MALACAÑANG

Manila

PRESIDENTIAL DECREE No. 705 May 19, 1975

REVISING PRESIDENTIAL DECREE NO. 389, OTHERWISE KNOWN AS THE FORESTRY

REFORM CODE OF THE PHILIPPINES

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;

WHEREAS, it is also imperative to place emphasis not only on the utilization thereof but more so on
the protection, rehabilitation and development of forest lands, in order to ensure the continuity of
their productive condition;

WHEREAS, the present laws and regulations governing forest lands are not responsive enough to
support re-oriented government programs, projects and efforts on the proper classification and
delimitation of the lands of the public domain, and the management, utilization, protection,
rehabilitation, and development of forest lands;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers in me vested by the Constitution, do hereby revise Presidential Decree No. 389 to read as
follows:

Section 1. Title of this Code. This decree shall be known as the "Revised Forestry Code of the
Philippines."

Section 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;

(b) Land classification and survey shall be systematized and hastened;

(c) The establishment of wood-processing plants shall be encouraged and rationalized; and

(d) The protection, development and rehabilitation of forest lands shall be emphasized so as
to ensure their continuity in productive condition.

Section 3. Definitions.

(a) Public forest is the mass of lands of the public domain which has not been the subject of
the present system of classification for the determination of which lands are needed for forest
purposes and which are not.
(b) Permanent forest or forest reserves refer to those lands of the public domain which have
been the subject of the present system of classification and determined to be needed for
forest purposes.

(c) Alienable and disposable lands refer to those lands of the public domain which have been
the subject of the present system of classification and declared as not needed for forest
purposes.

(d) Forest lands include the public forest, the permanent forest or forest reserves, and forest
reservations.

(e) Grazing land refers to that portion of the public domain which has been set aside, in view
of the suitability of its topography and vegetation, for the raising of livestock.

(f) Mineral lands refer to those lands of the public domain which have been classified as such
by the Secretary of Natural Resources in accordance with prescribed and approved criteria,
guidelines and procedure.

(g) Forest reservations refer to forest lands which have been reserved by the President of
the Philippines for any specific purpose or purposes.

(h) National park refers to a forest land reservation essentially of primitive or wilderness
character which has been withdrawn from settlement or occupancy and set aside as such
exclusively to preserve the scenery, the natural and historic objects and the wild animals or
plants therein, and to provide enjoyment of these features in such a manner as will leave
them unimpaired for future generations.

(i) Game refuge or bird sanctuary refers to a forest land designated for the protection of
game animals, birds and fish and closed to hunting and fishing in order that the excess
population may flow and restock surrounding areas.

(j) Marine parks refers to any off-shore area inhabited by rare and unique species of marine
flora and fauna.

(k) Seashore park refers to any public shore area delimited for outdoor recreation, sports
fishing, water skiing and related healthful activities.

(l) Watershed reservation is a forest land reservation established to protect or improve the
conditions of the water yield thereof or reduce sedimentation.

(m) Watershed is a land area drained by a stream or fixed body of water and its tributaries
having a common outlet for surface run-off.

(n) Critical watershed is a drainage area of a river system supporting existing and proposed
hydro-electric power and irrigation works needing immediate rehabilitation as it is being
subjected to a fast denudation causing accelerated erosion and destructive floods. It is
closed from logging until it is fully rehabilitated.

(o) Mangrove is a term applied to the type of forest occurring on tidal flat along the sea coast,
extending along streams where the water is brackish.
(p) Kaingin is a portion of the forest land, whether occupied or not, which is subjected to
shifting and/or permanent slash-and-burn cultivation having little or no provision to prevent
soil erosion.

(q) Forest product means timber, pulpwood, firewood, bark, tree top, resin, gum, wood, oil,
honey, beeswax, nipa, rattan, or other forest growth such as grass, shrub, and flowering
plant, the associated water, fish, game, scenic, historical, recreational and geologic
resources in forest lands.

(r) Dipterocarp forest is a forest dominated by trees of the dipterocarp species, such as red
lauan, tengile, tiaong, white lauan, almon, bagtikan and mayapis of the Philippine mahogany
group, apitong and the yakals.

(s) Pine forest is a forest composed of the Benguet Pine in the Mountain Provinces or the
Mindoro pine in Mindoro and Zambales provinces.

(t) Industrial tree plantation is any tract of forest land purposely and extensively planted to
timber crops primarily to supply the raw material requirements of existing or proposed
processing plants and related industries.

(u) Tree farm refers to any tract of forest land purposely and extensively planted to trees of
economic value for their fruits, flowers, leaves, barks, or extractives, but not for the wood
thereof.

(v) Multiple-use is the harmonized utilization of the numerous beneficial uses of the land, soil,
water, wildlife, recreation value, grass and timber of forest lands.

(w) Selective logging means the systematic removal of the mature, over-mature and
defective trees in such manner as to leave adequate number and volume of healthy residual
trees of the desired species necessary to assure a future crop of timber, and forest cover for
the protection and conservation of soil and water.

(x) Seed tree system is partial clearcutting with seed trees left to regenerate the area.

(y) Healthy residual is a sound or slightly injured tree of the commercial species left after
logging.

(z) Sustained-yield management implies continuous or periodic production of forest products

in a working unit with the aid of achieving at the earliest practicable time an approximate
balance between growth and harvest or use. This is generally applied to the commercial
timber resources and is also applicable to the water, grass, wildlife, and other renewable
resources of the forest.

(aa) Processing plant is any mechanical set-up, machine or combination of machine used for
the processing of logs and other forest raw materials into lumber, veneer, plywood,
wallboard, block-board, paper board, pulp, paper or other finished wood products.

(bb) Lease is a privilege granted by the State to a person to occupy and possess, in
consideration of a specified rental, any forest land of the public domain in order to undertake
any authorized activity therein.
 (cc) License is a privilege granted by the State to a person to utilize forest resources as in
any forest land, without any right of occupation and possession over the same, to the
exclusion of others, or establish and operate a wood-processing plant, or conduct any
activity involving the utilization of any forest resources.

(dd) License agreement is a privilege granted by the State to a person to utilize forest
resources within any forest land with the right of possession and occupation thereof to the
exclusion of others, except the government, but with the corresponding obligation to develop,
protect and rehabilitate the same in accordance with the terms and conditions set forth in
said agreement.

(ee) Permit is a short-term privilege or authority granted by the State to a person to utilize
any limited forest resources or undertake a limited activity with any forest land without any
right of occupation and possession therein.

(ff) Annual allowable cut is the volume of materials, whether of wood or other forest products,
that is authorized to be cut regularly from the forest.

(gg) Cutting cycle is the number of years between major harvests in the same working unit
and/or region, within a rotation.

(hh) Ecosystem means the ecological community considered together with non-living factors
and its environment as a unit.

(ii) Silviculture is the establishment, development reproduction and care of forest trees.

(jj) Rationalization is the organization of a business or industry using scientific business

management principles and simplified procedures to obtain greater efficiency of operation.

(kk) Forest officer means any official or employee of the Bureau who, by the nature of his
appointment or the function of the position to which he is appointed, is delegated by law or
by competent authority to execute, implement or enforce the provisions of this Code, other
related laws, as well as their implementing regulations.

(ll) Primitive tribe is a group of endemic tribe living primitively as a distinct portion of a people
from a common ancestor.

(mm) Private right means or refers to titled rights of ownership under existing laws, and in the
case of primitive tribes, to rights of possession existing at the time a license is granted under
this Code, which possession may include places of abode and worship, burial grounds, and
old clearings, but excludes production forest inclusive of logged-over areas, commercial
forests and established plantations of forest trees and trees of economic value.

(nn) Person includes natural as well as juridical person.

CHAPTER I
ORGANIZATION AND JURISDICTION OF THE BUREAU

Section 4. Creation of, and merger of all forestry agencies into, the Bureau of Forest
Development. For the purpose of implementing the provisions of this Code, the Bureau of Forestry,
the Reforestation Administration, the Southern Cebu Reforestation Development Project, and the
Parks and Wildlife Office, including applicable appropriations, records, equipment, property and such
personnel as may be necessary, are hereby merged into a single agency to be known as the Bureau
of Forest Development, hereinafter referred to as the Bureau.

Section 5. Jurisdiction of Bureau. The Bureau shall have jurisdiction and authority over all forest
land, grazing lands, and all forest reservations including watershed reservations presently
administered by other government agencies or instrumentalities.

It shall be responsible for the protection, development, management, regeneration, and reforestation
of forest lands; the regulation and supervision of the operation of licensees, lessees and permittees
for the taking or use of forest products therefrom or the occupancy or use thereof; the
implementation of multiple use and sustained yield management in forest lands; the protection,
development and preservation of national parks, marine parks, game refuges and wildlife; the
implementation of measures and programs to prevent kaingin and managed occupancy of forest and
grazing lands; in collaboration with other bureaus, the effective, efficient and economic classification
of lands of the public domain; and the enforcement of forestry, reforestation, parks, game and
wildlife laws, rules, and regulations.

The Bureau shall regulate the establishment and operation of sawmills, veneer and plywood mills
and other wood processing plants and conduct studies of domestic and world markets of forest
products.

Section 6. Director and Assistant Director and their qualifications. The Bureau shall be headed by a
Director, who shall be assisted by one or more Assistant Directors. The Director and Assistant
Directors shall be appointed by the President.

No person shall be appointed Director or Assistant Director of the Bureau unless he is a natural born
citizen of the Philippines, at least 30 years of age, a holder of at least a Bachelor's Degree in
Forestry or its equivalent, and a registered forester.

Section 7. Supervision and Control. The Bureau shall be directly under the control and supervision
of the Secretary of the Department of Natural Resources, hereinafter referred to as the Department
Head.

Section 8. Review. All actions and decisions of the Director are subject to review, motu propio or
upon appeal of any person aggrieved thereby, by the Department Head whose decision shall be final
and executory after the lapse of thirty (30) days from receipt by the aggrieved party of said decision,
unless appealed to the President in accordance with the Executive Order No. 19, series of 1966.
The Decision of the Department Head may not be reviewed by the courts except through a special
civil action for certiorari or prohibition.

Section 9. Rules and Regulations. The Department Head, upon the recommendation of the Director
of Forest Development, shall promulgate the rules and regulations necessary to implement
effectively the provisions of this Code.

Section 10. Creation of Functional Divisions, and Regional and District Offices. All positions in the
merged agencies are considered vacant. Present occupants may be appointed in accordance with a
staffing pattern or plan of organization to be prepared by the Director and approved by the
Department Head. Any appointee who fails to report for duty in accordance with the approved plan
within thirty (30) days upon receipt of notification shall be deemed to have declined the appointment,
in which case the position may be filed by any other qualified applicant.
For the efficient and effective implementation of the program of the Bureau, the following divisions
and sections are hereby created, to wit:

Divisions Sections
Planning and Evaluation Program Planning;
Performance Evaluation;
Forest Economics;
Management Analysis
Data & Information.
Administrative Division Personnel;
Budget;
Accounting;
Information;
General Services.
Legal Division

Reforestation and Afforestation Cooperative Planting;

Division Planting Stock Production;
Plantation Management.

Timber Management Division Forest Surveys, Data & Mapping;

Sulviculture;
Timber Inventory & Photo-
Interpretation;
Timber Management Plans;
Land Classification.

Utilization Division Timber Operations;

Land Uses;
Utilization.
Forest Protection and Infrastructure Forest Protection;
Forest Occupancy
Management;
Watershed Management;
Infrastructure.
Parks, Wildlife Division Parks Management;
Recreation Management;
Wildlife Management;
Range Management.

Security and Intelligence Division

Forest Development Training Center Technical Training;

Non-Technical Training.
The Department Head may, upon recommendation of the Director, reorganize or create such other
divisions, sections of units as may be deemed necessary and to appoint the personnel there:
Provided, That an employee appointed or designated as officer-in-charge of a newly created
division, section or unit, or to an existing vacant position with a higher salary, shall receive, from the
date of such appointment or designation until he is replaced or reverted to his original position, the
salary corresponding to the position temporarily held by him.

There shall be created at least eleven regional offices. In each region, there shall be as many forest
districts as may be necessary, in accordance with the extent of forest area, established work loads,
need for forest protection, fire prevention and other factors, the provisions of any law to the contrary
notwithstanding: Provided, That the boundaries of such districts shall follow, whenever possible,
natural boundaries of watersheds under the river-basin concept of management.

Section 11. Manpower Development. The Bureau shall establish and operate an in-service training
center for the purpose of upgrading and training its personnel and new employees.

The Bureau shall also set aside adequate funds to enable personnel to obtain special education and
training in local or foreign colleges or institutions.

Section 12. Performance Evaluation. The Bureau shall devise a system, to be approved by the
Department Head, to evaluate the performance of its employees. The system shall measure
accomplishment in quantity and quality of performance as related to the funded program of work
assigned to each organizational unit. There shall be included a system of periodic inspection of
district offices by the regional offices and the regional and district offices by the Central Office in both
functional fields and in the overall assessment of how each administrative unit has implemented the
laws, regulations, policies, programs, and practices relevant to such unit. The evaluation system
shall provide the information necessary for annual progress reports and determination of employee
training civil service awards and transfer or disciplinary action.

CHAPTER II
CLASSIFICATION AND SURVEY

Section 13. System of Land Classification. The Department Head shall study, devise, determine and
prescribe the criteria, guidelines and methods for the proper and accurate classification and survey
of all lands of the public domain into agricultural, industrial or commercial, residential, resettlement,
mineral, timber or forest, and grazing lands, and into such other classes as now or may hereafter be
provided by law, rules and regulations.

In the meantime, the Department Head shall simplify through inter-bureau action the present system
of determining which of the unclassified lands of the public domain are needed for forest purposes
and declare them as permanent forest to form part of the forest reserves. He shall decree those
classified and determined not to be needed for forest purposes as alienable and disposable lands,
the administrative jurisdiction and management of which shall be transferred to the Bureau of Lands:
Provided, That mangrove and other swamps not needed for shore protection and suitable for
fishpond purposes shall be released to, and be placed under the administrative jurisdiction and
management of, the Bureau of Fisheries and Aquatic Resources. Those still to be classified under
the Present system shall continue to remain as part of the public forest.

Section 14. Existing Pasture Leases and Permits in Forest Lands. Forest lands which have been
the subject of pasture leases and permits shall remain classified as forest lands until classified as
grazing lands under the criteria, guidelines and methods of classification to be prescribed by the
Department Head: Provided, That the administration, management and disposition of grazing lands
shall remain under the Bureau.

Section 15. Topography. No land of the public domain eighteen per cent (18%) in slope or over shall
be classified as alienable and disposable, nor any forest land fifty per cent (50%) in slope or over, as
grazing land.

Lands eighteen per cent (18%) in slope or over which have already been declared as alienable and
disposable shall be reverted to the classification of forest lands by the Department Head, to form
part of the forest reserves, unless they are already covered by existing titles or approved public land
application, or actually occupied openly, continuously, adversely and publicly for a period of not less
than thirty (30) years as of the effectivity of this Code, where the occupant is qualified for a free
patent under the Public Land Act: Provided, That said lands, which are not yet part of a well-
established communities, shall be kept in a vegetative condition sufficient to prevent erosion and
adverse effects on the lowlands and streams: Provided, further, That when public interest so
requires, steps shall be taken to expropriate, cancel defective titles, reject public land application, or
eject occupants thereof.

Section 16. Areas needed for forest purposes. The following lands, even if they are below eighteen
per cent (18%) in slope, are needed for forest purposes, and may not, therefore, be classified as
alienable and disposable land, to wit:

1. Areas less than 250 hectares which are far from, or are not contiguous with, any certified
alienable and disposable land;

2. Isolated patches of forest of at least five (5) hectares with rocky terrain, or which protect a
spring for communal use;

3. Areas which have already been reforested;

4. Areas within forest concessions which are timbered or have good residual stocking to
support an existing, or approved to be established, wood processing plant;

5. Ridge tops and plateaus regardless of size found within, or surrounded wholly or partly by,
forest lands where headwaters emanate;

6. Appropriately located road-rights-or-way;

7. Twenty-meter strips of land along the edge of the normal high waterline of rivers and
streams with channels of at least five (5) meters wide;

8. Strips of mangrove or swamplands at least twenty (20) meters wide, along shorelines
facing oceans, lakes, and other bodies of water, and strips of land at least twenty (20) meters
wide facing lakes;

9. Areas needed for other purposes, such as national parks, national historical sites, game
refuges and wildlife sanctuaries, forest station sites, and others of public interest; and

10. Areas previously proclaimed by the President as forest reserves, national parks, game
refuge, bird sanctuaries, national shrines, national historic sites:
Provided, That in case an area falling under any of the foregoing categories shall have been titled in
favor of any person, steps shall be taken, if public interest so requires, to have said title cancelled or
amended, or the titled area expropriated.

Section 17. Establishment of boundaries of forest lands. All boundaries between permanent forests
and alienable and disposable lands shall be clearly marked and maintained on the ground, with
infrastructure or roads, or concrete monuments at intervals of not more than five hundred (500)
meters in accordance with established procedures and standards, or any other visible and
practicable signs to insure protection of the forest.

Section 18. Reservations in forest lands and off-shore areas. The President of the Philippines may
establish within any lands of the public domain, forest reserve and forest reservation for the national
park system, for preservation as critical watersheds, or for any other purpose, and modify
boundaries of existing ones. The Department Head may reserve and establish any portion of the
public forest or forest reserve as site or experimental forest for use of the Forest Research Institute.

When public interest so requires, any off-shore area needed for the preservation and protection of its
educational, scientific, historical, ecological and recreational values including the marine life found
therein, shall be established as marine parks.

CHAPTER III
UTILIZATION AND MANAGEMENT

Section 19. Multiple use. The numerous beneficial uses of the timber, land, soil, water, wildlife,
recreation value and grass of forest lands shall be evaluated and weighted before allowing the
utilization, exploitation, occupation or possession thereof, or the conduct of any activity therein.

Only the utilization, exploitation, occupation or possession of any forest land, or any activity therein,
involving one or more or its resources, which will produce the optimum benefits to the development
and progress of the country and the public welfare, without impairment or with the least injury to its
other resources, shall be allowed.

All forest reservations may be open to uses not inconsistent with the principal objectives of the
reservation: Provided, That critical watersheds and national parks shall not be subject to logging
operations.

Section 20. License agreement, license, lease or permit. No person may utilize, exploit, occupy,
possess or conduct any activity within any forest land, or establish and operate any wood-processing
plant, unless he has been authorized to do so under a license agreement, lease, license, or permit.

Section 21. Sustained yield. All measures shall be taken to achieve an approximate balance
between growth and harvest or use of forest products in forest lands.

A. TIMBER

Section 22. Silvicultural and harvesting systems. In any logging operations in production forests
within forest lands, the proper silvicultural and harvesting systems that will promote optimum
sustained yield shall be practised.

(a) For dipterocarp forest, selective logging shall be practised.

 (b) For pine forest, the seed tree system with planting when necessary shall be practised.

(c) For other types of forest, the silvicultural and harvesting system that will be found suitable
by research shall be applied. Meanwhile, a system based on observation and practices
abroad may be adopted initially.

Any practised system are subject to modification or changes based on research findings.

Section 23. Timber inventory. The Bureau shall conduct a program of progressive inventories of the
harvestable timber and young trees in all forest lands, whether covered by any license agreement,
license, lease or permit, or not, until a one hundred per cent (100%) timber inventory thereon has
been achieved.

Section 24. Required inventory prior to timber utilization in forest lands. No harvest of timber in any
forest land shall be allowed unless it has been the subject of at least a five per cent (5%) timber
inventory, or any statistically sound timber estimate, made not earlier than five (5) years prior to the
issuance of a license agreement or license allowing such utilization.

Section 25. Cutting cycle. The Bureau shall apply scientific cutting cycle and rotation in all forest
lands, giving particular consideration to the age, volume and kind of healthy residual trees which
may be left undisturbed and undamaged for future harvest and forest cover indipterocarp area, and
seed trees and reproduction in pine area.

Section 26. Annual allowable cut. The annual allowable cut of any particular forest land shall be
determined on the basis of the established rotation and cutting cycle thereof, and the volume and
kind of harvestable timber and healthy residuals, seed trees and reproduction found therein.

Section 27. Duration of license agreement or license to harvest timber in forest lands. The duration
of the privilege to harvest timber in any particular forest land under a license agreement or license
shall be fixed and determined in accordance with the annual allowable cut therein, the established
cutting cycle thereof, the yield capacity of harvestable timber, and the capacity of healthy residuals
for a second growth.

The privilege shall automatically terminate, even before the expiration of the license agreement of
license, the moment the harvestable timber have been utilized without leaving any logged-over area
capable of commercial utilization.

The maximum period of any privilege to harvest timber is twenty-five (25) years, renewable for a
period, not exceeding twenty-five (25) years, necessary to utilize all the remaining commercial
quantity or harvestable timber either from the unlogged or logged-over area.

It shall be a condition for the continued privilege to harvest timber under any license or license
agreement that the licensee shall reforest all the areas which shall be determined by the Bureau.

Section 28. Size of forest concessions. Forest lands shall not be held in perpetuity.

The size of the forest lands which may be the subject of timber utilization shall be limited to that
which a person may effectively utilize and develop for a period of fifty (50) years, considering the
cutting cycle, the past performance of the applicant and his capacity not only to utilize but, more
importantly, to protect and manage the whole area, and the requirements of processing plants
existing or to be installed in the region.
Forest concessions which had been the subject of consolidations shall be reviewed and re-evaluated
for the effective implementation of protection, reforestation and management thereof under the
multiple use and sustained yield concepts, and for the processing locally of the timber resources
therefrom.

B. WOOD-PROCESSING

Section 29. Incentives to the wood industry. The Department Head, in collaboration with other
government agencies and the wood industry associations and other private entities in the country,
shall evolve incentives for the establishment of an integrated wood industry in designated wood
industry centers and/or economic area.

The President of the Philippines, upon the recommendations of the National Economic Development
Authority and the Department Head, may establish wood industry import-export centers in selected
locations: Provided, That logs imported for such centers shall be subject to such precaution as may
be imposed by the Bureau, in collaboration with proper government agencies, to prevent the
introduction of pests, insects and/or diseases detrimental to the forests.

Section 30. Rationalization of the wood industry. While establishment of wood-processing plants
shall be encouraged, their locations and operations shall be regulated in order to rationalize the
industry. No new processing plant shall be established unless adequate raw material is available on
a sustained-yield basis in the area where the raw materials will come from.

The Department Head may cancel, suspend, or phase-out all uneconomical wood-processing plants
which are not responsive to the rationalization program of the government.

Section 31. Wood wastes, weed trees and residues. Timber licensees shall be encouraged and
assisted to gather and save the wood wastes and weed trees in their concessions, and those with
processing plants, the wood residues thereof, for utilization and conversion into wood by-products
and derivatives.

Section 32. Log production and processing. Unless otherwise decreed by the President, upon
recommendation of the National Economic Development Authority, the entire production of logs by
all licensees shall, beginning January 1, 1976, be processed locally.

A licensee who has no processing plant may, subject to the approval of the Director, enter into a
contract with a wood processor for the processing of his logs. Wood processors shall accept for
processing only logs cut by, or purchased from, licensees of good standing at the time of the cutting
of logs.

C. REFORESTATION

Section 33. Forest lands to be reforested. The following shall be reforested and covered with
suitable and sufficient trees, to wit:

(a) Bare or grass-covered tracts of forest lands with at least fifty per cent (50%) slope;

(b) Bare or grass-covered tracts of forest lands with less than fifty per cent (50%) slope, but
with soil so highly erodible as to make grass cover inadequate for soil erosion control;
 (c) Brushlands or tracts of forest lands generally covered with brush, which need to be
developed to increase their productivity;

(d) Open tracts of forest lands with slopes or gradients generally exceeding fifty per cent
(50%), interspersed with patches of forest each of which is less than two hundred fifty (250)
hectares in area;

(e) Denuded or inadequately-timbered areas proclaimed by the President as forest reserves

and reservations as critical watersheds, national parks, game refuge, bird sanctuaries,
national shrines, national historic sites;

(f) Inadequately-stocked forest lands within forest concessions;

(g) Portions of areas covered by pasture leases or permits having a slope of at least fifty per
cent (50%); and

(h) River banks, easements, road rights-of-ways, deltas, swamps, former river beds, and
beaches.

Section 34. Industrial Tree Plantations and Tree Farms. A lease for a period of twenty-five (25)
years, renewable for another period not exceeding twenty-five (25) years, for the establishment of an
industrial tree plantation or a tree farm may be granted by the Department Head upon
recommendation of the Director to any person qualified to develop and exploit natural resources,
over timber or forest lands of the public domain categorized in Section 33 hereof, with a minimum
area of One Thousand (1,000) hectares for industrial tree plantation and One Hundred (100)
hectares for tree farm; Provided, That the size of the area that may be granted under each category
shall in each case depend upon the capacity of the lessee to develop or convert the area into
productive condition within the term of the lease; Provided, further, That no lease shall be granted
within critical watersheds.

Scattered areas of less than One Hundred (100) hectares each may be leased for the establishment
of tree farms to different qualified persons upon a showing that if developed as an integrated unit
these areas can be economically exploited: Provided, That it shall be a condition of the lease that
such persons organize themselves into a cooperative to ensure the orderly management thereof.

The lease may be granted under such terms and conditions as the Department Head may prescribe,
taking into account, among others, the raw material needs of forest-based industries and the
maintenance of a wholesome ecological balance.

Reforestation projects of the Government, or portions thereof which, upon field evaluation, are found
to be more suitable for, or can be better developed as, industrial tree plantations or tree farms in
terms of benefits to the Government and the general surrounding area, may be the subject of the
lease under this section.

Section 35. Priority. Over any suitable area covered by a timber license agreement, or a pasture
lease agreement or permit, the priority to establish industrial forest plantation or tree farm shall be
given to the holder thereof.

The priority herein granted must, however, be availed of within a reasonable period to be determined
by the Department Head, otherwise, the area shall be declared open to any qualified person and
consequently segregated from the holder's area.
Section 36. Incentives. To encourage qualified persons to engage in industrial tree plantation and/or
tree farming, the following incentives are granted:

(a) Payment of a nominal filing fee of fifty centavos (P0.50) per hectare;

(b) No rental shall be collected during the first five (5) years from the date of the lease; from
the sixth year to the tenth year, the annual rental shall be fifty centavos (P0.50) per hectare;
and thereafter, the annual rental shall be one peso (P1.00) per hectare: Provided, That
lessees of areas long denuded as certified by the Director and approved by the Department
Head, shall be exempted from the payment of rental for the full term of the lease which shall
not exceed twenty-five (25) years; for the first five (5) years following the renewal of the
lease, the annual rental shall be fifty centavos (P0.50) per hectare; and thereafter, the annual
rental shall be one peso (P1.00) per hectare.

(c) The lessee shall pay forest charges on the timber and other forest products grown and
cut or gathered in an industrial tree plantation or tree farm equivalent to six percent (6%)
current market value thereof;

(d) Sale at cost of seedlings and free technical advice and assistance to persons who will
develop their privately-owned lands into industrial tree plantation or tree farm;

(e) Exemption from the payment of the percentage tax levied in Title V of the National
Internal Revenue Code when the timber and forest products are sold, bartered or exchanged
by the lessee whether in their original state or not;

(f) The Board of Investments shall, notwithstanding its nationality requirement on projects
involving natural resources, classify industrial tree plantations and tree farms as pioneer
areas of investment under its annual priority plan, to be governed by the rules and
regulations of said Board. A lessee of an industrial tree plantation or tree farm may either
apply to the Board of Investments for the tax and other benefits thereunder, or avail of the
following benefits:

1. Amounts expended by a lessee in the development and operation of an industrial

tree plantation or tree farm prior to the time when the production state is reached,
may, at the option of said lessee, be regarded as ordinary and necessary business
expenses or as capital expenditures; and

2. Deduction from an investor's taxable income for the year, of an annual investment
allowance equivalent to thirty-three and one-third per cent (33-1/3%) of his actual
investment during the year in an enterprise engaged in industrial tree plantation or
tree farm: Provided, That such investment shall not be withdrawn for a period of at
least ten (10) years from the date of investment: Provided, further, That should the
investment be withdrawn within such period, a tax equivalent to double the amount of
the total income tax rebate resulting from the investment allowance shall be payable
as a lump sum in addition to the income tax due from the taxpayer for the year the
investment was withdrawn.

(g) Except when public interest demands the alteration or modification, the boundaries of an
area covered by an industrial tree plantation or tree farm lease, once established on the
ground, shall not be altered or modified; and
 (h) A lessee shall not be subject to any obligation prescribed in, or arising out of, the
provisions of the National Internal Revenue Code on withholding of tax at source upon
interests paid on borrowings incurred for development and operation of the industrial tree
plantation or tree farm.

The Department Head may provide other incentives in addition to those hereinabove granted to
promote industrial tree plantation and tree farms in special areas such as, but not limited to, those
where there are no roads or where roads are inadequate, or areas with rough topography and
remote areas far from processing plants.

All amounts collected under this section shall accrue to a special deposit of the Bureau to be used
for reforestation of critical watersheds or degraded areas and other development activities, over and
above the general appropriation of the said Bureau.

D. FOREST PROTECTION

Section 37. Protection of all resources. All measures shall be taken to protect the forest resources
from destruction, impairment and depletion.

Section 38. Control of concession area. In order to achieve the effective protection of the forest
lands and the resources thereof from illegal entry, unlawful occupation, kaingin, fire, insect
infestation, theft, and other forms of forest destruction, the utilization of timber therein shall not be
allowed except through license agreements under which the holders thereof shall have the exclusive
privilege to cut all the allowable harvestable timber in their respective concessions, and the
additional right of occupation, possession, and control over the same, to the exclusive of all others,
except the government, but with the corresponding obligation to adopt all the protection and
conservation measures to ensure the continuity of the productive condition of said areas,
conformably with multiple use and sustained yield management.

If the holder of a license agreement over a forest area expressly or impliedly waives the privilege to
utilize any softwood, hardwood or mangrove species therein, a license may be issued to another
person for the harvest thereof without any right of possession or occupation over the areas where
they are found, but he shall, likewise, adopt protection and conservation measures consistent with
those adopted by the license agreement holder in the said areas.

Section 39. Regulation of timber utilization in all other classes of lands and of wood-processing
plants. The utilization of timber in alienable and disposable lands, private lands, civil reservations,
and all lands containing standing or felled timber, including those under the jurisdiction of other
government agencies, and the establishment and operation of saw-mills and other wood-processing
plants, shall be regulated in order to prevent them from being used as shelters for excessive and
unauthorized harvests in forest lands, and shall not therefore be allowed except through a license
agreement, license, lease or permit.

Section 40. Timber inventory in other lands containing standing or felled timber. The Bureau shall
conduct a one hundred per cent (100%) timber inventory in alienable and disposable lands and civil
reservations immediately upon classification or reservation thereof.

No harvest of standing or felled timber in alienable and disposable lands, private lands, civil
reservation, and all other lands, including those under the jurisdiction of other government agencies,
shall be allowed unless a one hundred per cent (100%) timber inventory has been conducted
thereon.
Section 41. Sworn timber inventory reports. All reports on timber inventories of forest lands,
alienable and disposable lands, private lands, civil reservations, and all lands containing standing or
felled timber must be subscribed and sworn to by all the forest officers who conducted the same.

Section 42. Participation in the development of alienable and disposable lands and civil
reservations. The privilege to harvest timber in alienable and disposable lands and civil reservations
shall be given to those who can best help in the delineation and development of such areas in
accordance with the management plan of the appropriate government exercising jurisdiction over the
same.

The extent of participation shall be based on the amount of timber which may be harvested
therefrom.

Section 43. Swamplands and mangrove forests. Strips of mangrove forest bordering numerous
islands which protect the shoreline, the shoreline roads, and even coastal communities from the
destructive force of the sea during high winds and typhoons, shall be maintained and shall not be
alienated. Such strips must be kept from artificial obstruction so that flood water will flow unimpeded
to the sea to avoid flooding or inundation of cultivated areas in the upstream.

All mangrove swamps set aside for coast-protection purposes shall not be subject to clear-cutting
operation.

Mangrove and other swamps released to the Bureau of Fisheries and Aquatic Resources for
fishpond purposes which are not utilized, or which have been abandoned for five (5) years from the
date of such release shall revert to the category of forest land.

Section 44. Visitorial power. The Department Head may, by himself or thru the Director or any
qualified person duly designated by the Department Head, investigate, inspect and examine records,
books and other documents relating to the operation of any holder of a license agreement, license,
lease, or permit, and its subsidiary or affiliated companies, to determine compliance with the terms
and conditions thereof, this Code and pertinent laws, policies, rules and regulations.

Section 45. Authority of forest officers. When in the performance of their official duties, forest
officers, or other government officials or employees duly authorized by the Department Head or
Director, shall have free entry into areas covered by a license agreement, license, lease or permit.

Forest officers are authorized to administer oath and take acknowledgment in official matters
connected with the functions of their office, and to take testimony in official investigations conducted
under the authority of this Code and the implementing rules and regulations.

Section 46. Scaling stations. In collaboration with appropriate government agencies, the Bureau
shall establish control or scaling stations at suitably located outlets of timber and other forest
products to insure that they were legally cut or harvested.

Section 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.

Mine tailings and other pollutants affecting the health and safety of the people, water, fish,
vegetation, animal life and other surface resources, shall be filtered in silt traps or other filtration
devices and only clean exhausts and liquids shall be released therefrom.

Surface-mined areas shall be restored to as near its former natural configuration or as approved by
the Director prior to its abandonment by the mining concern.

Section 48. Mineral Reservations. Mineral reservations which are not the subject of mining
operations or where operations have been suspended for more than five (5) years shall be placed
under forest management by the Bureau.

Mineral reservations where mining operations have been terminated due to the exhaustion of its
minerals shall revert to the category of forest land, unless otherwise reserved for other purposes.

Section 49. Roads and other infrastructure. Roads and other infrastructure in forest lands shall be
constructed with the least impairment to the resource values thereof.

Government agencies undertaking the construction of roads, bridges, communications, and other
infrastructure and installations inside forest lands, shall coordinate with the Bureau, especially if it
will involve the utilization or destruction of timber and/or other forest resources, or watershed
disturbance therein, in order to adopt measures to avoid or reduce damage or injury to the forest
resource values.

They shall likewise extend assistance in the planning and establishment of roads, wharves, piers,
port facilities, and other infrastructure in locations designated as wood-processing centers or for the
convenience of wood-based industries.

In order to coincide and conform to government plans, programs, standards, and specifications,
holders of license agreements, licenses, leases and permits shall not undertake road or
infrastructure construction or installation in forest lands without the prior approval of the Director, or
in alienable and disposable lands, civil reservations and other government lands, without the
approval of the government agencies having administrative jurisdiction over the same.

All roads and infrastructure constructed by holders of license agreements, licenses, leases and
permits belong to the State and the use and administration thereof shall be transferred to the
government immediately upon the expiration or termination thereof. Prior thereto the Bureau may
authorize the public use thereof, if it will not be detrimental to forest conservation measures.

Where roads are utilized by more than one commercial forest user, the Bureau shall prescribe the
terms and conditions of joint use including the equitable sharing of construction and/or maintenance
costs, and of the use of these roads by other parties and the collection of such fees as may be
deemed necessary.

Section 50. Logging roads. There shall be indiscriminate construction of logging roads.

Such roads shall be strategically located and their widths regulated so as to minimize clear-cutting,
unnecessary damage or injury to healthy residuals, and erosion. Their construction must not only
serve the transportation need of the logger but, most importantly, the requirement to save as many
healthy residuals as possible during cutting and hauling operations.

Section 51. Management of occupancy in forest lands. Forest occupancy shall henceforth be
managed. The Bureau shall study, determine and define which lands may be the subject of
occupancy and prescribed therein, an agro-forestry development program.

Occupants shall undertake measures to prevent and protect forest resources.

Any occupancy in forest land which will result in sedimentation, erosion, reduction in water yield and
impairment of other resources to the detriment of community and public interest shall not be allowed.

In areas above 50% in slope, occupation shall be conditioned upon the planting of desirable trees
thereon and/or adoption of other conservation measures.

Section 52. Census of kaingineros, squatters, cultural minorities and other occupants and residents
in forest lands.Henceforth, no person shall enter into forest lands and cultivate the same without
lease or permit.

A complete census of kaingineros, squatters, cultural minorities and other occupants and residents
in forest lands with or without authority or permits from the government, showing the extent of their
respective occupation and resulting damage, or impairment of forest resources, shall be conducted.

The Bureau may call upon other agencies of the government and holders of license agreement,
license, lease and permits over forest lands to participate in the census.

Section 53. Criminal Prosecution. Kaingineros, squatters, cultural minorities and other occupants
who entered into forest lands before the effectivity of this Code, without permits or authority, shall not
be prosecuted: Provided, That they do not increase their clearings: Provided, further, That they
undertake, within two (2) months from the notice thereof, the activities which will be imposed upon
them by the Bureau in accordance with a management plan calculated to conserve and protect
forest resources.

E. SPECIAL USES

Section 54. Pasture in forest lands. No forest land 50% in slope or over may be utilized for pasture
purposes.

Forest lands which are being utilized for pasture shall be maintained with sufficient grass cover to
protect soil, water and other forest resources.

If grass cover is insufficient, the same shall be supplemented with trees or such vegetative cover as
may be deemed necessary.

The size of forest lands that may be allowed for pasture and other special uses shall be determined
by rules and regulations, any provision of law to the contrary notwithstanding.

Section 55. Wildlife. Wildlife may be destroyed, killed, consumed, eaten or otherwise disposed of,
without the necessity of permit, for the protection of life, health, safety and property, and the
convenience of the people.
However, the Director may regulate the killing and destruction of wildlife in forest lands in order to
maintain an ecological balance of flora and fauna.

Section 56. Recreation. The Bureau shall, in the preparation of multiple-use management plans,
identify and provide for the protection of scenic areas in all forest lands which are potentially
valuable for recreation and tourism, and plan for the development and protection of such areas to
attract visitors thereto and meet increasing demands therefor.

The construction and operation of necessary facilities to accommodate outdoor recreation shall be
done by the Bureau with the use of funds derived from rentals and fees for the operation and use of
recreational facilities by private persons or operators, in addition to whatever funds may be
appropriated for such purposes.

Section 57. Other special uses of forest lands. Forest lands may be leased for a period not
exceeding twenty-five (25) years, renewable upon the expiration thereof for a similar period, or held
under permit, for the establishment of sawmills, lumber yards, timber depots, logging camps, rights-
of-way, or for the construction of sanatoria, bathing establishments, camps, salt works, or other
beneficial purposes which do not in any way impair the forest resources therein.

F. QUALIFICATIONS

Section 58. Diffusion of benefits. The privilege to utilize, exploit, occupy, or possess forest lands, or
to conduct any activity therein, or to establish and operate wood-processing plants, shall be diffused
to as many qualified and deserving applicants as possible.

Section 59. Citizenship. In the evaluation of applications of corporations, increased Filipino equity
and participation beyond the 60% constitutional limitation shall be encouraged. All other factors
being equal, the applicant with more Filipino equity and participation shall be preferred.

Section 60. Financial and technical capability. No license agreement, license, lease or permit over
forest lands shall be issued to an applicant unless he proves satisfactorily that he has the financial
resources and technical capability not only to minimize utilization, but also to practice forest
protection, conservation and development measures to insure the perpetuation of said forest in
productive condition.

Section 61. Transfers. Unless authorized by the Department Head, no licensee, lessee, or permittee
may transfer, exchange, sell or convey his license agreement, license, lease or permit, or any of his
rights or interests therein, or any of his assets used in connection therewith.

The licensee, lessee, or permittee shall be allowed to transfer or convey his license agreement,
license, lease or permit only if he has not violated any forestry law, rule or regulation; has been
faithfully complying with the terms and conditions of the license agreement, license, lease or permit;
the transferee has all the qualifications and none of the disqualifications to hold a license agreement,
license, lease or permit; there is no evidence that such transfer or conveyance is being made for
purposes of speculation; and the transferee shall assume all the obligations of the transferor.

The transferor shall forever be barred from acquiring another license agreement, license, lease or
permit.

Section 62. Service contracts. The Department Head, may in the national interest, allow forest
products licensees, lessees, or permittees to enter into service contracts for financial, technical,
management, or other forms of assistance, in consideration of a fee, with any foreign person or
entity for the exploration, development, exploitation or utilization of the forest resources, covered by
their license agreements, licenses, leases or permits. Existing valid and binding service contracts for
financial, technical, management or other forms of assistance are hereby recognized as such.

Section 63. Equity sharing. Every corporation holding a license agreement, license, lease or permit
to utilize, exploit, occupy or possess any forest land, or conduct any activity therein, or establish and
operate a wood-processing plant, shall within one (1) year after the effectivity of this Code, formulate
and submit to the Department Head for approval a plan for the sale of at least twenty percent (20%)
of its subscribed capital stock in favor of its employees and laborers.

The plan shall be so implemented that the sale of the shares of stock shall be effected by the
corporation not later than the sixth year of its operation, or the first year of the effectivity of this Code,
if the corporation has been in operation for more than 5 years prior to such effectivity.

No corporation shall be issued any license agreement, license, lease or permit after the effectivity of
this Code, unless it submits such a plan and the same is approved for implementation within the
sixth year of its operation.

The Department Head shall promulgate the necessary rules and regulations to carry out the
provisions of this section, particularly on the determination of the manner of payment, factors
affecting the selling price, establishment of priorities in the purchase of the shares of stock, and the
capability of the deserving employees and laborers. The industries concerned shall extend all
assistance in the promulgation of policies on the matter, such as the submission of all data and
information relative to their operation, personnel management, and asset evaluation.

G. REGULATORY FEES

Section 64. Charges, fees and bonds. The Department Head, upon recommendation of the Director,
shall fix the amount of charges, rental, bonds and fees for the different kinds of utilization,
exploitation, occupation, possession, or activity inside forest lands, the filing and processing of
applications therefor, the issuance and renewal of license agreements, licenses, leases and permits,
and for other services; Provided, That all fees and charges presently being collected under existing
laws and regulations shall continue to be imposed and collected until otherwise provided; Provided,
further, That timber taken and removed from private lands for commercial purposes shall be exempt
from the payment of forest charges.

Section 65. Authority of Department Head to impose other fees. In addition to the fees and charges
imposed under existing laws, rules and regulations, the Department Head is hereby authorized,
upon recommendation of the Director and in consultation with representatives of the industries
affected, to impose other fees for forest protection, management, reforestation, and development,
the proceeds of which shall accrue into a special deposit of the Bureau as its revolving fund for the
aforementioned purposes.

Section 66. Collection and Disbursement. The collection of the charges and fees above-mentioned
shall be the responsibility of the Director or his authorized representative. The Director shall remit his
monthly collection of fees and charges mentioned in Section 64 to the Treasurer of the Philippines
within the first ten (10) days of the succeeding month; Provided, That the proceeds of the collection
of the fees imposed under Section 65 and the special deposit heretofore required of licensees shall
be constituted into a revolving fund for such purposes and be deposited in the Philippine National
Bank, as a special deposit of the Bureau. The Budget Commissioner and the National Treasurer
shall effect the quarterly releases out of the collection accruing to the general fund upon request of
the Director on the basis of a consolidated annual budget of a work program approved by the
Department Head and the President.

In the case of the special deposit revolving fund, withdrawals therefrom shall be effected by the
Department Head on the basis of a consolidated annual budget prepared by the Director of a work
program for the specific purposes mentioned in Section 65.

Section 67. Basis of Assessment. Tree measurement shall be the basis for assessing government
charges and other fees on timber cut and removed from forest lands, alienable or disposable lands,
and the civil reservations; Provided, That until such time as the mechanics of tree measurement
shall have been developed and promulgated in rules and regulations, the present scaling method
provided for in the National Internal Revenue Code shall be used.

