking provision but a valid exercise of the police power and by virtue of which, the
state may prescribe regulations to promote the health, morals, peace, education,
good order, safety and general welfare of the people. This government regulation
involves the adjustment of rights for the public good and that this adjustment
curtails some potential for the use or economic exploitation of private property.
Public respondents concluded that to require compensation in all such
circumstances would compel the government to regulate by purchase.
Public respondents are inclined to believe that by entering private lands and
concession areas, FTAA holders do not oust the owners thereof nor deprive them of
all beneficial enjoyment of their properties as the said entry merely establishes a
legal easement upon surface owners, occupants and concessionaires of a mining
contract area.
Taking in Eminent Domain Distinguished from Regulation in Police Power
The power of eminent domain is the inherent right of the state (and of those
entities to which the power has been lawfully delegated) to condemn private
property to public use upon payment of just compensation.[17] On the other hand,
police power is the power of the state to promote public welfare by restraining and
regulating the use of liberty and property.[18] Although both police power and the
power of eminent domain have the general welfare for their object, and recent
trends show a mingling[19] of the two with the latter being used as an implement of
the former, there are still traditional distinctions between the two.
Property condemned under police power is usually noxious or intended for a
noxious purpose; hence, no compensation shall be paid.[20] Likewise, in the
exercise of police power, property rights of private individuals are subjected to
restraints and burdens in order to secure the general comfort, health, and
prosperity of the state. Thus, an ordinance prohibiting theaters from selling tickets
in excess of their seating capacity (which would result in the diminution of profits of
the theater-owners) was upheld valid as this would promote the comfort,
convenience and safety of the customers.[21] In U.S. v. Toribio,[22] the court upheld
the provisions of Act No. 1147, a statute regulating the slaughter of carabao for the
purpose of conserving an adequate supply of draft animals, as a valid exercise of
police power, notwithstanding the property rights impairment that the ordinance
imposed on cattle owners. A zoning ordinance prohibiting the operation of a lumber
yard within certain areas was assailed as unconstitutional in that it was an invasion
of the property rights of the lumber yard owners in People v. de Guzman.[23] The
Court nonetheless ruled that the regulation was a valid exercise of police power. A
similar ruling was arrived at in Seng Kee S Co. v. Earnshaw and Piatt[24] where an
ordinance divided the City of Manila into industrial and residential areas.
A thorough scrutiny of the extant jurisprudence leads to a cogent deduction that
where a property interest is merely restricted because the continued use thereof
would be injurious to public welfare, or where property is destroyed because its
continued existence would be injurious to public interest, there is no compensable
taking.[25] However, when a property interest is appropriated and applied to some
public purpose, there is compensable taking.[26]
According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its
police power regulation, the state restricts the use of private property, but none of
the property interests in the bundle of rights which constitute ownership is
appropriated for use by or for the benefit of the public.[27] Use of the property by
the owner was limited, but no aspect of the property is used by or for the public.
[28] The deprivation of use can in fact be total and it will not constitute
compensable taking if nobody else acquires use of the property or any interest
therein.[29]
If, however, in the regulation of the use of the property, somebody else acquires the
use or interest thereof, such restriction constitutes compensable taking. Thus, in
City Government of Quezon City v. Ericta,[30] it was argued by the local government
that an ordinance requiring private cemeteries to reserve 6% of their total areas for
the burial of paupers was a valid exercise of the police power under the general
welfare clause. This court did not agree in the contention, ruling that property taken
under the police power is sought to be destroyed and not, as in this case, to be
devoted to a public use. It further declared that the ordinance in question was
actually a taking of private property without just compensation of a certain area
from a private cemetery to benefit paupers who are charges of the local
government. Being an exercise of eminent domain without provision for the
payment of just compensation, the same was rendered invalid as it violated the
principles governing eminent domain.
In People v. Fajardo,[31] the municipal mayor refused Fajardo permission to build a
house on his own land on the ground that the proposed structure would destroy the
view or beauty of the public plaza. The ordinance relied upon by the mayor
prohibited the construction of any building that would destroy the view of the plaza
from the highway. The court ruled that the municipal ordinance under the guise of
police power permanently divest owners of the beneficial use of their property for
the benefit of the public; hence, considered as a taking under the power of eminent
domain that could not be countenanced without payment of just compensation to
the affected owners. In this case, what the municipality wanted was to impose an
easement on the property in order to preserve the view or beauty of the public
plaza, which was a form of utilization of Fajardos property for public benefit.[32]
While the power of eminent domain often results in the appropriation of title to or
possession of property, it need not always be the case. Taking may include trespass
without actual eviction of the owner, material impairment of the value of the
property or prevention of the ordinary uses for which the property was intended
such as the establishment of an easement.[33] In Ayala de Roxas v. City of Manila,
[34] it was held that the imposition of burden over a private property through
easement was considered taking; hence, payment of just compensation is required.