The Director may, with the approval of the Department Head, prescribe a new method of
assessment of forest products and collection of charges thereon based upon the result of production
cost and market studies undertaken by the Bureau; Provided, That such charges shall not be lower
than those now imposed.

CHAPTER IV
CRIMINAL OFFENSES AND PENALTIES

Section 68. Cutting, gathering and/or collecting timber or other products without license. Any person
who shall cut, gather, collect, or remove timber or other forest products from any forest land, or
timber from alienable and disposable public lands, or from private lands, without any authority under
a license agreement, lease, license or permit, shall be guilty of qualified theft as defined and
punished under Articles 309 and 310 of the Revised Penal Code; Provided, That in the case of
partnership, association or corporation, the officers who ordered the cutting, gathering or collecting
shall be liable, and if such officers are aliens, they shall, in addition to the penalty, be deported
without further proceedings on the part of the Commission on Immigration and Deportation.

The Court shall further order the confiscation in favor of the government of the timber or forest
products to cut, gathered, collected or removed, and the machinery, equipment, implements and
tools used therein, and the forfeiture of his improvements in the area.

The same penalty plus cancellation of his license agreement, lease, license or permit and perpetual
disqualification from acquiring any such privilege shall be imposed upon any licensee, lessee, or
permittee who cuts timber from the licensed or leased area of another, without prejudice to whatever
civil action the latter may bring against the offender.

Section 69. Unlawful occupation or destruction of forest lands. Any person who enters and occupies
or possesses, or makes kaingin for his own private use or for others any forest land without authority
under a license agreement, lease, license or permit, or in any manner destroys such forest land or
part thereof, or causes any damage to the timber stand and other products and forest growths found
therein, or who assists, aids or abets any other person to do so, or sets a fire, or negligently permits
a fire to be set in any forest land shall, upon conviction, be fined in an amount of not less than five
hundred pesos (P500.00) nor more than twenty thousand pesos (P20,000.00) and imprisoned for
not less than six (6) months nor more than two (2) years for each such offense, and be liable to the
payment of ten (10) times the rental fees and other charges which would have been accrued had the
occupation and use of the land been authorized under a license agreement, lease, license or permit:
Provided, That in the case of an offender found guilty of making kaingin, the penalty shall be
imprisoned for not less than two (2) nor more than (4) years and a fine equal to eight (8) times the
regular forest charges due on the forest products destroyed, without prejudice to the payment of the
full cost of restoration of the occupied area as determined by the Bureau.

The Court shall further order the eviction of the offender from the land and the forfeiture to the
Government of all improvements made and all vehicles, domestic animals and equipment of any
kind used in the commission of the offense. If not suitable for use by the Bureau, said vehicles shall
be sold at public auction, the proceeds of which shall accrue to the Development Fund of the
Bureau.

In case the offender is a government official or employee, he shall, in addition to the above
penalties, be deemed automatically dismissed from office and permanently disqualified from holding
any elective or appointive position.

Section 70. Pasturing Livestock. Imprisonment for not less than six (6) months nor more than two
(2) years and a fine equal to ten (10) times the regular rentals due, in addition to the confiscation of
such livestock and all improvement introduced in the area in favor of the government, shall be
imposed upon any person, who shall, without authority under a lease or permit, graze or cause to
graze livestock in forest lands, grazing lands and alienable and disposable lands which have not as
yet been disposed of in accordance with the Public Land Act; Provided, That in case the offender is
a corporation, partnership or association, the officers and directors thereof shall be liable.

Section 71. Illegal occupation of national parks system and recreation areas and vandalism
therein. Any person who shall, without permit, occupy for any length of time any portion of the
national parks system or shall, in any manner, cut, destroy, damage or remove timber or any species
of vegetation or forest cover and other natural resources found therein, or shall mutilate, deface or
destroy objects of natural beauty or of scenic value within areas in the national parks system, shall
be fined not less than two hundred (P200.00) pesos or more than five hundred (P500.00) pesos
exclusive of the value of the thing damaged; Provided, That if the area requires rehabilitation or
restoration as determined by the Director, the offender shall also be required to restore or
compensate for the restoration of the damage; Provided, Further, That any person who, without
proper permit shall hunt, capture or kill any kind of bird, fish or wild animal life within any area in the
national parks system shall be subject to the same penalty; Provided, Finally, That the Court shall
order eviction of the offender from the land and the forfeiture in favor of the Government of all timber
or any species of vegetation and other natural resources collected or removed, and any construction
or improvement made thereon by the offender. If the offender is an association or corporation, the
president or manager shall be directly responsible and liable for the act of his employees or laborers.

In the event that an official of a city or municipal government is primarily responsible for detecting
and convicting the violator of the provisions of this Section, fifty per centum (50%) of the fine
collected shall accrue to such municipality or city for the development of local parks.

Section 72. Destruction of wildlife resources. Any person violating the provisions of Section 55 of
this Code, or the regulations promulgated thereunder, shall be fined not less than one hundred
(P100.00) pesos for each such violation and in addition shall be denied a permit for a period of three
(3) years from the date of the violation.

Section 73. Survey by unauthorized person. Imprisonment for not less than two (2) nor more than
four (4) years, in addition to the confiscation of the implements used in the violation of this section
including the cancellation of the license, if any, shall be imposed upon any person who shall, without
permit to survey from the Director, enter any forest lands, whether covered by a license agreement,
lease, license, or permit, or not, and conduct or undertake a survey for whatever purpose.
Section 74. Misclassification and survey by government official or employee. Any public officer or
employee who knowingly surveys, classifies, or recommends the release of forest lands as alienable
and disposable lands contrary to the criteria and standards established in this Code, or the rules and
regulations promulgated hereunder, shall, after an appropriate administrative proceeding, be
dismissed from the service with prejudice to re-employment, and upon conviction by a court of
competent jurisdiction, suffer an imprisonment of not less than one (1) year and a fine of not less
than one thousand, (P1,000.00) pesos. The survey, classification or release of forest lands shall be
null and void.

Section 75. Tax declaration on real property. Imprisonment for a period of not less than two (2) nor
more than four (4) years and perpetual disqualification from holding an elective or appointive office,
shall be imposed upon any public officer or employee who shall issue a tax declaration on real
property without a certification from the Director of Forest Development and the Director of Lands or
their duly designated representatives that the area declared for taxation is alienable and disposable
lands, unless the property is titled or has been occupied and possessed by members of the national
cultural minorities prior to July 4, 1955.

Section 76. Coercion and influence. Any person who coerces, influences, abets or persuades the
public officer or employee referred to in the two preceding sections to commit any of the acts
mentioned therein shall suffer imprisonment of not less than one (1) year and pay a fine of five
hundred (P500.00) pesos for every hectare or a fraction thereof so improperly surveyed, classified or
released.

Section 77. Unlawful possession of implements and devices used by forest officers. Imprisonment
for a period of not less than (2) nor more than four (4) years and a fine of not less than one thousand
pesos (P1,000.00), nor more than ten thousand (P10,000.00) pesos in addition to the confiscation of
such implements and devices, and the automatic cancellation of the license agreement, lease,
license or permit, if the offender is a holder thereof, shall be imposed upon any person who shall,
without authority from the Director or his authorized representative, make, manufacture, or has in his
possession any government marking, hatchet or other marking implement, or any marker, poster, or
other devices officially used by officers of the Bureau for the marking or identification of timber or
other products, or any duplicate, counterfeit, or imitation thereof, or make or apply a government
mark on timber or any other forest products by means of any authentic or counterfeit device, or alter,
deface, or remove government marks or signs, from trees, logs, stumps, firewoods or other forest
products, or destroy, deface, remove or disfigure any such mark, sign, poster or warning notices set
by the Bureau to designate the boundaries of cutting areas, municipal or city forest or pasture,
classified timber land, forest reserve, and areas under the national park system or to make any false
mark or imitation of any mark or sign herein indicated; Provided, That if the offender is a corporation,
partnership or association, the officers and directors thereof shall be liable.

Section 78. Payment, collection and remittance of forest charges. Any person who fails to pay the
amount due and payable under the provisions of this Code, the National Internal Revenue Code, or
the rules and regulations promulgated thereunder, shall be liable to the payment of a surcharge of
twenty-five per centum (25%) of the amount due and payable.

Any person who fails or refuses to remit to the proper authorities said forest charges collectible
pursuant to the provisions of this Code or the National Internal Revenue Code, or who delays,
obstructs or prevents the same, or who orders, causes or effects the transfer or diversion of the
funds for purposes other than those specified in this Code, for each such offense shall, upon
conviction, be punished by a fine of not exceeding one hundred thousand pesos (P100,000.00)
and/or imprisonment for a period of not exceeding six (6) years in the discretion of the Court. If the
offender is a government official or employee, he shall, in addition, be dismissed from the service
with prejudice to reinstatement and with disqualification from holding any elective or appointive
office.

If the offender is a corporation, partnership or association, the officers and directors thereof shall be
liable.

Section 79. Sale of wood products. No person shall sell or offer for sale any log, lumber, plywood or
other manufactured wood products in the international or domestic market unless he complies with
grading rules and established or to be established by the Government.

Failure to adhere to the established grading rules and standards, or any act of falsification of the
volume of logs, lumber, or other forest products shall be a sufficient cause for the suspension of the
export, sawmill, or other license or permit authorizing the manufacture or sale of such products for a
period of not less than two (2) years.

A duly accredited representative of the Bureau shall certify to the compliance by the licensees with
grading rules.

Every dealer in lumber and other building material covered by this Code shall issue an invoice for
each sale of such material and such invoice shall state that the kind, standard and size of material
sold to each purchaser in exactly the same as described in the invoice. Any violation of this Section
shall be sufficient ground for the suspension of the dealer's license for a period of not less than two
(2) years and, in addition thereto, the dealer shall be punished for each such offense by a fine of not
less than two hundred pesos (P200.00) or the total value of the invoice, whichever is greater.

Section 80. Arrest; Institution of criminal actions. A forest officer or employee of the Bureau shall
arrest even without warrant any person who has committed or is committing in his presence any of
the offenses defined in this Chapter. He shall also seize and confiscate, in favor of the Government,
the tools and equipment used in committing the offense, and the forest products cut, gathered or
taken by the offender in the process of committing the offense. The arresting forest officer or
employee shall thereafter deliver within six (6) hours from the time of arrest and seizure, the offender
and the confiscated forest products, tools and equipment to, and file the proper complaint with, the
appropriate official designated by law to conduct preliminary investigations and file informations in
court.

If the arrest and seizure are made in the forests, far from the authorities designated by law to
conduct preliminary investigations, the delivery to, and filing of the complaint with, the latter shall be
done within a reasonable time sufficient for ordinary travel from the place of arrest to the place of
delivery. The seized products, materials and equipment shall be immediately disposed of in
accordance with forestry administrative orders promulgated by the Department Head.

The Department Head may deputize any member or unit of the Philippine Constabulary, police
agency, barangay or barrio official, or any qualified person to protect the forest and exercise the
power or authority provided for in the preceding paragraph.

Reports and complaints regarding the commission of any of the offenses defined in this Chapter, not
committed in the presence of any forest officer or employee, or any of the deputized officers or
officials, shall immediately be investigated by the forest officer assigned in the area where the
offense was allegedly committed, who shall thereupon receive the evidence supporting the report or
complaint.
If there is prima facie evidence to support the complaint or report, the investigating forest officer shall
file the necessary complaint with the appropriate official authorized by law to conduct a preliminary
investigation of criminal cases and file an information in Court.

SPECIAL CLAUSES

Section 81. Separability Clause. Should any provision herein be subsequently declared
unconstitutional, the same shall not affect the validity or the legality of the other provisions.

Section 82. Repealing Clause. Presidential Decree Nos. 330, and 389, C.A. No. 452, R.A. No. 4715
and all laws, orders, rules and regulations or any part thereof which are inconsistent herewith are
hereby repealed or amended accordingly.

Section 83. Date of Effectivity. This Code shall take effect immediately upon promulgation.

Done in the City of Manila, this 19th day of May, in the year of Our Lord, nineteen hundred and
seventy-five.

A.M. No. MTJ-93-874 March 14, 1995

AUGUSTUS L. MOMONGAN, Regional Director, Department of Environment and Natural

Resources, Region VIII, Tacloban City, petitioner,
vs.
JUDGE RAFAEL B. OMIPON, 6th Municipal Circuit Trial Court, Hinunangan Silago, Southern
Leyte, respondent.

RESOLUTION

ROMERO, J.:

At around 10:00 o'clock of November 14, 1992, police officers of the Municipality of Hinunangan,
Southern Leyte apprehended Dionisio Golpe while he was driving his truck loaded with illegally cut
lumber. The truck and logs were impounded. A complaint was filed against Basilio Cabig, the alleged
owner of the logs. After conducting the preliminary investigation, respondent Judge Rafael B.
Omipon found that a prima facie case exists against Mr. Cabig but he ordered the release of the
truck inasmuch as the owner/driver, Mr. Golpe, was not charged in the complaint.

Regional Director Augustus L. Momongan of the Department of Environment and Natural Resources
filed the instant complaint against respondent Judge alleging that his order releasing the truck used
in the transport of illegally cut forest products violated Presidential Decree 705, as amended by
Executive Order No. 277, Section 68 and 68-A1and Administrative Order No. 59, Series of
1990.2 Complainant claims that respondent Judge has no authority to order the release of the truck
despite the non-inclusion of Mr. Golpe in the complaint. The truck should have been turned over to
the Community Environment and Natural Resources Office of San Juan, Southern Leyte for
appropriate disposition as the same falls under the administrative jurisdiction of the Department of
Environment and Natural Resources Office.
In his comment, respondent Judge explained that after conducting the preliminary investigation, he
found that Golpe, the owner of the truck, is principally engaged in the hauling of sand and gravel and
the delivery of hollow blocks. On his way home after delivering hollow blocks in Barangay Sto. Niño
II, he met his friend Cabig who requested him to load sliced lumber and deliver the same at Brgy.
Lungsod-daan, Hinundayan to be used for the construction of a barangay high school building. They
were apprehended when the truck had a flat tire. After changing the tire, both the lumber and the
truck were ordered deposited at the police station of Hinunangan.

Respondent Judge observed that Golpe has a lesser participation in the crime of illegal logging and,
being a mere accessory, he might be utilized by the Acting Chief of Police as prosecution witness
against Cabig. More importantly, the fact that the complaint charged only Cabig, respondent Judge,
in the exercise of his sound discretion, ordered the release of the truck owned by Golpe.

The Memorandum of the Office of the Court Administrator recommended that a formal investigation
be conducted. An excerpt from its Memorandum states:

We find the explanation of respondent unsatisfactory. While he is authorized to

conduct preliminary investigation in all cases of violations of P.D. 705, as amended,
otherwise known as the Revised Forestry Code of the Philippines, Sec. 68-A thereof
provides that it is the Department Head or his duly authorized representative who
may order the confiscation and disposition of the forest products illegally cut,
gathered, removed, or possessed or abandoned, and all conveyances used either by
land, water or air in the commission of the offense and to dispose of the same in
accordance with pertinent laws, regulations or policies on the matter.

There may be some facts that are not extant in the records which can only come out
during a formal investigation to better establish clear culpability or exoneration over
the respondent.

In view thereof, and to give respondent an opportunity to clear himself, it is

respectfully recommended that this matter be referred to Acting Executive Judge
Leandro T. Loyao, Jr., RTC, Branch 26, San Juan, Southern Leyte, for investigation,
report and recommendation within sixty days from receipt of the records.3

In the Resolution of November 8, 1993, the Court resolved to refer the case to Acting Executive
Judge Leandro T. Loyao, Jr., RTC, Branch 26, San Juan, Southern Leyte, for investigation, report
and recommendation, within sixty (60) days from receipt of the records.4

During the first two hearing dates, complainant was unable to attend but sent his representatives,
DENR lawyer Constantino Esber and legal assistant Romeo Gulong. Respondent Judge appeared
with his counsel. However, on the third hearing date, respondent Judge failed to appear as he
suffered a stroke and was hospitalized. Thereafter, DENR counsel Esber manifested that their office
has filed a motion for reinvestigation and for the turnover of the jeep to the PNP and subsequently,
to the DENR. He also manifested that the complainant is submitting the administrative matter for
resolution and recommendation without adducing evidence against respondent. Respondent's
counsel did not object to complainant's manifestation. The counsel of both complainant and
respondent jointly agreed to submit the case for appropriate action.

The Investigating Judge's confidential report, in part, states:

In view of this development in the course of an intended investigation this

investigator could not elicit additional facts than are found in the records, whether
 inculpatory or exculpatory. Respondent was given an opportunity to explain the
unfavorable circumstances against him but he was overtaken by a serious illness. So
much was expected from the complainant to supply the facts not extant in the
records, but he lost interest in substantiating his April 1993 report to the Supreme
Court. In fact, he was submitting this administrative matter for resolution without
adducing evidence against respondent.

Except for the 21 January 1994 motion for reinvestigation of DENR counsel Esber
which sought for the inclusion of jeep owner and driver Dionisio Golpe in the criminal
information, there is nothing new that can be added to the facts found by the
Honorable Deputy Court Administrator as reflected in his Memorandum for the
Honorable Chief Justice dated 12 October 1993.

There being no actual investigation conducted, no additional facts could be reported

and consequently, there is no basis for a recommendation on the basis of facts.

This investigator can only recommend appropriate action by the Supreme Court on
the basis of the facts already extant in the records with a prayer for consideration of
respondent plight especially so since on account of this investigation his health has
deteriorated and may affect his efficiency output as a judge. Perhaps, allowing him to
bow out of the service with honor and corresponding benefits.5

During the pendency of this case, respondent Judge filed for disability retirement. His application
was approved but his pension was not released pending the outcome of this case.

We find respondent Judge's order to release the truck owned and driven by Mr. Dionisio Golpe
legally justifiable, hence, he is not subject to any disciplinary sanction.

According to the Revised Penal Code, Art. 45, first paragraph: "[E]very penalty imposed for the
commission of a felony shall carry with it the forfeiture of the proceeds of the crime and the
instrument or tools with which it was committed." However, this cannot be done if such proceeds and
instruments or tools "be the property of a third person not liable for offense." In this case, the truck,
though used to transport the illegally cut lumber, cannot be confiscated and forfeited in the event
accused therein be convicted because the truck owner/driver, Mr. Dionisio Golpe was not indicted.
Hence, there was no justification for respondent Judge not to release the truck.

Complainant is correct in pointing out that based on Pres. Decree No. 705, Sec. 68-A and Adm.
Order No. 59, the DENR Secretary or his duly authorized representative has the power to confiscate
any illegally obtained or gathered forest products and all conveyances used in the commission of the
offense and to dispose of the same in accordance with pertinent laws. However, as complainant
himself likewise pointed out, this power is in relation to the administrative jurisdiction of the DENR.

We do not find that when respondent Judge released the truck after he conducted the preliminary
investigation and satisfied himself that there was no reason to continue keeping the truck, he
violated Pres. Decree No. 705 and Adm. Order No. 59. The release of the truck did not render
nugatory the administrative authority of the DENR Secretary. The confiscation proceedings under
Adm. Order No. 596 is different from the confiscation under the Revised Penal Code, which is an
additional penalty imposed in the event of conviction. Despite the order of release, the truck can be
seized again either by filing a motion for reinvestigation and motion to include the truck owner/driver,
as co-accused, which complainant has done as manifested before the lower court or by enforcing
Adm. Order No. 59. Section 12 thereof categorically states that "[t]he confiscation of the conveyance
under these regulations shall be without prejudice to any criminal action which shall be filed against
the owner thereof or any person who used the conveyance in the commission of the offense."

Petitioner is of the opinion that under the circumstances, respondent Judge should have turned over
the truck to the Community Environment and Natural Resources Office (CENRO) of San Juan,
Southern Leyte for appropriate disposition. No doubt, this would have simplified matters and
prevented the present situation from occurring wherein one government official files a complaint
against another. Under Sec. 4 of Adm. Order No. 59, if the apprehension is not made by DENR field
offices, deputized military personnel and officials of other agencies apprehending illegal logs and
other forest products and their conveyances shall notify the nearest DENR field offices and turn over
said forest products and conveyances for proper action and disposition. A period of about two weeks
lapsed from the time the seizure was made before a complaint was filed. During this period, the
apprehending policemen had enough time to turn over the logs and the truck to the nearest DENR
field office for proper action and disposition since the duty to turn over the truck to the nearest DENR
field office rests on the officials apprehending the illegal logs. There being no mandatory duty on the
part of respondent Judge to turn over the truck, he should not be visited with disciplinary sanction
when he did not refer the same to the DENR field office in San Juan, Southern Leyte.

The Court takes this opportunity to enjoin the National Police, the DENR, the prosecutors, and the
members of the bench to coordinate with each other for a successful campaign against illegal
logging. It behooves all the concerned agencies to seriously strive for the attainment of the
constitutionally-declared policy to "protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of nature"7 in order to preserve our natural
resources for the benefit of the generations still to come.

WHEREFORE, the complaint is DISMISSED.

SO ORDERED.

G.R. No. 158182 June 12, 2008

SESINANDO MERIDA, petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the Decision2 dated 28 June 2002 and the Resolution dated 14 May
2003 of the Court of Appeals. The 28 June 2002 Decision affirmed the conviction of petitioner
Sesinando Merida (petitioner) for violation of Section 68,3 Presidential Decree No. 705 (PD 705),4 as
amended by Executive Order No. 277. The Resolution dated 14 May 2003 denied admission of
petitioner's motion for reconsideration.5

The Facts
Petitioner was charged in the Regional Trial Court of Romblon, Romblon, Branch 81 (trial court) with
violation of Section 68 of PD 705, as amended, for "cut[ting], gather[ing], collect[ing] and remov[ing]"
a lone narra tree inside a private land in Mayod, Ipil, Magdiwang, Romblon (Mayod Property) over
which private complainant Oscar M. Tansiongco (Tansiongco) claims ownership.6

The prosecution evidence showed that on 23 December 1998, Tansiongco learned that petitioner
cut a narra tree in the Mayod Property. Tansiongco reported the matter to Florencio Royo (Royo),
the punong barangay of Ipil. On 24 December 1998,7 Royo summoned petitioner to a meeting with
Tansiongco. When confronted during the meeting about the felled narra tree, petitioner admitted
cutting the tree but claimed that he did so with the permission of one Vicar Calix (Calix) who,
according to petitioner, bought the Mayod Property from Tansiongco in October 1987 under a pacto
de retro sale. Petitioner showed to Royo Calix's written authorization signed by Calix's wife.8

On 11 January 1999, Tansiongco reported the tree-cutting to the Department of Environment and
Natural Resources (DENR) forester Thelmo S. Hernandez (Hernandez) in Sibuyan, Romblon. When
Hernandez confronted petitioner about the felled tree, petitioner reiterated his earlier claim to Royo
that he cut the tree with Calix's permission. Hernandez ordered petitioner not to convert the felled
tree trunk into lumber.

On 26 January 1999, Tansiongco informed Hernandez that petitioner had converted the narra trunk
into lumber. Hernandez, with other DENR employees and enforcement officers, went to the Mayod
Property and saw that the narra tree had been cut into six smaller pieces of lumber. Hernandez took
custody of the lumber,9 deposited them for safekeeping with Royo, and issued an apprehension
receipt to petitioner. A larger portion of the felled tree remained at the Mayod Property. The DENR
subsequently conducted an investigation on the matter.10

Tansiongco filed a complaint with the Office of the Provincial Prosecutor of Romblon (Provincial
Prosecutor) charging petitioner with violation of Section 68 of PD 705, as amended. During the
preliminary investigation, petitioner submitted a counter-affidavit reiterating his claim that he cut the
narra tree with Calix's permission. The Provincial Prosecutor11 found probable cause to indict
petitioner and filed the Information with the trial court (docketed as Criminal Case No. 2207).

During the trial, the prosecution presented six witnesses including Tansiongco, Royo, and
Hernandez who testified on the events leading to the discovery of and investigation on the tree-
cutting. Petitioner testified as the lone defense witness and claimed, for the first time, that he had no
part in the tree-cutting.

The Ruling of the Trial Court

In its Decision dated 24 November 2000, the trial court found petitioner guilty as charged, sentenced
him to fourteen (14) years, eight (8) months and one (1) day to twenty (20) years of reclusion
temporal and ordered the seizedlumber forfeited in Tansiongco's favor.12 The trial court dismissed
petitioner's defense of denial in view of his repeated extrajudicial admissions that he cut the narra
tree in the Mayod Property with Calix's permission. With this finding and petitioner's lack of DENR
permit to cut the tree, the trial court held petitioner liable for violation of Section 68 of PD 705, as
amended.

Petitioner appealed to the Court of Appeals reiterating his defense of denial. Petitioner also
contended that (1) the trial court did not acquire jurisdiction over the case because it was based on a
complaint filed by Tansiongco and not by a forest officer as provided under Section 80 of PD 705
and (2) the penalty imposed by the trial court is excessive.
 The Ruling of the Court of Appeals

In its Decision dated 28 June 2002, the Court of Appeals affirmed the trial court's ruling but ordered
the seized lumber confiscated in the government's favor.13 The Court of Appeals sustained the trial
court's finding that petitioner is bound by his extrajudicial admissions of cutting the narra tree in the
Mayod Property without any DENR permit. The Court of Appeals also found nothing irregular in the
filing of the complaint by Tansiongco instead of a DENR forest officer considering that the case
underwent preliminary investigation by the proper officer who filed the Information with the trial court.

On the imposable penalty, the Court of Appeals, in the dispositive portion of its ruling, sentenced
petitioner to 14 years, 8 months and 1 day to 17 years of reclusion temporal. However, in the body of
its ruling, the Court of Appeals held that "the penalty to be imposed on [petitioner] should be (14)
years, eight (8) months and one (1) day to twenty (20) years of reclusion temporal,"14 the same
penalty the trial court imposed.

Petitioner sought reconsideration but the Court of Appeals, in its Resolution dated 14 May 2003, did
not admit his motion for having been filed late.15

Hence, this petition. Petitioner raises the following issues:

I. WHETHER x x x SECTION 68 OF P.D. 705 AS AMENDED PROHIBITING THE CUTTING,

GATHERING, COLLECTING AND REMOVING TIMBER OR OTHER FOREST PRODUCTS
FROM ANY FOREST LAND APPLIES TO PETITIONER.

II. WHETHER x x x POSSESSION OF THE NARRA TREE CUT IN PRIVATE LAND

CONTESTED BY VICAR CALIX AND PRIVATE-COMPLAINANT OSCAR TANSIONGCO IS
COVERED BY SECTION 80 OF P.D. 705 AS AMENDED.

III. WHETHER PRIVATE-COMPLAINANT CAN INITIATE THE CHARGE EVEN WITHOUT

THE STANDING AUTHORITY COMING FROM THE INVESTIGATING FOREST OFFICER
OF THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES AS
MANDATED BY SECTION 80 OF P.D. 705 AS AMENDED.

[IV.] WHETHER x x x THE TRIAL COURT ERRED IN TAKING COGNIZANCE OF THE

CASE FILED BY PRIVATE-COMPLAINANT BECAUSE IT WAS NOT THE INVESTIGATING
OFFICER AS REQUIRED BY SECTION 80 OF P.D. 705 AS AMENDED WHO MUST BE
THE ONE TO INSTITUTE THE FILING OF THE SAME.16

In its Comment to the petition, the Office of the Solicitor General (OSG) countered that (1) the trial
court acquired jurisdiction over the case even though Tansiongco, and not a DENR forest officer,
filed the complaint against petitioner and (2) petitioner is liable for violation of Section 68 of PD 705,
as amended.

The Issues

The petition raises the following issues:17

1) Whether the trial court acquired jurisdiction over Criminal Case No. 2207 even though it
was based on a complaint filed by Tansiongco and not by a DENR forest officer; and

2) Whether petitioner is liable for violation of Section 68 of PD 705, as amended.

 The Ruling of the Court

The petition has no merit.

The Trial Court Acquired Jurisdiction Over

Criminal Case No. 2207

We sustain the OSG's claim that the trial court acquired jurisdiction over Criminal Case No. 2207.
The Revised Rules of Criminal Procedure (Revised Rules) list the cases which must be initiated by a
complaint filed by specified individuals,18 non-compliance of which ousts the trial court of jurisdiction
from trying such cases.19 However, these cases concern only defamation and other crimes against
chastity20 and not to cases concerning Section 68 of PD 705, as amended. Further, Section 80 of PD
705 does not prohibit an interested person from filing a complaint before any qualified officer for
violation of Section 68 of PD 705, as amended. Section 80 of PD 705 provides in relevant parts:

SECTION 80. Arrest; Institution of criminal actions. - x x x x

Reports and complaints regarding the commission of any of the offenses defined in
this Chapter, not committed in the presence of any forest officer or employee, or any of the
deputized officers or officials, shall immediately be investigated by the forest
officer assigned in the area where the offense was allegedly committed, who shall
thereupon receive the evidence supporting the report or complaint.

If there is prima facie evidence to support the complaint or report, the investigating
forest officer shall file the necessary complaint with the appropriate official authorized
by law to conduct a preliminary investigation of criminal cases and file an information
in Court. (Emphasis supplied)

We held in People v. CFI of Quezon21 that the phrase "reports and complaints" in Section 80 refers
to "reports and complaints as might be brought to the forest officer assigned to the area by other
forest officers or employees of the Bureau of Forest Development or any of the deputized
officers or officials, for violations of forest laws not committed in their presence."22

Here, it was not "forest officers or employees of the Bureau of Forest Development or any of the
deputized officers or officials" who reported to Hernandez the tree-cutting in the Mayod Property but
Tansiongco, a private citizen who claims ownership over the Mayod Property. Thus, Hernandez
cannot be faulted for not conducting an investigation to determine "if there is prima facie evidence to
support the complaint or report."23 At any rate, Tansiongco was not precluded, either under Section
80 of PD 705 or the Revised Rules, from filing a complaint before the Provincial Prosecutor for
petitioner's alleged violation of Section 68 of PD 705, as amended. For its part, the trial court
correctly took cognizance of Criminal Case No. 2207 as the case falls within its exclusive original
jurisdiction.24

Petitioner is Liable for Cutting Timber in Private

Property Without Permit

Section 68, as amended, one of the 12 acts25 penalized under PD 705, provides:

SECTION 68. Cutting, Gathering and/or Collecting Timber, or Other Forest Products Without
License. - Any person who shall cut, gather, collect, remove timber or other forest products
from any forest land, or timber from alienable or disposable public land, or from private
 land, without any authority, or possess timber or other forest products without the legal
documents as required under existing forest laws and regulations, shall be punished with the
penalties imposed under Articles 309 and 310 of the Revised Penal Code: Provided, That in
the case of partnerships, associations, or corporations, the officers who ordered the cutting,
gathering, collection or possession shall be liable, and if such officers are aliens, they shall,
in addition to the penalty, be deported without further proceedings on the part of the
Commission on Immigration and Deportation.

The court shall further order the confiscation in favor of the government of the timber or any
forest products cut, gathered, collected, removed, or possessed as well as the machinery,
equipment, implements and tools illegally used in the area where the timber or forest
products are found. (Emphasis supplied)

Section 68 penalizes three categories of acts: (1) the cutting, gathering, collecting, or removing of
timber or other forest products from any forest land without any authority; (2) the cutting, gathering,
collecting, or removing of timber from alienable or disposable public land, or from private land
without any authority;26 and (3) the possession of timber or other forest products without the legal
documents as required under existing forest laws and regulations.27 Petitioner stands charged of
having "cut, gathered, collected and removed timber or other forest products from a private
land28 without x x x the necessary permit x x x " thus his liablity, if ever, should be limited only for
"cut[ting], gather[ing], collect[ing] and remov[ing] timber," under the second category. Further, the
prosecution evidence showed that petitioner did not perform any acts of "gathering, collecting, or
removing" but only the act of "cutting" a lone narra tree. Hence, this case hinges on the question of
whether petitioner "cut x x xtimber" in the Mayod Property without a DENR permit.29

We answer in the affirmative and thus affirm the lower courts' rulings.

On the question of whether petitioner cut a narra tree in the Mayod Property without a DENR permit,
petitioner adopted conflicting positions. Before his trial, petitioner consistently represented to the
authorities that he cut a narra tree in the Mayod Property and that he did so only with Calix's
permission. However, when he testified, petitioner denied cutting the tree in question. We sustain the
lower courts' rulings that petitioner's extrajudicial admissions bind him.30 Petitioner does not explain
why Royo and Hernandez, public officials who testified under oath in their official capacities, would
lie on the stand to implicate petitioner in a serious criminal offense, not to mention that the acts of
these public officers enjoy the presumption of regularity. Further, petitioner does not deny presenting
Calix's authorization to Royo and Hernandez as his basis for cutting the narra tree in the Mayod
Property. Petitioner has no use of Calix's authorization if, as he claimed during the trial, he did not
cut any tree in the Mayod Property.

We further hold that the lone narre tree petitioner cut from the Mayod Property constitutes "timber"
under Section 68 of PD 705, as amended. PD 705 does not define "timber," only "forest product"
(which circuitously includes "timber.")31 Does the narra tree in question constitute "timber" under
Section 68? The closest this Court came to defining the term "timber" in Section 68 was to provide
that "timber," includes "lumber" or "processed log."32 In other jurisdictions, timber is determined by
compliance with specified dimensions33 or certain "stand age" or "rotation age."34 In Mustang
Lumber, Inc. v. Court of Appeals,35 this Court was faced with a similar task of having to define a term
in Section 68 of PD 705 - "lumber" - to determine whether possession of lumber is punishable under
that provision. In ruling in the affirmative, we held that "lumber" should be taken in its ordinary or
common usage meaning to refer to "processed log or timber," thus:

The Revised Forestry Code contains no definition of either timber or lumber. While the
former is included in forest products as defined in paragraph (q) of Section 3, the latter is
 found in paragraph (aa) of the same section in the definition of "Processing plant," which
reads:

(aa) Processing plant is any mechanical set-up, machine or combination of machine

used for the processing of logs and other forest raw materials into lumber, veneer,
plywood, wallboard, blackboard, paper board, pulp, paper or other finished wood
products.

This simply means that lumber is a processed log or processed forest raw material. Clearly,
the Code uses the term lumber in its ordinary or common usage. In the 1993 copyright
edition of Webster's Third New International Dictionary, lumber is defined, inter alia, as
"timber or logs after being prepared for the market." Simply put, lumber is a processed log or
timber.

It is settled that in the absence of legislative intent to the contrary, words and phrases
used in a statute should be given their plain, ordinary, and common usage meaning.
And in so far as possession of timber without the required legal documents is concerned,
Section 68 of PD No. 705, as amended, makes no distinction between raw and procesed
timber. Neither should we.36 x x x x (Italicization in the original; boldfacing supplied)

We see no reason why, as in Mustang, the term "timber" under Section 68 cannot be taken in its
common acceptation as referring to "wood used for or suitable for building or for carpentry or
joinery."37 Indeed, tree saplings or tiny tree stems that are too small for use as posts, panelling,
beams, tables, or chairs cannot be considered timber.38

Here, petitioner was charged with having felled a narra tree and converted the same into "several
pieces of sawn lumber, about three (3) pcs. 2x16x6 and three (3) pcs. 2x18x7 x x x consisting of 111
board feet x x x." These measurements were indicated in the apprehension receipt Hernandez
issued to petitioner on 26 January 1999 which the prosecution introduced in evidence.39 Further,
Hernandez testified that the larger portion of the felled log left in the Mayod Property "measured 76
something centimeters [at the big end] while the smaller end measured 65 centimeters and the
length was 2.8 meters."40 Undoubtedly, the narra tree petitioner felled and converted to lumber was
"timber" fit "for building or for carpentry or joinery" and thus falls under the ambit of Section 68 of PD
705, as amended.

The Penalty Imposable on Petitioner

Violation of Section 68 of PD 705, as amended, is punishable as Qualified Theft under Article 310 in
relation to Article 309 of the Revised Penal Code (RPC), thus:

Art. 310. Qualified theft. - The crime of qualified theft shall be punished by the penalties next
higher by two degrees than those respectively specified in the next preceding article x x x.

Art. 309. Penalties. - Any person guilty of theft shall be punished by:

1. The penalty of prisión mayor in its minimum and medium periods, if the value of
the thing stolen is more than 12,000 pesos but does not exceed 22,000 pesos; but if
the value of the thing stolen exceeds the latter amount, the penalty shall be the
maximum period of the one prescribed in this paragraph, and one year for each
additional ten thousand pesos, but the total of the penalty which may be imposed
shall not exceed twenty years. In such cases, and in connection with the accessory
penalties which may be imposed and for the purpose of the other provisions of this
 Code, the penalty shall be termed prisión mayor or reclusión temporal, as the case
may be.

2. The penalty of prisión correccional in its medium and maximum periods, if the
value of the thing stolen is more than 6,000 pesos but does not exceed 12,000
pesos.

3. The penalty of prisión correccional in its minimum and medium periods, if the
value of the property stolen is more than 200 pesos but does not exceed 6,000
pesos.

4. Arresto mayor in its medium period to prisión correccional in its minimum period, if
the value of the property stolen is over 50 pesos but does not exceed 200 pesos.

5. Arresto mayor to its full extent, if such value is over 5 pesos but does not exceed
50 pesos.

6. Arresto mayor in its minimum and medium periods, if such value does not exceed
5 pesos.

7. Arresto menor or a fine not exceeding 200 pesos, if the theft is committed under
the circumstances enumerated in paragraph 3 of the next preceding article and the
value of the thing stolen does not exceed 5 pesos. If such value exceeds said
amount, the provisions of any of the five preceding subdivisions shall be made
applicable.

8. Arresto menor in its minimum period or a fine not exceeding 50 pesos, when the
value of the thing stolen is not over 5 pesos, and the offender shall have acted under
the impulse of hunger, poverty, or the difficulty of earning a livelihood for the support
of himself or his family.

The Information filed against petitioner alleged that the six pieces of lumber measuring 111 board
feet were valued at P3,330. However, if the value of the log left at the Mayod Property is included,
the amount increases to P20,930.40. To prove this allegation, the prosecution relied on Hernandez's
testimony that these amounts, as stated in the apprehension receipt he issued, are his "estimates"
based on "prevailing local price."41

This evidence does not suffice. To prove the amount of the property taken for fixing the penalty
imposable against the accused under Article 309 of the RPC, the prosecution must present more
than a mere uncorroborated "estimate" of such fact.42 In the absence of independent and reliable
corroboration of such estimate, courts may either apply the minimum penalty under Article 309 or fix
the value of the property taken based on the attendant circumstances of the case.43 In People v.
Dator44 where, as here, the accused was charged with violation of Section 68 of PD 705, as
amended, for possession of lumber without permit, the prosecution's evidence for the lumber's value
consisted of an estimate made by the apprehending authorities whose apparent lack of
corroboration was compounded by the fact that the transmittal letter for the estimate was not
presented in evidence. Accordingly, we imposed on the accused the minimum penalty under Article
309(6)45 of the RPC.46
Applying Dator in relation to Article 310 of the RPC and taking into account the Indeterminate
Sentence Law, we find it proper to impose on petitioner, under the circumstances obtaining here, the
penalty of four (4) months and one (1) day of arresto mayor, as minimum, to three (3) years, four (4)
months and twenty-one (21) days of prision correcional, as maximum.

WHEREFORE, we AFFIRM the Decision dated 28 June 2002 and the Resolution dated 14 May
2003 of the Court of Appeals with the modification that petitioner Sesinando Merida is sentenced to
four (4) months and one (1) day of arresto mayor, as minimum, to three (3) years, four (4) months
and twenty-one (21) days of prision correcional, as maximum.

SO ORDERED.

G.R. No. 104988 June 18, 1996

MUSTANG LUMBER, INC., petitioner,

vs.
HON. COURT OF APPEALS, HON. FULGENCIO S. FACTORAN, JR., Secretary, Department of
Environment and Natural Resources (DENR), and ATTY. VINCENT A. ROBLES, Chief, Special
Actions and Investigations Division, DENR, respondents.

G.R. No. 106424 June 18, 1996

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HON. TERESITA DIZON-CAPULONG, in her capacity as the Presiding Judge, Regional Trial
Court, National Capital Judicial Region, Branch 172, Valenzuela, Metro Manila, and RI CHUY
PO, respondents.

G.R. No. 123784 June 18, 1996

MUSTANG LUMBER, INC., petitioner,

vs.
HON. COURT OF APPEALS, ATTY. VINCENT A. ROBLES, Chief, Special Actions and
Investigation Division, Department of Environment and Natural Resources (DENR), ATTY.
NESTOR V. GAPUSAN, TIRSO P. PARIAN, JR., and FELIPE H. CALLORINA, JR., respondents.

DAVIDE, JR., J.:p

The first and third case, G.R. No. 104988 and G.R. No. 123784, were originally assigned to the Second and Third Divisions of the Court,
respectively. They were subsequently consolidated with the second, a case of the Court en banc.

Petitioner, a domestic corporation with principal office at Nos. 1350-1352 Juan Luna Street, Tondo,
Manila, and with a Lumberyard at Fortune Street, Fortune Village, Paseo de Blas, Valenzuela, Metro
Manila, was duly registered as a lumber dealer with the Bureau of Forest Development (BFD) under
Certificate of Registration No. NRD-4-092590-0469. Its permit as such was to expire on 25
September 1990.

Respondent Secretary Fulgencio S. Factoran, Jr., and respondent Atty. Vincent A. Robles were,
during all the time material to these cases, the Secretary of the Department of Environment and
Natural Resources (DENR) and the Chief of the Special Actions and Investigation Division (SAID) of
the DENR, respectively.

The material operative facts are as follows:

On 1 April 1990, acting on an information that a huge stockpile of narra flitches, shorts, and slabs
were seen inside the lumberyard of the petitioner in Valenzuela, Metro Manila, the SAID organized a
team of foresters and policemen and sent it to conduct surveillance at the said lumberyard. In the
course thereof, the team members saw coming out from the lumberyard the petitioner's truck, with
Plate No. CCK-322, loaded with lauan and almaciga lumber of assorted sizes and dimensions. Since
the driver could not produce the required invoices and transport documents, the team seized the
truck together with its cargo and impounded them at the DENR compound at Visayas Avenue,
Quezon City.1 The team was not able to gain entry into the premises because of the refusal of the
owner.2

On 3 April 1990, the team was able to secure a search warrant from Executive Judge Adriano R.
Osorio of the Regional Trial Court (RTC) of Valenzuela, Metro Manila. By virtue thereof, the team
seized on that date from the petitioner's lumberyard four truckloads of narra shorts, trimmings, and
slabs; a negligible number of narra lumber; and approximately 200,000 board feet of lumber and
shorts of various species including almaciga and supa.3

On 4 April 1990, the team returned to the premises of the petitioner's lumberyard in Valenzuela and
placed under administrative seizure the remaining stockpile of almaciga, supa, and lauan lumber
with a total volume of 311,000 board feet because the petitioner failed to produce upon demand the
corresponding certificate of lumber origin, auxiliary invoices, tally sheets, and delivery receipts from
the source of the invoices covering the lumber to prove the legitimacy of their source and origin.4

Parenthetically, it may be stated that under an administrative seizure the owner retains the physical
possession of the seized articles. Only an inventory of the articles is taken and signed by the owner
or his representative. The owner is prohibited from disposing them until further orders.5

On 10 April 1990, counsel for the petitioner sent a letter to Robles requesting an extension of fifteen
days from 14 April 1990 to produce the required documents covering the seized articles because
some of them, particularly the certificate of lumber origin, were allegedly in the Province of Quirino
Robles denied the motion on the ground that the documents being required from the petitioner must
accompany the lumber or forest products placed under seizure.6

On 11 April 1990, Robles submitted his memorandum-report recommending to Secretary Factoran

the following:

1. Suspension and subsequent cancellation of the lumber Dealer's Permit of Mustang

Lumber, Inc. for operating an unregistered lumberyard and resaw mill and
possession of Almaciga Lumber (a banned specie) without the required documents;

2. Confiscation of the lumber seized at the Mustang Lumberyard including the truck
with Plate No. CCK-322 and the lumber loaded herein [sic] now at the DENR
compound in the event its owner fails to submit documents showing legitimacy of the
source of said lumber within ten days from date of seizure;

3. Filing of criminal charges against Mr. Ri Chuy Po, owner of Mustang Lumber Inc.
and Mr. Ruiz, or if the circumstances warrant for illegal possession of narra and
almaciga lumber and shorts if and when recommendation no. 2 pushes through;
 4. Confiscation of Trucks with Plate No. CCS-639 and CDV. 458 as well as the
lumber loaded therein for transport lumber using "recycled" documents.7

On 23 April 1990, Secretary Factoran issued an order suspending immediately the petitioner's
lumber-dealer's permit No. NRD-4-092590-0469 and directing the petitioner to explain in writing
within fifteen days why its lumber-dealer's permit should not be cancelled.

On the same date, counsel for the petitioner sent another letter to Robles informing the latter that the
petitioner had already secured the required documents and was ready to submit them. None,
however, was submitted.8

On 3 May 1990, Secretary Factoran issued another order wherein, after reciting the events which
took place on 1 April and 3 April 1990, he ordered "CONFISCATED in favor of the government to be
disposed of in accordance with law" the approximately 311,000 board feet of lauan, supa, and
almaciga lumber, shorts, and sticks found inside the petitioner's lumberyard.9

On 11 July 1990, the petitioner filed with the RTC of Manila a petition for certiorari and prohibition
with a prayer for a restraining order or preliminary injunction against Secretary Fulgencio S.
Factoran, Jr., and Atty. Vincent A. Robles. The case (hereinafter, the FIRST CIVIL CASE) was
docketed as Civil Case No. 90-53648 and assigned to Branch 35 of the said court. The petitioner
questioned therein (a) the seizure on 1 April 1990, without any search and seizure order issued by a
judge, of its truck with Plate No. CCK-322 and its cargo of assorted lumber consisting of apitong,
tanguile, and lauan of different sizes and dimensions with a total value of P38,000.00; and (b) the
orders of Secretary Factoran of 23 April 1990 for lack of prior notice and hearing and of 3 May 1990
for violation of Section 2, Article III of the Constitution.

On 17 September 1990, in response to reports that violations of P.D. No. 705 (The Revised Forestry
Code of the Philippines), as amended, were committed and acting upon instruction of Robles and
under Special Order No. 897, series of 1990, a team of DENR agents went to the business premises
of the petitioner located at No. 1352 Juan Luna Street, Tondo, Manila. The team caught the
petitioner operating as a lumber dealer although its lumber-dealer's permit had already been
suspended or 23 April 1990. Since the gate of the petitioner's lumberyard was open, the team went
inside and saw an owner-type jeep with a trailer loaded with lumber. Upon investigation, the team
was informed that the lumber loaded on the trailer was to be delivered to the petitioner's customer. It
also came upon the sales invoice covering the transaction. The members of the team then
introduced themselves to the caretaker, one Ms. Chua, who turned out to be the wife of the
petitioner's president and general manager, Mr. Ri Chuy Po, who was then out of town. The team's
photographer was able to take photographs of the stockpiles of lumber including newly cut ones,
fresh dust around sawing or cutting machineries and equipment, and the transport vehicles loaded
with lumber. The team thereupon effected a constructive seizure of approximately 20,000 board feet
of lauan lumber in assorted sizes stockpiled in the premises by issuing a receipt
therefor. 10

As a consequence of this 17 September 1990 incident, the petitioner filed with the RTC of Manila a
petition for certiorari and prohibition. The case (hereinafter, the SECOND CIVIL CASE) was
docketed as Civil Case No. 90-54610 and assigned to Branch 24 of the said court.

In the meantime, Robles filed with the Department of Justice (DOJ) a complaint against the
petitioner's president and general manager, Ri Chuy Po, for violation of Section 68 of P.D. No. 705,
as amended by E.O. No. 277. After appropriate preliminary investigation, the investigating
prosecutor, Claro Arellano, handed down a resolution 11whose dispositive portion reads:
 WHEREFORE, premises considered, it is hereby recommended that an information
be filed against respondent Ri Chuy Po for illegal possession of approximately
200,000 bd. ft. of lumber consisting of almaciga and supa and for illegal shipment of
almaciga and lauan in violation of Sec. 68 of PD 705 as amended by E.O. 277,
series of 1987.

It is further recommended that the 30,000 bd. ft. of narra shorts, trimmings and slabs
covered by legal documents be released to the rightful owner, Malupa. 12

This resolution was approved by Undersecretary of Justice Silvestre H. Bello III, who served as
Chairman of the Task Force on Illegal Logging." 13

On the basis of that resolution, an information was filed on 5 June 1991 by the DOJ with Branch 172
of the RTC of Valenzuela, charging Ri Chuy Po with the violation of Section 58 of P.D. No. 705, as
amended, which was docketed as Criminal Case No. 324-V-91 (hereinafter, the CRIMINAL CASE).
The accusatory portion of the information reads as follows:

That on or about the 3rd day of April 1990, or prior to or subsequent thereto, within
the premises and vicinity of Mustang Lumber, Inc. in Fortune Village, Valenzuela,
Metro Manila, and within the jurisdiction of this Honorable Court, the above-named
accused, did then and there wilfully, feloniously and unlawfully have in his
possession truckloads of almaciga and lauan and approximately 200,000 bd. ft. of
lumber and shorts of various species including almaciga and supa, without the legal
documents as required under existing forest laws and
regulations. 14

On 7 June 1991, Branch 35 of the RTC of Manila rendered its decision 15 in the FIRST CIVIL CASE,
the dispositive portion of which reads:

WHEREFORE, judgment in this case is rendered as follows:

1. The Order of Respondent Secretary of the DENR, the Honorable Fulgencio S.

Factoran, Jr., dated 3 May 1990 ordering the confiscation in favor of the Government
the approximately 311,000 board feet of Lauan, supa, end almaciga Lumber, shorts
and sticks, found inside and seized from the Lumberyard of the petitioner at Fortune
Drive, Fortune Village, Paseo de Blas, Valenzuela, Metro Manila, on April 4, 1990
(Exhibit 10), is hereby set aside and vacated, and instead the respondents are
required to report and bring to the Hon. Adriano Osorio, Executive Judge, Regional
Trial Court, NCR, Valenzuela, Metro Manila, the said 311,000 board feet of Lauan,
supa and almaciga Lumber, shorts and sticks, to be dealt with as directed by Law;

2. The respondents are required to initiate and prosecute the appropriate action
before the proper court regarding the Lauan and almaciga lumber of assorted sizes
and dimensions Loaded in petitioner's truck bearing Plate No. CCK-322 which were
seized on April 1, 1990;

3. The Writ of Preliminary Injunction issued by the Court on August 2, 1990 shall be
rendered functus oficio upon compliance by the respondents with paragraphs 1 and
2 of this judgment;.

4. Action on the prayer of the petitioner that the Lauan, supa and almaciga lumber,
shorts and sticks mentioned above in paragraphs 1 and 2 of this judgment be
 returned to said petitioner is withheld in this case until after the proper court has
taken cognizance and determined how those Lumber, shorts and sticks should be
disposed of; and

5. The petitioner is ordered to pay the costs.

SO ORDERED.

In resolving the said case, the trial court held that the warrantless search and seizure on 1 April 1990
of the petitioner's truck, which was moving out from the petitioner's lumberyard in Valenzuela, Metro
Manila, loaded with large volumes of lumber without covering document showing the legitimacy of its
source or origin did not offend the constitutional mandate that search and seizure must be supported
by a valid warrant. The situation fell under one of the settled and accepted exceptions where
warrantless search and seizure is justified, viz., a search of a moving vehicle. 16 As to the seizure of a
large volume of almaciga, supa, and lauan lumber and shorts effected on 4 April 1990, the trial court
ruled that the said seizure was a continuation of that made the previous day and was still pursuant to
or by virtue of the search warrant issued by Executive Judge Osorio whose validity the petitioner did
not even question. 17 And, although the search warrant did not specifically mention almaciga, supa,
and lauan lumber and shorts, their seizure was valid because it is settled that the executing officer is
not required to ignore contrabands observed during the conduct of the
search.18

The trial court, however, set aside Secretary Factoran's order of 3 May 1990 ordering the
confiscation of the seized articles in favor of the Government for the reason that since the articles
were seized pursuant to the search warrant issued by Executive Judge Osorio they should have
been returned to him in compliance with the directive in the warrant.

As to the propriety of the 23 April 1990 order of Secretary Factoran, the trial court ruled that the
same had been rendered moot and academic by the expiration of the petitioner's lumber dealer's
permit on 25 September 1990, a fact the petitioner admitted in its memorandum.

The petitioner forthwith appealed from the decision in the FIRST CIVIL CASE to the Court of
Appeals, which docketed the appeal as CA-G.R. SP No. 25510.

On 7 July 1991, accused Ri Chuy Po filed in the CRIMINAL CASE a Motion to Quash and/or to
Suspend Proceedings based on the following grounds: (a) the information does not charge an
offense, for possession of lumber, as opposed to timber, is not penalized in Section 68 of P.D. No.
705, as amended, and even grantingarguendo that lumber falls within the purview of the said
section, the same may not be used in evidence against him for they were taken by virtue of an illegal
seizure; and (b) Civil Case No. 90-53648 of Branch 35 of the RTC of Manila, the FIRST CIVIL
CASE, then pending before the Court of Appeals, which involves the legality of the seizure, raises a
prejudicial question. 19

The prosecution opposed the motion alleging that lumber is included in Section 68 of P.D. No. 705,
as amended, and possession thereof without the required legal documents is penalized therein. It
referred to Section 3.2 of DENR Administrative Order No. 19, series of 1989, for the definitions
of timber and lumber, and then argued that exclusion of lumber from Section 68 would defeat the
very purpose of the law, i.e., to minimize, if not halt, illegal logging that has resulted in the rapid
denudation of our forest resources. 20
In her order of 16 August 1991 in the CRIMINAL CASE, 21 respondent Judge Teresita Dizon-
Capulong granted the motion to quash and dismissed the case on the ground that "possession of
lumber without the legal documents required by forest laws and regulations is not a crime. 22

Its motion for reconsideration having been denied in the order of 18 October 1991, 23 the People filed
a petition for certiorari with this Court in G.R. No. 106424, wherein it contends that the respondent
Judge acted with grave abuse of discretion in granting the motion to quash and in dismissing the
case.

On 29 November 1991, the Court of Appeals rendered a decision 24 in CA-G.R. SP

No. 25510 dismissing for lack of merit the petitioner's appeal from the decision in the FIRST CIVIL
CASE and affirming the trial court's rulings on the issues raised. As to the claim that the truck was
not carrying contraband articles since there is no law punishing the possession of lumber, and
that lumber is not timber whose possession without the required legal documents is unlawful under
P.D. No. 705, as amended, the Court of Appeals held:

This undue emphasis on lumber or the commercial nature of the forest product
involved has always been foisted by those who claim to be engaged in the legitimate
business of lumber dealership. But what is important to consider is that when
appellant was required to present the valid documents showing its acquisition and
lawful possession of the lumber in question, it failed to present any despite the period
of extension granted to it. 25

The petitioner's motion to reconsider the said decision was denied by the Court of Appeals in its
resolution of 3 March 1992. 26 Hence, the petitioner came to this Court by way of a petition for review
on certiorari in G.R. No. 104988, which was filed on 2 May 1992. 27

On 24 September 1992, Branch 24 of the RTC of Manila handed down a decision in the SECOND
CIVIL CASE dismissing the petition for certiorari and prohibition because (a) the petitioner did not
exhaust administrative remedies; (b) when the seizure was made on 17 September 1990 the
petitioner could not lawfully sell lumber, as its license was still under suspension; (c) the seizure was
valid under Section 68-A of P.D. No. 705, as amended; and (d) the seizure was justified as a
warrantless search and seizure under Section 80 of P.D. No. 705, as amended.

The petitioner appealed from the decision to the Court of Appeals, which docketed the appeal
as CA-G.R. SP No.33778.

In its decision 28 of 31 July 1995, the Court of Appeals dismissed the petitioner's appeal in CA-G.R.
SP No. 33778 for lack of merit and sustained the grounds relied upon by the trial court in dismissing
the SECOND CIVIL CASE. Relying on the definition of "lumber" by Webster, viz., "timber or logs,
especially after being prepared for the market," and by the Random House Dictionary of the English
Language, viz., "wood, esp. when suitable or adapted for various building purposes," the respondent
Court held that since wood is included in the definition of forest product in Section 3(q) of P.D. No.
705, as amended, lumber is necessarily included in Section 68 under the term forest product.

The Court of Appeals further emphasized that a forest officer or employee can seize the forest
product involved in a violation of Section 68 of P.D. No. 705 pursuant to Section 80 thereof, as
amended by P.D. No. 1775, which provides in part as follows:

Sec. 80. Arrest, Institution of Criminal Actions. -- A forest officer or employee of the
Bureau or any personnel of the Philippine Constabulary/Integrated National Police
shall arrest even without warrant any person who has committed or is committing in
 his presence any of the offenses defined in this chapter. He shall also seize and
confiscate, in favor of the Government, the tools and equipment used in committing
the offense, or the forest products cut, gathered or taken by the offender in the
process of committing the offense.

Among the offenses punished in the chapter referred to in said Section 80 are the cutting, gathering,
collection, or removal of timber or other forest products or possession of timber or other forest
products without the required legal documents.

Its motion to reconsider the decision having been denied by the Court of Appeals in the resolution of
6 February 1996, the petitioner filed with this Court on 27 February 1996 a petition for review
on certiorari in G.R. No. 123784.

We shall now resolve these three cases starting with G.R. No. 106424 with which the other two were
consolidated.

G.R. No. 106424

The petitioner had moved to quash the information in Criminal Case No. 324-V-91 on the ground
that it does not charge an offense. Respondent Judge Dizon-Capulong granted the motion reasoning
that the subject matter of the information in the CRIMINAL CASE is LUMBER, which is neither
"timber" nor "other forest product" under Section 68 of P.D. No. 705, as amended, and hence,
possession thereof without the required legal documents is not prohibited and penalized under the
said section.

Under paragraph (a), Section 3, Rule 117 of the Rules of Court, an information may be quashed on
the ground that the facts alleged therein do not constitute an offense. It has been said that "the test
for the correctness of this ground is the sufficiency of the averments in the information, that is,
whether the facts alleged, if hypothetically admitted, constitute the elements of the
offense, 29 and matters aliunde will not be considered." Anent the sufficiency of the information,
Section 6, Rule 110 of the Rules of Court requires, inter alia, that the information state the acts or
omissions complained of as constituting the offense.

Respondent Ri Chuy Po is charged with the violation of Section 68 of P.D. No. 705, as amended by
E.O. No. 277, which provides:

Sec. 68. Cutting, Gathering and/or collecting Timber, or Other Forest Products
Without License. -- Any person who shall cut, gather, collect, remove timber or other
forest products from any forest land, or timber from alienable or disposable public
land, or from private land, without any authority, or possess timber or other forest
products without the legal documents as required under existing forest laws and
regulations, shall be punished with the penalties imposed under Articles 309 and 310
of the Revised Penal Code: Provided, That in the case of partnerships, associations,
or corporations, the officers who ordered the cutting, gathering, collection or
possession shall be liable, and if such officers are aliens, they shall, in addition to the
penalty, be deported without further proceedings on the part of the Commission on
Immigration and Deportation.

The Court shall further order the confiscation in favor of the government of the timber
or any forest products cut, gathered, collected, removed, or possessed, as well as
the machinery, equipment, implements and tools illegally used in the area where the
timber or forest products are found.
 Punished then in this section are (1) the cutting, gathering, collection, or removal of timber or
other forest products from the places therein mentioned without any authority; and
(b) possession of timber forest products without the legal documents as required under
existing forest laws and regulations.

Indeed, the word lumber does not appear in Section 68. But conceding ex gratia that this omission
amounts to an exclusion of lumber from the section's coverage, do the facts averred in the
information in the CRIMINAL CASE validly charge a violation of the said section?

A cursory reading of the information readily leads us to an infallible conclusion that lumber is not
solely its subject matter. It is evident therefrom that what are alleged to be in the possession of the
private respondent, without the required legal documents, are truckloads of

(1) almaciga and lauan; and

(2) approximately 200,000 bd. ft. of lumber and shorts of various

species including almaciga and supa.

The "almaciga and lauan" specifically mentioned in no. (1) are not described as "lumber."
They cannot refer to the "lumber" in no. (2) because they are separated by the words
"approximately 200,000 bd. ft." with the conjunction "and," and not with the preposition "of."
They must then be raw forest products or, more specifically, timbers under Section 3(q) of
P.D. No. 705, as amended, which reads:

Sec. 3. Definitions. --

xxx xxx xxx

(q) Forest product means timber, firewood, bark, tree top, resin, gum,
wood, oil, honey, beeswax, nipa, rattan, or other forest plant, the
associated water, fish game, scenic, historical, recreational and
geological resources in forest lands.

It follows then that lumber is only one of the items covered by the information. The public and the
private respondents obviously miscomprehended the averments in the information. Accordingly,
even if lumber is not included in Section 68, the other items therein as noted above fall within the
ambit of the said section, and as to them, the information validly charges an offense.

Our respected brother, Mr. Justice Jose C. Vitug, suggests in his dissenting opinion that this Court
go beyond the four corners of the information for enlightenment as to whether the information
exclusively refers to lumber. With the aid of the pleadings and the annexes thereto, he arrives at the
conclusion that "only lumber has been envisioned in the indictment."

The majority is unable to subscribe to his view. First, his proposition violates the rule that only the
facts alleged in the information vis-a-vis the law violated must be considered in determining whether
an information charges an offense.

Second, the pleadings and annexes he resorted to are insufficient to justify his conclusion. On the
contrary, the Joint Affidavit of Melencio Jalova, Jr., and Araman Belleng, which is one of the annexes
he referred to, 30 cannot lead one to infer that what the team seized was all lumber. Paragraph 8
thereof expressly states:
 8. That when inside the compound, the team found approximately
four (4) truckloads of narra shorts, trimmings and slabs and a
negligible amount of narra lumber, and approximately 200,000 bd. ft.
of lumber and shorts of various species including almaciga and supa
which are classified as prohibited wood species. (emphasis supplied)

In the same vein, the dispositive portion of the resolution31 of the investigating prosecutor,
which served as the basis for the filing of the information, does not limit itself to lumber; thus:

WHEREFORE, premises considered, it is hereby recommended that an information

be filed against respondent Ri Chuy Po for illegal possession of 200,000 bd. ft. of
lumber consisting of almaciga and supa and for illegal shipment of almaciga and
lauan in violation of Sec. 63 of PD 705 as amended by E.O. 277, series of 1987.
(emphasis supplied)

The foregoing disquisitions should not, in any manner, be construed as an affirmance of the
respondent Judge's conclusion that lumber is excluded from the coverage of Section 68 of P.D. No.
705, as amended, and thus possession thereof without the required legal documents is not a crime.
On the contrary, this Court rules that such possession is penalized in the said section
because lumber is included in the term timber.

The Revised Forestry Code contains no definition of either timber or lumber. While the former is
included in forest products as defined in paragraph (q) of Section 3, the latter is found in paragraph
(aa) of the same section in the definition of "Processing plant," which reads:

(aa) Processing plant is any mechanical set-up, machine or

combination of machine used for the processing of logs and other
forest raw materials into lumber, veneer, plywood, wallbond,
blockboard, paper board, pulp, paper or other finished wood
products.

This simply means that lumber is a processed log or processed forest raw material. Clearly,
the Code uses the term lumber in its ordinary or common usage. In the 1993 copyright
edition of Webster's Third New International Dictionary, lumber is defined, inter alia, as
"timber or logs after being prepared for the market." 32Simply put, lumber is a processed log
or timber.

It is settled that in the absence of legislative intent to the contrary, words and phrases used in a
statute should be given their plain, ordinary, and common usage meaning. 33 And insofar as
possession of timber without the required legal documents is concerned, Section 68 of P.D. No. 705,
as amended, makes no distinction between raw or processed timber. Neither should we. Ubi lex non
distinguere debemus.

Indisputably, respondent Judge Teresita Dizon-Capulong of Branch 172 of the RTC of Valenzuela,
Metro Manila, committed grave abuse of discretion in granting the motion to quash the information in
the CRIMINAL CASE and in dismissing the said case.

G.R. No. 104988

We find this petition to be without merit. The petitioner has miserably failed to show that the Court of
Appeals committed any reversible error in its assailed decision of 29 November 1991.
It was duly established that on 1 April 1990, the petitioner's truck with Plate No. CCK-322 was
coming out from the petitioner's lumberyard loaded with lauan and almaciga lumber of different sizes
and dimensions which were not accompanied with the required invoices and transport documents.
The seizure of such truck and its cargo was a valid exercise of the power vested upon a forest officer
or employee by Section 80 of P.D. No. 705, as amended by P.D. No. 1775. Then, too, as correctly
held by the trial court and the Court of Appeals in the FIRST CIVIL CASE, the search was conducted
on a moving vehicle. Such a search could be lawfully conducted without a search warrant.

Search of a moving vehicle is one of the five doctrinally accepted exceptions to the constitutional
mandate 34 that no search or seizure shall be made except by virtue of a warrant issued by a judge
after personally determining the existence of probable cause. The other exceptions are (3) search as
an incident to a lawful arrest, (2) seizure of evidence in plain view, (3) customs searches, and (4)
consented warrantless search. 35

We also affirm the rulings of both the trial court and the Court of Appeals that the search on 4 April
1990 was a continuation of the search on 3 April 1990 done under and by virtue of the search
warrant issued on 3 April 1990 by Executive Judge Osorio. Under Section 9, Rule 126 of the Rules
of Court, a search warrant has a lifetime of ten days. Hence, it could be served at any time within the
said period, and if its object or purpose cannot be accomplished in one day, the same may be
continued the following day or days until completed. Thus, when the search under a warrant on one
day was interrupted, it may be continued under the same warrant the following day, provided it is still
within the ten-day period. 36

As to the final plea of the petitioner that the search was illegal because possession of lumber without
the required legal documents is not illegal under Section 68 of P.D. No. 705, as amended,
since lumber is neither specified therein nor included in the term forest product, the same hardly
merits further discussion in view of our ruling in G.R. No. 106424.

G.R. No. 123784

The allegations and arguments set forth in the petition in this case palpally fail to shaw prima
facie that a reversible error has been committed by the Court of Appeals in its challenged decision of
31 July 1995 and resolution of 6 February 1996 in CA-G.R. SP No. 33778. We must, forthwith, deny
it for utter want of merit. There is no need to require the respondents to comment on the petition.

The Court of Appeals correctly dismissed the petitioner's appeal from the judgment of the trial court
in the SECOND CIVIL CASE. The petitioner never disputed the fact that its lumber-dealer's license
or permit had been suspended by Secretary Factoran on 23 April 1990. The suspension was never
lifted, and since the license had only a lifetime of up to 25 September 1990, the petitioner has
absolutely no right to possess, sell, or otherwise dispose of lumber. Accordingly, Secretary Factoran
or his authorized representative had the authority to seize the Lumber pursuant to Section 68-A of
P.D. No. 705, as amended, which provides as follows:

Sec. 68-A Administrative Authority of the Department Head or his Duly Authorized
Representative to Order Confiscation. -- In all cases of violations of this Code or
other forest laws, rules and regulations, the Department Head or his duly authorized
representative may order the confiscation of any forest products illegally cut,
gathered, removed, or possessed or abandoned. . . .

The petitioner's insistence that possession or sale of lumber is not penalized must also fail view of
our disquisition and ruling on the same issue in G.R. No. 106424. Besides, the issue is totally
irrelevant in the SECOND CIVIL CASE which involves administrative seizure as a consequence of
the violation of the suspension of the petitioner's license as lumber dealer.

All told then, G.R. No. 104988 and G.R. No. 123784 are nothing more than rituals to cover up blatant
violations of the Revised Forestry Code of the Philippines (P.D. No. 705), as amended. They are
presumably trifling attempts to block the serious efforts of the DENR to enforce the decree, efforts
which deserve the commendation of the public in light of the urgent need to take firm and decisive
action against despoilers of our forests whose continuous destruction only ensures to the
generations to come, if not the present, an inheritance of parched earth incapable of sustaining life.
The Government must not tire in its vigilance to protect the environment by prosecuting without fear
or favor any person who dares to violate our laws for the utilization and protection of our forests.

WHEREFORE, judgment is hereby rendered

1. (a) GRANTING the petition in G.R. No. 106424; (b) SETTING ASIDE and
ANNULLING, for having been rendered with grave abuse of discretion, the
challenged orders of 16 August 1991 and 18 October 1991 of respondent Judge
Teresita Dizon-Capulong, Branch 172, Regional Trial Court of Valenzuela, Metro
Manila, in Criminal Case No. 324-V-91, entitled "People of the Philippines vs. Ri
Chuy Po"; (c) REINSTATING the information in the said criminal case; and (d)
DIRECTING the respondent Judge or her successor to hear and decide the case
with purposeful dispatch; and

2. DENYING the petitions in G.R. No. 104988 and in G. R. No. 123784 for utter
failure of the petitioner to show that the respondent Court of Appeals committed any
reversible error in the challenged decisions of 29 November 1991 in CA-G.R. SP No.
25510 in the FIRST CIVIL CASE and of 31 July 1995 in CA-G.R. SP No. 33778 on
the SECOND CIVIL CASE.

Costs against the petitioner in each of these three cases.

SO ORDERED

A.M. No. RTJ-06-2017 June 19, 2008

LT. GEN. ALFONSO P. DAGUDAG (Ret.), complainant,

vs.
JUDGE MAXIMO G.W. PADERANGA, Regional Trial Court, Branch 38, Cagayan de Oro
City, respondent.

DECISION

PER CURIAM, J.:

This is a complaint for gross ignorance of the law and conduct unbecoming a judge filed by retired
Lt. Gen. Alfonso P. Dagudag (Gen. Dagudag), Head of Task Force Sagip Kalikasan, against Judge
Maximo G. W. Paderanga (Judge Paderanga), Presiding Judge of the Regional Trial Court, Branch
38, Cagayan de Oro City.

On or about 30 January 2005, the Region VII Philippine National Police Regional Maritime Group
(PNPRMG) received information that MV General Ricarte of NMC Container Lines, Inc. was shipping
container vans containing illegal forest products from Cagayan de Oro to Cebu. The shipments were
falsely declared as cassava meal and corn grains to avoid inspection by the Department of
Environment and Natural Resources (DENR).1

On 30 and 31 January 2005, a team composed of representatives from the PNPRMG, DENR, and
the Philippine Coast Guard inspected the container vans at a port in Mandaue City, Cebu. The team
discovered the undocumented forest products and the names of the shippers and consignees:

Container Van No. Shipper Consignee

NCLU – 2000492-22GI Polaris Chua Polaris Chua
IEAU – 2521845-2210 Polaris Chua Polaris Chua
NOLU – 2000682-22GI Rowena Balangot Rowena Balangot
INBU – 3125757-BB2210 Rowena Balangot Rowena Balangot
NCLU – 20001591-22GI Jovan Gomez Jovan Gomez
GSTU – 339074-US2210 Jovan Gomez Jovan Gomez
CRXU – 2167567 Raffy Enriquez Raffy Enriquez
NCLU – 2001570-22GI Raffy Enriquez Raffy Enriquez

The crew of MV General Ricarte failed to produce the certificate of origin forms and other pertinent
transport documents covering the forest products, as required by DENR Administrative Order No.
07-94. Gen. Dagudag alleged that, since nobody claimed the forest products within a reasonable
period of time, the DENR considered them as abandoned and, on 31 January 2005, the Provincial
Environment and Natural Resources Office (PENRO) Officer-in-Charge (OIC), Richard N. Abella,
issued a seizure receipt to NMC Container Lines, Inc.2

On 1 February 2005, Community Environment and Natural Resources Office (CENRO) OIC Loreto
A. Rivac (Rivac) sent a notice to NMC Container Lines, Inc. asking for explanation why the
government should not confiscate the forest products.3 In an affidavit4 dated 9 February 2005, NMC
Container Lines, Inc.’s Branch Manager Alex Conrad M. Seno stated that he did not see any reason
why the government should not confiscate the forest products and that NMC Container Lines, Inc.
had no knowledge of the actual content of the container vans.

On 2, 9, and 15 February 2005, DENR Forest Protection Officer Lucio S. Canete, Jr. posted notices
on the CENRO and PENRO bulletin boards and at the NMC Container Lines, Inc. building informing
the unknown owner about the administrative adjudication scheduled on 18 February 2005 at the
Cebu City CENRO. Nobody appeared during the adjudication.5 In a resolution6 dated 10 March
2005, Rivac, acting as adjudication officer, recommended to DENR Regional Executive Director
Clarence L. Baguilat that the forest products be confiscated in favor of the government.

In a complaint7 dated 16 March 2005 and filed before Judge Paderanga, a certain Roger C. Edma
(Edma) prayed that a writ of replevin be issued ordering the defendants DENR, CENRO, Gen.
Dagudag, and others to deliver the forest products to him and that judgment be rendered ordering
the defendants to pay him moral damages, attorney’s fees, and litigation expenses. On 29 March
2005, Judge Paderanga issued a writ of replevin8 ordering Sheriff Reynaldo L. Salceda to take
possession of the forest products.

In a motion to quash the writ of replevin,9 the defendants DENR, CENRO, and Gen. Dagudag prayed
that the writ of replevin be set aside: (1) Edma’s bond was insufficient; (2) the forest products were
falsely declared as cassava meal and corn grains; (3) Edma was not a party-in-interest; (4) the forest
products were not covered by any legal document; (5) nobody claimed the forest products within a
reasonable period of time; (6) the forest products were already considered abandoned; (7) the forest
products were lawfully seized under the Revised Forestry Code of the Philippines; (8) replevin was
not proper; (9) courts could not take cognizance of cases pending before the DENR; (10) Edma
failed to exhaust administrative remedies; and (11) the DENR was the agency responsible for the
enforcement of forestry laws. In a motion to dismiss ad cautelam10 dated 12 April 2005, the
defendants prayed that the complaint for replevin and damages be dismissed: (1) the real defendant
is the Republic of the Philippines; (2) Edma failed to exhaust administrative remedies; (3) the State
cannot be sued without its consent; and (4) Edma failed to allege that he is the owner or is entitled to
the possession of the forest products.

In an order11 dated 14 April 2005, Judge Paderanga denied the motion to quash the writ of replevin
for lack of merit.

Gen. Dagudag filed with the Office of the Court Administrator (OCA) an affidavit-complaint12 dated 8
July 2005 charging Judge Paderanga with gross ignorance of the law and conduct unbecoming a
judge. Gen. Dagudag stated that:

During the x x x hearing, [Judge Paderanga] showed manifest partiality in favor of x x x

Edma. DENR’s counsel was lambasted, cajoled and intimidated by [Judge Paderanga] using
words such as "SHUT UP" and "THAT’S BALONEY."

xxxx

Edma in the replevin case cannot seek to recover the wood shipment from the DENR since
he had not sought administrative remedies available to him. The prudent thing for [Judge
Paderanga] to have done was to dismiss the replevin suit outright.

xxxx

[Judge Paderanga’s] act[s] of taking cognizance of the x x x replevin suit, issuing the writ of
replevin and the subsequent denial of the motion to quash clearly demonstrates [sic]
ignorance of the law.

In its 1st Indorsement13 dated 1 August 2005, the OCA directed Judge Paderanga to comment on the
affidavit-complaint. In his comment14 dated 6 September 2005, Judge Paderanga stated that he
exercised judicial discretion in issuing the writ of replevin and that he could not delve into the issues
raised by Gen. Dagudag because they were related to a case pending before him.

In its Report15 dated 10 July 2006, the OCA found that Judge Paderanga (1) violated the doctrine of
exhaustion of administrative remedies; (2) violated the doctrine of primary jurisdiction; and (3) used
inappropriate language in court. The OCA recommended that the case be re-docketed as a regular
administrative matter; that Judge Paderanga be held liable for gross ignorance of the law and for
violation of Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine
Judiciary;16 and that he be fined P30,000.

In its Resolution17 dated 16 August 2006, the Court re-docketed the case as a regular administrative
matter and required the parties to manifest whether they were willing to submit the case for decision
based on the pleadings already filed. Judge Paderanga manifested his willingness to submit the
case for decision based on the pleadings already filed.18 Since Gen. Dagudag did not file any
manifestation, the Court considered him to have waived his compliance with the 16 August 2006
Resolution.19
The Court finds Judge Paderanga liable for gross ignorance of the law and for conduct unbecoming
a judge.

The DENR is the agency responsible for the enforcement of forestry laws. Section 4 of Executive
Order No. 192 states that the DENR shall be the primary agency responsible for the conservation,
management, development, and proper use of the country’s natural resources.

Section 68 of Presidential Decree No. 705, as amended by Executive Order No. 277, states that
possessing forest products without the required legal documents is punishable. Section 68-A states
that the DENR Secretary or his duly authorized representatives may order the confiscation of any
forest product illegally cut, gathered, removed, possessed, or abandoned.

In the instant case, the forest products were possessed by NMC Container Lines, Inc. without the
required legal documents and were abandoned by the unknown owner. Consequently, the DENR
seized the forest products.

Judge Paderanga should have dismissed the replevin suit outright for three reasons. First, under the
doctrine of exhaustion of administrative remedies, courts cannot take cognizance of cases pending
before administrative agencies. In Factoran, Jr. v. Court of Appeals,20 the Court held that:

The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of

law, comity and convenience, should not entertain suits unless the available
administrative remedies have first been resorted to and the proper authorities have
been given an appropriate opportunity to act and correct their alleged errors, if any,
committed in the administrative forum. (Emphasis ours)

In Dy v. Court of Appeals,21 the Court held that a party must exhaust all administrative remedies
before he can resort to the courts. In Paat v. Court of Appeals,22 the Court held that:

This Court in a long line of cases has consistently held that before a party is allowed to
seek the intervention of the court, it is a pre-condition that he should have availed of
all the means of administrative processes afforded him. Hence, if a remedy within the
administrative machinery can still be resorted to by giving the administrative officer
concerned every opportunity to decide on a matter that comes within his jurisdiction then
such remedy should be exhausted first before court’s judicial power can be
sought. The premature invocation of court’s intervention is fatal to one’s cause of
action. Accordingly, absent any finding of waiver or estoppel the case is susceptible of
dismissal for lack of cause of action. (Emphasis ours)

In the instant case, Edma did not resort to, or avail of, any administrative remedy. He went straight to
court and filed a complaint for replevin and damages. Section 8 of Presidential Decree No. 705, as
amended, states that (1) all actions and decisions of the Bureau of Forest Development Director are
subject to review by the DENR Secretary; (2) the decisions of the DENR Secretary are appealable to
the President; and (3) courts cannot review the decisions of the DENR Secretary except through a
special civil action for certiorari or prohibition. In Dy,23 the Court held that all actions seeking to
recover forest products in the custody of the DENR shall be directed to that agency — not the
courts. In Paat,24 the Court held that:

Dismissal of the replevin suit for lack of cause of action in view of the private
respondents’ failure to exhaust administrative remedies should have been the proper
course of action by the lower court instead of assuming jurisdiction over the case and
consequently issuing the writ [of replevin]. Exhaustion of the remedies in the
 administrative forum, being a condition precedent prior to one’s recourse to the courts and
more importantly, being an element of private respondents’ right of action, is too significant
to be waylaid by the lower court.

xxxx

Moreover, the suit for replevin is never intended as a procedural tool to question the
orders of confiscation and forfeiture issued by the DENR in pursuance to the authority
given under P.D. 705, as amended. Section 8 of the said law is explicit that actions taken
by the

Director of the Bureau of Forest Development concerning the enforcement of the

provisions of the said law are subject to review by the Secretary of DENR and that
courts may not review the decisions of the Secretary except through a special civil
action for certiorari or prohibition. (Emphasis ours)

Second, under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending
before administrative agencies of special competence. The DENR is the agency responsible for the
enforcement of forestry laws. The complaint for replevin itself stated that members of DENR’s Task
Force Sagip Kalikasan took over the forest products and brought them to the DENR Community
Environment and Natural Resources Office. This should have alerted Judge Paderanga that the
DENR had custody of the forest products, that administrative proceedings may have been
commenced, and that the replevin suit had to be dismissed outright. In Tabao v. Judge Lilagan25 — a
case with a similar set of facts as the instant case — the Court held that:

The complaint for replevin itself states that the shipment x x x [was] seized by the NBI for
verification of supporting documents. It also states that the NBI turned over the seized items
to the DENR "for official disposition and appropriate action." x x x To our mind, these
allegations [should] have been sufficient to alert respondent judge that the DENR has
custody of the seized items and that administrative proceedings may have already
been commenced concerning the shipment. Under the doctrine of primary
jurisdiction, courts cannot take cognizance of cases pending before administrative
agencies of special competence. x x x The prudent thing for respondent judge to have
done was to dismiss the replevin suit outright. (Emphasis ours)

In Paat,26 the Court held that:

[T]he enforcement of forestry laws, rules and regulations and the protection, development
and management of forest lands fall within the primary and special responsibilities of the
Department of Environment and

Natural Resources. By the very nature of its function, the DENR should be given a free
hand unperturbed by judicial intrusion to determine a controversy which is well within
its jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed
by private respondents constitutes an unjustified encroachment into the domain of
the administrative agency’s prerogative. The doctrine of primary jurisdiction does not
warrant a court to arrogate unto itself the authority to resolve a controversy the
jurisdiction over which is initially lodged with an administrative body of special
competence. (Emphasis ours)

Third, the forest products are already in custodia legis and thus cannot be the subject of replevin.
There was a violation of the Revised Forestry Code and the DENR seized the forest products in
accordance with law. In Calub v. Court of Appeals,27 the Court held that properties lawfully seized by
the DENR cannot be the subject of replevin:

Since there was a violation of the Revised Forestry Code and the seizure was in
accordance with law, in our view the [properties seized] were validly deemed
in custodia legis. [They] could not be subject to an action for replevin. For it is property
lawfully taken by virtue of legal process and considered in the custody of the law, and not
otherwise. (Emphasis ours)

Judge Paderanga’s acts of taking cognizance of the replevin suit and of issuing the writ of replevin
constitute gross ignorance of the law. In Tabao,28 the Court held that:

Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending
before administrative of special competence. x x x [T]he plaintiff in the replevin suit
who [sought] to recover the shipment from the DENR had not exhausted the
administrative remedies available to him. The prudent thing for respondent judge to
have done was to dismiss the replevin suit outright.

Under Section 78-A of the Revised Forestry Code, the DENR secretary or his authorized
representatives may order the confiscation of forest products illegally cut, gathered,
removed, or possessed or abandoned.

xxxx

Respondent judge’s act of taking cognizance of the x x x replevin suit clearly

demonstrates ignorance of the law. x x x [J]udges are expected to keep abreast of all laws
and prevailing jurisprudence. Judges are duty bound to have more than just a cursory
acquaintance with laws and jurisprudence. Failure to follow basic legal commands
constitutes gross ignorance of the law from which no one may be excused, not even a
judge. (Emphasis ours)

Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that competence is
a prerequisite to the due performance of judicial office. Section 3 of Canon 6 states that judges shall
take reasonable steps to maintain and enhance their knowledge necessary for the proper
performance of judicial duties. Judges should keep themselves abreast with legal developments and
show acquaintance with laws.29

The rule that courts cannot prematurely take cognizance of cases pending before administrative
agencies is basic. There was no reason for Judge Paderanga to make an exception to this rule. The
forest products were in the custody of the DENR and Edma had not availed of any administrative
remedy. Judge Paderanga should have dismissed the replevin suit outright. In Español v. Toledo-
Mupas,30 the Court held that:

Being among the judicial front-liners who have direct contact with the litigants, a wanton
display of utter lack of familiarity with the rules by the judge inevitably erodes the confidence
of the public in the competence of our courts to render justice. It subjects the judiciary to
embarrassment. Worse, it could raise the specter of corruption.

When the gross inefficiency springs from a failure to consider so basic and elemental a rule,
a law, or a principle in the discharge of his or her duties, a judge is either too incompetent
and undeserving of the exalted position and title he or she holds, or the oversight or omission
was deliberately done in bad faith and in grave abuse of judicial authority.
The OCA found Judge Paderanga liable for using inappropriate language in court: "We x x x find
respondent’s intemperate use of "Shut up!" and "Baloney!" well nigh inappropriate in court
proceedings. The utterances are uncalled for."31

Indeed, the 14 and 22 April 2005 transcripts of stenographic notes show that Judge Paderanga was
impatient, discourteous, and undignified in court:

Atty. Luego: Your Honor, we want to have this motion because that is...

Judge Paderanga: I am asking you why did you not make any rejoinder[?]

xxxx

Atty. Luego: I apologize, Your Honor. We are ready to...

Judge Paderanga: Ready to what? Proceed.

Atty. Luego: Yes, Your Honor. We filed this motion to quash replevin, Your Honor, on the
grounds, first and foremost, it is our contention, Your Honor, with all due respect of [sic] this
Honorable Court, that the writ of replevin dated March 29, 2005 was improper, Your Honor,
for the reasons that the lumber, subject matter of this case, were apprehended in
accordance with...

Judge Paderanga: Where is your proof that it was apprehended? Where is your proof? Is
that apprehension proven by a seizure receipt? Where is your seizure receipt?

Atty. Luego: Under the rules...

Judge Paderanga: Where is your seizure receipt? You read your rules. What does [sic] the
rules say? Where in your rules does it say that it does not need any seizure receipt? You
look at your rules. You point out the rules. You take out your rules and then you point out. Do
you have the rules?

xxxx

Atty. Luego: Your Honor, there was no seizure receipt, but during the apprehension, Your
Honor, there was no claimant.

Judge Paderanga: Answer me. Is there a seizure receipt?

Atty. Luego: But during the apprehension, Your Honor, no owner has [sic] appeared.

xxxx

Atty. Luego: According to [the] rules, Your Honor, if there is no...

Judge Paderanga: Whom are you seizing it from? To [sic] whom are you taking it from?

Atty. Luego: From the shipping company, Your Honor.

xxxx

Atty. Luego: Your Honor please, the shipping company denied the ownership of that lumber.

xxxx

Atty. Luego: But the shipping company, Your Honor,...

Judge Paderanga: Shut up. That’s baloney. You are seizing it from nobody. Then how can
you seize it from the shipping company. Are you not? You are a lawyer. Who is in
possession of the property? The shipping company. Why did you not issue [a] seizure receipt
to the shipping company?

Atty. Luego: But the... May I continue, Your Honor?

xxxx

Judge Paderanga: Stop talking about the shipping company. Still you did not issue a seizure
receipt here. Well, I’m telling you you should have issued [a] seizure receipt to the shipping
company.

xxxx

Judge Paderanga: You are a lawyer. You should know how to write pleadings. You write
the pleadings the way it should be, not the way you think it should be.

Atty. Luego: I’m sorry, Your Honor.

Judge Paderanga: You are an officer of the court. You should be careful with your
language. You say that I am wrong. It’s you who are [sic] wrong because you do not
read the law.

xxxx

Judge Paderanga: Then you read the law. How dare you say that the Court is wrong.

xxxx

Judge Paderanga: Are you not representing [the DENR]?

Atty. Luego: Yes, in this case, Your Honor.