The Court declared:

And, considering that the easement intended to be established, whatever may be
the object thereof, is not merely a real right that will encumber the property, but is
one tending to prevent the exclusive use of one portion of the same, by
expropriating it for public use which, be it what it may, can not be accomplished
unless the owner of the property condemned or seized be previously and duly
indemnified, it is proper to protect the appellant by means of the remedy employed
in such cases, as it is only adequate remedy when no other legal action can be
resorted to, against an intent which is nothing short of an arbitrary restriction
imposed by the city by virtue of the coercive power with which the same is invested.
And in the case of National Power Corporation v. Gutierrez,[35] despite the NPCs
protestation that the owners were not totally deprived of the use of the land and
could still plant the same crops as long as they did not come into contact with the
wires, the Court nevertheless held that the easement of right-of-way was a taking
under the power of eminent domain. The Court said:
In the case at bar, the easement of right-of-way is definitely a taking under the
power of eminent domain. Considering the nature and effect of the installation of
230 KV Mexico-Limay transmission lines, the limitation imposed by NPC against the
use of the land for an indefinite period deprives private respondents of its ordinary
use.
A case exemplifying an instance of compensable taking which does not entail
transfer of title is Republic v. Philippine Long Distance Telephone Co.[36] Here, the
Bureau of Telecommunications, a government instrumentality, had contracted with
the PLDT for the interconnection between the Government Telephone System and
that of the PLDT, so that the former could make use of the lines and facilities of the
PLDT. In its desire to expand services to government offices, the Bureau of
Telecommunications demanded to expand its use of the PLDT lines. Disagreement
ensued on the terms of the contract for the use of the PLDT facilities. The Court
ruminated:
Normally, of course, the power of eminent domain results in the taking or
appropriation of title to, and possession of, the expropriated property; but no
cogent reason appears why said power may not be availed of to impose only a
burden upon the owner of the condemned property, without loss of title and
possession. It is unquestionable that real property may, through expropriation, be
subjected to an easement right of way.[37]
In Republic v. Castellvi,[38] this Court had the occasion to spell out the requisites of
taking in eminent domain, to wit:
(1) the expropriator must enter a private property;
(2) the entry must be for more than a momentary period.
(3) the entry must be under warrant or color of legal authority;
(4) the property must be devoted to public use or otherwise informally
appropriated or injuriously affected;
(5) the utilization of the property for public use must be in such a way as to
oust the owner and deprive him of beneficial enjoyment of the property.
As shown by the foregoing jurisprudence, a regulation which substantially deprives
the owner of his proprietary rights and restricts the beneficial use and enjoyment
for public use amounts to compensable taking. In the case under consideration, the
entry referred to in Section 76 and the easement rights under Section 75 of Rep. Act
No. 7942 as well as the various rights to CAMC under its FTAA are no different from
the deprivation of proprietary rights in the cases discussed which this Court
considered as taking. Section 75 of the law in question reads:
Easement Rights. - When mining areas are so situated that for purposes of more
convenient mining operations it is necessary to build, construct or install on the
mining areas or lands owned, occupied or leased by other persons, such
infrastructure as roads, railroads, mills, waste dump sites, tailing ponds,
warehouses, staging or storage areas and port facilities, tramways, runways,
airports, electric transmission, telephone or telegraph lines, dams and their normal
flood and catchment areas, sites for water wells, ditches, canals, new river beds,
pipelines, flumes, cuts, shafts, tunnels, or mills, the contractor, upon payment of just
compensation, shall be entitled to enter and occupy said mining areas or lands.
Section 76 provides:
Entry into private lands and concession areas Subject to prior notification, holders of
mining rights shall not be prevented from entry into private lands and concession
areas by surface owners, occupants, or concessionaires when conducting mining
operations therein.

The CAMC FTAA grants in favor of CAMC the right of possession of the Exploration
Contract Area, the full right of ingress and egress and the right to occupy the same.
It also bestows CAMC the right not to be prevented from entry into private lands by
surface owners or occupants thereof when prospecting, exploring and exploiting
minerals therein.
The entry referred to in Section 76 is not just a simple right-of-way which is
ordinarily allowed under the provisions of the Civil Code. Here, the holders of
mining rights enter private lands for purposes of conducting mining activities such
as exploration, extraction and processing of minerals. Mining right holders build
mine infrastructure, dig mine shafts and connecting tunnels, prepare tailing ponds,
storage areas and vehicle depots, install their machinery, equipment and sewer
systems. On top of this, under Section 75, easement rights are accorded to them
where they may build warehouses, port facilities, electric transmission, railroads
and other infrastructures necessary for mining operations. All these will definitely
oust the owners or occupants of the affected areas the beneficial ownership of their
lands. Without a doubt, taking occurs once mining operations commence.
Section 76 of Rep. Act No. 7942 is a Taking Provision
Moreover, it would not be amiss to revisit the history of mining laws of this country
which would help us understand Section 76 of Rep. Act No. 7942.
This provision is first found in Section 27 of Commonwealth Act No. 137 which took
effect on 7 November 1936, viz:
Before entering private lands the prospector shall first apply in writing for written
permission of the private owner, claimant, or holder thereof, and in case of refusal
by such private owner, claimant, or holder to grant such permission, or in case of
disagreement as to the amount of compensation to be paid for such privilege of
prospecting therein, the amount of such compensation shall be fixed by agreement
among the prospector, the Director of the Bureau of Mines and the surface owner,
and in case of their failure to unanimously agree as to the amount of compensation,
all questions at issue shall be determined by the Court of First Instance.
Similarly, the pertinent provision of Presidential Decree No. 463, otherwise known
as The Mineral Resources Development Decree of 1974, provides:
SECTION 12. Entry to Public and Private Lands. A person who desires to conduct
prospecting or other mining operations within public lands covered by concessions
or rights other than mining shall first obtain the written permission of the
government official concerned before entering such lands. In the case of private
lands, the written permission of the owner or possessor of the land must be
obtained before entering such lands. In either case, if said permission is denied, the
Director, at the request of the interested person may intercede with the owner or
possessor of the land. If the intercession fails, the interested person may bring suit
in the Court of First Instance of the province where the land is situated. If the court
finds the request justified, it shall issue an order granting the permission after fixing
the amount of compensation and/or rental due the owner or possessor: Provided,
That pending final adjudication of such amount, the court shall upon
recommendation of the Director permit the interested person to enter, prospect
and/or undertake other mining operations on the disputed land upon posting by
such interested person of a bond with the court which the latter shall consider
adequate to answer for any damage to the owner or possessor of the land resulting
from such entry, prospecting or any other mining operations.
Hampered by the difficulties and delays in securing surface rights for the entry into
private lands for purposes of mining operations, Presidential Decree No. 512 dated
19 July 1974 was passed into law in order to achieve full and accelerated mineral
resources development. Thus, Presidential Decree No. 512 provides for a new
system of surface rights acquisition by mining prospectors and claimants. Whereas
in Commonwealth Act No. 137 and Presidential Decree No. 463 eminent domain
may only be exercised in order that the mining claimants can build, construct or
install roads, railroads, mills, warehouses and other facilities, this time, the power of
eminent domain may now be invoked by mining operators for the entry, acquisition
and use of private lands, viz:
SECTION 1. Mineral prospecting, location, exploration, development and
exploitation is hereby declared of public use and benefit, and for which the power
of eminent domain may be invoked and exercised for the entry, acquisition and use
of private lands. x x x.
The evolution of mining laws gives positive indication that mining operators who are
qualified to own lands were granted the authority to exercise eminent domain for
the entry, acquisition, and use of private lands in areas open for mining operations.
This grant of authority extant in Section 1 of Presidential Decree No. 512 is not
expressly repealed by Section 76 of Rep. Act No. 7942; and neither are the former
statutes impliedly repealed by the former. These two provisions can stand together
even if Section 76 of Rep. Act No. 7942 does not spell out the grant of the privilege
to exercise eminent domain which was present in the old law.
It is an established rule in statutory construction that in order that one law may
operate to repeal another law, the two laws must be inconsistent.[39] The former
must be so repugnant as to be irreconciliable with the latter act. Simply because a
latter enactment may relate to the same subject matter as that of an earlier statute
is not of itself sufficient to cause an implied repeal of the latter, since the new law
may be cumulative or a continuation of the old one. As has been the ruled, repeals
by implication are not favored, and will not be decreed unless it is manifest that the
legislature so intended.[40] As laws are presumed to be passed with deliberation
and with full knowledge of all existing ones on the subject, it is but reasonable to
conclude that in passing a statute it was not intended to interfere with or abrogate
any former law relating to the same matter, unless the repugnancy between the two
is not only irreconcilable, but also clear and convincing, and flowing necessarily
from the language used, unless the later act fully embraces the subject matter of
the earlier, or unless the reason for the earlier act is beyond peradventure removed.
[41] Hence, every effort must be used to make all acts stand and if, by any
reasonable construction, they can be reconciled, the latter act will not operate as a
repeal of the earlier.
Considering that Section 1 of Presidential Decree No. 512 granted the qualified
mining operators the authority to exercise eminent domain and since this grant of
authority is deemed incorporated in Section 76 of Rep. Act No. 7942, the
inescapable conclusion is that the latter provision is a taking provision.
While this Court declares that the assailed provision is a taking provision, this does
not mean that it is unconstitutional on the ground that it allows taking of private
property without the determination of public use and the payment of just
compensation.
The taking to be valid must be for public use.[42] Public use as a requirement for the
valid exercise of the power of eminent domain is now synonymous with public
interest, public benefit, public welfare and public convenience.[43] It includes the
broader notion of indirect public benefit or advantage. Public use as traditionally
understood as actual use by the public has already been abandoned.[44]
Mining industry plays a pivotal role in the economic development of the country
and is a vital tool in the governments thrust of accelerated recovery.[45] The
importance of the mining industry for national development is expressed in
Presidential Decree No. 463:
WHEREAS, mineral production is a major support of the national economy, and
therefore the intensified discovery, exploration, development and wise utilization of
the countrys mineral resources are urgently needed for national development.
Irrefragably, mining is an industry which is of public benefit.