Judge Paderanga: Then you are representing them. They are your clients. What kind of a
lawyer are you?32

xxxx

Atty. Tiamson: Specifically it was stated in the [Factoran] versus Court of Appeals [case] that
the Court should not interfere, Your Honor.
 Judge Paderanga: No.

xxxx

Judge Paderanga: The problem with you people is you do not use your heads.

Atty. Tiamson: We use our heads, your Honor.

xxxx

Atty. Tiamson: Your Honor, we would like to put on record that we use our heads, your
Honor.33 (Emphasis ours)

Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that
judges shall be patient, dignified, and courteous in relation to lawyers. Rule 3.04, Canon 3 of the
Code of Judicial Conduct states that judges should be patient and courteous to lawyers, especially
the inexperienced. They should avoid the attitude that the litigants are made for the courts, instead
of the courts for the litigants.

Judicial decorum requires judges to be temperate in their language at all times. They must refrain
from inflammatory, excessively rhetoric, or vile language.34 They should (1) be dignified in demeanor
and refined in speech; (2) exhibit that temperament of utmost sobriety and self-restraint; and (3) be
considerate, courteous, and civil to all persons who come to their court.35 In Juan de la Cruz v.
Carretas,36 the Court held that:

A judge who is inconsiderate, discourteous or uncivil to lawyers x x x who appear in his sala
commits an impropriety and fails in his duty to reaffirm the people’s faith in the judiciary. He
also violates Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine
Judiciary.

xxxx

It is reprehensible for a judge to humiliate a lawyer x x x. The act betrays lack of patience,
prudence and restraint. Thus, a judge must at all times be temperate in his language. He
must choose his words x x x with utmost care and sufficient control. The wise and just man is
esteemed for his discernment. Pleasing speech increases his persuasiveness.

Equanimity and judiciousness should be the constant marks of a dispenser of justice. A

judge should always keep his passion guarded. He can never allow it to run loose and
overcome his reason. He descends to the level of a sharp-tongued, ill-mannered petty tyrant
when he utters harsh words x x x. As a result, he degrades the judicial office and erodes
public confidence in the judiciary.

Judge Paderanga’s refusal to consider the motion to quash the writ of replevin, repeated interruption
of the lawyers, and utterance of "shut up," "that’s baloney," "how dare you say that the court is
wrong," "what kind of a lawyer are you?," and "the problem with you people is you do not use your
heads" are undignified and very unbecoming a judge. In Office of the Court Administrator v.
Paderanga,37 the Court already reprimanded Judge Paderanga for repeatedly saying "shut up,"
being arrogant, and declaring that he had "absolute power" in court. He has not changed.
Section 8, Rule 140 of the Rules of Court classifies gross ignorance of the law as a serious offense.
It is punishable by (1) dismissal from the service, forfeiture of benefits, and disqualification from
reinstatement to any public office; (2) suspension from office without salary and other benefits for
more than three months but not exceeding six months; or (3) a fine of more than P20,000 but not
exceeding P40,000.38 Section 10 of Rule 140 classifies conduct unbecoming a judge as a light
offense. It is punishable by (1) a fine of not less than P1,000 but not exceeding P10,000; (2)
censure; (3) reprimand; or (4) admonition with warning.39

The Court notes that this is Judge Paderanga’s third offense. In Office of the Court Administrator v.
Paderanga,40the Court held him liable for grave abuse of authority and simple misconduct for
unceremoniously citing a lawyer in contempt while declaring himself as having "absolute power" and
for repeatedly telling a lawyer to "shut up." In Beltran, Jr. v. Paderanga,41 the Court held him liable for
undue delay in rendering an order for the delay of nine months in resolving an amended formal offer
of exhibits. In both cases, the Court sternly warned Judge Paderanga that the commission of
another offense shall be dealt with more severely. The instant case and the two cases decided
against him demonstrate Judge Paderanga’s arrogance, incorrigibility, and unfitness to become a
judge.

Judge Paderanga has two other administrative cases pending against him — one42 for gross
ignorance of the law, knowingly rendering an unjust judgment, and grave abuse of authority, and the
other43 for gross misconduct, grave abuse of authority, and gross ignorance of the law.

The Court will not hesitate to impose the ultimate penalty on those who have fallen short of their
accountabilities. It will not tolerate any conduct that violates the norms of public accountability and
diminishes the faith of the people in the judicial system.44

WHEREFORE, the Court finds Judge Maximo G.W. Paderanga, Regional Trial Court, Branch 38,
Cagayan de Oro City, GUILTY of GROSS IGNORANCE OF THE LAW and UNBECOMING
CONDUCT. Accordingly, the Court DISMISSES him from the service, with forfeiture of all retirement
benefits, except accrued leave credits, and with prejudice to reinstatement or appointment to any
public office, including government-owned or controlled corporations.

SO ORDERED.

G.R. No. 162243 December 3, 2009

HON. HEHERSON ALVAREZ substituted by HON. ELISEA G. GOZUN, in her capacity as

Secretary of the Department of Environment and Natural Resources, Petitioner,
vs.
PICOP RESOURCES, INC., Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 164516

PICOP RESOURCES, INC., Petitioner,

vs.
HON. HEHERSON ALVAREZ substituted by HON. ELISEA G. GOZUN, in her capacity as
Secretary of the Department of Environment and Natural Resources Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 171875

THE HON. ANGELO T. REYES (formerly Hon. Elisea G. Gozun), in his capacity as Secretary of
the Department of Environment and Natural Resources (DENR), Petitioner,
vs.
PAPER INDUSTRIES CORP. OF THE PHILIPPINES (PICOP), Respondent.

RESOLUTION

CHICO-NAZARIO, J.:

The cause of action of PICOP Resources, Inc. (PICOP) in its Petition for Mandamus with the trial
court is clear: the government is bound by contract, a 1969 Document signed by then President
Ferdinand Marcos, to enter into an Integrated Forest Management Agreement (IFMA) with PICOP.
Since the remedy of mandamus lies only to compel an officer to perform a ministerial duty, and since
the 1969 Document itself has a proviso requiring compliance with the laws and the Constitution, the
issues in this Motion for Reconsideration are the following: (1) firstly, is the 1969 Document a
contract enforceable under the Non-Impairment Clause of the Constitution, so as to make the
signing of the IFMA a ministerial duty? (2) secondly, did PICOP comply with all the legal and
constitutional requirements for the issuance of an IFMA?

To recall, PICOP filed with the Department of Environment and Natural Resources (DENR) an
application to have its Timber License Agreement (TLA) No. 43 converted into an IFMA. In the
middle of the processing of PICOP’s application, however, PICOP refused to attend further meetings
with the DENR. Instead, on 2 September 2002, PICOP filed before the Regional Trial Court (RTC) of
Quezon City a Petition for Mandamus1 against then DENR Secretary Heherson T. Alvarez. PICOP
seeks the issuance of a privileged writ of mandamus to compel the DENR Secretary to sign, execute
and deliver an IFMA to PICOP, as well as to –

[I]ssue the corresponding IFMA assignment number on the area covered by the IFMA, formerly TLA
No. 43, as amended; b) to issue the necessary permit allowing petitioner to act and harvest timber
from the said area of TLA No. 43, sufficient to meet the raw material requirements of petitioner’s pulp
and paper mills in accordance with the warranty and agreement of July 29, 1969 between the
government and PICOP’s predecessor-in-interest; and c) to honor and respect the Government
Warranties and contractual obligations to PICOP strictly in accordance with the warranty and
agreement dated July 29, [1969] between the government and PICOP’s predecessor-in-interest. x x
x.2

On 11 October 2002, the RTC rendered a Decision granting PICOP’s Petition for Mandamus, thus:

WHEREFORE, premises considered, the Petition for Mandamus is hereby GRANTED.

The Respondent DENR Secretary Hon. Heherson Alvarez is hereby ordered:

1. to sign, execute and deliver the IFMA contract and/or documents to PICOP and issue the
corresponding IFMA assignment number on the area covered by the IFMA, formerly TLA No.
43, as amended;
 2. to issue the necessary permit allowing petitioner to act and harvest timber from the said
area of TLA No. 43, sufficient to meet the raw material requirements of petitioner’s pulp and
paper mills in accordance with the warranty and agreement of July 29, 1969 between the
government and PICOP’s predecessor-in-interest; and

3. to honor and respect the Government Warranties and contractual obligations to PICOP
strictly in accordance with the warranty and agreement dated July 29, 1999 (sic) between the
government and PICOP’s predecessor-in-interest (Exhibits "H", "H-1" to "H-5", particularly
the following:

a) the area coverage of TLA No. 43, which forms part and parcel of the government
warranties;

b) PICOP tenure over the said area of TLA No. 43 and exclusive right to cut, collect
and remove sawtimber and pulpwood for the period ending on April 26, 1977; and
said period to be renewable for [an]other 25 years subject to compliance with
constitutional and statutory requirements as well as with existing policy on timber
concessions; and

c) The peaceful and adequate enjoyment by PICOP of the area as described and
specified in the aforesaid amended Timber License Agreement No. 43.

The Respondent Secretary Alvarez is likewise ordered to pay petitioner the sum of ₱10 million a
month beginning May 2002 until the conversion of TLA No. 43, as amended, to IFMA is formally
effected and the harvesting from the said area is granted.3

On 25 October 2002, the DENR Secretary filed a Motion for Reconsideration.4 In a 10 February 2003
Order, the RTC denied the DENR Secretary’s Motion for Reconsideration and granted PICOP’s
Motion for the Issuance of Writ of Mandamus and/or Writ of Mandatory Injunction.5 The fallo of the
11 October 2002 Decision was practically copied in the 10 February 2003 Order, although there was
no mention of the damages imposed against then DENR Secretary Alvarez.6 The DENR Secretary
filed a Notice of Appeal7 from the 11 October 2002 Decision and the 10 February 2003 Order.

On 19 February 2004, the Seventh Division of the Court of Appeals affirmed8 the Decision of the
RTC, to wit:

WHEREFORE, the appealed Decision is hereby AFFIRMED with modification that the order
directing then DENR Secretary Alvarez "to pay petitioner-appellee the sum of P10 million a month
beginning May, 2002 until the conversion to IFMA of TLA No. 43, as amended, is formally effected
and the harvesting from the said area is granted" is hereby deleted. 9

Challenging the deletion of the damages awarded to it, PICOP filed a Motion for Partial
Reconsideration10 of this Decision, which was denied by the Court of Appeals in a 20 July 2004
Resolution.11

The DENR Secretary and PICOP filed with this Court separate Petitions for Review of the 19
February 2004 Court of Appeals Decision. These Petitions were docketed as G.R. No. 162243 and
No. 164516, respectively. These cases were consolidated with G.R. No. 171875, which relates to
the lifting of a Writ of Preliminary Injunction enjoining the execution pending appeal of the foregoing
Decision.
On 29 November 2006, this Court rendered the assailed Decision on the Consolidated Petitions:

WHEREFORE, the Petition in G.R. No. 162243 is GRANTED. The Decision of the Court of Appeals
insofar as it affirmed the RTC Decision granting the Petition for Mandamus filed by Paper Industries
Corp. of the Philippines (PICOP) is hereby REVERSED and SET ASIDE. The Petition in G.R. No.
164516 seeking the reversal of the same Decision insofar as it nullified the award of damages in
favor of PICOP is DENIED for lack of merit. The Petition in G.R. No. 171875, assailing the lifting of
the Preliminary Mandatory Injunction in favor of the Secretary of Environment and Natural
Resources is DISMISSED on the ground of mootness.12

On 18 January 2006, PICOP filed the instant Motion for Reconsideration, based on the following
grounds:

I.

THE HONORABLE COURT ERRED IN HOLDING THAT THE CONTRACT WITH PRESIDENTIAL
WARRANTY SIGNED BY THE PRESIDENT OF THE REPUBLIC ON 29 JUNE 1969 ISSUED TO
PICOP IS A MERE PERMIT OR LICENSE AND IS NOT A CONTRACT, PROPERTY OR
PROPERTY RIGHT PROTECTED BY THE DUE PROCESS CLAUSE OF THE CONSTITUTION

II.

THE EVALUATION OF PICOP’S MANAGEMENT OF THE TLA 43 NATURAL FOREST CLEARLY

SHOWED SATISFACTORY PERFORMANCE FOR KEEPING THE NATURAL FOREST
GENERALLY INTACT AFTER 50 YEARS OF FOREST OPERATIONS. THIS COMPLETES THE
REQUIREMENT FOR AUTOMATIC CONVERSION UNDER SECTION 9 OF DAO 99-53.

III.

WITH DUE RESPECT, THE HONORABLE COURT, IN REVERSING THE FINDINGS OF FACTS
OF THE TRIAL COURT AND THE COURT OF APPEALS, MISAPPRECIATED THE EVIDENCE,
TESTIMONIAL AND DOCUMENTARY, WHEN IT RULED THAT:

i.

PICOP FAILED TO SUBMIT A FIVE-YEAR FOREST PROTECTION PLAN AND A SEVEN-YEAR

REFORESTATION PLAN FOR THE YEARS UNDER REVIEW.

ii.

PICOP FAILED TO COMPLY WITH THE PAYMENT OF FOREST CHARGES.

iii.

PICOP DID NOT COMPLY WITH THE REQUIREMENT FOR A CERTIFICATION FROM THE NCIP
THAT THE AREA OF TLA 43 DOES NOT OVERLAP WITH ANY ANCESTRAL DOMAIN.

iv.
PICOP FAILED TO HAVE PRIOR CONSULTATION WITH AND APPROVAL FROM THE
SANGUNIAN CONCERNED, AS REQUIRED BY SECTION 27 OF THE REPUBLIC ACT NO. 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991.

v.

PCIOP FAILED TO SECURE SOCIAL ACCEPTABILITY UNDER PRESIDENTIAL DECREE NO.

1586.

IV

THE MOTIVATION OF ALVAREZ IN RECALLING THE CLEARANCE FOR AUTOMATIC

CONVERSION HE ISSUED ON 25 OCTOBER 2001 WAS NOT DUE TO ANY SHORTCOMING
FROM PICOP BUT DUE TO HIS DETERMINATION TO EXCLUDE 28,125 HECTARES FROM THE
CONVERSION AND OTHER THINGS.

On 15 December 2008, on Motion by PICOP, the Third Division of this Court resolved to refer the
consolidated cases at bar to the Court en banc. On 16 December 2008, this Court sitting en banc
resolved to accept the said cases and set them for oral arguments. Oral arguments were conducted
on 10 February 2009.

PICOP’s Cause of Action: Matters PICOP Should Have Proven to Be Entitled to a Writ of Mandamus

In seeking a writ of mandamus to compel the issuance of an IFMA in its favor, PICOP relied on a 29
July 1969 Document, the so-called Presidential Warranty approved by then President Ferdinand E.
Marcos in favor of PICOP’s predecessor-in-interest, Bislig Bay Lumber Company, Inc. (BBLCI).
PICOP’s cause of action is summarized in paragraphs 1.6 and 4.19 of its Petition for Mandamus:

1.6 Respondent Secretary impaired the obligation of contract under the said Warranty and
Agreement of 29 July 1969 by refusing to respect the tenure; and its renewal for another twenty five
(25) years, of PICOP over the area covered by the said Agreement which consists of permanent
forest lands with an aggregate area of 121,587 hectares and alienable and disposable lands with an
aggregate area of approximately 21,580 hectares, and petitioner’s exclusive right to cut, collect and
remove sawtimber and pulpwood therein and the peaceful and adequate enjoyment of the said area
as described and specified in petitioner’s Timber License Agreement (TLA) No. 43 guaranteed by
the Government, under the Warranty and Agreement of 29 July 1969.13

4.19 Respondent is in violation of the Constitution and has impaired the obligation of contract by his
refusal to respect: a) the tenurial rights of PICOP over the forest area covered by TLA No. 43, as
amended and its renewal for another twenty five (25) years; b) the exclusive right of PICOP to cut,
collect and remove sawtimber and pulpwood therein; and c) PICOP’s peaceful and adequate
enjoyment of the said area which the government guaranteed under the Warranty and Agreement of
29 July 1969.14

The grounds submitted by PICOP in its Petition for Mandamus are as follows:

Respondent secretary has unlawfully refused and/or neglected to sign and execute the IFMA
contract of PICOP even as the latter has complied with all the legal requirements for the automatic
conversion of TLA No. 43, as amended, into an IFMA.
 II

Respondent Secretary acted with grave abuse of discretion and/or in excess of jurisdiction in
refusing to sign and execute PICOP’s IFMA contract, notwithstanding that PICOP had complied with
all the requirements for Automatic Conversion under DAO 99-53, as in fact Automatic Conversion
was already cleared in October, 2001, and was a completed process.

III

Respondent Secretary has impaired the obligation of contract under a valid and binding warranty
and agreement of 29 July 1969 between the government and PICOP’s predecessor-in-interest, by
refusing to respect: a) the tenure of PICOP, and its renewal for another twenty five (25) years, over
the TLA No.43 area covered by said agreement; b) the exclusive right to cut, collect and remove
sawtimber and pulpwood timber; and c) the peaceful and adequate enjoyment of the said area.

IV

As a result of respondent Secretary’s unlawful refusal and/or neglect to sign and deliver the IFMA
contract, and violation of the constitutional rights of PICOP against non-impairment of the obligation
of contract (Sec. 10, Art. III, 1997 [sic] Constitution), PICOP suffered grave and irreparable
damages.15

Petitions for Mandamus are governed by Rule 65 of the Rules of Court, Section 3 of which provides:

SEC. 3. Petition for mandamus.—When any tribunal, corporation, board, officer or person unlawfully
neglects the performance of an act which the law specifically enjoins as a duty resulting from an
office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office
to which such other is entitled, and there is no other plain, speedy and adequate remedy in the
ordinary course of law, the 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 respondent,
immediately or at some other time to be specified by the court, to do the act required to be done to
protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of
the wrongful acts of the respondent. (Emphasis supplied.)

PICOP is thus asking this Court to conclude that the DENR Secretary is specifically enjoined by law
to issue an IFMA in its favor. An IFMA, as defined by DENR Administrative Order (DAO) No. 99-
53,16 is -

[A] production-sharing contract entered into by and between the DENR and a qualified applicant
wherein the DENR grants to the latter the exclusive right to develop, manage, protect and utilize a
specified area of forestland and forest resource therein for a period of 25 years and may be renewed
for another 25-year period, consistent with the principle of sustainable development and in
accordance with an approved CDMP, and under which both parties share in its produce.17

PICOP stresses the word "automatic" in Section 9 of this DAO No. 99-53:

Sec. 9. Qualifications of Applicants. – The applicants for IFMA shall be:

(a) A Filipino citizen of legal age; or,

 (b) Partnership, cooperative or corporation whether public or private, duly registered under
Philippine laws.

However, in the case of application for conversion of TLA into IFMA, an automatic conversion after
proper evaluation shall be allowed, provided the TLA holder shall have signified such intention prior
to the expiry of the TLA, PROVIDED further, that the TLA holder has showed satisfactory
performance and have complied in the terms of condition of the TLA and pertinent rules and
regulations. (Emphasis supplied.)18

This administrative regulation provision allowing automatic conversion after proper evaluation can
hardly qualify as a law, much less a law specifically enjoining the execution of a contract. To enjoin
is "to order or direct with urgency; to instruct with authority; to command."19 "‘Enjoin’ is a mandatory
word, in legal parlance, always; in common parlance, usually."20 The word "allow," on the other hand,
is not equivalent to the word "must," and is in no sense a command.21

As an extraordinary writ, the remedy of mandamus lies only to compel an officer to perform a
ministerial duty, not a discretionary one; mandamus will not issue to control the exercise of discretion
of a public officer where the law imposes upon him the duty to exercise his judgment in reference to
any manner in which he is required to act, because it is his judgment that is to be exercised and not
that of the court.22

The execution of agreements, in itself, involves the exercise of discretion. Agreements are products
of negotiations and mutual concessions, necessitating evaluation of their provisions on the part of
both parties. In the case of the IFMA, the evaluation on the part of the government is specifically
mandated in the afore-quoted Section 3 of DAO No. 99-53. This evaluation necessarily involves the
exercise of discretion and judgment on the part of the DENR Secretary, who is tasked not only to
negotiate the sharing of the profit arising from the IFMA, but also to evaluate the compliance with the
requirements on the part of the applicant.

Furthermore, as shall be discussed later, the period of an IFMA that was merely automatically
converted from a TLA in accordance with Section 9, paragraph 2 of DAO No. 99-53 would only be
for the remaining period of the TLA. Since the TLA of PICOP expired on 26 April 2002, the IFMA that
could have been granted to PICOP via the automatic conversion provision in DAO No. 99-53 would
have expired on the same date, 26 April 2002, and the PICOP’s Petition for Mandamus would have
become moot.

This is where the 1969 Document, the purported Presidential Warranty, comes into play. When
PICOP’s application was brought to a standstill upon the evaluation that PICOP had yet to comply
with the requirements for such conversion, PICOP refused to attend further meetings with the DENR
and instead filed a Petition for Mandamus, insisting that the DENR Secretary had impaired the
obligation of contract by his refusal to respect: a) the tenurial rights of PICOP over the forest area
covered by TLA No. 43, as amended, and its renewal for another twenty-five (25) years; b) the
exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood therein; and c)
PICOP’s peaceful and adequate enjoyment of the said area which the government guaranteed
under the Warranty and Agreement of 29 July 1969. 23

PICOP is, thus, insisting that the government is obligated by contract to issue an IFMA in its favor
because of the 1969 Document.

A contract, being the law between the parties, can indeed, with respect to the State when it is a party
to such contract, qualify as a law specifically enjoining the performance of an act. Hence, it is
possible that a writ of mandamus may be issued to PICOP, but only if it proves both of the following:
 1) That the 1969 Document is a contract recognized under the non-impairment clause; and

2) That the 1969 Document specifically enjoins the government to issue the IFMA.

If PICOP fails to prove any of these two matters, the grant of a privileged writ of mandamus is not
warranted. This was why we pronounced in the assailed Decision that the overriding controversy
involved in the Petition was one of law.24 If PICOP fails to prove any of these two matters, more
significantly its assertion that the 1969 Document is a contract, PICOP fails to prove its cause of
action.25 Not even the satisfactory compliance with all legal and administrative requirements for an
IFMA would save PICOP’s Petition for Mandamus.

The reverse, however, is not true. The 1969 Document expressly states that the warranty as to the
tenure of PICOP is "subject to compliance with constitutional and statutory requirements as well as
with existing policy on timber concessions." Thus, if PICOP proves the two above-mentioned
matters, it still has to prove compliance with statutory and administrative requirements for the
conversion of its TLA into an IFMA.

Exhaustion of Administrative Remedies

PICOP uses the same argument –– that the government is bound by contract to issue the IFMA ––
in its refusal to exhaust all administrative remedies by not appealing the alleged illegal non-issuance
of the IFMA to the Office of the President. PICOP claimed in its Petition for Mandamus with the trial
court that:

1.10 This petition falls as an exception to the exhaustion of administrative remedies. The acts of
respondent DENR Secretary complained of in this petition are patently illegal; in derogation of the
constitutional rights of petitioner against non-impairment of the obligation of contracts; without
jurisdiction, or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion
amounting to excess or lack of jurisdiction; and moreover, the failure or refusal of a high government
official such as a Department head from whom relief is brought to act on the matter was considered
equivalent to exhaustion of administrative remedies (Sanoy v. Tantuico, 50 SCRA 455 [1973]), and
there are compelling and urgent reasons for judicial intervention (Bagatsing v. Ramirez, 74 SCRA
306 [1976]).

Thus, if there has been no impairment of the obligation of contracts in the DENR Secretary’s non-
issuance of the IFMA, the proper remedy of PICOP in claiming that it has complied with all statutory
and administrative requirements for the issuance of the IFMA should have been with the Office of
the President. This makes the issue of the enforceability of the 1969 Document as a contract even
more significant.

The Nature and Effects of the Purported 29 July 1969 Presidential Warranty

Base Metals Case

PICOP challenges our ruling that the 1969 Document is not a contract. Before we review this finding,
however, it must be pointed out that one week after the assailed Decision, another division of this
Court promulgated a Decision concerning the very same 1969 Document. Thus, in PICOP
Resources, Inc. v. Base Metals Mineral Resources Corporation,26 five other Justices who were still
unaware of this Division’s Decision,27 came up with the same conclusion as regards the same issue
of whether former President Marcos’s Presidential Warranty is a contract:
Finally, we do not subscribe to PICOP’s 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
government’s commitment to uphold the terms and conditions of its timber license and guarantees
PICOP’s 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 FMA No.
35. We agree with the OSG’s position that it is merely a collateral undertaking which cannot amplify
PICOP’s rights under its timber license. Our definitive ruling in Oposa v. Factoran 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.

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.28

The Motion for Reconsideration was denied with finality on 14 February 2007. A Second Motion for
Reconsideration filed by PICOP was denied on 23 May 2007.

PICOP insists that the pronouncement in Base Metals is a mere obiter dictum, which would not bind
this Court in resolving this Motion for Reconsideration. In the oral arguments, however, upon
questioning from the ponente himself of Base Metals, it was agreed that the issue of whether the
1969 Document is a contract was necessary in the resolution of Base Metals:

JUSTICE TINGA:

And do you confirm that one of the very issues raised by PICOP in that case [PICOP Resources Inc.
v. Base Metal Mineral Resources Corporation] revolves around its claim that a Presidential Warranty
is protected by the non-impairment c[l]ause of the Constitution.

ATTY. AGABIN:

Yes, I believe that statement was made by the Court, your Honor.

JUSTICE TINGA:

Yes. And that claim on the part of PICOP necessarily implies that the Presidential Warranty
according to PICOP is a contract protected by the non-impairment clause.

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:

Essentially, the PICOP raised the issue of whether the Presidential Warranty is a contract or not.

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:

And therefore any ruling on the part of the Court on that issue could not be an obiter dictum.

ATTY. AGABIN:

Your Honor, actually we believe that the basic issue in that case was whether or not Base Metals
could conduct mining activities underneath the forest reserve allotted to PICOP and the Honorable
Court ruled that the Mining Act of 1995 as well as the Department Order of DENR does not disallow
mining activity under a forest reserve.

JUSTICE TINGA:
But it was PICOP itself which raised the claim that a Presidential Warranty is a contract. And
therefore be, should be protected on the under the non-impairment clause of the Constitution.

ATTY. AGABIN:

Yes, Your Honor. Except that…

JUSTICE TINGA:

So, how can you say now that the Court merely uttered, declared, laid down an obiter dictum in
saying that the Presidential Warranty is not a contract, and it is not being a contract, it is not
prohibited by the non-impairment clause.

ATTY. AGABIN:

This Honorable Court could have just ruled, held that the mining law allows mining activities under a
forest reserve without deciding on that issue that was raised by PICOP, your Honor, and therefore
we believe….

JUSTICE TINGA:

It could have been better if PICOP has not raised that issue and had not claimed that the
Presidential Warranty is not a contract.

ATTY. AGABIN:

Well, that is correct, your Honor except that the Court could have just avoided that question.
Because…

JUSTICE TINGA:

Why[?]

ATTY. AGABIN:

It already settled the issue, the basic issue.

JUSTICE TINGA:

Yes, because the Court in saying that merely reiterated a number of rulings to the effect that the
Presidential Warranty, a Timber License for that matter is not a contract protected by the non-
impairment laws.

ATTY. AGABIN:

Well, it is our submission, your Honor, that it is obiter because, that issue even a phrase by PICOP
was not really fully argued by the parties for the Honorable Court and it seems from my reading at
least it was just an aside given by the Honorable Court to decide on that issue raised by PICOP but
it was not necessary to the decision of the court.
JUSTICE TINGA:

It was not necessary[?]

ATTY. AGABIN:

To the decision of the Court.

JUSTICE TINGA:

It was.

ATTY. AGABIN:

It was not necessary.

JUSTICE TINGA:

It was.

ATTY. AGABIN:

Yes.

JUSTICE TINGA:

And PICOP devoted quite a number of pages in [its] memorandum to that issue and so did the Court
[in its Decision].

ATTY. AGABIN:

Anyway, your Honor, we beg the Court to revisit, not to…29

Interpretation of the 1969 Document That Would Be in Harmony with the Constitution

To remove any doubts as to the contents of the 1969 Document, the purported Presidential
Warranty, below is a complete text thereof:

Republic of the Philippines

Department of Agriculture and Natural Resources
OFFICE OF THE SECRETARY
Diliman, Quezon City

D-53, Licenses (T.L.A. No. 43)

Bislig Bay Lumber Co., Inc.
(Bislig, Surigao)

July 29, 1969

Bislig Bay Lumber Co., Inc.
[unreadable word] Bldg.
Makati, Rizal

S i r s:

This has reference to the request of the Board of Investments through its Chairman in a letter dated
July 16, 1969 for a warranty on the boundaries of your concession area under Timber License
Agreement No. 43, as amended.

We are made to understand that your company is committed to support the first large scale
integrated wood processing complex hereinafter called: "The Project") and that such support will be
provided not only in the form of the supply of pulpwood and other wood materials from your
concession but also by making available funds generated out of your own operations, to supplement
PICOP’s operational sources of funds and other financial arrangements made by him. In order that
your company may provide such support effectively, it is understood that you will call upon your
stockholders to take such steps as may be necessary to effect a unification of managerial, technical,
economic and manpower resources between your company and PICOP.

It is in the public interest to promote industries that will enhance the proper conservation of our forest
resources as well as insure the maximum utilization thereof to the benefit of the national economy.
The administration feels that the PICOP project is one such industry which should enjoy priority over
the usual logging operations hitherto practiced by ordinary timber licensees: For this reason, we are
pleased to consider favorably the request.

We confirm that your Timber License Agreement No. 43, as amended (copy of which is attached as
Annex "A" hereof which shall form part and parcel of this warranty) definitely establishes the
boundary lines of your concession area which consists of permanent forest lands with an aggregate
area of 121,587 hectares and alienable or disposable lands with an aggregate area of approximately
21,580 hectares.

We further confirm that your tenure over the area and exclusive right to cut, collect and remove
sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be
renewable for other 25 years subject to compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions.

The peaceful and adequate enjoyment by you of your area as described and specified in your
aforesaid amended Timber License Agreement No. 43 is hereby warranted provided that pertinent
laws, regulations and the terms and conditions of your license agreement are observed.

Very truly yours,

(Sgd.) FERNANDO LOPEZ

Secretary of Agriculture
and Natural Resources

Encl.:

RECOMMENDED BY:
 (Sgd.) JOSE VIADO
Acting Director of Forestry

APPROVED:

(Sgd.) FERDINAND E. MARCOS

President of the Philippines

ACCEPTED:

BISLIG BAY LBR. CO., INC.

By:

(Sgd.) JOSE E. SORIANO

President

PICOP interprets this document in the following manner:

6.1 It is clear that the thrust of the government warranty is to establish a particular area defined by
boundary lines of TLA No. 43 for the PICOP Project. In consideration for PICOP’s commitment to
pursue and establish the project requiring huge investment/funding from stockholders and lending
institutions, the government provided a warranty that ensures the continued and exclusive right of
PICOP to source its raw materials needs from the forest and renewable trees within the areas
established.

6.2 As a long-term support, the warranty covers the initial twenty five (25) year period and
is renewable for periods of twenty five (25) years provided the project continues to exist and
operate. Very notably, the wording of the Presidential Warranty connotes that for as long as the
holder complies with all the legal requirements, the term of the warranty is not limited to fifty (50)
years but other twenty five (25) years.

6.3 Note must be made that the government warranted that PICOP’s tenure over the area and
exclusive right to cut, collect and remove saw timber and pulpwood shall be for the period ending on
26 April 1977 and said period to be renewable for other 25 years subject to "compliance with
constitutional and statutory requirements as well as existing policy on timber requirements". It is
clear that the renewal for other 25 years, not necessarily for another 25 years is guaranteed. This
explains why on 07 October 1977, TLA No. 43, as amended, was automatically renewed for another
period of twenty five (25) years to expire on 26 April 2002.30

PICOP’s interpretation of the 1969 Document cannot be sustained. PICOP’s claim that the term of
the warranty is not limited to fifty years, but that it extends to other fifty years, perpetually, violates
Section 2, Article XII of the Constitution which provides:

Section 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.

Mr. Justice Dante O. Tinga’s interpretation of the 1969 Document is much more in accord with the
laws and the Constitution. What one cannot do directly, he cannot do indirectly. Forest lands cannot
be alienated in favor of private entities. Granting to private entities, via a contract, a permanent,
irrevocable, and exclusive possession of and right over forest lands is tantamount to granting
ownership thereof. PICOP, it should be noted, claims nothing less than having exclusive, continuous
and uninterrupted possession of its concession areas,31 where all other entrants are illegal,32 and
where so-called "illegal settlers and squatters" are apprehended.33

IFMAs are production-sharing agreements concerning the development and utilization of natural
resources. As such, these 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." Any superior "contract" requiring the State to issue TLAs and IFMAs whenever
they expire clearly circumvents Section 2, Article XII of the Constitution, which provides for the only
permissible schemes wherein the full control and supervision of the State are not derogated: co-
production, joint venture, or production-sharing agreements within the time limit of twenty-five years,
renewable for another twenty-five years.

On its face, the 1969 Document was meant to expire on 26 April 2002, upon the expiration of the
expected extension of the original TLA period ending on 26 April 1977:

We further confirm that your tenure over the area and exclusive right to cut, collect and remove
sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be
renewable for other 25 years subject to compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions. 1avvphi 1

Any interpretation extending the application of the 1969 Document beyond 26 April 2002 and any
concession that may be granted to PICOP beyond the said date would violate the Constitution, and
no amount of legal hermeneutics can change that. Attempts of PICOP to explain its way out of this
Constitutional provision only led to absurdities, as exemplified in the following excerpt from the oral
arguments:

JUSTICE CARPIO:

The maximum trend of agreement to develop and utilize natural resources like forest products is 25
years plus another 25 years or a total of 50 years correct?

ATTY. AGABIN

Yes, Your Honor.

JUSTICE CARPIO:

That is true for the 1987, 1973, 1935 Constitution, correct?

ATTY. AGABIN:
Yes, Your Honor.

JUSTICE CARPIO:

The TLA here, TLA 43, expired, the first 25 years expired in 1977, correct?

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE CARPIO:

And it was renewed for another 25 years until 2002, the 50th year?

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE CARPIO:

Now, could PICOP before the end of the 50th year let’s say in 2001, one year before the expiration,
could it have asked for an extension of another 25 years of its TLA agreement[?]

ATTY. AGABIN:

I believe so, Your Honor.

JUSTICE CARPIO:

But the Constitution says, maximum of fifty years. How could you ask for another 25 years of its
TLA.

ATTY. AGABIN:

Well, your Honor, we believe on a question like this, this Honorable Court should balance the
interest.

JUSTICE CARPIO:

The Constitution is very clear, you have only a maximum of 50 years, 25 plus another 25. PICOP
could never have applied for an extension, for a third 25-year term whether under the 1935
Constitution, the 1973 Constitution and the 1987 Constitution, correct?

ATTY. AGABIN:

Your Honor, except that we are invoking the warranty, the terms of the warranty….

JUSTICE CARPIO:

Can the warranty prevail over the Constitution?

ATTY. AGABIN:

Well, it is a vested right, your Honor.

JUSTICE CARPIO:

Yes, but whatever it is, can it prevail over the Constitution?

ATTY. AGABIN:

The Constitution itself provides that vested rights should be ….

JUSTICE CARPIO:

If it is not in violation of specific provision of the Constitution. The Constitution says, 25 years plus
another 25 years, that’s the end of it. You mean to say that a President of the Philippines can give
somebody 1,000 years license?

ATTY. AGABIN:

Well, that is not our position, Your Honor. Because our position is that ….

JUSTICE CARPIO:

My question is, what is the maximum term, you said 50 years. So, my next question is, can PICOP
apply for an extension of another 25 years after 2002, the 50th year?

ATTY. AGABIN:

Yes, based on the contract of warranty, Your Honor, because the contract of warranty….

JUSTICE CARPIO:

But in the PICOP license it is very clear, it says here, provision 28, it says the license agreement is
for a total of 50 years. I mean it is very simple, the President or even Congress cannot pass a law
extending the license, whatever kind of license to utilize natural resources for more than fifty year[s].
I mean even the law cannot do that. It cannot prevail over the Constitution. Is that correct, Counsel?

ATTY. AGABIN:

It is correct, Your Honor, except that in this case, what is actually our application is that the law
provides for the conversion of existing TLA into IFMA.

JUSTICE CARPIO:

So, they file the petition for conversion before the end of the 50th year for IFMA.

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE CARPIO:

But IFMA is the same, it is based on Section 2, Article 12 of the Constitution, develop and utilize
natural resources because as you said when the new constitution took effect we did away with the
old licensing regime, we have now co-production, a production sharing, joint venture, direct
undertaking but still the same developing and utilizing the natural resources, still comes from section
2, Art. 12 of the Constitution. It is still a license but different format now.

ATTY. AGABIN:

It is correct, Your Honor, except that the regimes of joint venture, co-production and production
sharing are what is referred to in the constitution, Your Honor, and still covered…

JUSTICE CARPIO:

Yes, but it is covered by same 25 year[s], you mean to say people now can circumvent the 50 year
maximum term by calling their TLA as IFMA and after fifty years calling it ISMA, after another 50
years call it MAMA.

ATTY. AGABIN:

Yes, Your Honor. Because…

JUSTICE CARPIO:

It can be done.

ATTY. AGABIN:

That is provided for by the department itself.34

PICOP is, in effect, arguing that the DENR issued DAO No. 99-53 in order to provide a way to
circumvent the provisions of the Constitution limiting agreements for the utilization of natural
resources to a maximum period of fifty years. Official duties are, however, disputably considered to
be regularly performed,35 and good faith is always presumed.

DAO No. 99-53 was issued to change the means by which the government enters into an agreement
with private entities for the utilization of forest products. DAO No. 99-53 is a late response to the
change in the constitutional provisions on natural resources from the 1973 Constitution, which
allowed the granting of licenses to private entities,36 to the present Constitution, which provides for
co-production, joint venture, or production-sharing agreements as the permissible schemes wherein
private entities may participate in the utilization of forest products. Since the granting of timber
licenses ceased to be a permissible scheme for the participation of private entities under the present
Constitution, their operations should have ceased upon the issuance of DAO No. 99-53, the rule
regulating the schemes under the present Constitution. This would be iniquitous to those with
existing TLAs that would not have expired yet as of the issuance of DAO No. 99-53, especially those
with new TLAs that were originally set to expire after 10 or even 20 or more years. The DENR thus
inserted a provision in DAO No. 99-53 allowing these TLA holders to finish the period of their TLAs,
but this time as IFMAs, without the rigors of going through a new application, which they have
probably just gone through a few years ago.
Such an interpretation would not only make DAO No. 99-53 consistent with the provisions of the
Constitution, but would also prevent possible discrimination against new IFMA applicants:

ASSOCIATE JUSTICE DE CASTRO:

I ask this question because of your interpretation that the period of the IFMA, if your TLA is
converted into IFMA, would cover a new a fresh period of twenty-five years renewable by another
period of twenty-five years.

DEAN AGABIN:

Yes, Your Honor.

ASSOCIATE JUSTICE DE CASTRO:

Don’t you think that will, in effect, be invidious discrimination with respect to other applicants if you
are granted a fresh period of twenty-five years extendible to another twenty-five years?

DEAN AGABIN:

I don’t think it would be, Your Honor, considering that the IFMA is different regime from the TLA. And
not only that, there are considerations of public health and ecology which should come into play in
this case, and which we had explained in our opening statement and, therefore the provision of the
Constitution on the twenty-five limits for renewal of co-production, joint venture and production
sharing agreements, should be balanced with other values stated in the Constitution, like the value
of balanced ecology, which should be in harmony with the rhythm of nature, or the policy of forest
preservation in Article XII, Section 14 of the Constitution. These are all important policy
considerations which should be balanced against the term limits in Article II of the Constitution.

ASSOCIATE JUSTICE DE CASTRO:

The provision of this Administrative Order regarding automatic conversion may be reasonable, if, I
want to know if you agree with me, if we limit this automatic conversion to the remaining period of
the TLA, because in that case there will be a valid ground to make a distinction between those with
existing TLA and those who are applying for the first time for IFMA?

DEAN AGABIN:

Well, Your Honor, we beg to disagree, because as I said TLA’s are completely different from IFMA.
The TLA has no production sharing or co-production agreement or condition. All that the licensee
has to do is, to pay forest charges, taxes and other impositions from the local and national
government. On the other hand, the IFMAs contained terms and conditions which are completely
different, and that they either impose co-production, production sharing or joint venture terms. So it’s
a completely different regime, Your Honor.

ASSOCIATE JUSTICE DE CASTRO:

Precisely, that is the reason why there should be an evaluation of what you mentioned earlier of the
development plan.

DEAN AGABIN:
Yes, Your Honor.

ASSOCIATE JUSTICE DE CASTRO:

So it will be reasonable to convert a TLA into an IFMA without considering the development plan
submitted by other applicants or the development plan itself of one seeking conversion into IFMA if it
will only be limited to the period, the original period of the TLA. But once you go beyond the period of
the TLA, then you will be, the DENR is I think should evaluate the different proposals of the
applicants if we are thinking of a fresh period of twenty-five years, and which is renewable under the
Constitution by another twenty-five years. So the development plan will be important in this case, the
submission of the development plan of the different applicants must be considered. So I don’t
understand why you mentioned earlier that the development plan will later on be a subject matter of
negotiation between the IFMA grantee and the government. So it seems that it will be too late in the
day to discuss that if you have already converted the TLA into IFMA or if the government has
already granted the IFMA, and then it will later on study the development plan, whether it is viable or
not, or it is sustainable or not, and whether the development plan of the different applicants are, are,
which of the development plan of the different applicants is better or more advantageous to the
government.37

PICOP insists that the alleged Presidential Warranty, having been signed on 29 July 1969, could not
have possibly considered the limitations yet to be imposed by future issuances, such as the 1987
Constitution. However, Section 3, Article XVIII of said Constitution, provides:

Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and
other executive issuances not inconsistent with this Constitution shall remain operative until
amended, repealed, or revoked.

In the recent case Sabio v. Gordon,38 we ruled that "(t)he clear import of this provision is that all
existing laws, executive orders, proclamations, letters of instructions and other executive issuances
inconsistent or repugnant to the Constitution are repealed."

When a provision is susceptible of two interpretations, "the one that will render them operative and
effective and harmonious with other provisions of law"39 should be adopted. As the interpretations in
the assailed Decision and in Mr. Justice Tinga’s ponencia are the ones that would not make the
subject Presidential Warranty unconstitutional, these are what we shall adopt.

Purpose of the 1969 Document: Assurance That the Boundaries of Its Concession Area Would Not
Be Altered Despite the Provision in the TLA that the DENR Secretary Can Amend Said Boundaries

In the assailed Decision, we ruled that the 1969 Document cannot be considered a contract that
would bind the government regardless of changes in policy and the demands of public interest and
social welfare. PICOP claims this conclusion "did not take into consideration that PICOP already had
a valid and current TLA before the contract with warranty was signed in 1969."40 PICOP goes on:
"The TLA is a license that equips any TLA holder in the country for harvesting of timber. A TLA is
signed by the Secretary of the DANR now DENR. The Court ignored the significance of the need for
another contract with the Secretary of the DANR but this time with the approval of the President of
the Republic."41 PICOP then asks us: "If PICOP/BBLCI was only an ordinary TLA holder, why will it
go through the extra step of securing another contract just to harvest timber when the same can be
served by the TLA signed only by the Secretary and not requiring the approval of the President of
the Republic(?)"42
The answer to this query is found in TLA No. 43 itself wherein, immediately after the boundary lines
of TLA No. 43 were established, the following conditions were given:

This license is granted to the said party of the second part upon the following express conditions:

I. That authority is granted hereunder to the party of the second part43 to cut, collect or
remove firewood or other minor forest products from the area embraced in this license
agreement except as hereinafter provided.