That public use is negated by the fact that the state would be taking private
properties for the benefit of private mining firms or mining contractors is not at all
true. In Heirs of Juancho Ardona v. Reyes,[46] petitioners therein contended that
the promotion of tourism is not for public use because private concessionaires
would be allowed to maintain various facilities such as restaurants, hotels, stores,
etc., inside the tourist area. The Court thus contemplated:
The rule in Berman v. Parker [348 U.S. 25; 99 L. ed. 27] of deference to legislative
policy even if such policy might mean taking from one private person and conferring
on another private person applies as well in the Philippines.
. . . Once the object is within the authority of Congress, the means by which it will
be attained is also for Congress to determine. Here one of the means chosen is the
use of private enterprise for redevelopment of the area. Appellants argue that this
makes the project a taking from one businessman for the benefit of another
businessman. But the means of executing the project are for Congress and Congress
alone to determine, once the public purpose has been established. x x x[47]
Petitioners further maintain that the states discretion to decide when to take private
property is reduced contractually by Section 13.5 of the CAMC FTAA, which reads:
If the CONTRACTOR so requests at its option, the GOVERNMENT shall use its offices
and legal powers to assist in the acquisition at reasonable cost of any surface areas
or rights required by the CONTRACTOR at the CONTRACTORs cost to carry out the
Mineral Exploration and the Mining Operations herein.
All obligations, payments and expenses arising from, or incident to, such
agreements or acquisition of right shall be for the account of the CONTRACTOR and
shall be recoverable as Operating Expense.
According to petitioners, the government is reduced to a sub-contractor upon the
request of the private respondent, and on account of the foregoing provision, the
contractor can compel the government to exercise its power of eminent domain
thereby derogating the latters power to expropriate property.
The provision of the FTAA in question lays down the ways and means by which the
foreign-owned contractor, disqualified to own land, identifies to the government the
specific surface areas within the FTAA contract area to be acquired for the mine
infrastructure.[48] The government then acquires ownership of the surface land
areas on behalf of the contractor, through a voluntary transaction in order to enable
the latter to proceed to fully implement the FTAA. Eminent domain is not yet called
for at this stage since there are still various avenues by which surface rights can be
acquired other than expropriation. The FTAA provision under attack merely
facilitates the implementation of the FTAA given to CAMC and shields it from
violating the Anti-Dummy Law. Hence, when confronted with the same question in
La Bugal-BLaan Tribal Association, Inc. v. Ramos,[49] the Court answered:
Clearly, petitioners have needlessly jumped to unwarranted conclusions, without
being aware of the rationale for the said provision. That provision does not call for
the exercise of the power of eminent domain -- and determination of just
compensation is not an issue -- as much as it calls for a qualified party to acquire the
surface rights on behalf of a foreign-owned contractor.
Rather than having the foreign contractor act through a dummy corporation, having
the State do the purchasing is a better alternative. This will at least cause the
government to be aware of such transaction/s and foster transparency in the
contractors dealings with the local property owners. The government, then, will not
act as a subcontractor of the contractor; rather, it will facilitate the transaction and
enable the parties to avoid a technical violation of the Anti-Dummy Law.
There is also no basis for the claim that the Mining Law and its implementing rules
and regulations do not provide for just compensation in expropriating private
properties. Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 provide
for the payment of just compensation:
Section 76. xxx Provided, that any damage to the property of the surface owner,
occupant, or concessionaire as a consequence of such operations shall be properly
compensated as may be provided for in the implementing rules and regulations.
Section 107. Compensation of the Surface Owner and Occupant- Any damage done
to the property of the surface owners, occupant, or concessionaire thereof as a
consequence of the mining operations or as a result of the construction or
installation of the infrastructure mentioned in 104 above shall be properly and justly
compensated.
Such compensation shall be based on the agreement entered into between the
holder of mining rights and the surface owner, occupant or concessionaire thereof,
where appropriate, in accordance with P.D. No. 512. (Emphasis supplied.)
Second Substantive Issue: Power of Courts to Determine Just Compensation
Closely-knit to the issue of taking is the determination of just compensation. It is
contended that Rep. Act No. 7942 and Section 107 of DAO 96-40 encroach on the
power of the trial courts to determine just compensation in eminent domain cases
inasmuch as the same determination of proper compensation are cognizable only
by the Panel of Arbitrators.
The question on the judicial determination of just compensation has been settled in
the case of Export Processing Zone Authority v. Dulay[50] wherein the court
declared that the determination of just compensation in eminent domain cases is a
judicial function. Even as the executive department or the legislature may make the
initial determinations, the same cannot prevail over the courts findings.