II. That the party of the first part44 may amend or alter the description of the boundaries of the
area covered by this license agreement to conform with official surveys and that the decision
of the party of the first part as to the exact location of the said boundaries shall be final.

III. That if the party of the first part deems it necessary to establish on the ground the
boundary lines of the area granted under this license agreement, the party of the second part
shall furnish to the party of the first part or its representatives as many laborers as it needs
and all the expenses to be incurred on the work including the wages of such laborers shall
be paid by the party of the second part.45

Thus, BBLCI needed an assurance that the boundaries of its concession area, as established in TLA
No. 43, as amended, would not be altered despite this provision. Hence, BBLCI endeavored to
obtain the 1969 Document, which provides:

We confirm that your Timber License Agreement No. 43, as amended (copy of which is attached as
Annex "A" hereof which shall form part and parcel of this warranty) definitely establishes the
boundary lines of your concession area which consists of permanent forest lands with an aggregate
area of 121,587 hectares and alienable or disposable lands with an aggregate area of approximately
21,580 hectares.

We further confirm that your tenure over the area and exclusive right to cut, collect and remove
sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be
renewable for other 25 years subject to compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions.

The peaceful and adequate enjoyment by you of your area as described and specified in your
aforesaid amended Timber License Agreement No. 43 is hereby warranted provided that pertinent
laws, regulations and the terms and conditions of your license agreement are observed.46

In Koa v. Court of Appeals,47 we ruled that a warranty is a collateral undertaking and is merely part of
a contract. As a collateral undertaking, it follows the principal wherever it goes. When this was
pointed out by the Solicitor General, PICOP changed its designation of the 1969 Document from
"Presidential Warranty" or "government warranty" in all its pleadings prior to our Decision, to
"contract with warranty" in its Motion for Reconsideration. This, however, is belied by the statements
in the 29 July 1969 Document, which refers to itself as "this warranty."

Re: Allegation That There Were Mutual Contract Considerations

Had the 29 July 1969 Document been intended as a contract, it could have easily said so. More
importantly, it could have clearly defined the mutual considerations of the parties thereto. It could
have also easily provided for the sanctions for the breach of the mutual considerations specified
therein. PICOP had vigorously argued that the 1969 Document was a contract because of these
mutual considerations, apparently referring to the following paragraph of the 1969 Document:

We are made to understand that your company is committed to support the first large scale
integrated wood processing complex hereinafter called: "The Project") and that such support will be
provided not only in the form of the supply of pulpwood and other wood materials from your
concession but also by making available funds generated out of your own operations, to supplement
PICOP’s operational surces (sic) of funds and other financial arrangements made by him. In order
that your company may provide such support effectively, it is understood that you will call upon your
stockholders to take such steps as may be necessary to effect a unification of managerial, technical,
economic and manpower resources between your company and PICOP. 1avv phi 1

This provision hardly evinces a contract consideration (which, in PICOP’s interpretation, is in

exchange for the exclusive and perpetual tenure over 121,587 hectares of forest land and 21,580
hectares of alienable and disposable lands). As elucidated by PICOP itself in bringing up the
Investment Incentives Act which we shall discuss later, and as shown by the tenor of the 1969
Document, the latter document was more of a conferment of an incentive for BBLCI’s investment
rather than a contract creating mutual obligations on the part of the government, on one hand, and
BBLCI, on the other. There was no stipulation providing for sanctions for breach if BBLCI’s being
"committed to support the first large scale integrated wood processing complex" remains a
commitment. Neither did the 1969 Document give BBLCI a period within which to pursue this
commitment.

According to Article 1350 of the Civil Code, "(i)n onerous contracts the cause is understood to be, for
each contracting party, the prestation or promise of a thing or service by the other."48 Private
investments for one’s businesses, while indeed eventually beneficial to the country and deserving to
be given incentives, are still principally and predominantly for the benefit of the investors. Thus, the
"mutual" contract considerations by both parties to this alleged contract would be both for the benefit
of one of the parties thereto, BBLCI, which is not obligated by the 1969 Document to surrender a
share in its proceeds any more than it is already required by its TLA and by the tax laws.

PICOP’s argument that its investments can be considered as contract consideration derogates the
rule that "a license or a permit is not a contract between the sovereignty and the licensee or
permittee, and is not a property in the constitutional sense, as to which the constitutional proscription
against the impairment of contracts may extend." All licensees obviously put up investments,
whether they are as small as a tricycle unit or as big as those put up by multi-billion-peso
corporations. To construe these investments as contract considerations would be to abandon the
foregoing rule, which would mean that the State would be bound to all licensees, and lose its power
to revoke or amend these licenses when public interest so dictates.

The power to issue licenses springs from the State’s police power, known as "the most essential,
insistent and least limitable of powers, extending as it does to all the great public
needs."49 Businesses affecting the public interest, such as the operation of public utilities and those
involving the exploitation of natural resources, are mandated by law to acquire licenses. This is so in
order that the State can regulate their operations and thereby protect the public interest. Thus, while
these licenses come in the form of "agreements," e.g., "Timber License Agreements," they cannot be
considered contracts under the non-impairment clause.50

PICOP found this argument "lame," arguing, thus:

43. It is respectfully submitted that the aforesaid pronouncement in the Decision is an egregious and
monumental error.
44. The Decision could not dismiss as "preposterous" the mutual covenants in the Presidential
Warranty which calls for a huge investment of Php500 million at that time in 1969 out of which
Php268,440,000 raised from domestic foreign lending institution to establish the first large scale
integrated wood processing complex in the Philippines.

45. The Decision puts up a lame explanation that "all licensees put up investments in pursuing their
business"

46. Now there are about a hundred timber licenses issued by the Government thru the DENR, but
these are ordinary timber licenses which involve the mere cutting of timber in the concession area,
and nothing else. Records in the DENR shows that no timber licensee has put up an integrated large
wood processing complex in the Philippines except PICOP.51

PICOP thus argues on the basis of quantity, and wants us to distinguish between the investment of
the tricycle driver and that of the multi-billion corporation. However, not even billions of pesos in
investment can change the fact that natural resources and, therefore, public interest are involved in
PICOP’s venture, consequently necessitating the full control and supervision by the State as
mandated by the Constitution. Not even billions of pesos in investment can buy forest lands, which is
practically what PICOP is asking for by interpreting the 1969 Document as a contract giving it
perpetual and exclusive possession over such lands. Among all TLA holders in the Philippines,
PICOP has, by far, the largest concession area at 143,167 hectares, a land area more than the size
of two Metro Manilas.52 How can it not expect to also have the largest investment?

Investment Incentives Act

PICOP then claims that the contractual nature of the 1969 Document was brought about by its
issuance in accordance with and pursuant to the Investment Incentives Act. According to PICOP:

The conclusion in the Decision that to construe PICOP’s investments as a consideration in a

contract would be to stealthily render ineffective the principle that a license is not a contract between
the sovereignty and the licensee is so flawed since the contract with the warranty dated 29 July 1969
was issued by the Government in accordance with and pursuant to Republic Act No. 5186,
otherwise known as "The Investment Incentives Act."53

PICOP then proceeds to cite Sections 2 and 4(d) and (e) of said act:

Section 2. Declaration of Policy – To accelerate the sound development of the national economy in
consonance with the principles and objectives of economic nationalism, and in pursuance of a
planned, economically feasible and practicable dispersal of industries, under conditions which will
encourage competition and discharge monopolies, it is hereby declared to be the policy of the state
to encourage Filipino and foreign investments, as hereinafter set out, in projects to develop
agricultural, mining and manufacturing industries which increase national income most at the least
cost, increase exports, bring about greater economic stability, provide more opportunities for
employment, raise the standards of living of the people, and provide for an equitable distribution of
wealth. It is further declared to be the policy of the state to welcome and encourage foreign capital to
establish pioneer enterprises that are capital intensive and would utilize a substantial amount of
domestic raw materials, in joint venture with substantial Filipino capital, whenever available.

Section 4. Basic Rights and Guarantees. – All investors and enterprises are entitled to the basic
rights and guarantees provided in the constitution. Among other rights recognized by the
Government of the Philippines are the following:
xxxx

d) Freedom from Expropriation. – There shall be no expropriation by the government of the property
represented by investments or of the property of enterprises except for public use or in the interest of
national welfare and defense and upon payment of just compensation. x x x.

e) Requisition of Investment. – There shall be no requisition of the property represented by the

investment or of the property of enterprises, except in the event of war or national emergency and
only for the duration thereof. Just compensation shall be determined and paid either at the time of
requisition 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
investment was originally made and at the exchange rate prevailing at the time of remittance, subject
to the provisions of Section seventy-four of republic Act Numbered Two hundred sixty-five.

Section 2 speaks of the policy of the State to encourage Filipino and foreign investments. It does not
speak of how this policy can be implemented. Implementation of this policy is tackled in Sections 5
to 12 of the same law,54 which PICOP failed to mention, and for a good reason. None of the 24
incentives enumerated therein relates to, or even remotely suggests that, PICOP’s proposition that
the 1969 Document is a contract.

PICOP could indeed argue that the enumeration is not exclusive. Certainly, granting incentives to
investors, whether included in the enumeration or not, would be an implementation of this policy.
However, it is presumed that whatever incentives may be given to investors should be within the
bounds of the laws and the Constitution. The declaration of policy in Section 2 cannot, by any stretch
of the imagination, be read to provide an exception to either the laws or, heaven forbid, the
Constitution. Exceptions are never presumed and should be convincingly proven. Section 2 of the
Investment Incentives Act cannot be read as exempting investors from the Constitutional provisions
(1) prohibiting private ownership of forest lands; (2) providing for the complete control and
supervision by the State of exploitation activities; or (3) limiting exploitation agreements to twenty-
five years, renewable for another twenty-five years.

Section 4(d) and (e), on the other hand, is a recognition of rights already guaranteed under the
Constitution. Freedom from expropriation is granted under Section 9 of Article III55 of the
Constitution, while the provision on requisition is a negative restatement of Section 6, Article XII.56

Refusal to grant perpetual and exclusive possession to PICOP of its concession area would not
result in the expropriation or requisition of PICOP’s property, as these forest lands belong to the
State, and not to PICOP. This is not changed by PICOP’s allegation that:

Since it takes 35 years before the company can go back and harvest their residuals in a logged-over
area, it must be assured of tenure in order to provide an inducement for the company to manage and
preserve the residuals during their growth period. This is a commitment of resources over a span of
35 years for each plot for each cycle. No company will undertake the responsibility and cost involved
in policing, preserving and managing residual forest areas until it were sure that it had firm title to the
timber.57

The requirement for logging companies to preserve and maintain forest areas, including the
reforestation thereof, is one of the prices a logging company must pay for the exploitation thereof.
Forest lands are meant to be enjoyed by countless future generations of Filipinos, and not just by
one logging company. The requirements of reforestation and preservation of the concession areas
are meant to protect them, the future generations, and not PICOP. Reforestation and preservation of
the concession areas are not required of logging companies so that they would have something to
cut again, but so that the forest would remain intact after their operations. That PICOP would not
accept the responsibility to preserve its concession area if it is not assured of tenure thereto does
not speak well of its corporate policies.

Conclusion

In sum, PICOP was not able to prove either of the two things it needed to prove to be entitled to a
Writ of Mandamus against the DENR Secretary. The 1969 Document is not a contract recognized
under the non-impairment clause and, even if we assume for the sake of argument that it is, it did
not enjoin the government to issue an IFMA in 2002 either. These are the essential elements in
PICOP’s cause of action, and the failure to prove the same warrants a dismissal of PICOP’s Petition
for Mandamus, as not even PICOP’s compliance with all the administrative and statutory
requirements can save its Petition now.

Whether PICOP Has Complied with the Statutory and Administrative Requirements for the
Conversion of the TLA to an IFMA

In the assailed Decision, our ruling was based on two distinct grounds, each one being sufficient in
itself for us to rule that PICOP was not entitled to a Writ of Mandamus: (1) the 1969 Document, on
which PICOP hinges its right to compel the issuance of an IFMA, is not a contract; and (2) PICOP
has not complied with all administrative and statutory requirements for the issuance of an IFMA.

When a court bases its decision on two or more grounds, each is as authoritative as the other and
neither is obiter dictum.58 Thus, both grounds on which we based our ruling in the assailed Decision
would become judicial dictum, and would affect the rights and interests of the parties to this case
unless corrected in this Resolution on PICOP’s Motion for Reconsideration. Therefore, although
PICOP would not be entitled to a Writ of Mandamus even if the second issue is resolved in its favor,
we should nonetheless resolve the same and determine whether PICOP has indeed complied with
all administrative and statutory requirements for the issuance of an IFMA.

While the first issue (on the nature of the 1969 Document) is entirely legal, this second issue (on
PICOP’s compliance with administrative and statutory requirements for the issuance of an IFMA)
has both legal and factual sub-issues. Legal sub-issues include whether PICOP is legally required to
(1) consult with and acquire an approval from the Sanggunian concerned under Sections 26 and 27
of the Local Government Code; and (2) acquire a Certification from the National Commission on
Indigenous Peoples (NCIP) that the concession area does not overlap with any ancestral domain.
Factual sub-issues include whether, at the time it filed its Petition for Mandamus, PICOP had
submitted the required Five-Year Forest Protection Plan and Seven-Year Reforestation Plan and
whether PICOP had paid all forest charges.

For the factual sub-issues, PICOP invokes the doctrine that factual findings of the trial court,
especially when upheld by the Court of Appeals, deserve great weight. However, deserving of even
greater weight are the factual findings of administrative agencies that have the expertise in the area
of concern. The contentious facts in this case relate to the licensing, regulation and management of
forest resources, the determination of which belongs exclusively to the DENR:

SECTION 4. Mandate. – The Department shall be the primary government agency responsible for
the conservation, management, development and proper use of the country’s environment and
natural resources, specifically forest and grazing lands, mineral resources, including those in
reservation and watershed areas, and lands of the public domain, as well as the licensing and
regulation of all natural resources as may be provided for by law in order to ensure equitable sharing
of the benefits derived therefrom for the welfare of the present and future generations of Filipinos.59
When parties file a Petition for Certiorari against judgments of administrative agencies tasked with
overseeing the implementation of laws, the findings of such administrative agencies are entitled to
great weight. In the case at bar, PICOP could not have filed a Petition for Certiorari, as the DENR
Secretary had not yet even determined whether PICOP should be issued an IFMA. As previously
mentioned, when PICOP’s application was brought to a standstill upon the evaluation that PICOP
had yet to comply with the requirements for the issuance of an IFMA, PICOP refused to attend
further meetings with the DENR and instead filed a Petition for Mandamus against the latter. By
jumping the gun, PICOP did not diminish the weight of the DENR Secretary’s initial determination.

Forest Protection and Reforestation Plans

The Performance Evaluation Team tasked to appraise PICOP’s performance on its TLA No. 43
found that PICOP had not submitted its Five-Year Forest Protection Plan and its Seven-Year
Reforestation Plan.60

In its Motion for Reconsideration, PICOP asserts that, in its Letter of Intent dated 28 August 2000
and marked as Exhibit L in the trial court, there was a reference to a Ten-Year Sustainable Forest
Management Plan (SFMP), in which a Five-Year Forest Protection Plan and a Seven-Year
Reforestation Plan were allegedly incorporated. PICOP submitted a machine copy of a certified
photocopy of pages 50-67 and 104-110 of this SFMP in its Motion for Reconsideration. PICOP
claims that the existence of this SFMP was repeatedly asserted during the IFMA application
process.61

Upon examination of the portions of the SFMP submitted to us, we cannot help but notice that
PICOP’s concept of forest protection is the security of the area against "illegal" entrants and settlers.
There is no mention of the protection of the wildlife therein, as the focus of the discussion of the
silvicultural treatments and the SFMP itself is on the protection and generation of future timber
harvests. We are particularly disturbed by the portions stating that trees of undesirable quality shall
be removed.

However, when we required the DENR Secretary to comment on PICOP’s Motion for
Reconsideration, the DENR Secretary did not dispute the existence of this SFMP, or question
PICOP’s assertion that a Ten-Year Forest Protection Plan and a Ten-Year Reforestation Plan are
already incorporated therein. Hence, since the agency tasked to determine compliance with IFMA
administrative requirements chose to remain silent in the face of allegations of compliance, we are
constrained to withdraw our pronouncement in the assailed Decision that PICOP had not submitted
a Five-Year Forest Protection Plan and a Seven-Year Reforestation Plan for its TLA No. 43. As
previously mentioned, the licensing, regulation and management of forest resources are the primary
responsibilities of the DENR.62

The compliance discussed above is, of course, only for the purpose of determining PICOP’s
satisfactory performance as a TLA holder, and covers a period within the subsistence of PICOP’s
TLA No. 43. This determination, therefore, cannot prohibit the DENR from requiring PICOP, in the
future, to submit proper forest protection and reforestation plans covering the period of the proposed
IFMA.

Forest Charges

In determining that PICOP did not have unpaid forest charges, the Court of Appeals relied on the
assumption that if it were true that PICOP had unpaid forest charges, it should not have been issued
an approved Integrated Annual Operation Plan (IAOP) for the year 2001-2002 by Secretary Alvarez
himself.63
In the assailed Decision, we held that the Court of Appeals had been selective in its evaluation of the
IAOP, as it disregarded the part thereof that shows that the IAOP was approved subject to several
conditions, not the least of which was the submission of proof of the updated payment of forest
charges from April 2001 to June 2001.64 We also held that even if we considered for the sake of
argument that the IAOP should not have been issued if PICOP had existing forestry accounts, the
issuance of the IAOP could not be considered proof that PICOP had paid the same. Firstly, the best
evidence of payment is the receipt thereof. PICOP has not presented any evidence that such
receipts were lost or destroyed or could not be produced in court.65 Secondly, the government
cannot be estopped by the acts of its officers. If PICOP has been issued an IAOP in violation of the
law, allegedly because it may not be issued if PICOP had existing forestry accounts, the government
cannot be estopped from collecting such amounts and providing the necessary sanctions therefor,
including the withholding of the IFMA until such amounts are paid.

We therefore found that, as opposed to the Court of Appeals’ findings, which were based merely on
estoppel of government officers, the positive and categorical evidence presented by the DENR
Secretary was more convincing with respect to the issue of payment of forestry charges:

1. Forest Management Bureau (FMB) Senior Forest Management Specialist (SFMS) Ignacio
M. Evangelista testified that PICOP had failed to pay its regular forest charges covering the
period from 22 September 2001 to 26 April 2002 in the total amount of
₱15,056,054.0566 PICOP also allegedly paid late most of its forest charges from 1996
onwards, by reason of which, PICOP is liable for a surcharge of 25% per annum on the tax
due and interest of 20% per annum which now amounts to ₱150,169,485.02.67 Likewise,
PICOP allegedly had overdue and unpaid silvicultural fees in the amount of ₱2,366,901.00
as of 30 August 2002.68 Summing up the testimony, therefore, it was alleged that PICOP had
unpaid and overdue forest charges in the sum of ₱167,592,440.90 as of 10 August 2002.69

2. Collection letters were sent to PICOP, but no official receipts are extant in the DENR
record in Bislig City evidencing payment of the overdue amount stated in the said collection
letters.70 There were no official receipts for the period covering 22 September 2001 to 26
April 2002.

We also considered these pieces of evidence more convincing than the other ones presented by
PICOP:

1. PICOP presented the certification of Community Environment and Natural Resources

Office (CENRO) Officer Philip A. Calunsag, which refers only to PICOP’s alleged payment of
regular forest charges covering the period from 14 September 2001 to 15 May 2002.71 We
noted that it does not mention similar payment of the penalties, surcharges and interests that
PICOP incurred in paying late several forest charges, which fact was not rebutted by PICOP.

2. The 27 May 2002 Certification by CENRO Calunsag specified only the period covering 14
September 2001 to 15 May 2002 and the amount of P53,603,719.85 paid by PICOP without
indicating the corresponding volume and date of production of the logs. This is in contrast to
the findings of SFMS Evangelista, which cover the period from CY 1996 to 30 August 2002
and includes penalties, interests, and surcharges for late payment pursuant to DAO 80,
series of 1987.

3. The 21 August 2002 PICOP-requested certification issued by Bill Collector Amelia D.

Arayan, and attested to by CENRO Calunsag himself, shows that PICOP paid only regular
forest charges for its log production covering 1 July 2001 to 21 September 2001. However,
there were log productions after 21 September 2001, the regular forest charges for which
 have not been paid, amounting to ₱15,056,054.05.72 The same certification shows delayed
payment of forest charges, thereby corroborating the testimony of SFMS Evangelista and
substantiating the imposition of penalties and surcharges.

In its Motion for Reconsideration, PICOP claims that SFMS Evangelista is assigned to an office that
has nothing to do with the collection of forest charges, and that he based his testimony on the
Memoranda of Forest Management Specialist II (FMS II) Teofila Orlanes and DENR, Bislig City Bill
Collector Amelia D. Arayan, neither of whom was presented to testify on his or her Memorandum.
PICOP also submitted an Addendum to Motion for Reconsideration, wherein it appended certified
true copies of CENRO Summaries with attached Official Receipts tending to show that PICOP had
paid a total of ₱81,184,747.70 in forest charges for 10 January 2001 to 20 December 2002,
including the period during which SFMS Evangelista claims PICOP did not pay forest charges (22
September 2001 to 26 April 2002).

Before proceeding any further, it is necessary for us to point out that, as with our ruling on the forest
protection and reforestation plans, this determination of compliance with the payment of forest
charges is exclusively for the purpose of determining PICOP’s satisfactory performance on its TLA
No. 43. This cannot bind either party in a possible collection case that may ensue.

An evaluation of the DENR Secretary’s position on this matter shows a heavy reliance on the
testimony of SFMS Evangelista, making it imperative for us to strictly scrutinize the same with
respect to its contents and admissibility.

PICOP claims that SFMS Evangelista’s office has nothing to do with the collection of forest charges.
According to PICOP, the entity having administrative jurisdiction over it is CENRO, Bislig City by
virtue of DENR Administrative Order No. 96-36, dated 20 November 1996, which states:

1. In order for the DENR to be able to exercise closer and more effective supervision, management
and control over the forest resources within the areas covered by TLA No. 43, PTLA No. 47 and
IFMA No. 35 of the PICOP Resources, Inc., (PRI) and, at the same time, provide greater facility in
the delivery of DENR services to various publics, the aforesaid forest holdings of PRI are hereby
placed under the exclusive jurisdiction of DENR Region No. XIII with the CENR Office at Bislig,
Surigao del Sur, as directly responsible thereto. x x x.

We disagree. Evangelista is an SFMS assigned at the Natural Forest Management Division of the
FMB, DENR. In Evangelista’s aforementioned affidavit submitted as part of his direct examination,
Evangelista enumerated his duties and functions as SFMS:

1. As SFMS, I have the following duties and functions:

a) To evaluate and act on cases pertaining to forest management referred to in the

Natural forest Management Division;

b) To monitor, verify and validate forest management and related activities by timber
licences as to their compliance to approved plans and programs;

c) To conduct investigation and verification of compliance by timber

licenses/permittees to existing DENR rules and regulations;

d) To gather field data and information to be used in the formulation of forest policies
and regulations; and
 e) To perform other duties and responsibilities as may be directed by superiors.73

PICOP also alleges that the testimony of SFMS Evangelista was based on the
aforementioned Memoranda of Orlanes and Arayan and that, since neither Orlanes nor
Arayan was presented as a witness, SFMS Evangelista’s testimony should be deemed
hearsay. SFMS Evangelista’s 1 October 2002 Affidavit,74 which was offered as part of his
testimony, provides:

2. Sometime in September, 2001 the DENR Secretary was furnished a copy of forest
Management Specialist II (FMS II) Teofila L. Orlanes’ Memorandum dated September 24,
2001 concerning unopaid forest charges of PICOP. Attached to the said Memorandum was a
Memorandum dated September 19, 2001 of Amelia D. Arayan, Bill collector of the DENR
R13-14, Bislig City. Copies of the said Memoranda are attached as Annexes 1 and 2,
respectively.

3. The said Memoranda were referred to the FMB Director for appropriate action.

4. Thus, on August 5, 2002, I was directed by the FMB Director to proceed to Region 13 to
gather forestry-related data and validate the report contained in the Memoranda of Ms.
Orlanes and Arayan.

5. On August 6, 2002, I proceeded to DENR Region 13 in Bislig City. A copy of my Travel

Order is attached as Annex 3.

6. Upon my arrival at CENRO, Bislig, surigao del Sur, I coordinated with CENRO Officer
Philip A. Calunsag and requested him to make available to me the records regarding the
forest products assessments of PICOP.

7. After I was provided with the requested records, I evaluated and collected the data.

8. After the evaluation, I found that the unpaid forest charges adverted to in the Memoranda
of Mr. Orlanes and Arayan covering the period from May 8, 2001 to July 7, 2001 had already
been paid but late. I further found out that PICOP had not paid its forest charges covering the
period from September 22, 2001 to April 26, 2002 in the total amount of ₱15,056,054.05.

9. I also discovered that from 1996 up to august 30, 2002, PICOP paid late some of its forest
charges in 1996 and consistently failed to pay late its forest charges from 1997 up to the
present time.

10. Under Section 7.4 of DAO No. 80 Series of 197\87 and Paragraph (4a), Section 10 of
BIR revenue Regulations No. 2-81 dated November 18, 1980, PICOP is mandated to pay a
surcharge of 25% per annum of the tax due and interest of 20% per annum for late payment
of forest charges.

11. The overdue unpaid forest charges of PICOP as shown in the attached tabulation
marked as Annex 4 hereof is ₱150,169,485.02. Likewise, PICOP has overdue and unpaid
silvicultural fees in the amount of ₱2,366,901.00 from 1996 to the present.

12. In all, PICOP has an outstanding and overdue total obligation of ₱167,592,440.90 as of
August 30, 2002 based on the attached tabulation which is marked as Annex 5 hereof.75
Clearly, SFMS Evangelista had not relied on the Memoranda of Orlanes and Arayan. On the
contrary, he traveled to Surigao del Sur in order to verify the contents of these Memoranda. SFMS
Evangelista, in fact, revised the findings therein, as he discovered that certain forest charges
adverted to as unpaid had already been paid.

This does not mean, however, that SFMS Evangelista’s testimony was not hearsay. A witness may
testify only on facts of which he has personal knowledge; that is, those derived from his perception,
except in certain circumstances allowed by the Rules.76 Otherwise, such testimony is considered
hearsay and, hence, inadmissible in evidence.77

SFMS Evangelista, while not relying on the Memoranda of Orlanes and Arayan, nevertheless relied
on records, the preparation of which he did not participate in.78 These records and the persons who
prepared them were not presented in court, either. As such, SFMS Evangelista’s testimony, insofar
as he relied on these records, was on matters not derived from his own perception, and was,
therefore, hearsay.

Section 44, Rule 130 of the Rules of Court, which speaks of entries in official records as an
exception to the hearsay rule, cannot excuse the testimony of SFMS Evangelista. Section 44
provides:

SEC. 44. Entries in official records. – Entries in official records made in the performance of his duty
by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined
by law, are prima facie evidence of the facts therein stated.

In Africa v. Caltex,79 we enumerated the following requisites for the admission of entries in official
records as an exception to the hearsay rule: (1) the entries were made by a public officer or a private
person in the performance of a duty; (2) the performance of the duty is especially enjoined by law;
(3) the public officer or the private person had sufficient knowledge of the facts stated by him, which
must have been acquired by him personally or through official information.

The presentation of the records themselves would, therefore, have been admissible as an exception
to the hearsay rule even if the public officer/s who prepared them was/were not presented in court,
provided the above requisites could be adequately proven. In the case at bar, however, neither the
records nor the persons who prepared them were presented in court. Thus, the above requisites
cannot be sufficiently proven. Also, since SFMS Evangelista merely testified based on what those
records contained, his testimony was hearsay evidence twice removed, which was one step too
many to be covered by the official-records exception to the hearsay rule.

SFMS Evangelista’s testimony of nonpayment of forest charges was, furthermore, based on his
failure to find official receipts corresponding to billings sent to PICOP. As stated above, PICOP
attached official receipts in its Addendum to Motion for Reconsideration to this Court. While this
course of action is normally irregular in judicial proceedings, we merely stated in the assailed
Decision that "the DENR Secretary has adequately proven that PICOP has, at this time, failed to
comply with administrative and statutory requirements for the conversion of TLA No. 43 into an
IFMA,"80 and that "this disposition confers another chance to comply with the foregoing
requirements."81

In view of the foregoing, we withdraw our pronouncement that PICOP has unpaid forestry charges,
at least for the purpose of determining compliance with the IFMA requirements.

NCIP Certification
The Court of Appeals held that PICOP need not comply with Section 59 of Republic Act No. 8371,
which requires prior certification from the NCIP that the areas affected do not overlap with any
ancestral domain before any IFMA can be entered into by the government. According to the Court of
Appeals, Section 59 should be interpreted to refer to ancestral domains that have been duly
established as such by the continuous possession and occupation of the area concerned by
indigenous peoples since time immemorial up to the present. The Court of Appeals held that PICOP
had acquired property rights over TLA No. 43 areas, being in exclusive, continuous and
uninterrupted possession and occupation of these areas since 1952 up to the present.

In the assailed Decision, we reversed the findings of the Court of Appeals. Firstly, the Court of
Appeals ruling defies the settled jurisprudence we have mentioned earlier, that a TLA is neither a
property nor a property right, and that it does not create a vested right.82

Secondly, the Court of Appeals’ resort to statutory construction is misplaced, as Section 59 of

Republic Act No. 8379 is clear and unambiguous:

SEC. 59. Certification Precondition. – All departments and other governmental agencies shall
henceforth be strictly enjoined from issuing, renewing or granting any concession, license or lease,
or entering into any production-sharing agreement, without prior certification from the NCIP that the
area affected does not overlap with any ancestral domain. Such certification shall only be issued
after a field-based investigation is conducted by the Ancestral Domains Office of the area
concerned: Provided, That no certification shall be issued by the NCIP without the free and prior
informed and written consent of the ICCs/IPs concerned: Provided, further, That no department,
government agency or government-owned or controlled corporation may issue new concession,
license, lease, or production sharing agreement while there is a pending application for a CADT:
Provided, finally, That the ICCs/IPs shall have the right to stop or suspend, in accordance with this
Act, any project that has not satisfied the requirement of this consultation process.

PICOP had tried to put a cloud of ambiguity over Section 59 of Republic Act No. 8371 by invoking
the definition of Ancestral Domains in Section 3(a) thereof, wherein the possesssion by Indigenous
Cultural Communities/Indigenous Peoples (ICCs/IPs) must have been continuous to the present.
However, we noted the exception found in the very same sentence invoked by PICOP:

a) Ancestral domains – Subject to Section 56 hereof, refers to all areas generally belonging to
ICCs/IPs comprising lands, inland waters, coastal areas, and natural resources therein, held under a
claim of ownership, occupied or possessed by ICCs/IPs, by themselves or through their ancestors,
communally or individually since time immemorial, continuously to the present except when
interrupted by war, force majeure or displacement by force, deceit, stealth or as a consequence of
government projects or any other voluntary dealings entered into by government and private
individuals/corporations, and which are necessary to ensure their economic, social and cultural
welfare. It shall include ancestral lands, forests, pasture, residential, agricultural, and other lands
individually owned whether alienable and disposable or otherwise, hunting grounds, burial grounds,
worship areas, bodies of water, mineral and other natural resources, and lands which may no longer
be exclusively occupied by ICCs/IPs but from which they traditionally had access to for their
subsistence and traditional activities, particularly the home ranges of ICCs/IPs who are still nomadic
and/or shifting cultivators;

Ancestral domains, therefore, remain as such even when possession or occupation of these areas
has been interrupted by causes provided under the law, such as voluntary dealings entered into by
the government and private individuals/corporations. Consequently, the issuance of TLA No. 43 in
1952 did not cause the ICCs/IPs to lose their possession or occupation over the area covered by
TLA No. 43.
Thirdly, we held that it was manifestly absurd to claim that the subject lands must first be proven to
be part of ancestral domains before a certification that the lands are not part of ancestral domains
can be required, and invoked the separate opinion of now Chief Justice Reynato Puno in Cruz v.
Secretary of DENR83:

As its subtitle suggests, [Section 59 of R.A. No. 8371] requires as a precondition for the issuance of
any concession, license or agreement over natural resources, that a certification be issued by the
NCIP that the area subject of the agreement does not lie within any ancestral domain. The provision
does not vest the NCIP with power over the other agencies of the State as to determine whether to
grant or deny any concession or license or agreement. It merely gives the NCIP the authority to
ensure that the ICCs/IPs have been informed of the agreement and that their consent thereto has
been obtained. Note that the certification applies to agreements over natural resources that do not
necessarily lie within the ancestral domains. For those that are found within the said domains,
Sections 7(b) and 57 of the IPRA apply.

PICOP rejects the entire disposition of this Court on the matter, relying on the following theory:

84. It is quite clear that Section 59 of R.A. 8371 does not apply to the automatic conversion of TLA
43 to IFMA.

First, the automatic conversion of TLA 43 to an IFMA is not a new project. It is a mere continuation
of the harvesting process in an area that PICOP had been managing, conserving and reforesting for
the last 50 years since 1952. Hence any pending application for a CADT within the area, cannot
affect much less hold back the automatic conversion. That the government now wishes to change
the tenurial system to an IFMA could not change the PICOP project, in existence and operating for
the last 30 (sic) years, into a new one.84

PICOP’s position is anything but clear. What is clearly provided for in Section 59 is that it covers
"issuing, renewing or granting (of) any concession, license or lease, or entering into any production
sharing agreement." PICOP is implying that, when the government changed the tenurial system to
an IFMA, PICOP’s existing TLA would just be upgraded or modified, but would be the very same
agreement, hence, dodging the inclusion in the word "renewing." However, PICOP is conveniently
leaving out the fact that its TLA expired in 2002. If PICOP really intends to pursue the argument that
the conversion of the TLA into an IFMA would not create a new agreement, but would only be a
modification of the old one, then it should be willing to concede that the IFMA expired as well in
2002. An automatic modification would not alter the terms and conditions of the TLA except when
they are inconsistent with the terms and conditions of an IFMA. Consequently, PICOP’s concession
period under the renewed TLA No. 43, which is from the year 1977 to 2002, would remain the same.

PICOP cannot rely on a theory of the case whenever such theory is beneficial to it, but refute the
same whenever the theory is damaging to it. In the same way, PICOP cannot claim that the alleged
Presidential Warranty is "renewable for other 25 years" and later on claim that what it is asking for is
not a renewal. Extensions of agreements must necessarily be included in the term renewal.
Otherwise, the inclusion of "renewing" in Section 59 would be rendered inoperative.

PICOP further claims:

85. Verily, in interpreting the term "held under claim of ownership," the Supreme Court could not
have meant to include claims that had just been filed and not yet recognized under the provisions of
DENR Administrative Order No. 2 Series of 1993, nor to any other community / ancestral domain
program prior to R.A. 8371.
xxxx

87. One can not imagine the terrible damage and chaos to the country, its economy, its people and
its future if a mere claim filed for the issuance of a CADC or CADT will already provide those who
filed the application, the authority or right to stop the renewal or issuance of any concession, license
or lease or any production-sharing agreement. The same interpretation will give such applicants
through a mere application the right to stop or suspend any project that they can cite for not
satisfying the requirements of the consultation process of R.A. 8371. If such interpretation gets
enshrined in the statures of the land, the unscrupulous and the extortionists can put any ongoing or
future project or activity to a stop in any part of the country citing their right from having filed an
application for issuance of a CADC or CADT claim and the legal doctrine established by the
Supreme Court in this PICOP case.85

We are not sure whether PICOP’s counsels are deliberately trying to mislead us, or are just plainly
ignorant of basic precepts of law. The term "claim" in the phrase "claim of ownership" is not a
document of any sort. It is an attitude towards something. The phrase "claim of ownership" means
"the possession of a piece of property with the intention of claiming it in hostility to the true
owner."86 It is also defined as "a party’s manifest intention to take over land, regardless of title or
right."87 Other than in Republic Act No. 8371, the phrase "claim of ownership" is thoroughly
discussed in issues relating to acquisitive prescription in Civil Law.

Before PICOP’s counsels could attribute to us an assertion that a mere attitude or intention would
stop the renewal or issuance of any concession, license or lease or any production-sharing
agreement, we should stress beforehand that this attitude or intention must be clearly shown by
overt acts and, as required by Section 3(a), should have been in existence "since time immemorial,
continuously to the present except when interrupted by war, force majeure or displacement by force,
deceit, stealth or as a consequence of government projects or any other voluntary dealings entered
into by government and private individuals/corporations."

Another argument of PICOP involves the claim itself that there was no overlapping:

Second, there could be no overlapping with any Ancestral Domain as proven by the evidence
presented and testimonies rendered during the hearings in the Regional Trial Court. x x x.

x x x x.

88. The DENR issued a total of 73 CADCs as of December 11, 1996. The DENR Undersecretary for
Field Operations had recommended another 11 applications for issuance of CADCs. None of the
CADCs overlap the TLA 43 area.

89. However former DENR Secretary Alvarez, in a memorandum dated 13 September, 2002
addressed to PGMA, insisted that PICOP had to comply with the requirement to secure a Free and
Prior Informed Concent because CADC 095 was issued covering 17,112 hectares of TLA 43.

90. This CADC 095 is a fake CADC and was not validly released by the DENR. While the Legal
Department of the DENR was still in the process of receiving the filings for applicants and the
oppositors to the CADC application, PICOP came across filed copies of a CADC 095 with the
PENRO of Davao Oriental as part of their application for a Community Based Forest Management
Agreement (CBFMA). Further research came across the same group filing copies of the alleged
CADC 095 with the Mines and Geosciences Bureau in Davao City for a mining agreement
application. The two applications had two different versions of the CADCs second page. One had
Mr. Romeo T. Acosta signing as the Social reform Agenda Technical Action Officer, while the other
had him signing as the Head, Community-Based Forest Management Office. One had the word
"Eight" crossed out and "Seven" written to make it appear that the CADC was issued on September
25, 1997, the other made it appear that there were no alterations and the date was supposed to be
originally 25 September 1997.

What is required in Section 59 of Republic Act No. 8379 is a Certification from the NCIP that there
was no overlapping with any Ancestral Domain. PICOP cannot claim that the DENR gravely abused
its discretion for requiring this Certification, on the ground that there was no overlapping. We
reiterate that it is manifestly absurd to claim that the subject lands must first be proven to be part of
ancestral domains before a certification that they are not can be required. As discussed in the
assailed Decision, PICOP did not even seek any certification from the NCIP that the area covered by
TLA No. 43, subject of its IFMA conversion, did not overlap with any ancestral domain.88

Sanggunian Consultation and Approval

While PICOP did not seek any certification from the NCIP that the former’s concession area did not
overlap with any ancestral domain, PICOP initially sought to comply with the requirement under
Sections 26 and 27 of the Local Government Code to procure prior approval of the Sanggunians
concerned. However, only one of the many provinces affected approved the issuance of an IFMA to
PICOP. Undaunted, PICOP nevertheless submitted to the DENR the purported resolution89 of the
Province of Surigao del Sur indorsing the approval of PICOP’s application for IFMA conversion,
apparently hoping either that the disapproval of the other provinces would go unnoticed, or that the
Surigao del Sur approval would be treated as sufficient compliance.

Surprisingly, the disapproval by the other provinces did go unnoticed before the RTC and the Court
of Appeals, despite the repeated assertions thereof by the Solicitor General. When we pointed out in
the assailed Decision that the approval must be by all the Sanggunians concerned and not by only
one of them, PICOP changed its theory of the case in its Motion for Reconsideration, this time
claiming that they are not required at all to procure Sanggunian approval.

Sections 2(c), 26 and 27 of the Local Government Code provide:

SEC. 2. x x x.

xxxx

(c) It is likewise the policy of the State to require all national agencies and offices to conduct periodic
consultations with appropriate local government units, nongovernmental and people’s organizations,
and other concerned sectors of the community before any project or program is implemented in their
respective jurisdictions.

SEC. 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. – It shall
be the duty of every national agency or government-owned or controlled corporation authorizing or
involved in the planning and implementation of any project or program that may cause pollution,
climatic change, depletion of non-renewable resources, loss of crop land, rangeland, or forest cover,
and extinction of animal or plant species, to consult with the local government units,
nongovernmental organizations, and other sectors concerned and explain the goals and objectives
of the project or program, its impact upon the people and the community in terms of environmental
or ecological balance, and the measures that will be undertaken to prevent or minimize the adverse
effects thereof.
SEC. 27. Prior Consultations Required. – No project or program shall be implemented by
government authorities unless the consultations mentioned in Sections 2(c) and 26 hereof are
complied with, and prior approval of the sanggunian concerned is obtained: Provided, That
occupants in areas where such projects are to be implemented shall not be evicted unless
appropriate relocation sites have been provided, in accordance with the provisions of the
Constitution.

As stated in the assailed Decision, the common evidence of the DENR Secretary and PICOP,
namely, the 31 July 2001 Memorandum of Regional Executive Director (RED) Elias D. Seraspi, Jr.,
enumerated the local government units and other groups which had expressed their opposition to
PICOP’s application for IFMA conversion:

7. During the conduct of the performance evaluation of TLA No. 43 issues complaints against PRI
were submitted thru Resolutions and letters. It is important that these are included in this report for
assessment of what are their worth, viz:

xxxx

7.2 Joint Resolution (unnumbered), dated March 19, 2001 of the Barangay Council and Barangay
Tribal Council of Simulao, Boston, Davao Oriental (ANNEX F) opposing the conversion of TLA No.
43 into IFMA over the 17,112 hectares allegedly covered with CADC No. 095.

7.3 Resolution Nos. 10, s-2001 and 05, s-2001 (ANNEXES G & H) of the Bunawan Tribal Council of
Elders (BBMTCE) strongly demanding none renewal of PICOP TLA. They claim to be the rightful
owner of the area it being their alleged ancestral land.

7.4 Resolution No. 4, S-2001 of Sitio Linao, San Jose, Bislig City (ANNEX I) requesting not to renew
TLA 43 over the 900 hectares occupied by them.

7.5 Resolution No. 22, S-2001 (ANNEX J) of the Sanguniang Bayan, Lingig, Surigao del Sur not to
grant the conversion of TLA 43 citing the plight of former employees of PRI who were forced to enter
and farm portion of TLA No. 43, after they were laid off.

7.6 SP Resolution No. 2001-113 and CDC Resolution Nos. 09-2001 of the Sanguniang Panglungsod
of Bislig City (ANNEXES K & L) requesting to exclude the area of TLA No. 43 for watershed
purposes.

7.7 Resolution No. 2001-164, dated June 01, 2001 (ANNEX M) Sanguniang Panglungsod of Bislig
City opposing the conversion of TLA 43 to IFMA for the reason that IFMA do not give revenue
benefits to the City.90

PICOP had claimed that it complied with the Local Government Code requirement of obtaining prior
approval of the Sanggunian concerned by submitting a purported resolution91 of the Province of
Surigao del Sur indorsing the approval of PICOP’s application for IFMA conversion. We ruled that
this cannot be deemed sufficient compliance with the foregoing provision. Surigao del Sur is not the
only province affected by the area covered by the proposed IFMA. As even the Court of Appeals
found, PICOP’s TLA No. 43 traverses the length and breadth not only of Surigao del Sur but also of
Agusan del Sur, Compostela Valley and Davao Oriental.92

On Motion for Reconsideration, PICOP now argues that the requirement under Sections 26 and 27
does not apply to it:
97. PICOP is not a national agency. Neither is PICOP government owned or controlled. Thus
Section 26 does not apply to PICOP.