Implementing Section 76 of Rep. Act No. 7942, Section 105 of DAO 96-40 states that
holder(s) of mining right(s) shall not be prevented from entry into its/their
contract/mining areas for the purpose of exploration, development, and/or
utilization. That in cases where surface owners of the lands, occupants or
concessionaires refuse to allow the permit holder or contractor entry, the latter
shall bring the matter before the Panel of Arbitrators for proper disposition. Section
106 states that voluntary agreements between the two parties permitting the
mining right holders to enter and use the surface owners lands shall be registered
with the Regional Office of the MGB. In connection with Section 106, Section 107
provides that the compensation for the damage done to the surface owner,
occupant or concessionaire as a consequence of mining operations or as a result of
the construction or installation of the infrastructure shall be properly and justly
compensated and that such compensation shall be based on the agreement
between the holder of mining rights and surface owner, occupant or concessionaire,
or where appropriate, in accordance with Presidential Decree No. 512. In cases
where there is disagreement to the compensation or where there is no agreement,
the matter shall be brought before the Panel of Arbitrators. Section 206 of the
implementing rules and regulations provides an aggrieved party the remedy to
appeal the decision of the Panel of Arbitrators to the Mines Adjudication Board, and
the latters decision may be reviewed by the Supreme Court by filing a petition for
review on certiorari.[51]
An examination of the foregoing provisions gives no indication that the courts are
excluded from taking cognizance of expropriation cases under the mining law. The
disagreement referred to in Section 107 does not involve the exercise of eminent
domain, rather it contemplates of a situation wherein the permit holders are
allowed by the surface owners entry into the latters lands and disagreement ensues
as regarding the proper compensation for the allowed entry and use of the private
lands. Noticeably, the provision points to a voluntary sale or transaction, but not to
an involuntary sale.
The legislature, in enacting the mining act, is presumed to have deliberated with full
knowledge of all existing laws and jurisprudence on the subject. Thus, it is but
reasonable to conclude that in passing such statute it was in accord with the existing
laws and jurisprudence on the jurisdiction of courts in the determination of just
compensation and that it was not intended to interfere with or abrogate any former
law relating to the same matter. Indeed, there is nothing in the provisions of the
assailed law and its implementing rules and regulations that exclude the courts from
their jurisdiction to determine just compensation in expropriation proceedings
involving mining operations. Although Section 105 confers upon the Panel of
Arbitrators the authority to decide cases where surface owners, occupants,
concessionaires refuse permit holders entry, thus, necessitating involuntary taking,
this does not mean that the determination of the just compensation by the Panel of
Arbitrators or the Mines Adjudication Board is final and conclusive. The
determination is only preliminary unless accepted by all parties concerned. There is
nothing wrong with the grant of primary jurisdiction by the Panel of Arbitrators or
the Mines Adjudication Board to determine in a preliminary matter the reasonable
compensation due the affected landowners or occupants.[52] The original and
exclusive jurisdiction of the courts to decide determination of just compensation
remains intact despite the preliminary determination made by the administrative
agency. As held in Philippine Veterans Bank v. Court of Appeals[53]:
The jurisdiction of the Regional Trial Courts is not any less original and exclusive
because the question is first passed upon by the DAR, as the judicial proceedings are
not a continuation of the administrative determination.
Third Substantive Issue: Sufficient Control by the State Over Mining Operations
Anent the third issue, petitioners charge that Rep. Act No. 7942, as well as its
Implementing Rules and Regulations, makes it possible for FTAA contracts to cede
over to a fully foreign-owned corporation full control and management of mining
enterprises, with the result that the State is allegedly reduced to a passive regulator
dependent on submitted plans and reports, with weak review and audit powers.
The State is not acting as the supposed owner of the natural resources for and on
behalf of the Filipino people; it practically has little effective say in the decisions
made by the enterprise. In effect, petitioners asserted that the law, the
implementing regulations, and the CAMC FTAA cede beneficial ownership of the
mineral resources to the foreign contractor.
It must be noted that this argument was already raised in La Bugal-BLaan Tribal
Association, Inc. v. Ramos,[54] where the Court answered in the following manner:
RA 7942 provides for the states control and supervision over mining operations.
The following provisions thereof establish the mechanism of inspection and
visitorial rights over mining operations and institute reportorial requirements in this
manner:
1. Sec. 8 which provides for the DENRs power of over-all supervision and
periodic review for the conservation, management, development and proper use of
the States mineral resources;
2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the
DENR to exercise direct charge in the administration and disposition of mineral
resources, and empowers the MGB to monitor the compliance by the contractor of
the terms and conditions of the mineral agreements, confiscate surety and
performance bonds, and deputize whenever necessary any member or unit of the
Phil. National Police, barangay, duly registered non-governmental organization
(NGO) or any qualified person to police mining activities;
3. Sec. 66 which vests in the Regional Director exclusive jurisdiction over safety
inspections of all installations, whether surface or underground, utilized in mining
operations.
4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and
warranties:
(g) Mining operations shall be conducted in accordance with the provisions of the
Act and its IRR.
(h) Work programs and minimum expenditures commitments.
xxxx
(k) Requiring proponent to effectively use appropriate anti-pollution technology
and facilities to protect the environment and restore or rehabilitate mined-out
areas.
(l) The contractors shall furnish the Government records of geologic, accounting
and other relevant data for its mining operation, and that books of accounts and
records shall be open for inspection by the government. x x x.
(m) Requiring the proponent to dispose of the minerals at the highest price and
more advantageous terms and conditions.
xxxx
(o) Such other terms and conditions consistent with the Constitution and with this
Act as the Secretary may deem to be for the best interest of the State and the
welfare of the Filipino people.
The foregoing provisions of Section 35 of RA 7942 are also reflected and
implemented in Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO
96-40.
Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the
governments control over mining enterprises:
The contractor is to relinquish to the government those portions of the contract
area not needed for mining operations and not covered by any declaration of mining
feasibility (Section 35-e, RA 7942; Section 60, DAO 96-40).
The contractor must comply with the provisions pertaining to mine safety,
health and environmental protection (Chapter XI, RA 7942; Chapters XV and XVI,
DAO 96-40).
For violation of any of its terms and conditions, government may cancel an
FTAA. (Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40).
An FTAA contractor is obliged to open its books of accounts and records for
0inspection by the government (Section 56-m, DAO 96-40).
An FTAA contractor has to dispose of the minerals and by-products at the
highest market price and register with the MGB a copy of the sales agreement
(Section 56-n, DAO 96-40).
MGB is mandated to monitor the contractors compliance with the terms and
conditions of the FTAA; and to deputize, when necessary, any member or unit of the
Philippine National Police, the barangay or a DENR-accredited nongovernmental
organization to police mining activities (Section 7-d and -f, DAO 96-40).
An FTAA cannot be transferred or assigned without prior approval by the
President (Section 40, RA 7942; Section 66, DAO 96-40).
A mining project under an FTAA cannot proceed to the
construction/development/utilization stage, unless its Declaration of Mining Project
Feasibility has been approved by government (Section 24, RA 7942).
The Declaration of Mining Project Feasibility filed by the contractor cannot be
approved without submission of the following documents:
1. Approved mining project feasibility study (Section 53-d, DAO 96-40)
2. Approved three-year work program (Section 53-a-4, DAO 96-40)
3. Environmental compliance certificate (Section 70, RA 7942)
4. Approved environmental protection and enhancement program (Section 69, RA
7942)
5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section 70, RA
7942; Section 27, RA 7160)
6. Free and prior informed consent by the indigenous peoples concerned, including
payment of royalties through a Memorandum of Agreement (Section 16, RA 7942;
Section 59, RA 8371)
The FTAA contractor is obliged to assist in the development of its mining
community, promotion of the general welfare of its inhabitants, and development of
science and mining technology (Section 57, RA 7942).
The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or
annual basis as the case may be; per Section 270, DAO 96-40), pertaining to the
following:
1. Exploration
2. Drilling
3. Mineral resources and reserves
4. Energy consumption
5. Production
6. Sales and marketing
7. Employment
8. Payment of taxes, royalties, fees and other Government Shares
9. Mine safety, health and environment
10. Land use
11. Social development
12. Explosives consumption
An FTAA pertaining to areas within government reservations cannot be
granted without a written clearance from the government agencies concerned
(Section 19, RA 7942; Section 54, DAO 96-40).
An FTAA contractor is required to post a financial guarantee bond in favor of
the government in an amount equivalent to its expenditures obligations for any
particular year. This requirement is apart from the representations and warranties
of the contractor that it has access to all the financing, managerial and technical
expertise and technology necessary to carry out the objectives of the FTAA (Section
35-b, -e, and -f, RA 7942).
Other reports to be submitted by the contractor, as required under DAO 96-
40, are as follows: an environmental report on the rehabilitation of the mined-out
area and/or mine waste/tailing covered area, and anti-pollution measures
undertaken (Section 35-a-2); annual reports of the mining operations and records of
geologic accounting (Section 56-m); annual progress reports and final report of
exploration activities (Section 56-2).
Other programs required to be submitted by the contractor, pursuant to DAO
96-40, are the following: a safety and health program (Section 144); an
environmental work program (Section 168); an annual environmental protection
and enhancement program (Section 171).
The foregoing gamut of requirements, regulations, restrictions and limitations
imposed upon the FTAA contractor by the statute and regulations easily overturns
petitioners contention. The setup under RA 7942 and DAO 96-40 hardly relegates
the State to the role of a passive regulator dependent on submitted plans and
reports. On the contrary, the government agencies concerned are empowered to
approve or disapprove -- hence, to influence, direct and change -- the various work
programs and the corresponding minimum expenditure commitments for each of
the exploration, development and utilization phases of the mining enterprise.
Once these plans and reports are approved, the contractor is bound to comply with
its commitments therein. Figures for mineral production and sales are regularly
monitored and subjected to government review, in order to ensure that the
products and by-products are disposed of at the best prices possible; even copies of
sales agreements have to be submitted to and registered with MGB. And the
contractor is mandated to open its books of accounts and records for scrutiny, so as
to enable the State to determine if the government share has been fully paid.
The State may likewise compel the contractors compliance with mandatory
requirements on mine safety, health and environmental protection, and the use of
anti-pollution technology and facilities. Moreover, the contractor is also obligated
to assist in the development of the mining community and to pay royalties to the
indigenous peoples concerned.
Cancellation of the FTAA may be the penalty for violation of any of its terms and
conditions and/or noncompliance with statutes or regulations. This general, all-
around, multipurpose sanction is no trifling matter, especially to a contractor who
may have yet to recover the tens or hundreds of millions of dollars sunk into a
mining project.
Overall, considering the provisions of the statute and the regulations just discussed,
we believe that the State definitely possesses the means by which it can have the
ultimate word in the operation of the enterprise, set directions and objectives, and
detect deviations and noncompliance by the contractor; likewise, it has the
capability to enforce compliance and to impose sanctions, should the occasion
therefor arise.