98. It is very clear that Section 27 refers to projects or programs to be implemented by government
authorities or government-owned and controlled corporations. PICOP’s project or the automatic
conversion is a purely private endevour. First the PICOP project has been implemented since 1969.
Second, the project was being implemented by private investors and financial institutions.

99. The primary government participation is to warrant and ensure that the PICOP project shall have
peaceful tenure in the permanent forest allocated to provide raw materials for the project. To rule
now that a project whose foundations were commenced as early as 1969 shall now be subjected to
a 1991 law is to apply the law retrospectively in violation of Article 4 of the Civil Code that laws shall
not be applied retroactively.

100. In addition, under DAO 30, Series of 1992, TLA and IFMA operations were not among those
devolved function from the National Government / DENR to the local government unit. Under its
Section 03, the devolved function cover only:

a) Community Based forestry projects.

b) Communal forests of less than 5000 hectares

c) Small watershed areas which are sources of local water supply.93

We have to remind PICOP again of the contents of Section 2, Article XII of the Constitution:

Section 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.

All projects relating to the exploration, development and utilization of natural resources are projects
of the State. While the State 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 these citizens, such as PICOP, the projects nevertheless remain as State
projects and can never be purely private endeavors.

Also, despite entering into co-production, joint venture, or production-sharing agreements, the State
remains in full control and supervision over such projects. PICOP, thus, cannot limit government
participation in the project to being merely its bouncer, whose primary participation is only to
"warrant and ensure that the PICOP project shall have peaceful tenure in the permanent forest
allocated to provide raw materials for the project."
PICOP is indeed neither a national agency nor a government-owned or controlled corporation. The
DENR, however, is a national agency and is the national agency prohibited by Section 27 from
issuing an IFMA without the prior approval of the Sanggunian concerned. As previously discussed,
PICOP’s Petition for Mandamus can only be granted if the DENR Secretary is required by law to
issue an IFMA. We, however, see here the exact opposite: the DENR Secretary was actually
prohibited by law from issuing an IFMA, as there had been no prior approval by all the other
Sanggunians concerned.

As regards PICOP’s assertion that the application to them of a 1991 law is in violation of the
prohibition against the non-retroactivity provision in Article 4 of the Civil Code, we have to remind
PICOP that it is applying for an IFMA with a term of 2002 to 2027. Section 2, Article XII of the
Constitution allows exploitation agreements to last only "for a period not exceeding twenty-five years,
renewable for not more than twenty-five years." PICOP, thus, cannot legally claim that the project’s
term started in 1952 and extends all the way to the present.

Finally, the devolution of the project to local government units is not required before Sections 26 and
27 would be applicable. Neither Section 26 nor 27 mentions such a requirement. Moreover, it is not
only the letter, but more importantly the spirit of Sections 26 and 27, that shows that the devolution
of the project is not required. The approval of the Sanggunian concerned is required by law, not
because the local government has control over such project, but because the local government has
the duty to protect its constituents and their stake in the implementation of the project. Again,
Section 26 states that it applies to projects that "may cause pollution, climatic change, depletion of
non-renewable resources, loss of crop land, rangeland, or forest cover, and extinction of animal or
plant species." The local government should thus represent the communities in such area, the very
people who will be affected by flooding, landslides or even climatic change if the project is not
properly regulated, and who likewise have a stake in the resources in the area, and deserve to be
adequately compensated when these resources are exploited.

Indeed, it would be absurd to claim that the project must first be devolved to the local government
before the requirement of the national government seeking approval from the local government can
be applied. If a project has been devolved to the local government, the local government itself would
be implementing the project. That the local government would need its own approval before
implementing its own project is patently silly.

EPILOGUE AND DISPOSITION

PICOP’c cause of action consists in the allegation that the DENR Secretary, in not issuing an IFMA,
violated its constitutional right against non-impairment of contracts. We have ruled, however, that the
1969 Document is not a contract recognized under the non-impairment clause, much less a contract
specifically enjoining the DENR Secretary to issue the IFMA. The conclusion that the 1969
Document is not a contract recognized under the non-impairment clause has even been disposed of
in another case decided by another division of this Court, PICOP Resources, Inc. v. Base Metals
Mineral Resources Corporation,94 the Decision in which case has become final and executory.
PICOP’s Petition for Mandamus should, therefore, fail.

Furthermore, even if we assume for the sake of argument that the 1969 Document is a contract
recognized under the non-impairment clause, and even if we assume for the sake of argument that
the same is a contract specifically enjoining the DENR Secretary to issue an IFMA, PICOP’s Petition
for Mandamus must still fail. The 1969 Document expressly states that the warranty as to the tenure
of PICOP is "subject to compliance with constitutional and statutory requirements as well as with
existing policy on timber concessions." Thus, if PICOP proves the two above-mentioned matters, it
still has to prove compliance with statutory and administrative requirements for the conversion of its
TLA into an IFMA.

While we have withdrawn our pronouncements in the assailed Decision that (1) PICOP had not
submitted the required forest protection and reforestation plans, and that (2) PICOP had unpaid
forestry charges, thus effectively ruling in favor of PICOP on all factual issues in this case, PICOP
still insists that the requirements of an NCIP certification and Sanggunian consultation and approval
do not apply to it. To affirm PICOP’s position on these matters would entail nothing less than
rewriting the Indigenous Peoples’ Rights Act and the Local Government Code, an act simply beyond
our jurisdiction.

WHEREFORE, the Motion for Reconsideration of PICOP Resources, Inc. is DENIED.

SO ORDERED.

REPUBLIC ACT NO. 7942 March 3, 1995

AN ACT INSTITUTING A NEW SYSTEM OF MINERAL RESOURCES EXPLORATION,

DEVELOPMENT, UTILIZATION, AND CONSERVATION

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

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 eighty-one 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 geographic-based instruments for planners and

decision-makers which presents an 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, partnership, 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 of 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 (JVA) 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. Non-governmental 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 miring, 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 claim-owners 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 Review 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 government 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 non-governmental 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 or bureau 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 location 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 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 expressedly 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 areas,
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 Areas 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. Representations 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 dispositions 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 the 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 intention 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 large-scale 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 twenty-five (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 cancelled 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 own 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, an 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 government agencies to maintain ecological balance, and prior consultation with the
local government units, non-governmental 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 non-
governmental 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, mined-out,
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 shall have the right to possess and use explosives within his
contract/permit area as may be necessary for his mining operations upon approval of 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 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, 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 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.

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 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.

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 subpoenas 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 decision 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; 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.

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 semi-annual 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 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 period which 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 a 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 Tar Incentives and Credits

Failure to abide by the terms and conditions of tax incentive 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 hereby.

Section 106
Willful Damage to a Mine

Any person who willfully damages a mine, 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

Section 112
Non-Impairment of Existing Mining/Quarrying Rights

All valid and existing mining lease contracts, permits/licenses, leases pending renewal, mineral
production-sharing agreements granted under Executive Order No. 279, at the date 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 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: Provided, further, That no renewal of mining
lease contracts shall be made after the expiration of its term: 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.

Section 113
Recognition of Valid and Existing Mining Claims and Lease/Quarry Applications

Holders of valid and existing mining claims, lease/quarry applications shall be given preferential
rights to enter into any mode of mineral agreement with the government within two (2) years from the
promulgation of the rules and regulations implementing this Act.

G.R. No. 127882 December 1, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., Represented by its Chairman F'LONG

MIGUEL M. LUMAYONG; WIGBERTO E. TAÑADA; PONCIANO BENNAGEN; JAIME TADEO;
RENATO R. CONSTANTINO JR.; F'LONG AGUSTIN M. DABIE; ROBERTO P. AMLOY; RAQIM
L. DABIE; SIMEON H. DOLOJO; IMELDA M. GANDON; LENY B. GUSANAN; MARCELO L.
GUSANAN; QUINTOL A. LABUAYAN; LOMINGGES D. LAWAY; BENITA P. TACUAYAN;
Minors JOLY L. BUGOY, Represented by His Father UNDERO D. BUGOY and ROGER M.
DADING; Represented by His Father ANTONIO L. DADING; ROMY M. LAGARO, Represented
by His Father TOTING A. LAGARO; MIKENY JONG B. LUMAYONG, Represented by His Father
MIGUEL M. LUMAYONG; RENE T. MIGUEL, Represented by His Mother EDITHA T. MIGUEL;
ALDEMAR L. SAL, Represented by His Father DANNY M. SAL; DAISY RECARSE,
Represented by Her Mother LYDIA S. SANTOS; EDWARD M. EMUY; ALAN P. MAMPARAIR;
MARIO L. MANGCAL; ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO CULAR; MARVIC M.V.F.
LEONEN; JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR JR., Represented
by Their Father VIRGILIO CULAR; PAUL ANTONIO P. VILLAMOR, Represented by His Parents
JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR; ANA GININA R. TALJA, Represented by
Her Father MARIO JOSE B. TALJA; SHARMAINE R. CUNANAN, Represented by Her Father
ALFREDO M. CUNANAN; ANTONIO JOSE A. VITUG III, Represented by His Mother ANNALIZA
A. VITUG, LEAN D. NARVADEZ, Represented by His Father MANUEL E. NARVADEZ JR.;
ROSERIO MARALAG LINGATING, Represented by Her Father RIO OLIMPIO A. LINGATING;
MARIO JOSE B. TALJA; DAVID E. DE VERA; MARIA MILAGROS L. SAN JOSE; Sr. SUSAN O.
BOLANIO, OND; LOLITA G. DEMONTEVERDE; BENJIE L. NEQUINTO;1 ROSE LILIA S.
ROMANO; ROBERTO S. VERZOLA; EDUARDO AURELIO C. REYES; LEAN LOUEL A. PERIA,
Represented by His Father ELPIDIO V. PERIA;2 GREEN FORUM PHILIPPINES; GREEN FORUM
WESTERN VISAYAS (GF-WV); ENVIRONMENTAL LEGAL ASSISTANCE CENTER (ELAC);
KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN
(KAISAHAN);3 PARTNERSHIP FOR AGRARIAN REFORM and RURAL DEVELOPMENT
SERVICES, INC. (PARRDS); PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF
HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA); WOMEN'S LEGAL BUREAU
(WLB); CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI); UPLAND
DEVELOPMENT INSTITUTE (UDI); KINAIYAHAN FOUNDATION, INC.; SENTRO NG
ALTERNATIBONG LINGAP PANLIGAL (SALIGAN); and LEGAL RIGHTS AND NATURAL
RESOURCES CENTER, INC. (LRC), petitioners,
vs.
VICTOR O. RAMOS, Secretary, Department of Environment and Natural Resources (DENR);
HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGB-DENR); RUBEN TORRES,
Executive Secretary; and WMC (PHILIPPINES), INC.,4 respondents.

RESOLUTION

PANGANIBAN, J.:

All mineral resources are owned by the State. Their exploration, development and utilization (EDU)
must always be subject to the full control and supervision of the State. More specifically, given the
inadequacy of Filipino capital and technology in large-scale EDU activities, the State may secure the
help of foreign companies in all relevant matters -- especially financial and technical assistance --
provided that, at all times, the State maintains its right of full control. The foreign assistor or
contractor assumes all financial, technical and entrepreneurial risks in the EDU activities; hence, it
may be given reasonable management, operational, marketing, audit and other prerogatives to
protect its investments and to enable the business to succeed.

Full control is not anathematic to day-to-day management by the contractor, provided that the State
retains the power to direct overall strategy; and to set aside, reverse or modify plans and actions of
the contractor. The idea of full control is similar to that which is exercised by the board of directors of
a private corporation: the performance of managerial, operational, financial, marketing and other
functions may be delegated to subordinate officers or given to contractual entities, but the board
retains full residual control of the business.
Who or what organ of government actually exercises this power of control on behalf of the State?
The Constitution is crystal clear: the President. Indeed, the Chief Executive is the official
constitutionally mandated to "enter into agreements with foreign owned corporations." On the other
hand, Congress may review the action of the President once it is notified of "every contract entered
into in accordance with this [constitutional] provision within thirty days from its execution." In contrast
to this express mandate of the President and Congress in the EDU of natural resources, Article XII
of the Constitution is silent on the role of the judiciary. However, should the President and/or
Congress gravely abuse their discretion in this regard, the courts may -- in a proper case -- exercise
their residual duty under Article VIII. Clearly then, the judiciary should not inordinately interfere in the
exercise of this presidential power of control over the EDU of our natural resources.

The Constitution should be read in broad, life-giving strokes. It should not be used to strangulate
economic growth or to serve narrow, parochial interests. Rather, it should be construed to grant the
President and Congress sufficient discretion and reasonable leeway to enable them to attract foreign
investments and expertise, as well as to secure for our people and our posterity the blessings of
prosperity and peace.

On the basis of this control standard, this Court upholds the constitutionality of the Philippine Mining
Law, its Implementing Rules and Regulations -- insofar as they relate to financial and technical
agreements -- as well as the subject Financial and Technical Assistance Agreement (FTAA).5

Background

The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1)
Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and
Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30,
1995,6 executed by the government with Western Mining Corporation (Philippines), Inc. (WMCP).7

On January 27, 2004, the Court en banc promulgated its Decision8 granting the Petition and
declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire
FTAA executed between the government and WMCP, mainly on the finding that FTAAs are service
contracts prohibited by the 1987 Constitution.

The Decision struck down the subject FTAA for being similar to service contracts,9 which, though
permitted under the 1973 Constitution,10 were subsequently denounced for being antithetical to the
principle of sovereignty over our natural resources, because they allowed foreign control over the
exploitation of our natural resources, to the prejudice of the Filipino nation.

The Decision quoted several legal scholars and authors who had criticized service contracts
for, inter alia, vesting in the foreign contractor exclusive management and control of the enterprise,
including operation of the field in the event petroleum was discovered; control of production,
expansion and development; nearly unfettered control over the disposition and sale of the products
discovered/extracted; effective ownership of the natural resource at the point of extraction; and
beneficial ownership of our economic resources. According to the Decision, the 1987 Constitution
(Section 2 of Article XII) effectively banned such service contracts.

Subsequently, respondents filed separate Motions for Reconsideration. In a Resolution dated March
9, 2004, the Court required petitioners to comment thereon. In the Resolution of June 8, 2004, it set
the case for Oral Argument on June 29, 2004.

After hearing the opposing sides, the Court required the parties to submit their respective
Memoranda in amplification of their arguments. In a Resolution issued later the same day, June 29,
2004, the Court noted, inter alia, the Manifestation and Motion (in lieu of comment) filed by the Office
of the Solicitor General (OSG) on behalf of public respondents. The OSG said that it was not
interposing any objection to the Motion for Intervention filed by the Chamber of Mines of the
Philippines, Inc. (CMP) and was in fact joining and adopting the latter's Motion for Reconsideration.

Memoranda were accordingly filed by the intervenor as well as by petitioners, public respondents,
and private respondent, dwelling at length on the three issues discussed below. Later, WMCP
submitted its Reply Memorandum, while the OSG -- in obedience to an Order of this Court -- filed a
Compliance submitting copies of more FTAAs entered into by the government.

Three Issues Identified by the Court

During the Oral Argument, the Court identified the three issues to be resolved in the present
controversy, as follows:

1. Has the case been rendered moot by the sale of WMC shares in WMCP to Sagittarius (60 percent
of Sagittarius' equity is owned by Filipinos and/or Filipino-owned corporations while 40 percent is
owned by Indophil Resources NL, an Australian company) and by the subsequent transfer and
registration of the FTAA from WMCP to Sagittarius?

2. Assuming that the case has been rendered moot, would it still be proper to resolve the
constitutionality of the assailed provisions of the Mining Law, DAO 96-40 and the WMCP FTAA?

3. What is the proper interpretation of the phrase Agreements Involving Either Technical or Financial
Assistancecontained in paragraph 4 of Section 2 of Article XII of the Constitution?

Should the Motion for Reconsideration Be Granted?

Respondents' and intervenor's Motions for Reconsideration should be granted, for the reasons
discussed below. The foregoing three issues identified by the Court shall now be taken up seriatim.

First Issue:

Mootness

In declaring unconstitutional certain provisions of RA 7942, DAO 96-40, and the WMCP FTAA, the
majority Decision agreed with petitioners' contention that the subject FTAA had been executed in
violation of Section 2 of Article XII of the 1987 Constitution. According to petitioners, the FTAAs
entered into by the government with foreign-owned corporations are limited by the fourth paragraph
of the said provision to agreements involving only technical or financial assistance for large-scale
exploration, development and utilization of minerals, petroleum and other mineral oils. Furthermore,
the foreign contractor is allegedly permitted by the FTAA in question to fully manage and control the
mining operations and, therefore, to acquire "beneficial ownership" of our mineral resources.

The Decision merely shrugged off the Manifestation by WMPC informing the Court (1) that on
January 23, 2001, WMC had sold all its shares in WMCP to Sagittarius Mines, Inc., 60 percent of
whose equity was held by Filipinos; and (2) that the assailed FTAA had likewise been transferred
from WMCP to Sagittarius.11 The ponencia declared that the instant case had not been rendered
moot by the transfer and registration of the FTAA to a Filipino-owned corporation, and that the
validity of the said transfer remained in dispute and awaited final judicial determination.12Patently
therefore, the Decision is anchored on the assumption that WMCP had remained
a foreign corporation.

The crux of this issue of mootness is the fact that WMCP, at the time it entered into the
FTAA, happened to be wholly owned by WMC Resources International Pty., Ltd. (WMC), which in
turn was a wholly owned subsidiary of Western Mining Corporation Holdings Ltd., a publicly listed
major Australian mining and exploration company.

The nullity of the FTAA was obviously premised upon the contractor being a foreign corporation.
Had the FTAA been originally issued to a Filipino-owned corporation, there would have been no
constitutionality issue to speak of. Upon the other hand, the conveyance of the WMCP FTAA to a
Filipino corporation can be likened to the sale of land to a foreigner who subsequently acquires
Filipino citizenship, or who later resells the same land to a Filipino citizen. The conveyance would be
validated, as the property in question would no longer be owned by a disqualified vendee.

And, inasmuch as the FTAA is to be implemented now by a Filipino corporation, it is no longer

possible for the Court to declare it unconstitutional. The case pending in the Court of Appeals is a
dispute between two Filipino companies (Sagittarius and Lepanto), both claiming the right to
purchase the foreign shares in WMCP. So, regardless of which side eventually wins, the FTAA
would still be in the hands of a qualified Filipino company. Considering that there is no longer any
justiciable controversy, the plea to nullify the Mining Law has become a virtual petition for
declaratory relief, over which this Court has no original jurisdiction.

In their Final Memorandum, however, petitioners argue that the case has not become moot,
considering the invalidity of the alleged sale of the shares in WMCP from WMC to Sagittarius, and of
the transfer of the FTAA from WMCP to Sagittarius, resulting in the change of contractor in the FTAA
in question. And even assuming that the said transfers were valid, there still exists an actual case
predicated on the invalidity of RA 7942 and its Implementing Rules and Regulations (DAO 96-40).
Presently, we shall discuss petitioners' objections to the transfer of both the shares and the
FTAA. We shall take up the alleged invalidity of RA 7942 and DAO 96-40 later on in the discussion
of the third issue.

No Transgression of the Constitution

by the Transfer of the WMCP Shares

Petitioners claim, first, that the alleged invalidity of the transfer of the WMCP shares to Sagittarius
violates the fourth paragraph of Section 2 of Article XII of the Constitution; second, that it is contrary
to the provisions of the WMCP FTAA itself; and third, that the sale of the shares is suspect and
should therefore be the subject of a case in which its validity may properly be litigated.

On the first ground, petitioners assert that paragraph 4 of Section 2 of Article XII permits the
government to enter into FTAAs only with foreign-owned corporations. Petitioners insist that the first
paragraph of this constitutional provision limits the participation of Filipino corporations in the
exploration, development and utilization of natural resources to only three species of contracts --
production sharing, co-production and joint venture -- to the exclusion of all other arrangements or
variations thereof, and the WMCP FTAA may therefore not be validly assumed and implemented by
Sagittarius. In short, petitioners claim that a Filipino corporation is not allowed by the Constitution to
enter into an FTAA with the government.

However, a textual analysis of the first paragraph of Section 2 of Article XII does not support
petitioners' argument. The pertinent part of the said provision 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. 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." Nowhere in the provision is
there any express limitation or restriction insofar as arrangements other than the three
aforementioned contractual schemes are concerned.

Neither can one reasonably discern any implied stricture to that effect. Besides, there is no basis to
believe that the framers of the Constitution, a majority of whom were obviously concerned with
furthering the development and utilization of the country's natural resources, could have wanted to
restrict Filipino participation in that area. This point is clear, especially in the light of the overarching
constitutional principle of giving preference and priority to Filipinos and Filipino corporations in the
development of our natural resources.

Besides, even assuming (purely for argument's sake) that a constitutional limitation barring Filipino
corporations from holding and implementing an FTAA actually exists, nevertheless, such provision
would apply only to the transfer of the FTAA to Sagittarius, but definitely not to the sale of WMC's
equity stake in WMCP to Sagittarius. Otherwise, an unreasonable curtailment of property rights
without due process of law would ensue. Petitioners' argument must therefore fail.

FTAA Not Intended

Solely for Foreign Corporation

Equally barren of merit is the second ground cited by petitioners -- that the FTAA was intended to
apply solely to a foreign corporation, as can allegedly be seen from the provisions therein. They
manage to cite only one WMCP FTAA provision that can be regarded as clearly intended to apply
only to a foreign contractor: Section 12, which provides for international commercial arbitration under
the auspices of the International Chamber of Commerce, after local remedies are exhausted. This
provision, however, does not necessarily imply that the WMCP FTAA cannot be transferred to and
assumed by a Filipino corporation like Sagittarius, in which event the said provision should simply be
disregarded as a superfluity.

No Need for a Separate

Litigation of the Sale of Shares

Petitioners claim as third ground the "suspicious" sale of shares from WMC to Sagittarius; hence, the
need to litigate it in a separate case. Section 40 of RA 7942 (the Mining Law) allegedly requires the
President's prior approval of a transfer.

A re-reading of the said provision, however, leads to a different conclusion. "Sec.

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 40 expressly applies to the assignment or transfer of the FTAA, not to the sale and transfer
of shares of stock in WMCP. Moreover, when the transferee of an FTAA is
another foreign corporation, there is a logical application of the requirement of prior approval by the
President of the Republic and notification to Congress in the event of assignment or transfer of an
FTAA. In this situation, such approval and notification are appropriate safeguards, considering that
the new contractor is the subject of a foreign government.
On the other hand, when the transferee of the FTAA happens to be a Filipino corporation, the need
for such safeguard is not critical; hence, the lack of prior approval and notification may not be
deemed fatal as to render the transfer invalid. Besides, it is not as if approval by the President is
entirely absent in this instance. As pointed out by private respondent in its Memorandum,13 the issue
of approval is the subject of one of the cases brought by Lepanto against Sagittarius in GR No.
162331. That case involved the review of the Decision of the Court of Appeals dated November 21,
2003 in CA-GR SP No. 74161, which affirmed the DENR Order dated December 31, 2001 and the
Decision of the Office of the President dated July 23, 2002, both approving the assignment of the
WMCP FTAA to Sagittarius.

Petitioners also question the sale price and the financial capacity of the transferee. According to the
Deed of Absolute Sale dated January 23, 2001, executed between WMC and Sagittarius, the price
of the WMCP shares was fixed at US$9,875,000, equivalent to P553 million at an exchange rate of
56:1. Sagittarius had an authorized capital stock of P250 million and a paid up capital of P60 million.
Therefore, at the time of approval of the sale by the DENR, the debt-to-equity ratio of the transferee
was over 9:1 -- hardly ideal for an FTAA contractor, according to petitioners.

However, private respondents counter that the Deed of Sale specifically provides that the payment
of the purchase price would take place only after Sagittarius' commencement of commercial
production from mining operations, if at all. Consequently, under the circumstances, we believe it
would not be reasonable to conclude, as petitioners did, that the transferee's high debt-to-equity ratio
per se necessarily carried negative implications for the enterprise; and it would certainly be improper
to invalidate the sale on that basis, as petitioners propose.

FTAA Not Void,

Thus Transferrable

To bolster further their claim that the case is not moot, petitioners insist that the FTAA is void and,
hence cannot be transferred; and that its transfer does not operate to cure the constitutional infirmity
that is inherent in it; neither will a change in the circumstances of one of the parties serve to ratify the
void contract.

While the discussion in their Final Memorandum was skimpy, petitioners in their Comment (on the
MR) did ratiocinate that this Court had declared the FTAA to be void because, at the time it was
executed with WMCP, the latter was a fully foreign-owned corporation, in which the former vested
full control and management with respect to the exploration, development and utilization of mineral
resources, contrary to the provisions of paragraph 4 of Section 2 of Article XII of the Constitution.
And since the FTAA was per se void, no valid right could be transferred; neither could it be ratified,
so petitioners conclude.

Petitioners have assumed as fact that which has yet to be established. First and foremost, the
Decision of this Court declaring the FTAA void has not yet become final. That was precisely the
reason the Court still heard Oral Argument in this case. Second, the FTAA does not vest in the
foreign corporation full control and supervision over the exploration, development and utilization of
mineral resources, to the exclusion of the government. This point will be dealt with in greater detail
below; but for now, suffice it to say that a perusal of the FTAA provisions will prove that the
government has effective overall direction and control of the mining operations, including marketing
and product pricing, and that the contractor's work programs and budgets are subject to its review
and approval or disapproval.

As will be detailed later on, the government does not have to micro-manage the mining operations
and dip its hands into the day-to-day management of the enterprise in order to be considered as
having overall control and direction. Besides, for practical and pragmatic reasons, there is a need for
government agencies to delegate certain aspects of the management work to the contractor. Thus
the basis for declaring the FTAA void still has to be revisited, reexamined and reconsidered.

Petitioners sniff at the citation of Chavez v. Public Estates Authority,14 and Halili v. CA,15 claiming that
the doctrines in these cases are wholly inapplicable to the instant case.

Chavez clearly teaches: "Thus, the Court has ruled consistently that where a Filipino citizen sells
land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by
the subsequent sale to a citizen. Similarly, where the alien who buys the land subsequently acquires
Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land
ownership to Filipinos has been achieved. In short, the law disregards the constitutional
disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or
the buyer himself becomes a qualified party."16

In their Comment, petitioners contend that in Chavez and Halili, the object of the transfer (the land)
was not what was assailed for alleged unconstitutionality. Rather, it was the transaction that was
assailed; hence subsequent compliance with constitutional provisions would cure its infirmity. In
contrast, in the instant case it is the FTAA itself, the object of the transfer, that is being assailed as
invalid and unconstitutional. So, petitioners claim that the subsequent transfer of a void FTAA to a
Filipino corporation would not cure the defect.

Petitioners are confusing themselves. The present Petition has been filed, precisely because the
grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be gainsaid
that anyone would have asserted that the same FTAA was void if it had at the outset been issued to
a Filipino corporation. The FTAA, therefore, is not per se defective or unconstitutional. It was
questioned only because it had been issued to an allegedly non-qualified, foreign-owned
corporation.

We believe that this case is clearly analogous to Halili, in which the land acquired by a non-Filipino
was re-conveyed to a qualified vendee and the original transaction was thereby cured.
Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the invalidity
of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a Filipino
corporation -- can no longer be assailed; the objective of the constitutional provision -- to keep the
exploration, development and utilization of our natural resources in Filipino hands -- has been
served.

More accurately speaking, the present situation is one degree better than that obtaining in Halili, in
which the original sale to a non-Filipino was clearly and indisputably violative of the constitutional
prohibition and thus void ab initio. In the present case, the issuance/grant of the subject FTAA to the
then foreign-owned WMCP was not illegal, void or unconstitutional at the time. The matter had to be
brought to court, precisely for adjudication as to whether the FTAA and the Mining Law had indeed
violated the Constitution. Since, up to this point, the decision of this Court declaring the FTAA void
has yet to become final, to all intents and purposes, the FTAA must be deemed valid and
constitutional.17

At bottom, we find completely outlandish petitioners' contention that an FTAA could be entered into
by the government only with a foreign corporation, never with a Filipino enterprise. Indeed, the
nationalistic provisions of the Constitution are all anchored on the protection of Filipino interests.
How petitioners can now argue that foreigners have the exclusive right to FTAAs totally overturns
the entire basis of the Petition -- preference for the Filipino in the exploration, development and
utilization of our natural resources. It does not take deep knowledge of law and logic to understand
that what the Constitution grants to foreigners should be equally available to Filipinos.

Second Issue:

Whether the Court Can Still Decide the Case,

Even Assuming It Is Moot

All the protagonists are in agreement that the Court has jurisdiction to decide this controversy, even
assuming it to be moot.

Petitioners stress the following points. First, while a case becomes moot and academic when "there
is no more actual controversy between the parties or no useful purpose can be served in passing
upon the merits,"18 what is at issue in the instant case is not only the validity of the WMCP FTAA, but
also the constitutionality of RA 7942 and its Implementing Rules and Regulations. Second, the acts
of private respondent cannot operate to cure the law of its alleged unconstitutionality or to divest this
Court of its jurisdiction to decide. Third, the Constitution imposes upon the Supreme Court the duty
to declare invalid any law that offends the Constitution.

Petitioners also argue that no amendatory laws have been passed to make the Mining Act of 1995
conform to constitutional strictures (assuming that, at present, it does not); that public respondents
will continue to implement and enforce the statute until this Court rules otherwise; and that the said
law continues to be the source of legal authority in accepting, processing and approving numerous
applications for mining rights.

Indeed, it appears that as of June 30, 2002, some 43 FTAA applications had been filed with the
Mines and Geosciences Bureau (MGB), with an aggregate area of 2,064,908.65 hectares -- spread
over Luzon, the Visayas and Mindanao19 -- applied for. It may be a bit far-fetched to assert, as
petitioners do, that each and every FTAA that was entered into under the provisions of the Mining
Act "invites potential litigation" for as long as the constitutional issues are not resolved with finality.
Nevertheless, we must concede that there exists the distinct possibility that one or more of the future
FTAAs will be the subject of yet another suit grounded on constitutional issues.

But of equal if not greater significance is the cloud of uncertainty hanging over the mining industry,
which is even now scaring away foreign investments. Attesting to this climate of anxiety is the fact
that the Chamber of Mines of the Philippines saw the urgent need to intervene in the case and to
present its position during the Oral Argument; and that Secretary General Romulo Neri of the
National Economic Development Authority (NEDA) requested this Court to allow him to speak,
during that Oral Argument, on the economic consequences of the Decision of January 27, 2004.20

We are convinced. We now agree that the Court must recognize the exceptional character of the
situation and the paramount public interest involved, as well as the necessity for a ruling to put an
end to the uncertainties plaguing the mining industry and the affected communities as a result of
doubts cast upon the constitutionality and validity of the Mining Act, the subject FTAA and future
FTAAs, and the need to avert a multiplicity of suits. Paraphrasing Gonzales v. Commission on
Elections,21 it is evident that strong reasons of public policy demand that the constitutionality issue be
resolved now.22

In further support of the immediate resolution of the constitutionality issue, public respondents
cite Acop v. Guingona,23 to the effect that the courts will decide a question -- otherwise moot and
academic -- if it is "capable of repetition, yet evading review."24 Public respondents ask the Court to
avoid a situation in which the constitutionality issue may again arise with respect to another FTAA,
the resolution of which may not be achieved until after it has become too late for our mining industry
to grow out of its infancy. They also recall Salonga v. Cruz Paño,25 in which this Court declared
that "(t)he Court also has the duty to formulate guiding and controlling constitutional principles,
precepts, doctrines or rules. It has the symbolic function of educating the bench and bar on the
extent of protection given by constitutional guarantees. x x x."

The mootness of the case in relation to the WMCP FTAA led the undersigned ponente to state in his
dissent to the Decision that there was no more justiciable controversy and the plea to nullify the
Mining Law has become a virtual petition for declaratory relief.26 The entry of the Chamber of Mines
of the Philippines, Inc., however, has put into focus the seriousness of the allegations of
unconstitutionality of RA 7942 and DAO 96-40 which converts the case to one for prohibition27 in the
enforcement of the said law and regulations.

Indeed, this CMP entry brings to fore that the real issue in this case is whether paragraph 4 of
Section 2 of Article XII of the Constitution is contravened by RA 7942 and DAO 96-40, not whether it
was violated by specific acts implementing RA 7942 and DAO 96-40. "[W]hen an act of the
legislative department is seriously alleged to have infringed the Constitution, settling the controversy
becomes the duty of this Court. By the mere enactment of the questioned law or the approval of the
challenged action, the dispute is said to have ripened into a judicial controversy even without any
other overt act."28 This ruling can be traced from Tañada v. Angara,29 in which the Court said:

"In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of the
legislative branch is seriously alleged to have infringed the Constitution, it becomes not only
the right but in fact the duty of the judiciary to settle the dispute.

xxxxxxxxx

"As this Court has repeatedly and firmly emphasized in many cases, it will not shirk, digress
from or abandon its sacred duty and authority to uphold the Constitution in matters that
involve grave abuse of discretion brought before it in appropriate cases, committed by any
officer, agency, instrumentality or department of the government."30

Additionally, the entry of CMP into this case has also effectively forestalled any possible objections
arising from the standing or legal interest of the original parties.

For all the foregoing reasons, we believe that the Court should proceed to a resolution of the
constitutional issues in this case.

Third Issue:

The Proper Interpretation of the Constitutional Phrase

"Agreements Involving Either Technical or Financial Assistance"

The constitutional provision at the nucleus of the controversy is paragraph 4 of Section 2 of Article
XII of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced 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."31

No Restriction of Meaning by
a Verba Legis Interpretation

To interpret the foregoing provision, petitioners adamantly assert that the language of the
Constitution should prevail; that the primary method of interpreting it is to seek the ordinary meaning
of the words used in its provisions. They rely on rulings of this Court, such as the following:

"The fundamental principle in constitutional construction however is that the primary source
from which to ascertain constitutional intent or purpose is the language of the provision itself.
The presumption is that the words in which the constitutional provisions are couched express
the objective sought to be attained. In other words, verba legis prevails. Only when the
meaning of the words used is unclear and equivocal should resort be made to extraneous
aids of construction and interpretation, such as the proceedings of the Constitutional
Commission or Convention to shed light on and ascertain the true intent or purpose of the
provision being construed."32

Very recently, in Francisco v. The House of Representatives,33 this Court indeed had the occasion to
reiterate the well-settled principles of constitutional construction:

"First, verba legis, that is, wherever possible, the words used in the Constitution must be
given their ordinary meaning except where technical terms are employed. x x x.

xxxxxxxxx
 "Second, where there is ambiguity, ratio legis est anima. The words of the Constitution
should be interpreted in accordance with the intent of its framers. x x x.

xxxxxxxxx

"Finally, ut magis valeat quam pereat. The Constitution is to be interpreted as a whole."34

For ease of reference and in consonance with verba legis, we reconstruct and stratify the
aforequoted Section 2 as follows:

1. All natural resources are owned by the State. Except for agricultural lands, natural
resources cannot be alienated by the State.

2. The exploration, development and utilization (EDU) of natural resources shall be under the
full control and supervision of the State.

3. The State may undertake these EDU activities through either of the following:

(a) By itself directly and solely

(b) By (i) co-production; (ii) joint venture; or (iii) production sharing agreements with
Filipino citizens or corporations, at least 60 percent of the capital of which is owned
by such citizens

4. Small-scale utilization of natural resources may be allowed by law in favor of Filipino

citizens.

5. For large-scale EDU of minerals, petroleum and other mineral oils, the President may
enter into "agreements with foreign-owned corporations involving either technical or financial
assistance according to the general terms and conditions provided by law x x x."

Note that in all the three foregoing mining activities -- exploration, development and utilization -- the
State may undertake such EDU activities by itself or in tandem with Filipinos or Filipino corporations,
except in two instances: first, in small-scale utilization of natural resources, which Filipinos may be
allowed by law to undertake; and second, in large-scale EDU of minerals, petroleum and mineral
oils, which may be undertaken by the State via "agreementswith foreign-owned corporations
involving either technical or financial assistance" as provided by law.

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 eitherfinancial 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.35

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 country's
natural resources. They maintain that this Court's Decision36 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 country's 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."

On the other hand, the intervenor37 and public respondents argue that the FTAA allowed by
paragraph 4 is not merely an agreement for supplying limited and specific financial or technical
services to the State. Rather, such FTAA is a comprehensive agreement for the foreign-owned
corporation's integrated exploration, development and utilization of mineral, petroleum or other
mineral oils on a large-scale basis. The agreement, therefore, authorizes the foreign contractor's
rendition of a whole range of integrated and comprehensive services, ranging from the discovery to
the development, utilization and production of minerals or petroleum products.

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."38

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 anyone's 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.

Deletion of "Service Contracts" to

Avoid Pitfalls of Previous Constitutions,
Not to Ban Service Contracts Per Se

Third, we do not see how a verba legis approach leads to the conclusion that "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." Nowhere in the
above-quoted Section can be discerned the objective to keep out of foreign hands the management
or operation of mining activities or the plan to eradicate service contracts as these were understood
in the 1973 Constitution. Still, petitioners maintain that the deletion or omission from the 1987
Constitution of the term "service contracts" found in the 1973 Constitution sufficiently proves the
drafters' intent to exclude foreigners from the management of the affected enterprises.

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.

Fourth, a literal and restrictive interpretation of paragraph 4, such as that proposed by petitioners,
suffers from certain internal logical inconsistencies that generate ambiguities in the understanding of
the provision. As the intervenor pointed out, there has never been any constitutional or statutory
provision that reserved to Filipino citizens or corporations, at least 60 percent of which is Filipino-
owned, the rendition of financial or technical assistance to companies engaged in mining or the
development of any other natural resource. The taking out of foreign-currency or peso-denominated
loans or any other kind of financial assistance, as well as the rendition of technical assistance --
whether to the State or to any other entity in the Philippines -- has never been restricted in favor of
Filipino citizens or corporations having a certain minimum percentage of Filipino equity. Such a
restriction would certainly be preposterous and unnecessary. As a matter of fact, financial, and even
technical assistance, regardless of the nationality of its source, would be welcomed in the mining
industry anytime with open arms, on account of the dearth of local capital and the need to continually
update technological know-how and improve technical skills.

There was therefore no need for a constitutional provision specifically allowing foreign-owned
corporations to render financial or technical assistance, whether in respect of mining or some other
resource development or commercial activity in the Philippines. The last point needs to be
emphasized: if merely financial or technical assistance agreements are allowed, there would
be no need to limit them to large-scale mining operations, as there would be far greater need
for them in the smaller-scale mining activities (and even in non-mining areas). Obviously, the
provision in question was intended to refer to agreements other than those for mere financial
or technical assistance.
In like manner, there would be no need to require the President of the Republic to report to
Congress, if only financial or technical assistance agreements are involved. Such agreements are in
the nature of foreign loans that -- pursuant to Section 20 of Article VII39 of the 1987 Constitution -- the
President may contract or guarantee, merely with the prior concurrence of the Monetary Board. In
turn, the Board is required to report to Congress within thirty days from the end of every quarter of
the calendar year, not thirty days after the agreement is entered into.

And if paragraph 4 permits only agreements for loans and other forms of financial, or technical
assistance, what is the point of requiring that they be based on real contributions to the economic
growth and general welfare of the country? For instance, how is one to measure and assess the
"real contributions" to the "economic growth" and "general welfare" of the country that may ensue
from a foreign-currency loan agreement or a technical-assistance agreement for, say, the
refurbishing of an existing power generating plant for a mining operation somewhere in Mindanao?
Such a criterion would make more sense when applied to a major business investment in a principal
sector of the industry.

The conclusion is clear and inescapable -- a verba legis construction shows that paragraph 4 is not
to be understood as one limited only to foreign loans (or other forms of financial support) and to
technical assistance. There is definitely more to it than that. These are provisions permitting
participation by foreign companies; requiring the President's report to Congress; and using,
as yardstick, contributions based on economic growth and general welfare. These were
neither accidentally inserted into the Constitution nor carelessly cobbled together by the
drafters in lip service to shallow nationalism. The provisions patently have significance and
usefulness in a context that allows agreements with foreign companies to include more than mere
financial or technical assistance.

Fifth, it is argued that Section 2 of Article XII authorizes nothing more than a rendition of specific and
limited financial service or technical assistance by a foreign company. This argument begs the
question "To whom or for whom would it be rendered"? or Who is being assisted? If the answer is
"The State," then it necessarily implies that the State itself is the one directly and solely undertaking
the large-scale exploration, development and utilization of a mineral resource, so it follows that the
State must itself bear the liability and cost of repaying the financing sourced from the foreign lender
and/or of paying compensation to the foreign entity rendering technical assistance.

However, it is of common knowledge, and of judicial notice as well, that the government is and has
for many many years been financially strapped, to the point that even the most essential services
have suffered serious curtailments -- education and health care, for instance, not to mention judicial
services -- have had to make do with inadequate budgetary allocations. Thus, government has had
to resort to build-operate-transfer and similar arrangements with the private sector, in order to get
vital infrastructure projects built without any governmental outlay.

The very recent brouhaha over the gargantuan "fiscal crisis" or "budget deficit" merely confirms what
the ordinary citizen has suspected all along. After the reality check, one will have to admit the
implausibility of a direct undertaking -- by the State itself -- of large-scale exploration, development
and utilization of minerals, petroleum and other mineral oils. Such an undertaking entails not only
humongous capital requirements, but also the attendant risk of never finding and developing
economically viable quantities of minerals, petroleum and other mineral oils.40

It is equally difficult to imagine that such a provision restricting foreign companies to the rendition of
only financial or technical assistance to the government was deliberately crafted by the drafters of
the Constitution, who were all well aware of the capital-intensive and technology-oriented nature of
large-scale mineral or petroleum extraction and the country's deficiency in precisely those areas.41 To
say so would be tantamount to asserting that the provision was purposely designed to ladle the
large-scale development and utilization of mineral, petroleum and related resources with impossible
conditions; and to remain forever and permanently "reserved" for future generations of Filipinos.

A More Reasonable Look

at the Charter's Plain Language

Sixth, we shall now look closer at the plain language of the Charter and examining the logical
inferences. The drafters chose to emphasize and highlight agreements x x x involving either
technical or financial assistance in relation to foreign corporations' participation in large-scale EDU.
The inclusion of this clause on "technical or financial assistance" recognizes the fact that foreign
business entities and multinational corporations are the ones with the resources and know-how to
provide technical and/or financial assistance of the magnitude and type required for large-scale
exploration, development and utilization of these resources.

The drafters -- whose ranks included many academicians, economists, businessmen, lawyers,
politicians and government officials -- were not unfamiliar with the practices of foreign corporations
and multinationals.

Neither were they so naïve as to believe that these entities would provide "assistance" without
conditionalities or some quid pro quo. Definitely, as business persons well know and as a matter of
judicial notice, this matter is not just a question of signing a promissory note or executing a
technology transfer agreement. Foreign corporations usually require that they be given a say in the
management, for instance, of day-to-day operations of the joint venture. They would demand the
appointment of their own men as, for example, operations managers, technical experts, quality
control heads, internal auditors or comptrollers. Furthermore, they would probably require seats on
the Board of Directors -- all these to ensure the success of the enterprise and the repayment of the
loans and other financial assistance and to make certain that the funding and the technology they
supply would not go to waste. Ultimately, they would also want to protect their business reputation
and bottom lines.42

In short, the drafters will have to be credited with enough pragmatism and savvy to know that these
foreign entities will not enter into such "agreements involving assistance" without requiring
arrangements for the protection of their investments, gains and benefits.

Thus, by specifying such "agreements involving assistance," the drafters necessarily gave implied
assent to everything that these agreements necessarily entailed; or that could reasonably be
deemed necessary to make them tenable and effective, including management authority with
respect to the day-to-day operations of the enterprise and measures for the protection of the
interests of the foreign corporation, PROVIDED THAT Philippine sovereignty over natural resources
and full control over the enterprise undertaking the EDU activities remain firmly in the State.