In other words, the FTAA contractor is not free to do whatever it pleases and get
away with it; on the contrary, it will have to follow the government line if it wants to
stay in the enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the
government more than a sufficient degree of control and supervision over the
conduct of mining operations.
Fourth Substantive Issue: The Proper Interpretation of the Constitutional Phrase
Agreements Involving Either Technical or Financial Assistance
In interpreting the first and fourth paragraphs of Section 2, Article XII of the
Constitution, petitioners set forth the argument that foreign corporations are barred
from making decisions on the conduct of operations and the management of the
mining project. The first paragraph of Section 2, Article XII reads:
x x x The exploration, development, and utilization of natural resources shall be
under the full control and supervision of the State. The State may directly undertake
such activities, or it may enter into co-production, joint venture, or production
sharing agreements with Filipino citizens, or corporations or associations at least
sixty percentum of whose capital is owned by such citizens. Such agreements may
be for a period not exceeding twenty five years, renewable for not more than
twenty five years, and under such terms and conditions as may be provided by law x
x x.
The fourth paragraph of Section 2, Article XII provides:
The President may enter into agreements with foreign-owned corporations
involving either technical or financial assistance for large scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country x x x.
Petitioners maintain that the first paragraph bars aliens and foreign-owned
corporations from entering into any direct arrangement with the government
including those which involve co-production, joint venture or production sharing
agreements. They likewise insist that the fourth paragraph allows foreign-owned
corporations to participate in the large-scale exploration, development and
utilization of natural resources, but such participation, however, is merely limited to
an agreement for either financial or technical assistance only.
Again, this issue has already been succinctly passed upon by this Court in La Bugal-
BLaan Tribal Association, Inc. v. Ramos.[55] In discrediting such argument, the Court
ratiocinated:
Petitioners claim that the phrase agreements x x x involving either technical or
financial assistance simply means technical assistance or financial assistance
agreements, nothing more and nothing else. They insist that there is no ambiguity
in the phrase, and that a plain reading of paragraph 4 quoted above leads to the
inescapable conclusion that what a foreign-owned corporation may enter into with
the government is merely an agreement for either financial or technical assistance
only, for the large-scale exploration, development and utilization of minerals,
petroleum and other mineral oils; such a limitation, they argue, excludes foreign
management and operation of a mining enterprise.
This restrictive interpretation, petitioners believe, is in line with the general policy
enunciated by the Constitution reserving to Filipino citizens and corporations the
use and enjoyment of the countrys natural resources. They maintain that this
Courts Decision of January 27, 2004 correctly declared the WMCP FTAA, along with
pertinent provisions of RA 7942, void for allowing a foreign contractor to have direct
and exclusive management of a mining enterprise. Allowing such a privilege not
only runs counter to the full control and supervision that the State is constitutionally
mandated to exercise over the exploration, development and utilization of the
countrys natural resources; doing so also vests in the foreign company beneficial
ownership of our mineral resources. It will be recalled that the Decision of January
27, 2004 zeroed in on management or other forms of assistance or other activities
associated with the service contracts of the martial law regime, since the
management or operation of mining activities by foreign contractors, which is the
primary feature of service contracts, was precisely the evil that the drafters of the
1987 Constitution sought to eradicate.
xxxx
We do not see how applying a strictly literal or verba legis interpretation of
paragraph 4 could inexorably lead to the conclusions arrived at in the ponencia.
First, the drafters choice of words -- their use of the phrase agreements x x x
involving either technical or financial assistance -- does not indicate the intent to
exclude other modes of assistance. The drafters opted to use involving when they
could have simply said agreements for financial or technical assistance, if that was
their intention to begin with. In this case, the limitation would be very clear and no
further debate would ensue.
In contrast, the use of the word involving signifies the possibility of the inclusion of
other forms of assistance or activities having to do with, otherwise related to or
compatible with financial or technical assistance. The word involving as used in this
context has three connotations that can be differentiated thus: one, the sense of
concerning, having to do with, or affecting; two, entailing, requiring, implying or
necessitating; and three, including, containing or comprising.
Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the
word involving, when understood in the sense of including, as in including technical
or financial assistance, necessarily implies that there are activities other than those
that are being included. In other words, if an agreement includes technical or
financial assistance, there is apart from such assistance -- something else already in,
and covered or may be covered by, the said agreement.
In short, it allows for the possibility that matters, other than those explicitly
mentioned, could be made part of the agreement. Thus, we are now led to the
conclusion that the use of the word involving implies that these agreements with
foreign corporations are not limited to mere financial or technical assistance. The
difference in sense becomes very apparent when we juxtapose agreements for
technical or financial assistance against agreements including technical or financial
assistance. This much is unalterably clear in a verba legis approach.
Second, if the real intention of the drafters was to confine foreign corporations to
financial or technical assistance and nothing more, their language would have
certainly been so unmistakably restrictive and stringent as to leave no doubt in
anyones mind about their true intent. For example, they would have used the
sentence foreign corporations are absolutely prohibited from involvement in the
management or operation of mining or similar ventures or words of similar import.
A search for such stringent wording yields negative results. Thus, we come to the
inevitable conclusion that there was a conscious and deliberate decision to avoid
the use of restrictive wording that bespeaks an intent not to use the expression
agreements x x x involving either technical or financial assistance in an exclusionary
and limiting manner.
Fifth Substantive Issue: Service Contracts Not Deconstitutionalized
Lastly, petitioners stress that the service contract regime under the 1973
Constitution is expressly prohibited under the 1987 Constitution as the term service
contracts found in the former was deleted in the latter to avoid the circumvention of
constitutional prohibitions that were prevalent in the 1987 Constitution. According
to them, the framers of the 1987 Constitution only intended for foreign-owned
corporations to provide either technical assistance or financial assistance. Upon
perusal of the CAMC FTAA, petitioners are of the opinion that the same is a replica
of the service contract agreements that the present constitution allegedly prohibit.
Again, this contention is not well-taken. The mere fact that the term service
contracts found in the 1973 Constitution was not carried over to the present
constitution, sans any categorical statement banning service contracts in mining
activities, does not mean that service contracts as understood in the 1973
Constitution was eradicated in the 1987 Constitution.[56] The 1987 Constitution
allows the continued use of service contracts with foreign corporations as
contractors who would invest in and operate and manage extractive enterprises,
subject to the full control and supervision of the State; this time, however, safety
measures were put in place to prevent abuses of the past regime.[57] We ruled,
thus:
To our mind, however, such intent cannot be definitively and conclusively
established from the mere failure to carry the same expression or term over to the
new Constitution, absent a more specific, explicit and unequivocal statement to that
effect. What petitioners seek (a complete ban on foreign participation in the
management of mining operations, as previously allowed by the earlier
Constitutions) is nothing short of bringing about a momentous sea change in the
economic and developmental policies; and the fundamentally capitalist, free-
enterprise philosophy of our government. We cannot imagine such a radical shift
being undertaken by our government, to the great prejudice of the mining sector in
particular and our economy in general, merely on the basis of the omission of the
terms service contract from or the failure to carry them over to the new
Constitution. There has to be a much more definite and even unarguable basis for
such a drastic reversal of policies.
xxxx
The foregoing are mere fragments of the framers lengthy discussions of the
provision dealing with agreements x x x involving either technical or financial
assistance, which ultimately became paragraph 4 of Section 2 of Article XII of the
Constitution. Beyond any doubt, the members of the ConCom were actually
debating about the martial-law-era service contracts for which they were crafting
appropriate safeguards.
In the voting that led to the approval of Article XII by the ConCom, the explanations
given by Commissioners Gascon, Garcia and Tadeo indicated that they had voted to
reject this provision on account of their objections to the constitutionalization of the
service contract concept.
Mr. Gascon said, I felt that if we would constitutionalize any provision on service
contracts, this should always be with the concurrence of Congress and not guided
only by a general law to be promulgated by Congress. Mr. Garcia explained, Service
contracts are given constitutional legitimization in Sec. 3, even when they have been
proven to be inimical to the interests of the nation, providing, as they do, the legal
loophole for the exploitation of our natural resources for the benefit of foreign
interests. Likewise, Mr. Tadeo cited inter alia the fact that service contracts
continued to subsist, enabling foreign interests to benefit from our natural
resources. It was hardly likely that these gentlemen would have objected so
strenuously, had the provision called for mere technical or financial assistance and
nothing more.
The deliberations of the ConCom and some commissioners explanation of their
votes leave no room for doubt that the service contract concept precisely
underpinned the commissioners understanding of the agreements involving either
technical or financial assistance.
xxxx
From the foregoing, we are impelled to conclude that the phrase agreements
involving either technical or financial assistance, referred to in paragraph 4, are in
fact service contracts. But unlike those of the 1973 variety, the new ones are
between foreign corporations acting as contractors on the one hand; and on the
other, the government as principal or owner of the works. In the new service
contracts, the foreign contractors provide capital, technology and technical know-
how, and managerial expertise in the creation and operation of large-scale
mining/extractive enterprises; and the government, through its agencies (DENR,
MGB), actively exercises control and supervision over the entire operation.
xxxx
It is therefore reasonable and unavoidable to make the following conclusion, based
on the above arguments. As written by the framers and ratified and adopted by the
people, the Constitution allows the continued use of service contracts with foreign
corporations -- as contractors who would invest in and operate and manage
extractive enterprises, subject to the full control and supervision of the State -- sans
the abuses of the past regime. The purpose is clear: to develop and utilize our
mineral, petroleum and other resources on a large scale for the immediate and
tangible benefit of the Filipino people.[58]
WHEREFORE, the instant petition for prohibition and mandamus is hereby
DISMISSED. Section 76 of Republic Act No. 7942 and Section 107 of DAO 96-40;
Republic Act No. 7942 and its Implementing Rules and Regulations contained in DAO
96-40 insofar as they relate to financial and technical assistance agreements
referred to in paragraph 4 of Section 2 of Article XII of the Constitution are NOT
UNCONSTITUTIONAL.

SO ORDERED.