Petitioners' Theory Deflated by the

Absence of Closing-Out Rules or Guidelines

Seventh and final point regarding the plain-language approach, one of the practical difficulties that
results from it is the fact that there is nothing by way of transitory provisions that would serve to
confirm the theory that the omission of the term "service contract" from the 1987 Constitution
signaled the demise of service contracts.

The framers knew at the time they were deliberating that there were various service contracts extant
and in force and effect, including those in the petroleum industry. Many of these service contracts
were long-term (25 years) and had several more years to run. If they had meant to ban service
contracts altogether, they would have had to provide for the termination or pretermination of the
existing contracts. Accordingly, they would have supplied the specifics and the when and how of
effecting the extinguishment of these existing contracts (or at least the mechanics for determining
them); and of putting in place the means to address the just claims of the contractors for
compensation for their investments, lost opportunities, and so on, if not for the recovery thereof.

If the framers had intended to put an end to service contracts, they would have at least left specific
instructions to Congress to deal with these closing-out issues, perhaps by way of general guidelines
and a timeline within which to carry them out. The following are some extant examples of such
transitory guidelines set forth in Article XVIII of our Constitution:

"Section 23. Advertising entities affected by paragraph (2), Section 11 of Article XVI of this
Constitution shall have five years from its ratification to comply on a graduated and
proportionate basis with the minimum Filipino ownership requirement therein.

xxxxxxxxx

"Section 25. After the expiration in 1991 of the Agreement between the Republic of the
Philippines and the United States of America concerning military bases, foreign military
bases, troops, or facilities shall not be allowed in the Philippines except under a treaty duly
concurred in by the Senate and, when the Congress so requires, ratified by a majority of the
votes cast by the people in a national referendum held for that purpose, and recognized as a
treaty by the other contracting State.

"Section 26. The authority to issue sequestration or freeze orders under Proclamation No. 3
dated March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for
not more than eighteen months after the ratification of this Constitution. However, in the
national interest, as certified by the President, the Congress may extend such period.

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The
order and the list of the sequestered or frozen properties shall forthwith be registered with
the proper court. For orders issued before the ratification of this Constitution, the
corresponding judicial action or proceeding shall be filed within six months from its
ratification. For those issued after such ratification, the judicial action or proceeding shall be
commenced within six months from the issuance thereof.

The sequestration or freeze order is deemed automatically lifted if no judicial action or

proceeding is commenced as herein provided." 43]

It is inconceivable that the drafters of the Constitution would leave such an important matter -- an
expression of sovereignty as it were -- indefinitely hanging in the air in a formless and ineffective
state. Indeed, the complete absence of even a general framework only serves to further deflate
petitioners' theory, like a child's balloon losing its air.

Under the circumstances, the logical inconsistencies resulting from petitioners' literal and
purely verba legisapproach to paragraph 4 of Section 2 of Article XII compel a resort to other aids to
interpretation.

Petitioners' Posture Also Negated

by Ratio Legis Et Anima
Thus, in order to resolve the inconsistencies, incongruities and ambiguities encountered and to
supply the deficiencies of the plain-language approach, there is a need for recourse to the
proceedings of the 1986 Constitutional Commission. There is a need for ratio legis et anima.

Service Contracts Not

"Deconstitutionalized"

Pertinent portions of the deliberations of the members of the Constitutional Commission (ConCom)
conclusively show that they discussed agreements involving either technical or financial
assistance in the same breadth as service contracts and used the terms interchangeably. The
following exchange between Commissioner Jamir (sponsor of the provision) and Commissioner
Suarez irrefutably proves that the "agreements involving technical or financial assistance" were none
other than service contracts.

THE PRESIDENT. Commissioner Jamir is recognized. We are still on Section 3.

MR. JAMIR. Yes, Madam President. With respect to the second paragraph of Section 3, my
amendment by substitution reads: THE PRESIDENT MAY ENTER INTO AGREEMENTS
WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER TECHNICAL OR
FINANCIAL ASSISTANCE FOR LARGE-SCALE EXPLORATION, DEVELOPMENT AND
UTILIZATION OF NATURAL RESOURCES ACCORDING TO THE TERMS AND
CONDITIONS PROVIDED BY LAW.

MR. VILLEGAS. The Committee accepts the amendment. Commissioner Suarez will give the
background.

MR. JAMIR. Thank you.

THE PRESIDENT. Commissioner Suarez is recognized.

MR. SUAREZ. Thank you, Madam President.

Will Commissioner Jamir answer a few clarificatory questions?

MR. JAMIR. Yes, Madam President.

MR. SUAREZ. This particular portion of the section has reference to what was popularly
known before as service contracts, among other things, is that correct?

MR. JAMIR. Yes, Madam President.

MR. SUAREZ. As it is formulated, the President may enter into service contracts but
subject to the guidelines that may be promulgated by Congress?

MR. JAMIR. That is correct.

MR. SUAREZ. Therefore, that aspect of negotiation and consummation will fall on the
President, not upon Congress?

MR. JAMIR. That is also correct, Madam President.

 MR. SUAREZ. Except that all of these contracts, service or otherwise, must be made
strictly in accordance with guidelines prescribed by Congress?

MR. JAMIR. That is also correct.

MR. SUAREZ. And the Gentleman is thinking in terms of a law that uniformly covers
situations of the same nature?

MR. JAMIR. That is 100 percent correct.

MR. SUAREZ. I thank the Commissioner.

MR. JAMIR. Thank you very much.44

The following exchange leaves no doubt that the commissioners knew exactly what they were
dealing with: service contracts.

THE PRESIDENT. Commissioner Gascon is recognized.

MR. GASCON. Commissioner Jamir had proposed an amendment with regard to

special service contractswhich was accepted by the Committee. Since the Committee has
accepted it, I would like to ask some questions.

THE PRESIDENT. Commissioner Gascon may proceed.

MR. GASCON. As it is proposed now, such service contracts will be entered into by the
President with the guidelines of a general law on service contract to be enacted by
Congress. Is that correct?

MR. VILLEGAS. The Commissioner is right, Madam President.

MR. GASCON. According to the original proposal, if the President were to enter into a
particular agreement, he would need the concurrence of Congress. Now that it has been
changed by the proposal of Commissioner Jamir in that Congress will set the general law to
which the President shall comply, the President will, therefore, not need the concurrence of
Congress every time he enters into service contracts. Is that correct?

MR. VILLEGAS. That is right.

MR. GASCON. The proposed amendment of Commissioner Jamir is in indirect contrast to

my proposed amendment, so I would like to object and present my proposed amendment to
the body.

xxxxxxxxx

MR. GASCON. Yes, it will be up to the body.

I feel that the general law to be set by Congress as regard service contract
agreements which the President will enter into might be too general or since we do not know
the content yet of such a law, it might be that certain agreements will be detrimental to the
interest of the Filipinos. This is in direct contrast to my proposal which provides that there be
effective constraints in the implementation of service contracts.

So instead of a general law to be passed by Congress to serve as a guideline to the

President when entering into service contract agreements, I propose that every service
contract entered into by the President would need the concurrence of Congress, so as to
assure the Filipinos of their interests with regard to the issue in Section 3 on all lands of the
public domain. My alternative amendment, which we will discuss later, reads: THAT THE
PRESIDENT SHALL ENTER INTO SUCH AGREEMENTS ONLY WITH THE
CONCURRENCE OF TWO-THIRDS VOTE OF ALL THE MEMBERS OF CONGRESS
SITTING SEPARATELY.

xxxxxxxxx

MR. BENGZON. The reason we made that shift is that we realized the original proposal
could breed corruption. By the way, this is not just confined to service contracts but also
to financial assistance. If we are going to make every single contract subject to the
concurrence of Congress – which, according to the Commissioner's amendment is the
concurrence of two-thirds of Congress voting separately – then (1) there is a very great
chance that each contract will be different from another; and (2) there is a great temptation
that it would breed corruption because of the great lobbying that is going to happen. And we
do not want to subject our legislature to that.

Now, to answer the Commissioner's apprehension, by "general law," we do not mean

statements of motherhood. Congress can build all the restrictions that it wishes into that
general law so that every contract entered into by the President under that specific area will
have to be uniform. The President has no choice but to follow all the guidelines that will be
provided by law.

MR. GASCON. But my basic problem is that we do not know as of yet the contents of such a
general law as to how much constraints there will be in it. And to my mind, although the
Committee's contention that the regular concurrence from Congress would subject Congress
to extensive lobbying, I think that is a risk we will have to take since Congress is a body of
representatives of the people whose membership will be changing regularly as there will be
changing circumstances every time certain agreements are made. It would be best then to
keep in tab and attuned to the interest of the Filipino people, whenever the President enters
into any agreement with regard to such an important matter as technical or financial
assistance for large-scale exploration, development and utilization of natural
resources or service contracts, the people's elected representatives should be on top of it.

xxxxxxxxx

MR. OPLE. Madam President, we do not need to suspend the session. If Commissioner
Gascon needs a few minutes, I can fill up the remaining time while he completes his
proposed amendment. I just wanted to ask Commissioner Jamir whether he would entertain
a minor amendment to his amendment, and it reads as follows: THE PRESIDENT SHALL
SUBSEQUENTLY NOTIFY CONGRESS OF EVERY SERVICE CONTRACT ENTERED
INTO IN ACCORDANCE WITH THE GENERAL LAW. I think the reason is, if I may state it
briefly, as Commissioner Bengzon said, Congress can always change the general law later
on to conform to new perceptions of standards that should be built into service contracts.
But the only way Congress can do this is if there were a notification requirement from the
Office of the President that such service contracts had been entered into, subject then to
 the scrutiny of the Members of Congress. This pertains to a situation where the service
contracts are already entered into, and all that this amendment seeks is the reporting
requirement from the Office of the President. Will Commissioner Jamir entertain that?

MR. JAMIR. I will gladly do so, if it is still within my power.

MR. VILLEGAS. Yes, the Committee accepts the amendment.

xxxxxxxxx

SR. TAN. Madam President, may I ask a question?

THE PRESIDENT. Commissioner Tan is recognized.

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.45

More Than Mere Financial

and Technical Assistance
Entailed by the Agreements

The clear words of Commissioner Jose N. Nolledo quoted below explicitly and eloquently
demonstrate that the drafters knew that the agreements with foreign corporations were going to
entail not mere technical or financial assistance but, rather, foreign investment in and management
of an enterprise involved in large-scale exploration, development and utilization of minerals,
petroleum, and other mineral oils.

THE PRESIDENT. Commissioner Nolledo is recognized.

MR. NOLLEDO. Madam President, I have the permission of the Acting Floor Leader to
speak for only two minutes in favor of the amendment of Commissioner Gascon.

THE PRESIDENT. Commissioner Nolledo may proceed.

MR. NOLLEDO. With due respect to the members of the Committee and Commissioner
Jamir, I am in favor of the objection of Commissioner Gascon.

Madam President, I was one of those who refused to sign the 1973 Constitution, and
one of the reasons is that there were many provisions in the Transitory Provisions
therein that favored aliens. I was shocked when I read a provision
 authorizing service contracts while we, in this Constitutional Commission, provided
for Filipino control of the economy. We are, therefore, providing for exceptional
instances where aliens may circumvent Filipino control of our economy. And one way
of circumventing the rule in favor of Filipino control of the economy is to
recognize service contracts.

As far as I am concerned, if I should have my own way, I am for the complete

deletion of this provision. However, we are presenting a compromise in the sense
that we are requiring a two-thirds vote of all the Members of Congress as a
safeguard. I think we should not mistrust the future Members of Congress by saying
that the purpose of this provision is to avoid corruption. We cannot claim that they
are less patriotic than we are. I think the Members of this Commission should know
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. It seems to me that we are
liberalizing the rules in favor of aliens.

I say these things with a heavy heart, Madam President. I do not claim to be a
nationalist, but I love my country. Although we need investments, we must adopt
safeguards that are truly reflective of the sentiments of the people and not mere
cosmetic safeguards as they now appear in the Jamir amendment. (Applause)

Thank you, Madam President.46

Another excerpt, featuring then Commissioner (now Chief Justice) Hilario G. Davide Jr., indicates
the limitations of the scope of such service contracts -- they are valid only in regard to minerals,
petroleum and other mineral oils, not to all natural resources.

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. Thank you, Madam President. This is an amendment to the Jamir amendment
and also to the Ople amendment. I propose to delete "NATURAL RESOURCES" and
substitute it with the following: MINERALS, PETROLEUM AND OTHER MINERAL OILS. On
the Ople amendment, I propose to add: THE NOTIFICATION TO CONGRESS SHALL BE
WITHIN THIRTY DAYS FROM THE EXECUTION OF THE SERVICE CONTRACT.

THE PRESIDENT. What does the Committee say with respect to the first amendment in lieu
of "NATURAL RESOURCES"?

MR. VILLEGAS. Could Commissioner Davide explain that?

MR. DAVIDE. Madam President, with the use of "NATURAL RESOURCES" here, it would
necessarily include all lands of the public domain, our marine resources, forests, parks and
so on. So we would like to limit the scope of these service contracts to those areas really
where these may be needed, the exploitation, development and exploration of minerals,
petroleum and other mineral oils. And so, we believe that we should really, if we want to
grant service contracts at all, limit the same to only those particular areas where Filipino
capital may not be sufficient, and not to all natural resources.

MR. SUAREZ. Just a point of clarification again, Madam President. When the Commissioner
made those enumerations and specifications, I suppose he deliberately did not include
"agricultural land"?
 MR. DAVIDE. That is precisely the reason we have to enumerate what these resources are
into which service contracts may enter. So, beyond the reach of any service contract will
be lands of the public domain, timberlands, forests, marine resources, fauna and flora,
wildlife and national parks.47

After the Jamir amendment was voted upon and approved by a vote of 21 to 10 with 2 abstentions,
Commissioner Davide made the following statement, which is very relevant to our quest:

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals, petroleum
and mineral oils. The Commission has just approved the possible foreign entry into the
development, exploration and utilization of these minerals, petroleum and other mineral oils
by virtue of the Jamir amendment. I voted in favor of the Jamir amendment because it will
eventually give way to vesting in exclusively Filipino citizens and corporations wholly owned
by Filipino citizens the right to utilize the other natural resources. This means that as a matter
of policy, natural resources should be utilized and exploited only by Filipino citizens or
corporations wholly owned by such citizens. But by virtue of the Jamir amendment, since we
feel that Filipino capital may not be enough for the development and utilization of minerals,
petroleum and other mineral oils, the President can enter into service contracts with foreign
corporations precisely for the development and utilization of such resources. And so, there is
nothing to fear that we will stagnate in the development of minerals, petroleum and mineral
oils because we now allow service contracts. x x x."48

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."49 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."50 Likewise, Mr. Tadeo cited inter alia the fact that service contracts
continued to subsist, enabling foreign interests to benefit from our natural resources.51 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."

Summation of the
Concom Deliberations
At this point, we sum up the matters established, based on a careful reading of the ConCom
deliberations, as follows:

· In their deliberations on what was to become paragraph 4, the framers used the
term service contracts in referring to agreements x x x involving either technical or financial
assistance.

· They spoke of service contracts as the concept was understood in the 1973 Constitution.

· It was obvious from their discussions that they were not about to ban or eradicate service
contracts.

· Instead, they were plainly crafting provisions to put in place safeguards that would eliminate
or minimize the abuses prevalent during the marital law regime. In brief, they were going to
permit service contracts with foreign corporations as contractors, but with safety measures to
prevent abuses, as an exception to the general norm established in the first paragraph of
Section 2 of Article XII. This provision reserves or limits to Filipino citizens -- and
corporations at least 60 percent of which is owned by such citizens -- the exploration,
development and utilization of natural resources.

· This provision was prompted by the perceived insufficiency of Filipino capital and the felt
need for foreign investments in the EDU of minerals and petroleum resources.

· The framers for the most part debated about the sort of safeguards that would be
considered adequate and reasonable. But some of them, having more "radical" leanings,
wanted to ban service contracts altogether; for them, the provision would permit aliens to
exploit and benefit from the nation's natural resources, which they felt should be reserved
only for Filipinos.

· In the explanation of their votes, the individual commissioners were heard by the entire
body. They sounded off their individual opinions, openly enunciated their philosophies, and
supported or attacked the provisions with fervor. Everyone's viewpoint was heard.

· In the final voting, the Article on the National Economy and Patrimony -- including
paragraph 4 allowing service contracts with foreign corporations as an exception to the
general norm in paragraph 1 of Section 2 of the same article -- was resoundingly approved
by a vote of 32 to 7, with 2 abstentions.

Agreements Involving Technical

or Financial Assistance Are

Service Contracts With Safeguards

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.

Such service contracts may be entered into only with respect to minerals, petroleum and other
mineral oils. The grant thereof is subject to several safeguards, among which are these
requirements:

(1) The service contract shall be crafted in accordance with a general law that will set
standard or uniform terms, conditions and requirements, presumably to attain a certain
uniformity in provisions and avoid the possible insertion of terms disadvantageous to the
country.

(2) The President shall be the signatory for the government because, supposedly before an
agreement is presented to the President for signature, it will have been vetted several times
over at different levels to ensure that it conforms to law and can withstand public scrutiny.

(3) Within thirty days of the executed agreement, the President shall report it to Congress to
give that branch of government an opportunity to look over the agreement and interpose
timely objections, if any.

Use of the Record of the

ConCom to Ascertain Intent

At this juncture, we shall address, rather than gloss over, the use of the "framers' intent" approach,
and the criticism hurled by petitioners who quote a ruling of this Court:

"While it is permissible in this jurisdiction to consult the debates and proceedings of the
constitutional convention in order to arrive at the reason and purpose of the resulting
Constitution, resort thereto may be had only when other guides fail as said proceedings are
powerless to vary the terms of the Constitution when the meaning is clear. Debates in the
constitutional convention 'are of value as showing the views of the individual members, and
as indicating the reason for their votes, but they give us no light as to the views of the large
majority who did not talk, much less the mass of our fellow citizens whose votes at the polls
gave that instrument the force of fundamental law. We think it safer to construe the
constitution from what appears upon its face.' The proper interpretation therefore depends
more on how it was understood by the people adopting it than in the framers' understanding
thereof."52

The notion that the deliberations reflect only the views of those members who spoke out and not the
views of the majority who remained silent should be clarified. We must never forget that those who
spoke out were heard by those who remained silent and did not react. If the latter were silent
because they happened not to be present at the time, they are presumed to have read the minutes
and kept abreast of the deliberations. By remaining silent, they are deemed to have signified their
assent to and/or conformity with at least some of the views propounded or their lack of objections
thereto. It was incumbent upon them, as representatives of the entire Filipino people, to follow the
deliberations closely and to speak their minds on the matter if they did not see eye to eye with the
proponents of the draft provisions.

In any event, each and every one of the commissioners had the opportunity to speak out and to vote
on the matter. Moreover, the individual explanations of votes are on record, and they show where
each delegate stood on the issues. In sum, we cannot completely denigrate the value or
usefulness of the record of the ConCom, simply because certain members chose not to
speak out.

It is contended that the deliberations therein did not necessarily reflect the thinking of the voting
population that participated in the referendum and ratified the Constitution. Verily, whether we like it
or not, it is a bit too much to assume that every one of those who voted to ratify the proposed
Charter did so only after carefully reading and mulling over it, provision by provision.

Likewise, it appears rather extravagant to assume that every one of those who did in fact bother to
read the draft Charter actually understood the import of its provisions, much less analyzed it vis-à-vis
the previous Constitutions. We believe that in reality, a good percentage of those who voted in favor
of it did so more out of faith and trust. For them, it was the product of the hard work and careful
deliberation of a group of intelligent, dedicated and trustworthy men and women of integrity and
conviction, whose love of country and fidelity to duty could not be questioned.

In short, a large proportion of the voters voted "yes" because the drafters, or a majority of them,
endorsed the proposed Constitution. What this fact translates to is the inescapable conclusion that
many of the voters in the referendum did not form their own isolated judgment about the draft
Charter, much less about particular provisions therein. They only relied or fell back and acted upon
the favorable endorsement or recommendation of the framers as a group. In other words, by
voting yes, they may be deemed to have signified their voluntary adoption of the understanding and
interpretation of the delegates with respect to the proposed Charter and its particular provisions. "If
it's good enough for them, it's good enough for me;" or, in many instances, "If it's good enough for
President Cory Aquino, it's good enough for me."

And even for those who voted based on their own individual assessment of the proposed Charter,
there is no evidence available to indicate that their assessment or understanding of its provisions
was in fact different from that of the drafters. This unwritten assumption seems to be petitioners' as
well. For all we know, this segment of voters must have read and understood the provisions of the
Constitution in the same way the framers had, an assumption that would account for the favorable
votes.

Fundamentally speaking, in the process of rewriting the Charter, the members of the ConCom as a
group were supposed to represent the entire Filipino people. Thus, we cannot but regard their views
as being very much indicative of the thinking of the people with respect to the matters deliberated
upon and to the Charter as a whole.

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.

In view of the foregoing discussion, we should reverse the Decision of January 27, 2004, and in fact
now hold a view different from that of the Decision, which had these findings: (a) paragraph 4 of
Section 2 of Article XII limits foreign involvement in the local mining industry to agreements strictly
for either financial or technical assistance only; (b) the same paragraph precludes agreements that
grant to foreign corporations the management of local mining operations, as such agreements are
purportedly in the nature of service contracts as these were understood under the 1973 Constitution;
(c) these service contracts were supposedly "de-constitutionalized" and proscribed by the omission
of the term service contracts from the 1987 Constitution; (d) since the WMCP FTAA contains
provisions permitting the foreign contractor to manage the concern, the said FTAA is invalid for
being a prohibited service contract; and (e) provisions of RA 7942 and DAO 96-40, which likewise
grant managerial authority to the foreign contractor, are also invalid and unconstitutional.

Ultimate Test: State's "Control"

Determinative of Constitutionality

But we are not yet at the end of our quest. Far from it. It seems that we are confronted with a
possible collision of constitutional provisions. On the one hand, paragraph 1 of Section 2 of Article
XII explicitly mandates the State to exercise "full control and supervision" over the exploration,
development and utilization of natural resources. On the other hand, paragraph 4 permits
safeguarded service contracts with foreign contractors. Normally, pursuant thereto, the contractors
exercise management prerogatives over the mining operations and the enterprise as a whole. There
is thus a legitimate ground to be concerned that either the State's full control and supervision may
rule out any exercise of management authority by the foreign contractor; or, the other way around,
allowing the foreign contractor full management prerogatives may ultimately negate the State's full
control and supervision.

Ut Magis Valeat
Quam Pereat

Under the third principle of constitutional construction laid down in Francisco -- ut magis valeat quam
pereat -- every part of the Constitution is to be given effect, and the Constitution is to be read and
understood as a harmonious whole. Thus, "full control and supervision" by the State must be
understood as one that does not preclude the legitimate exercise of management prerogatives by
the foreign contractor. Before any further discussion, we must stress the primacy and supremacy of
the principle of sovereignty and State control and supervision over all aspects of exploration,
development and utilization of the country's natural resources, as mandated in the first paragraph of
Section 2 of Article XII.

But in the next breadth we have to point out that "full control and supervision" cannot be taken
literally to mean that the State controls and supervises everything involved, down to the minutest
details, and makes all decisions required in the mining operations. This strained concept of control
and supervision over the mining enterprise would render impossible the legitimate exercise by the
contractors of a reasonable degree of management prerogative and authority necessary and
indispensable to their proper functioning.

For one thing, such an interpretation would discourage foreign entry into large-scale exploration,
development and utilization activities; and result in the unmitigated stagnation of this sector, to the
detriment of our nation's development. This scenario renders paragraph 4 inoperative and useless.
And as respondents have correctly pointed out, the government does not have to micro-manage the
mining operations and dip its hands into the day-to-day affairs of the enterprise in order for it to be
considered as having full control and supervision.

The concept of control53 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 enterprises. Control by the State may be on
a macro level, through the establishment of policies, guidelines, regulations, industry standards and
similar measures that would enable the government to control the conduct of affairs in various
enterprises and restrain activities deemed not desirable or beneficial.
The end in view is ensuring that these enterprises contribute to the economic development and
general welfare of the country, conserve the environment, and uplift the well-being of the affected
local communities. Such a concept of control would be compatible with permitting the foreign
contractor sufficient and reasonable management authority over the enterprise it invested in, in order
to ensure that it is operating efficiently and profitably, to protect its investments and to enable it to
succeed.

The question to be answered, then, is whether RA 7942 and its Implementing Rules enable
the government to exercise that degree of control sufficient to direct and regulate the
conduct of affairs of individual enterprises and restrain undesirable activities.

On the resolution of these questions will depend the validity and constitutionality of certain provisions
of the Philippine Mining Act of 1995 (RA 7942) and its Implementing Rules and Regulations (DAO
96-40), as well as the WMCP FTAA.

Indeed, petitioners charge54 that RA 7942, as well as its Implementing Rules and Regulations, makes
it possible for FTAA contracts to cede full control and management of mining enterprises over to fully
foreign-owned corporations, 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 does not
supposedly act as the 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. Petitioners then conclude
that the law, the implementing regulations, and the WMCP FTAA cede "beneficial ownership" of the
mineral resources to the foreign contractor.

A careful scrutiny of the provisions of RA 7942 and its Implementing Rules belies petitioners' claims.
Paraphrasing the Constitution, Section 4 of the statute clearly affirms the State's control thus:

"Sec. 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."

The aforequoted provision is substantively reiterated in Section 2 of DAO 96-40 as follows:

"Sec. 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 the Government
and private sector in order to enhance national growth in a way that effectively safeguards
the environment and protects the rights of affected communities."

Sufficient Control Over Mining

Operations Vested in the State
by RA 7942 and DAO 96-40

RA 7942 provides for the State's 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 DENR's power of over-all supervision and periodic review for
"the conservation, management, development and proper use of the State's 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.

xxxxxxxxx

"(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.

"(n) x x x x x x x x x

"(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 government's
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 inspection 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 contractor's 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 contractor's 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.

Section 3(aq) of RA 7942

Not Unconstitutional

An objection has been expressed that Section 3(aq)55 of RA 7942 -- which allows a foreign contractor
to apply for and hold an exploration permit -- is unconstitutional. The reasoning is that Section 2 of
Article XII of the Constitution does not allow foreign-owned corporations to undertake mining
operations directly. They may act only as contractors of the State under an FTAA; and the State, as
the party directly undertaking exploitation of its natural resources, must hold through the government
all exploration permits and similar authorizations. Hence, Section 3(aq), in permitting foreign-owned
corporations to hold exploration permits, is unconstitutional.

The objection, however, is not well-founded. While the Constitution mandates the State to exercise
full control and supervision over the exploitation of mineral resources, nowhere does it require the
government to hold all exploration permits and similar authorizations. In fact, there is no prohibition
at all against foreign or local corporations or contractors holding exploration permits. The reason is
not hard to see.

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. This phase
involves nothing but expenditures for exploring the contract area and locating the mineral bodies. As
no extraction is involved, there are no revenues or incomes to speak of. In short, the exploration
permit is an authorization for the grantee to spend its own funds on exploration programs that are
pre-approved by the government, without any right to recover anything should no minerals in
commercial quantities be discovered. The State risks nothing and loses nothing by granting these
permits to local or foreign firms; in fact, it stands to gain in the form of data generated by the
exploration activities.

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.

Thus, the permit grantee may apply for an MPSA, a joint venture agreement, a co-production
agreement, or an FTAA over the permit area, and the application shall be approved if the permit
grantee meets the necessary qualifications and the terms and conditions of any such agreement.
Therefore, the contractor will be in a position to extract minerals and earn revenues only when the
MPSA or another mineral agreement, or an FTAA, is granted. At that point, the contractor's rights
and obligations will be covered by an FTAA or a mineral agreement.

But 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, and the grantee would definitely need to have some document or instrument as evidence
of its right to conduct exploration works within the specified area. This need is met by the exploration
permit issued pursuant to Sections 3(aq), 20 and 23 of RA 7942.

In brief, the exploration permit serves a practical and legitimate purpose in that it protects the
interests and preserves the rights of the exploration permit grantee (the would-be contractor)
-- foreign or local -- during the period of time that it is spending heavily on exploration works,
without yet being able to earn revenues to recoup any of its investments and
expenditures. Minus this permit and the protection it affords, the exploration works and
expenditures may end up benefiting only claim-jumpers. Such a possibility tends to discourage
investors and contractors. Thus, Section 3(aq) of RA 7942 may not be deemed unconstitutional.

The Terms of the WMCP FTAA

A Deference to State Control

A perusal of the WMCP FTAA also reveals a slew of stipulations providing for State control and
supervision:

1. The contractor is obligated to account for the value of production and sale of minerals
(Clause 1.4).

2. The contractor's work program, activities and budgets must be approved by/on behalf of
the State (Clause 2.1).

3. The DENR secretary has the power to extend the exploration period (Clause 3.2-a).

4. Approval by the State is necessary for incorporating lands into the FTAA contract area
(Clause 4.3-c).

5. The Bureau of Forest Development is vested with discretion in regard to approving the
inclusion of forest reserves as part of the FTAA contract area (Clause 4.5).
6. The contractor is obliged to relinquish periodically parts of the contract area not needed for
exploration and development (Clause 4.6).

7. A Declaration of Mining Feasibility must be submitted for approval by the State (Clause
4.6-b).

8. The contractor is obligated to report to the State its exploration activities (Clause 4.9).

9. The contractor is required to obtain State approval of its work programs for the succeeding
two-year periods, containing the proposed work activities and expenditures budget related to
exploration (Clause 5.1).

10. The contractor is required to obtain State approval for its proposed expenditures for
exploration activities (Clause 5.2).

11. The contractor is required to submit an annual report on geological, geophysical,

geochemical and other information relating to its explorations within the FTAA area (Clause
5.3-a).

12. The contractor is to submit within six months after expiration of exploration period a final
report on all its findings in the contract area (Clause 5.3-b).

13. The contractor, after conducting feasibility studies, shall submit a declaration of mining
feasibility, along with a description of the area to be developed and mined, a description of
the proposed mining operations and the technology to be employed, and a proposed work
program for the development phase, for approval by the DENR secretary (Clause 5.4).

14. The contractor is obliged to complete the development of the mine, including construction
of the production facilities, within the period stated in the approved work program (Clause
6.1).

15. The contractor is obligated to submit for approval of the DENR secretary a work program
covering each period of three fiscal years (Clause 6.2).

16. The contractor is to submit reports to the DENR secretary on the production, ore
reserves, work accomplished and work in progress, profile of its work force and management
staff, and other technical information (Clause 6.3).

17. Any expansions, modifications, improvements and replacements of mining facilities shall
be subject to the approval of the secretary (Clause 6.4).

18. The State has control with respect to the amount of funds that the contractor may borrow
within the Philippines (Clause 7.2).

19. The State has supervisory power with respect to technical, financial and marketing
issues (Clause 10.1-a).

20. The contractor is required to ensure 60 percent Filipino equity in the contractor, within ten
years of recovering specified expenditures, unless not so required by subsequent legislation
(Clause 10.1).
 21. The State has the right to terminate the FTAA for the contractor's unremedied substantial
breach thereof (Clause 13.2);

22. The State's approval is needed for any assignment of the FTAA by the contractor to an
entity other than an affiliate (Clause 14.1).

We should elaborate a little on the work programs and budgets, and what they mean with respect to
the State's ability to exercise full control and effective supervision over the enterprise. For instance,
throughout the initial five-year exploration and feasibility phase of the project, the contractor is
mandated by Clause 5.1 of the WMCP FTAA to submit a series of work programs (copy furnished
the director of MGB) to the DENR secretary for approval. The programs will detail the contractor's
proposed exploration activities and budget covering each subsequent period of two fiscal years.

In other words, the concerned government officials will be informed beforehand of the proposed
exploration activities and expenditures of the contractor for each succeeding two-year period, with
the right to approve/disapprove them or require changes or adjustments therein if deemed
necessary.

Likewise, under Clause 5.2(a), the amount that the contractor was supposed to spend for exploration
activities during the first contract year of the exploration period was fixed at not less than P24 million;
and then for the succeeding years, the amount shall be as agreed between the DENR secretary and
the contractor prior to the commencement of each subsequent fiscal year. If no such agreement is
arrived upon, the previous year's expenditure commitment shall apply.

This provision alone grants the government through the DENR secretary a very big say in the
exploration phase of the project. This fact is not something to be taken lightly, considering that
the government has absolutely no contribution to the exploration expenditures or work activities and
yet is given veto power over such a critical aspect of the project. We cannot but construe as very
significant such a degree of control over the project and, resultantly, over the mining enterprise itself.

Following its exploration activities or feasibility studies, if the contractor believes that any part of the
contract area is likely to contain an economic mineral resource, it shall submit to the DENR secretary
a declaration of mining feasibility (per Clause 5.4 of the FTAA), together with a technical description
of the area delineated for development and production, a description of the proposed mining
operations including the technology to be used, a work program for development, an environmental
impact statement, and a description of the contributions to the economic and general welfare of the
country to be generated by the mining operations (pursuant to Clause 5.5).

The work program for development is subject to the approval of the DENR secretary. Upon its
approval, the contractor must comply with it and complete the development of the mine, including
the construction of production facilities and installation of machinery and equipment, within the
period provided in the approved work program for development (per Clause 6.1).

Thus, notably, the development phase of the project is likewise subject to the control and
supervision of the government. It cannot be emphasized enough that the proper and timely
construction and deployment of the production facilities and the development of the mine are of
pivotal significance to the success of the mining venture. Any missteps here will potentially be very
costly to remedy. Hence, the submission of the work program for development to the DENR
secretary for approval is particularly noteworthy, considering that so many millions of dollars worth of
investments -- courtesy of the contractor -- are made to depend on the State's consideration and
action.
Throughout the operating period, the contractor is required to submit to the DENR secretary for
approval, copy furnished the director of MGB, work programs covering each period of three fiscal
years (per Clause 6.2). During the same period (per Clause 6.3), the contractor is mandated to
submit various quarterly and annual reports to the DENR secretary, copy furnished the director of
MGB, on the tonnages of production in terms of ores and concentrates, with corresponding grades,
values and destinations; reports of sales; total ore reserves, total tonnage of ores, work
accomplished and work in progress (installations and facilities related to mining operations),
investments made or committed, and so on and so forth.

Under Section VIII, during the period of mining operations, the contractor is also required to submit
to the DENR secretary (copy furnished the director of MGB) the work program and corresponding
budget for the contract area, describing the mining operations that are proposed to be carried out
during the period covered. The secretary is, of course, entitled to grant or deny approval of any work
program or budget and/or propose revisions thereto. Once the program/budget has been approved,
the contractor shall comply therewith.

In sum, the above provisions of the WMCP FTAA taken together, far from constituting a surrender of
control and a grant of beneficial ownership of mineral resources to the contractor in
question, bestow upon the State more than adequate control and supervision over the
activities of the contractor and the enterprise.

No Surrender of Control
Under the WMCP FTAA

Petitioners, however, take aim at Clause 8.2, 8.3, and 8.5 of the WMCP FTAA which, they say,
amount to a relinquishment of control by the State, since it "cannot truly impose its own discretion" in
respect of the submitted work programs.

"8.2. The Secretary shall be deemed to have approved any Work Programme or Budget or
variation thereofsubmitted by the Contractor unless within sixty (60) days after submission by
the Contractor the Secretary gives notice declining such approval or proposing a revision of
certain features and specifying its reasons therefor ('the Rejection Notice').

8.3. If the Secretary gives a Rejection Notice, the Parties shall promptly meet and endeavor
to agree on amendments to the Work Programme or Budget. If the Secretary and the
Contractor fail to agree on the proposed revision within 30 days from delivery of the
Rejection Notice then the Work Programme or Budget or variation thereof proposed by the
Contractor shall be deemed approved, so as not to unnecessarily delay the performance of
the Agreement.

8.4. x x x x x x x x x

8.5. So far as is practicable, the Contractor shall comply with any approved Work
Programme and Budget. It is recognized by the Secretary and the Contractor that the details
of any Work Programmes or Budgets may require changes in the light of changing
circumstances. The Contractor may make such changes without approval of the Secretary
provided they do not change the general objective of any Work Programme, nor entail a
downward variance of more than twenty per centum (20percent) of the relevant Budget. All
other variations to an approved Work Programme or Budget shall be submitted for approval
of the Secretary."
From the provisions quoted above, petitioners generalize by asserting that the government does not
participate in making critical decisions regarding the operations of the mining firm. Furthermore,
while the State can require the submission of work programs and budgets, the decision of the
contractor will still prevail, if the parties have a difference of opinion with regard to matters affecting
operations and management.

We hold, however, that the foregoing provisions do not manifest a relinquishment of control. For
instance, Clause 8.2 merely provides a mechanism for preventing the business or mining operations
from grinding to a complete halt as a result of possibly over-long and unjustified delays in the
government's handling, processing and approval of submitted work programs and budgets. Anyway,
the provision does give the DENR secretary more than sufficient time (60 days) to react to submitted
work programs and budgets. It cannot be supposed that proper grounds for objecting thereto, if any
exist, cannot be discovered within a period of two months.

On the other hand, Clause 8.3 seeks to provide a temporary, stop-gap solution in the event a
disagreement over the submitted work program or budget arises between the State and the
contractor and results in a stalemate or impasse, in order that there will be no unreasonably long
delays in the performance of the works.

These temporary or stop-gap solutions are not necessarily evil or wrong. Neither does it follow that
the government will inexorably be aggrieved if and when these temporary remedies come into
play. First, avoidance of long delays in these situations will undoubtedly redound to the benefit of the
State as well as the contractor. Second, who is to say that the work program or budget proposed by
the contractor and deemed approved under Clause 8.3 would not be the better or more reasonable
or more effective alternative? The contractor, being the "insider," as it were, may be said to be in a
better position than the State -- an outsider looking in -- to determine what work program or budget
would be appropriate, more effective, or more suitable under the circumstances.

All things considered, we take exception to the characterization of the DENR secretary as a
subservient nonentity whom the contractor can overrule at will, on account of Clause 8.3. And
neither is it true that under the same clause, the DENR secretary has no authority whatsoever to
disapprove the work program. As Respondent WMCP reasoned in its Reply-Memorandum, the State
-- despite Clause 8.3 -- still has control over the contract area and it may, as sovereign authority,
prohibit work thereon until the dispute is resolved. And ultimately, the State may terminate the
agreement, pursuant to Clause 13.2 of the same FTAA, citing substantial breach thereof. Hence, it
clearly retains full and effective control of the exploitation of the mineral resources.

On the other hand, Clause 8.5 is merely an acknowledgment of the parties' need for flexibility, given
that no one can accurately forecast under all circumstances, or predict how situations may change.
Hence, while approved work programs and budgets are to be followed and complied with as far as
practicable, there may be instances in which changes will have to be effected, and effected rapidly,
since events may take shape and unfold with suddenness and urgency. Thus, Clause 8.5 allows the
contractor to move ahead and make changes without the express or implicit approval of the DENR
secretary. Such changes are, however, subject to certain conditions that will serve to limit or restrict
the variance and prevent the contractor from straying very far from what has been approved.

Clause 8.5 provides the contractor a certain amount of flexibility to meet unexpected situations, while
still guaranteeing that the approved work programs and budgets are not abandoned altogether.
Clause 8.5 does not constitute proof that the State has relinquished control. And ultimately, should
there be disagreement with the actions taken by the contractor in this instance as well as under
Clause 8.3 discussed above, the DENR secretary may resort to cancellation/termination of the FTAA
as the ultimate sanction.
Discretion to Select Contract
Area Not an Abdication of Control

Next, petitioners complain that the contractor has full discretion to select -- and the government has
no say whatsoever as to -- the parts of the contract area to be relinquished pursuant to Clause 4.6 of
the WMCP FTAA.56This clause, however, does not constitute abdication of control. Rather, it is a
mere acknowledgment of the fact that the contractor will have determined, after appropriate
exploration works, which portions of the contract area do not contain minerals in commercial
quantities sufficient to justify developing the same and ought therefore to be relinquished. The State
cannot just substitute its judgment for that of the contractor and dictate upon the latter which areas to
give up.

Moreover, we can be certain that the contractor's self-interest will propel proper and efficient
relinquishment. According to private respondent,57 a mining company tries to relinquish as much non-
mineral areas as soon as possible, because the annual occupation fees paid to the government are
based on the total hectarage of the contract area, net of the areas relinquished. Thus, the larger the
remaining area, the heftier the amount of occupation fees to be paid by the contractor. Accordingly,
relinquishment is not an issue, given that the contractor will not want to pay the annual occupation
fees on the non-mineral parts of its contract area. Neither will it want to relinquish promising sites,
which other contractors may subsequently pick up.

Government Not a Subcontractor

Petitioners further maintain that the contractor can compel the government to exercise its power of
eminent domain to acquire surface areas within the contract area for the contractor's use. Clause
10.2 (e) of the WMCP FTAA provides that the government agrees that the contractor shall "(e) have
the right to require the Government at the Contractor's own cost, to purchase or acquire surface
areas for and on behalf of the Contractor at such price and terms as may be acceptable to the
contractor. At the termination of this Agreement such areas shall be sold by public auction or tender
and the Contractor shall be entitled to reimbursement of the costs of acquisition and maintenance,
adjusted for inflation, from the proceeds of sale."

According to petitioners, "government becomes a subcontractor to the contractor" and may, on

account of this provision, be compelled "to make use of its power of eminent domain, not for public
purposes but on behalf of a private party, i.e., the contractor." Moreover, the power of the courts to
determine the amount corresponding to the constitutional requirement of just compensation has
allegedly also been contracted away by the government, on account of the latter's commitment that
the acquisition shall be at such terms as may be acceptable to the contractor.

However, private respondent has proffered a logical explanation for the provision.58 Section 10.2(e)
contemplates a situation applicable to foreign-owned corporations. WMCP, at the time of the
execution of the FTAA, was a foreign-owned corporation and therefore not qualified to own land. As
contractor, it has at some future date to construct the infrastructure -- the mine processing plant, the
camp site, the tailings dam, and other infrastructure -- needed for the large-scale mining operations.
It will then have to identify and pinpoint, within the FTAA contract area, the particular surface areas
with favorable topography deemed ideal for such infrastructure and will need to acquire the surface
rights. The State owns the mineral deposits in the earth, and is also qualified to own land.

Section 10.2(e) sets forth the mechanism whereby 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. The government then acquires ownership of the surface land
areas on behalf of the contractor, in order to enable the latter to proceed to fully implement the
FTAA.

The contractor, of course, shoulders the purchase price of the land. Hence, the provision allows it,
after termination of the FTAA, to be reimbursed from proceeds of the sale of the surface areas,
which the government will dispose of through public bidding. It should be noted that this provision
will not be applicable to Sagittarius as the present FTAA contractor, since it is a Filipino corporation
qualified to own and hold land. As such, it may therefore freely negotiate with the surface rights
owners and acquire the surface property in its own right.

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 contractor's 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.

Absence of Provision
Requiring Sale at Posted
Prices Not Problematic

The supposed absence of any provision in the WMCP FTAA directly and explicitly requiring the
contractor to sell the mineral products at posted or market prices is not a problem. Apart from Clause
1.4 of the FTAA obligating the contractor to account for the total value of mineral production and the
sale of minerals, we can also look to Section 35 of RA 7942, which incorporates into all FTAAs
certain terms, conditions and warranties, including the following:

"(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."

For that matter, Section 56(n) of DAO 99-56 specifically obligates an FTAA contractor to dispose of
the minerals and by-products at the highest market price and to register with the MGB a copy of the
sales agreement. After all, the provisions of prevailing statutes as well as rules and regulations are
deemed written into contracts.

Contractor's Right to Mortgage

Not Objectionable Per Se

Petitioners also question the absolute right of the contractor under Clause 10.2 (l) to mortgage and
encumber not only its rights and interests in the FTAA and the infrastructure and improvements
introduced, but also the mineral products extracted. Private respondents do not touch on this matter,
but we believe that this provision may have to do with the conditions imposed by the creditor-banks
of the then foreign contractor WMCP to secure the lendings made or to be made to the latter.
Ordinarily, banks lend not only on the security of mortgages on fixed assets, but also on
encumbrances of goods produced that can easily be sold and converted into cash that can be
applied to the repayment of loans. Banks even lend on the security of accounts receivable that are
collectible within 90 days.59

It is not uncommon to find that a debtor corporation has executed deeds of assignment "by way of
security" over the production for the next twelve months and/or the proceeds of the sale thereof -- or
the corresponding accounts receivable, if sold on terms -- in favor of its creditor-banks. Such deeds
may include authorizing the creditors to sell the products themselves and to collect the sales
proceeds and/or the accounts receivable.

Seen in this context, Clause 10.2(l) is not something out of the ordinary or objectionable. In any
case, as will be explained below, even if it is allowed to mortgage or encumber the mineral end-
products themselves, the contractor is not freed of its obligation to pay the government its basic and
additional shares in the net mining revenue, which is the essential thing to consider.

In brief, the alarum raised over the contractor's right to mortgage the minerals is simply unwarranted.
Just the same, the contractor must account for the value of mineral production and the sales
proceeds therefrom. Likewise, under the WMCP FTAA, the government remains entitled to its sixty
percent share in the net mining revenues of the contractor. The latter's right to mortgage the
minerals does not negate the State's right to receive its share of net mining revenues.

Shareholders Free to Sell Their Stocks

Petitioners likewise criticize Clause 10.2(k), which gives the contractor authority "to change its equity
structure at any time." This provision may seem somewhat unusual, but considering that WMCP
then was 100 percent foreign-owned, any change would mean that such percentage would either
stay unaltered or be decreased in favor of Filipino ownership. Moreover, the foreign-held shares may
change hands freely. Such eventuality is as it should be.

We believe it is not necessary for government to attempt to limit or restrict the freedom of the
shareholders in the contractor to freely transfer, dispose of or encumber their shareholdings,
consonant with the unfettered exercise of their business judgment and discretion. Rather, what is
critical is that, regardless of the identity, nationality and percentage ownership of the various
shareholders of the contractor -- and regardless of whether these shareholders decide to take the
company public, float bonds and other fixed-income instruments, or allow the creditor-banks to take
an equity position in the company -- the foreign-owned contractor is always in a position to render
the services required under the FTAA, under the direction and control of the government.

Contractor's Right to Ask

For Amendment Not Absolute

With respect to Clauses 10.4(e) and (i), petitioners complain that these provisions bind government
to allow amendments to the FTAA if required by banks and other financial institutions as part of the
conditions for new lendings. However, we do not find anything wrong with Clause 10.4(e), which only
states that "if the Contractor seeks to obtain financing contemplated herein from banks or other
financial institutions, (the Government shall) cooperate with the Contractor in such efforts provided
that such financing arrangements will in no event reduce the Contractor's obligations or the
Government's rights hereunder." The colatilla obviously safeguards the State's interests; if breached,
it will give the government cause to object to the proposed amendments.

On the other hand, Clause 10.4(i) provides that "the Government shall favourably consider any
request from [the] Contractor for amendments of this Agreement which are necessary in order for
the Contractor to successfully obtain the financing." Petitioners see in this provision a complete
renunciation of control. We disagree.

The proviso does not say that the government shall grant any request for amendment. Clause 10.4(i)
only obliges the State to favorably consider any such request, which is not at all unreasonable, as it
is not equivalent to saying that the government must automatically consent to it. This provision
should be read together with the rest of the FTAA provisions instituting government control and
supervision over the mining enterprise. The clause should not be given an interpretation that enables
the contractor to wiggle out of the restrictions imposed upon it by merely suggesting that certain
amendments are requested by the lenders.

Rather, it is up to the contractor to prove to the government that the requested changes to the FTAA
are indispensable, as they enable the contractor to obtain the needed financing; that without such
contract changes, the funders would absolutely refuse to extend the loan; that there are no other
sources of financing available to the contractor (a very unlikely scenario); and that without the
needed financing, the execution of the work programs will not proceed. But the bottom line is, in the
exercise of its power of control, the government has the final say on whether to approve or
disapprove such requested amendments to the FTAA. In short, approval thereof is not mandatory on
the part of the government.

In fine, the foregoing evaluation and analysis of the aforementioned FTAA provisions
sufficiently overturns petitioners' litany of objections to and criticisms of the State's alleged
lack of control.

Financial Benefits Not

Surrendered to the Contractor

One of the main reasons certain provisions of RA 7942 were struck down was the finding mentioned
in the Decision that beneficial ownership of the mineral resources had been conveyed to the
contractor. This finding was based on the underlying assumption, common to the said provisions,
that the foreign contractor manages the mineral resources in the same way that foreign contractors
in service contracts used to. "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."60 As the WMCP FTAA contained similar provisions deemed by
the ponente to be abhorrent to the Constitution, the Decision struck down the Contract as well.

Beneficial ownership has been defined as ownership recognized by law and capable of being
enforced in the courts at the suit of the beneficial owner.61 Black's Law Dictionary indicates that the
term is used in two senses: first, to indicate the interest of a beneficiary in trust property (also called
"equitable ownership"); and second, to refer to the power of a corporate shareholder to buy or sell
the shares, though the shareholder is not registered in the corporation's books as the
owner.62 Usually, beneficial ownership is distinguished from naked ownership, which is the enjoyment
of all the benefits and privileges of ownership, as against possession of the bare title to property.

An assiduous examination of the WMCP FTAA uncovers no indication that it confers upon WMCP
ownership, beneficial or otherwise, of the mining property it is to develop, the minerals to be
produced, or the proceeds of their sale, which can be legally asserted and enforced as against the
State.

As public respondents correctly point out, any interest the contractor may have in the proceeds of
the mining operation is merely the equivalent of the consideration the government has undertaken to
pay for its services. All lawful contracts require such mutual prestations, and the WMCP FTAA is no
different. The contractor commits to perform certain services for the government in respect of the
mining operation, and in turn it is to be compensated out of the net mining revenues generated from
the sale of mineral products. What would be objectionable is a contractual provision that unduly
benefits the contractor far in excess of the service rendered or value delivered, if any, in exchange
therefor.

A careful perusal of the statute itself and its implementing rules reveals that neither RA 7942 nor
DAO 99-56 can be said to convey beneficial ownership of any mineral resource or product to any
foreign FTAA contractor.

Equitable Sharing
of Financial Benefits

On the contrary, DAO 99-56, entitled "Guidelines Establishing the Fiscal Regime of Financial or
Technical Assistance Agreements" aims to ensure an equitable sharing of the benefits derived from
mineral resources. These benefits are to be equitably shared among the government (national and
local), the FTAA contractor, and the affected communities. The purpose is to ensure sustainable
mineral resources development; and a fair, equitable, competitive and stable investment regime for
the large-scale exploration, development and commercial utilization of minerals. The general
framework or concept followed in crafting the fiscal regime of the FTAA is based on the principle that
the government expects real contributions to the economic growth and general welfare of the
country, while the contractor expects a reasonable return on its investments in the project.63

Specifically, under the fiscal regime, the government's expectation is, inter alia, the receipt of its
share from the taxes and fees normally paid by a mining enterprise. On the other hand, the FTAA
contractor is granted by the government certain fiscal and non-fiscal incentives64 to help support the
former's cash flow during the most critical phase (cost recovery) and to make the Philippines
competitive with other mineral-producing countries. After the contractor has recovered its initial
investment, it will pay all the normal taxes and fees comprising the basic share of the government,
plus an additional share for the government based on the options and formulae set forth in DAO 99-
56.

The said DAO spells out the financial benefits the government will receive from an FTAA, referred to
as "the Government Share," composed of a basic government share and an additional
government share.

The basic government share is comprised of all direct taxes, fees and royalties, as well as other
payments made by the contractor during the term of the FTAA. These are amounts paid directly to (i)
the national government (through the Bureau of Internal Revenue, Bureau of Customs, Mines &
Geosciences Bureau and other national government agencies imposing taxes or fees), (ii) the local
government units where the mining activity is conducted, and (iii) persons and communities directly
affected by the mining project. The major taxes and other payments constituting the basic
government share are enumerated below:65

Payments to the National Government:

· Excise tax on minerals - 2 percent of the gross output of mining operations

· Contractor' income tax - maximum of 32 percent of taxable income for corporations

 · Customs duties and fees on imported capital equipment -the rate is set by the Tariff
and Customs Code (3-7 percent for chemicals; 3-10 percent for explosives; 3-15
percent for mechanical and electrical equipment; and 3-10 percent for vehicles,
aircraft and vessels

· VAT on imported equipment, goods and services – 10 percent of value

· Royalties due the government on minerals extracted from mineral reservations, if

applicable – 5 percent of the actual market value of the minerals produced

· Documentary stamp tax - the rate depends on the type of transaction

· Capital gains tax on traded stocks - 5 to 10 percent of the value of the shares

· Withholding tax on interest payments on foreign loans -15 percent of the amount of
interest

· Withholding tax on dividend payments to foreign stockholders – 15 percent of the

dividend

· Wharfage and port fees

· Licensing fees (for example, radio permit, firearms permit, professional fees)

· Other national taxes and fees.

Payments to Local Governments:

· Local business tax - a maximum of 2 percent of gross sales or receipts (the rate
varies among local government units)

· Real property tax - 2 percent of the fair market value of the property, based on an
assessment level set by the local government

· Special education levy - 1 percent of the basis used for the real property tax

· Occupation fees - PhP50 per hectare per year; PhP100 per hectare per year if
located in a mineral reservation

· Community tax - maximum of PhP10,500 per year

· All other local government taxes, fees and imposts as of the effective date of the
FTAA - the rate and the type depend on the local government

Other Payments:

· Royalty to indigenous cultural communities, if any – 1 percent of gross output from

mining operations

· Special allowance - payment to claim owners and surface rights holders

Apart from the basic share, an additional government share is also collected from the FTAA
contractor in accordance with the second paragraph of Section 81 of RA 7942, which provides that
the government share shall be comprised of, among other things, certain taxes, duties and fees. The
subject proviso reads:

"The Government share in a 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." (Bold types supplied.)

The government, through the DENR and the MGB, has interpreted the insertion of the
phrase among other things as signifying that the government is entitled to an "additional government
share" to be paid by the contractor apart from the "basic share," in order to attain a fifty-fifty sharing
of net benefits from mining.

The additional government share is computed by using one of three options or schemes
presented in DAO 99-56: (1) a fifty-fifty sharing in the cumulative present value of cash flows; (2) the
share based on excess profits; and (3) the sharing based on the cumulative net mining revenue. The
particular formula to be applied will be selected by the contractor, with a written notice to the
government prior to the commencement of the development and construction phase of the mining
project.66

Proceeds from the government shares arising from an FTAA contract are distributed to and received
by the different levels of government in the following proportions:

National Government 50 percent

Provincial 10 percent
Government

Municipal 20 percent
Government

Affected Barangays 20 percent

The portion of revenues remaining after the deduction of the basic and additional government shares
is what goes to the contractor.

Government's Share in an
FTAA Not Consisting Solely
of Taxes, Duties and Fees

In connection with the foregoing discussion on the basic and additional government shares, it is
pertinent at this juncture to mention the criticism leveled at the second paragraph of Section 81 of
RA 7942, quoted earlier. The said proviso has been denounced, because, allegedly, the State's
share in FTAAs with foreign contractors has been limited to taxes, fees and duties only; in effect, the
State has been deprived of a share in the after-tax income of the enterprise. In the face of this
allegation, one has to consider that the law does not define the term among other things; and the
Office of the Solicitor General, in its Motion for Reconsideration, appears to have erroneously
claimed that the phrase refers to indirect taxes.
The law provides no definition of the term among other things, for the reason that Congress
deliberately avoided setting unnecessary limitations as to what may constitute compensation to the
State for the exploitation and use of mineral resources. But the inclusion of that phrase clearly and
unmistakably reveals the legislative intent to have the State collect more than just the usual taxes,
duties and fees. Certainly, there is nothing in that phrase -- or in the second paragraph of Section 81
-- that would suggest that such phrase should be interpreted as referring only to taxes, duties, fees
and the like.

Precisely for that reason, to fulfill the legislative intent behind the inclusion of the phrase among
other things in the second paragraph of Section 81,67 the DENR structured and formulated in DAO
99-56 the said additional government share. Such a share was to consist not of taxes, but of a
share in the earnings or cash flows of the mining enterprise. The additional government share
was to be paid by the contractor on top of the basic share, so as to achieve a fifty-fifty sharing --
between the government and the contractor -- of net benefits from mining. In the Ramos-DeVera
paper, the explanation of the three options or formulas68 -- presented in DAO 99-56 for the
computation of the additional government share -- serves to debunk the claim that the government's
take from an FTAA consists solely of taxes, fees and duties.

Unfortunately, the Office of the Solicitor General -- although in possession of the relevant data --
failed to fully replicate or echo the pertinent elucidation in the Ramos-DeVera paper regarding the
three schemes or options for computing the additional government share presented in DAO 99-56.
Had due care been taken by the OSG, the Court would have been duly apprised of the real nature
and particulars of the additional share.

But, perhaps, on account of the esoteric discussion in the Ramos-DeVera paper, and the even more
abstruse mathematical jargon employed in DAO 99-56, the OSG omitted any mention of the three
options. Instead, the OSG skipped to a side discussion of the effect of indirect taxes, which
had nothing at all to do with the additional government share, to begin with. Unfortunately, this move
created the wrong impression, pointed out in Justice Antonio T. Carpio's Opinion, that the OSG had
taken the position that the additional government share consisted of indirect taxes.

In any event, what is quite evident is the fact that the additional government share, as formulated,
has nothing to do with taxes -- direct or indirect -- or with duties, fees or charges. To repeat, it is over
and above the basic government share composed of taxes and duties. Simply put, the additional
share may be (a) an amount that will result in a 50-50 sharing of the cumulative present value of
the cash flows69 of the enterprise; (b) an amount equivalent to 25 percent of the additional or excess
profits of the enterprise, reckoned against a benchmark return on investments; or (c) an amount that
will result in a fifty-fifty sharing of the cumulative net mining revenue from the end of the recovery
period up to the taxable year in question. The contractor is required to select one of the three options
or formulae for computing the additional share, an option it will apply to all of its mining operations.

As used above, "net mining revenue" is defined as the gross output from mining operations for a
calendar year, less deductible expenses (inclusive of taxes, duties and fees). Such revenue would
roughly be equivalent to "taxable income" or income before income tax. Definitely, as compared with,
say, calculating the additional government share on the basis of net income (after income tax), the
net mining revenue is a better and much more reasonable basis for such computation, as it gives a
truer picture of the profitability of the company.

To demonstrate that the three options or formulations will operate as intended, Messrs. Ramos and
de Vera also performed some quantifications of the government share via a financial modeling of
each of the three options discussed above. They found that the government would get the highest
share from the option that is based on the net mining revenue, as compared with the other two
options, considering only the basic and the additional shares; and that, even though production rate
decreases, the government share will actually increase when the net mining revenue and the
additional profit-based options are used.

Furthermore, it should be noted that the three options or formulae do not yet take into account the
indirect taxes70and other financial contributions71 of mining projects. These indirect taxes and other
contributions are real and actual benefits enjoyed by the Filipino people and/or government. Now, if
some of the quantifiable items are taken into account in the computations, the financial modeling
would show that the total government share increases to 60 percent or higher -- in one instance, as
much as 77 percent and even 89 percent -- of the net present value of total benefits from the project.
As noted in the Ramos-DeVera paper, these results are not at all shabby, considering that the
contractor puts in all the capital requirements and assumes all the risks, without the government
having to contribute or risk anything.

Despite the foregoing explanation, Justice Carpio still insisted during the Court's deliberations that
the phrase among other things refers only to taxes, duties and fees. We are bewildered by his
position. On the one hand, he condemns the Mining Law for allegedly limiting the government's
benefits only to taxes, duties and fees; and on the other, he refuses to allow the State to benefit from
the correct and proper interpretation of the DENR/MGB. To remove all doubts then, we hold that the
State's share is not limited to taxes, duties and fees only and that the DENR/MGB interpretation of
the phrase among other things is correct. Definitely, this DENR/MGB interpretation is not only legally
sound, but also greatly advantageous to the government.

One last point on the subject. The legislature acted judiciously in not defining the terms among other
things and, instead, leaving it to the agencies concerned to devise and develop the various modes of
arriving at a reasonable and fair amount for the additional government share. As can be seen from
DAO 99-56, the agencies concerned did an admirable job of conceiving and developing not just one
formula, but three different formulae for arriving at the additional government share. Each of these
options is quite fair and reasonable; and, as Messrs. Ramos and De Vera stated, other alternatives
or schemes for a possible improvement of the fiscal regime for FTAAs are also being studied by the
government.

Besides, not locking into a fixed definition of the term among other things will ultimately be more
beneficial to the government, as it will have that innate flexibility to adjust to and cope with rapidly
changing circumstances, particularly those in the international markets. Such flexibility is especially
significant for the government in terms of helping our mining enterprises remain competitive in world
markets despite challenging and shifting economic scenarios.

In conclusion, we stress that we do not share the view that in FTAAs with foreign contractors
under RA 7942, the government's share is limited to taxes, fees and duties. Consequently, we
find the attacks on the second paragraph of Section 81 of RA 7942 totally unwarranted.

Collections Not Made Uncertain

by the Third Paragraph of Section 81

The third or last paragraph of Section 8172 provides that the government share in FTAAs shall be
collected when the contractor shall have recovered its pre-operating expenses and exploration and
development expenditures. The objection has been advanced that, on account of the proviso, the
collection of the State's share is not even certain, as there is no time limit in RA 7942 for this grace
period or recovery period.
We believe that Congress did not set any time limit for the grace period, preferring to leave it to the
concerned agencies, which are, on account of their technical expertise and training, in a better
position to determine the appropriate durations for such recovery periods. After all, these recovery
periods are determined, to a great extent, by technical and technological factors peculiar to the
mining industry. Besides, with developments and advances in technology and in the geosciences,
we cannot discount the possibility of shorter recovery periods. At any rate, the concerned agencies
have not been remiss in this area. The 1995 and 1996 Implementing Rules and Regulations of RA
7942 specify that the period of recovery, reckoned from the date of commercial operation, shall be
for a period not exceeding five years, or until the date of actual recovery, whichever comes earlier.

Approval of Pre-Operating
Expenses Required by RA 7942

Still, RA 7942 is criticized for allegedly not requiring government approval of pre-operating,
exploration and development expenses of the foreign contractors, who are in effect given unfettered
discretion to determine the amounts of such expenses. Supposedly, nothing prevents the
contractors from recording such expenses in amounts equal to the mining revenues anticipated for
the first 10 or 15 years of commercial production, with the result that the share of the State will be
zero for the first 10 or 15 years. Moreover, under the circumstances, the government would be
unable to say when it would start to receive its share under the FTAA.

We believe that the argument is based on incorrect information as well as speculation. Obviously,
certain crucial provisions in the Mining Law were overlooked. Section 23, dealing with the rights and
obligations of the exploration permit grantee, states: "The permittee shall undertake exploration work
on the area as specified by its permit based on an approved work program." The next proviso
reads: "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. x x
x." (underscoring supplied)

Clearly, even at the stage of application for an exploration permit, the applicant is required to submit
-- for approval by the government -- a proposed work program for exploration, containing a yearly
budget of proposed expenditures. The State has the opportunity to pass upon (and approve or
reject) such proposed expenditures, with the foreknowledge that -- if approved -- these will
subsequently be recorded as pre-operating expenses that the contractor will have to recoup over the
grace period. That is not all.

Under Section 24, an exploration permit holder who determines the commercial viability of a project
covering a mining area may, within the term of the permit, file with the Mines and Geosciences
Bureau a declaration of mining project feasibility. This declaration is to be accompanied by a work
program for development for the Bureau's approval, the necessary prelude for entering into an
FTAA, a mineral production sharing agreement (MPSA), or some other mineral agreement. At this
stage, too, the government obviously has the opportunity to approve or reject the proposed work
program and budgeted expenditures for development works on the project. Such expenditures will
ultimately become the pre-operating and development costs that will have to be recovered by the
contractor.

Naturally, with the submission of approved work programs and budgets for the exploration and the
development/construction phases, the government will be able to scrutinize and approve or
reject such expenditures. It will be well-informed as to the amounts of pre-operating and other
expenses that the contractor may legitimately recover and the approximate period of time needed to
effect such a recovery. There is therefore no way the contractor can just randomly post any amount
of pre-operating expenses and expect to recover the same.
The aforecited provisions on approved work programs and budgets have counterparts in Section 35,
which deals with the terms and conditions exclusively applicable to FTAAs. The said provision
requires certain terms and conditions to be incorporated into FTAAs; among them, "a firm
commitment x x x of an amount corresponding to the expenditure obligation that will be invested in
the contract area" and "representations and warranties x x x to timely deploy these [financing,
managerial and technical expertise and technological] resources under its supervision pursuant to
the periodic work programs and related budgets x x x," as well as "work programs and minimum
expenditures commitments." (underscoring supplied)

Unarguably, given the provisions of Section 35, the State has every opportunity to pass upon the
proposed expenditures under an FTAA and approve or reject them. It has access to all the
information it may need in order to determine in advance the amounts of pre-operating and
developmental expenses that will have to be recovered by the contractor and the amount of time
needed for such recovery.

In summary, we cannot agree that the third or last paragraph of Section 81 of RA 7942 is in
any manner unconstitutional.

No Deprivation of Beneficial Rights

It is also claimed that aside from the second and the third paragraphs of Section 81 (discussed
above), Sections 80, 84 and 112 of RA 7942 also operate to deprive the State of beneficial rights of
ownership over mineral resources; and give them away for free to private business enterprises
(including foreign owned corporations). Likewise, the said provisions have been construed as
constituting, together with Section 81, an ingenious attempt to resurrect the old and discredited
system of "license, concession or lease."

Specifically, Section 80 is condemned for limiting the State's share in a mineral production-sharing
agreement (MPSA) to just the excise tax on the mineral product. Under Section 151(A) of the Tax
Code, such tax is only 2 percent of the market value of the gross output of the minerals.
The colatilla in Section 84, the portion considered offensive to the Constitution, reiterates the same
limitation made in Section 80.73

It should be pointed out that Section 80 and the colatilla in Section 84 pertain only to MPSAs and
have no application to FTAAs. These particular statutory provisions do not come within the issues
that were defined and delineated by this Court during the Oral Argument -- particularly the third
issue, which pertained exclusively to FTAAs. Neither did the parties argue upon them in their
pleadings. Hence, this Court cannot make any pronouncement in this case regarding the
constitutionality of Sections 80 and 84 without violating the fundamental rules of due process.
Indeed, the two provisos will have to await another case specifically placing them in issue.

On the other hand, Section 11274 is disparaged for allegedly reverting FTAAs and all mineral
agreements to the old and discredited "license, concession or lease" system. This Section states in
relevant part that "the provisions of Chapter XIV [which includes Sections 80 to 82] on government
share in mineral production-sharing agreement x x x shall immediately govern and apply to a mining
lessee or contractor." (underscoring supplied) This provision is construed as signifying that the 2
percent excise tax which, pursuant to Section 80, comprises the government share in MPSAs shall
now also constitute the government share in FTAAs -- as well as in co-production agreements and
joint venture agreements -- to the exclusion of revenues of any other nature or from any other
source.
Apart from the fact that Section 112 likewise does not come within the issues delineated by this
Court during the Oral Argument, and was never touched upon by the parties in their pleadings, it
must also be noted that the criticism hurled against this Section is rooted in unwarranted conclusions
made without considering other relevant provisions in the statute. Whether Section 112 may properly
apply to co-production or joint venture agreements, the fact of the matter is that it cannot be made to
apply to FTAAs.

First, Section 112 does not specifically mention or refer to FTAAs; the only reason it is being applied
to them at all is the fact that it happens to use the word "contractor." Hence, it is a bit of a stretch to
insist that it covers FTAAs as well. Second, mineral agreements, of which there are three types --
MPSAs, co-production agreements, and joint venture agreements -- are covered by Chapter V of RA
7942. On the other hand, FTAAs are covered by and in fact are the subject of Chapter VI, an entirely
different chapter altogether. The law obviously intends to treat them as a breed apart from mineral
agreements, since Section 35 (found in Chapter VI) creates a long list of specific terms, conditions,
commitments, representations and warranties -- which have not been made applicable to mineral
agreements -- to be incorporated into FTAAs.

Third, under Section 39, the FTAA contractor is given the option to "downgrade" -- to convert the
FTAA into a mineral agreement at any time during the term if the economic viability of the contract
area is inadequate to sustain large-scale mining operations. Thus, there is no reason to think that
the law through Section 112 intends to exact from FTAA contractors merely the same government
share (a 2 percent excise tax) that it apparently demands from contractors under the three forms of
mineral agreements. In brief, Section 112 does not apply to FTAAs.

Notwithstanding the foregoing explanation, Justices Carpio and Morales maintain that the Court
must rule now on the constitutionality of Sections 80, 84 and 112, allegedly because the WMCP
FTAA contains a provision which grants the contractor unbridled and "automatic" authority to convert
the FTAA into an MPSA; and should such conversion happen, the State would be prejudiced since
its share would be limited to the 2 percent excise tax. Justice Carpio adds that there are five MPSAs
already signed just awaiting the judgment of this Court on respondents' and intervenor's Motions for
Reconsideration. We hold however that, at this point, this argument is based on pure speculation.
The Court cannot rule on mere surmises and hypothetical assumptions, without firm factual anchor.
We repeat: basic due process requires that we hear the parties who have a real legal interest in the
MPSAs (i.e. the parties who executed them) before these MPSAs can be reviewed, or worse, struck
down by the Court. Anything less than that requirement would be arbitrary and capricious.

In any event, the conversion of the present FTAA into an MPSA is problematic. First, the contractor
must comply with the law, particularly Section 39 of RA 7942; inter alia, it must convincingly show
that the "economic viability of the contract is found to be inadequate to justify large-scale mining
operations;" second, it must contend with the President's exercise of the power of State control over
the EDU of natural resources; and third, it will have to risk a possible declaration of the
unconstitutionality (in a proper case) of Sections 80, 84 and 112.

The first requirement is not as simple as it looks. Section 39 contemplates a situation in which an
FTAA has already been executed and entered into, and is presumably being implemented, when the
contractor "discovers" that the mineral ore reserves in the contract area are not sufficient to justify
large-scale mining, and thus the contractor requests the conversion of the FTAA into an MPSA. The
contractor in effect needs to explain why, despite its exploration activities, including the conduct of
various geologic and other scientific tests and procedures in the contract area, it was unable to
determine correctly the mineral ore reserves and the economic viability of the area. The contractor
must explain why, after conducting such exploration activities, it decided to file a declaration of
mining feasibility, and to apply for an FTAA, thereby leading the State to believe that the area could
sustain large-scale mining. The contractor must justify fully why its earlier findings, based on
scientific procedures, tests and data, turned out to be wrong, or were way off. It must likewise prove
that its new findings, also based on scientific tests and procedures, are correct. Right away, this puts
the contractor's technical capabilities and expertise into serious doubt. We wonder if anyone would
relish being in this situation. The State could even question and challenge the contractor's
qualification and competence to continue the activity under an MPSA.

All in all, while there may be cogent grounds to assail the aforecited Sections, this Court -- on
considerations of due process -- cannot rule upon them here. Anyway, if later on these
Sections are declared unconstitutional, such declaration will not affect the other portions
since they are clearly separable from the rest.

Our Mineral Resources Not

Given Away for Free by RA 7942

Nevertheless, if only to disabuse our minds, we should address the contention that our mineral
resources are effectively given away for free by the law (RA 7942) in general and by Sections 80,
81, 84 and 112 in particular.

Foreign contractors do not just waltz into town one day and leave the next, taking away mineral
resources without paying anything. In order to get at the minerals, they have to invest huge sums of
money (tens or hundreds of millions of dollars) in exploration works first. If the exploration proves
unsuccessful, all the cash spent thereon will not be returned to the foreign investors; rather, those
funds will have been infused into the local economy, to remain there permanently. The benefits
therefrom cannot be simply ignored. And assuming that the foreign contractors are successful in
finding ore bodies that are viable for commercial exploitation, they do not just pluck out the minerals
and cart them off. They have first to build camp sites and roadways; dig mine shafts and connecting
tunnels; prepare tailing ponds, storage areas and vehicle depots; install their machinery and
equipment, generator sets, pumps, water tanks and sewer systems, and so on.

In short, they need to expend a great deal more of their funds for facilities, equipment and supplies,
fuel, salaries of local labor and technical staff, and other operating expenses. In the meantime, they
also have to pay taxes,75 duties, fees, and royalties. All told, the exploration, pre-feasibility, feasibility,
development and construction phases together add up to as many as eleven years.76 The contractors
have to continually shell out funds for the duration of over a decade, before they can commence
commercial production from which they would eventually derive revenues. All that money translates
into a lot of "pump-priming" for the local economy.

Granted that the contractors are allowed subsequently to recover their pre-operating expenses, still,
that eventuality will happen only after they shall have first put out the cash and fueled the economy.
Moreover, in the process of recouping their investments and costs, the foreign contractors do not
actually pull out the money from the economy. Rather, they recover or recoup their investments out
of actual commercial production by not paying a portion of the basic government share
corresponding to national taxes, along with the additional government share, for a period of not more
than five years77 counted from the commencement of commercial production.

It must be noted that there can be no recovery without commencing actual commercial production. In
the meantime that the contractors are recouping costs, they need to continue operating; in order to
do so, they have to disburse money to meet their various needs. In short, money is continually
infused into the economy.
The foregoing discussion should serve to rid us of the mistaken belief that, since the foreign
contractors are allowed to recover their investments and costs, the end result is that they practically
get the minerals for free, which leaves the Filipino people none the better for it.

All Businesses Entitled

to Cost Recovery

Let it be put on record that not only foreign contractors, but all businessmen and all business entities
in general, have to recoup their investments and costs. That is one of the first things a student learns
in business school. Regardless of its nationality, and whether or not a business entity has a five-year
cost recovery period, it will -- must -- have to recoup its investments, one way or another. This is just
common business sense. Recovery of investments is absolutely indispensable for business survival;
and business survival ensures soundness of the economy, which is critical and contributory to the
general welfare of the people. Even government corporations must recoup their investments in order
to survive and continue in operation. And, as the preceding discussion has shown, there is no
business that gets ahead or earns profits without any cost to it.

It must also be stressed that, though the State owns vast mineral wealth, such wealth is not readily
accessible or transformable into usable and negotiable currency without the intervention of the
credible mining companies. Those untapped mineral resources, hidden beneath tons of earth and
rock, may as well not be there for all the good they do us right now. They have first to be extracted
and converted into marketable form, and the country needs the foreign contractor's funds,
technology and know-how for that.

After about eleven years of pre-operation and another five years for cost recovery, the foreign
contractors will have just broken even. Is it likely that they would at that point stop their operations
and leave? Certainly not. They have yet to make profits. Thus, for the remainder of the contract
term, they must strive to maintain profitability. During this period, they pay the whole of the basic
government share and the additional government share which, taken together with indirect taxes and
other contributions, amount to approximately 60 percent or more of the entire financial benefits
generated by the mining venture.

In sum, we can hardly talk about foreign contractors taking our mineral resources for free. It takes a
lot of hard cash to even begin to do what they do. And what they do in this country ultimately
benefits the local economy, grows businesses, generates employment, and creates infrastructure,
as discussed above. Hence, we definitely disagree with the sweeping claim that no FTAA under
Section 81 will ever make any real contribution to the growth of the economy or to the general
welfare of the country. This is not a plea for foreign contractors. Rather, this is a question of focusing
the judicial spotlight squarely on all the pertinent facts as they bear upon the issue at hand, in order
to avoid leaping precipitately to ill-conceived conclusions not solidly grounded upon fact.

Repatriation of After-Tax Income

Another objection points to the alleged failure of the Mining Law to ensure real contributions to the
economic growth and general welfare of the country, as mandated by Section 2 of Article XII of the
Constitution. Pursuant to Section 81 of the law, the entire after-tax income arising from the
exploitation of mineral resources owned by the State supposedly belongs to the foreign contractors,
which will naturally repatriate the said after-tax income to their home countries, thereby resulting in
no real contribution to the economic growth of this country. Clearly, this contention is premised on
erroneous assumptions.
First, as already discussed in detail hereinabove, the concerned agencies have correctly interpreted
the second paragraph of Section 81 of RA 7942 to mean that the government is entitled to an
additional share, to be computed based on any one of the following factors: net mining revenues, the
present value of the cash flows, or excess profits reckoned against a benchmark rate of return on
investments. So it is not correct to say that all of the after-tax income will accrue to the foreign FTAA
contractor, as the government effectively receives a significant portion thereof.

Second, the foreign contractors can hardly "repatriate the entire after-tax income to their home
countries." Even a bit of knowledge of corporate finance will show that it will be impossible to
maintain a business as a "going concern" if the entire "net profit" earned in any particular year will be
taken out and repatriated. The "net income" figure reflected in the bottom line is a mere accounting
figure not necessarily corresponding to cash in the bank, or other quick assets. In order to produce
and set aside cash in an amount equivalent to the bottom line figure, one may need to sell off assets
or immediately collect receivables or liquidate short-term investments; but doing so may very likely
disrupt normal business operations.

In terms of cash flows, the funds corresponding to the net income as of a particular point in time
are actually in usein the normal course of business operations. Pulling out such net income disrupts
the cash flows and cash position of the enterprise and, depending on the amount being taken out,
could seriously cripple or endanger the normal operations and financial health of the business
enterprise. In short, no sane business person, concerned with maintaining the mining
enterprise as a going concern and keeping a foothold in its market, can afford to repatriate
the entire after-tax income to the home country.

The State's Receipt of Sixty

Percent of an FTAA Contractor's
After-Tax Income Not Mandatory

We now come to the next objection which runs this way: In FTAAs with a foreign contractor, the
State must receive at least 60 percent of the after-tax income from the exploitation of its mineral
resources. This share is the equivalent of the constitutional requirement that at least 60 percent of
the capital, and hence 60 percent of the income, of mining companies should remain in Filipino
hands.

First, we fail to see how we can properly conclude that the Constitution mandates the State to
extract at least 60 percent of the after-tax income from a mining company run by a foreign
contractor. The argument is that the Charter requires the State's partner in a co-production
agreement, joint venture agreement or MPSA to be a Filipino corporation (at least 60 percent owned
by Filipino citizens).

We question the logic of this reasoning, premised on a supposedly parallel or analogous situation.
We are, after all, dealing with an essentially different equation, one that involves different
elements. The Charter did not intend to fix an iron-clad rule on the 60 percent share,
applicable to all situations at all times and in all circumstances.If ever such was the intention of
the framers, they would have spelt it out in black and white. Verba legis will serve to dispel
unwarranted and untenable conclusions.

Second, if we would bother to do the math, we might better appreciate the impact (and
reasonableness) of what we are demanding of the foreign contractor. Let us use
a simplified illustration. Let us base it on gross revenues of, say, P500. After deducting operating
expenses, but prior to income tax, suppose a mining firm makes a taxable incomeof P100. A
corporate income tax of 32 percent results in P32 of taxable income going to the government,
leaving the mining firm with P68. Government then takes 60 percent thereof, equivalent to P40.80,
leaving only P27.20 for the mining firm.

At this point the government has pocketed P32.00 plus P40.80, or a total of P72.80 for every P100
of taxable income, leaving the mining firm with only P27.20. But that is not all. The government has
also taken 2 percent excise tax "off the top," equivalent to another P10. Under the minimum 60
percent proposal, the government nets around P82.80 (not counting other taxes, duties, fees and
charges) from a taxable income of P100 (assuming gross revenues of P500, for purposes of
illustration). On the other hand, the foreign contractor, which provided all the capital, equipment and
labor, and took all the entrepreneurial risks -- receives P27.20. One cannot but wonder whether such
a distribution is even remotely equitable and reasonable, considering the nature of the mining
business. The amount of P82.80 out of P100.00 is really a lot – it does not matter that we call part of
it excise tax or income tax, and another portion thereof income from exploitation of mineral
resources. Some might think it wonderful to be able to take the lion's share of the benefits. But we
have to ask ourselves if we are really serious in attracting the investments that are the indispensable
and key element in generating the monetary benefits of which we wish to take the lion's
share. Fairness is a credo not only in law, but also in business.

Third, the 60 percent rule in the petroleum industry cannot be insisted upon at all times in the mining
business. The reason happens to be the fact that in petroleum operations, the bulk of expenditures
is in exploration, but once the contractor has found and tapped into the deposit, subsequent
investments and expenditures are relatively minimal. The crude (or gas) keeps gushing out, and the
work entailed is just a matter of piping, transporting and storing. Not so in mineral mining. The ore
body does not pop out on its own. Even after it has been located, the contractor must continually
invest in machineries and expend funds to dig and build tunnels in order to access and extract the
minerals from underneath hundreds of tons of earth and rock.

As already stated, the numerous intrinsic differences involved in their respective operations and
requirements, cost structures and investment needs render it highly inappropriate to use petroleum
operations FTAAs as benchmarks for mining FTAAs. Verily, we cannot just ignore the realities of
the distinctly different situations and stubbornly insist on the "minimum 60 percent."

The Mining and the Oil Industries

Different From Each Other

To stress, there is no independent showing that the taking of at least a 60 percent share in the after-
tax income of a mining company operated by a foreign contractor is fair and reasonable under most
if not all circumstances. The fact that some petroleum companies like Shell acceded to such
percentage of sharing does not ipso facto mean that it is per se reasonable and applicable to non-
petroleum situations (that is, mining companies) as well. We can take judicial notice of the fact that
there are, after all, numerous intrinsic differences involved in their respective operations and
equipment or technological requirements, costs structures and capital investment needs, and
product pricing and markets.

There is no showing, for instance, that mining companies can readily cope with a 60 percent
government share in the same way petroleum companies apparently can. What we have is a
suggestion to enforce the 60 percent quota on the basis of a disjointed analogy. The only factor
common to the two disparate situations is the extraction of natural resources.

Indeed, we should take note of the fact that Congress made a distinction between mining firms and
petroleum companies. In Republic Act No. 7729 -- "An Act Reducing the Excise Tax Rates on
Metallic and Non-Metallic Minerals and Quarry Resources, Amending for the Purpose Section 151(a)
of the National Internal Revenue Code, as amended" -- the lawmakers fixed the excise tax rate on
metallic and non-metallic minerals at two percent of the actual market value of the annual gross
output at the time of removal. However, in the case of petroleum, the lawmakers set the excise tax
rate for the first taxable sale at fifteen percent of the fair international market price thereof.

There must have been a very sound reason that impelled Congress to impose two very dissimilar
excise tax rate. We cannot assume, without proof, that our honorable legislators acted arbitrarily,
capriciously and whimsically in this instance. We cannot just ignore the reality of two distinctly
different situations and stubbornly insist on going "minimum 60 percent."

To repeat, the mere fact that gas and oil exploration contracts grant the State 60 percent of the net
revenues does not necessarily imply that mining contracts should likewise yield a minimum of 60
percent for the State. Jumping to that erroneous conclusion is like comparing apples with oranges.
The exploration, development and utilization of gas and oil are simply different from those of mineral
resources.

To stress again, the main risk in gas and oil is in the exploration. But once oil in commercial
quantities is struck and the wells are put in place, the risk is relatively over and black gold simply
flows out continuously with comparativelyless need for fresh investments and technology.

On the other hand, even if minerals are found in viable quantities, there is still need for continuous
fresh capital and expertise to dig the mineral ores from the mines. Just because deposits of mineral
ores are found in one area is no guarantee that an equal amount can be found in the adjacent areas.
There are simply continuing risks and need for more capital, expertise and industry all the time.

Note, however, that the indirect benefits -- apart from the cash revenues -- are much more in the
mineral industry. As mines are explored and extracted, vast employment is created, roads and other
infrastructure are built, and other multiplier effects arise. On the other hand, once oil wells start
producing, there is less need for employment. Roads and other public works need not be
constructed continuously. In fine, there is no basis for saying that government revenues from the oil
industry and from the mineral industries are to be identical all the time.

Fourth, to our mind, the proffered "minimum 60 percent" suggestion tends to limit the flexibility and
tie the hands of government, ultimately hampering the country's competitiveness in the international
market, to the detriment of the Filipino people. This "you-have-to-give-us-60-percent-of-after-tax-
income-or-we-don't-do- business-with-you" approach is quite perilous. True, this situation may not
seem too unpalatable to the foreign contractor during good years, when international market prices
are up and the mining firm manages to keep its costs in check. However, under unfavorable
economic and business conditions, with costs spiraling skywards and minerals prices plummeting, a
mining firm may consider itself lucky to make just minimal profits.

The inflexible, carved-in-granite demand for a 60 percent government share may spell the end of the
mining venture, scare away potential investors, and thereby further worsen the already dismal
economic scenario. Moreover, such an unbending or unyielding policy prevents the government from
responding appropriately to changing economic conditions and shifting market forces. This
inflexibility further renders our country less attractive as an investment option compared with other
countries.

And fifth, for this Court to decree imperiously that the government's share should be not less than 60
percent of the after-tax income of FTAA contractors at all times is nothing short of dictating upon the
government. The result, ironically, is that the State ends up losing control. To avoid compromising
the State's full control and supervision over the exploitation of mineral resources, this Court must
back off from insisting upon a "minimum 60 percent" rule. It is sufficient that the State has the power
and means, should it so decide, to get a 60 percent share (or more) in the contractor's net mining
revenues or after-tax income, or whatever other basis the government may decide to use in
reckoning its share. It is not necessary for it to do so in every case, regardless of circumstances.

In fact, the government must be trusted, must be accorded the liberty and the utmost flexibility to
deal, negotiate and transact with contractors and third parties as it sees fit; and upon terms that it
ascertains to be most favorable or most acceptable under the circumstances, even if it means
agreeing to less than 60 percent. Nothing must prevent the State from agreeing to a share less than
that, should it be deemed fit; otherwise the State will be deprived of full control over mineral
exploitation that the Charter has vested in it.

To stress again, there is simply no constitutional or legal provision fixing the minimum share of the
government in an FTAA at 60 percent of the net profit. For this Court to decree such minimum is to
wade into judicial legislation, and thereby inordinately impinge on the control power of the State. Let
it be clear: the Court is not against the grant of more benefits to the State; in fact, the more the
better. If during the FTAA negotiations, the President can secure 60 percent,78 or even 90 percent,
then all the better for our people. But, if under the peculiar circumstances of a specific contract, the
President could secure only 50 percent or 55 percent, so be it. Needless to say, the President will
have to report (and be responsible for) the specific FTAA to Congress, and eventually to the people.

Finally, if it should later be found that the share agreed to is grossly disadvantageous to the
government, the officials responsible for entering into such a contract on its behalf will have to
answer to the courts for their malfeasance. And the contract provision voided. But this Court would
abuse its own authority should it force the government's hand to adopt the 60 percent demand of
some of our esteemed colleagues.

Capital and Expertise Provided,

Yet All Risks Assumed by Contractor

Here, we will repeat what has not been emphasized and appreciated enough: the fact that the
contractor in an FTAA provides all the needed capital, technical and managerial expertise, and
technology required to undertake the project.

In regard to the WMCP FTAA, the then foreign-owned WMCP as contractor committed, at the very
outset, to make capital investments of up to US$50 million in that single mining project. WMCP
claims to have already poured in well over P800 million into the country as of February 1998, with
more in the pipeline. These resources, valued in the tens or hundreds of millions of dollars, are
invested in a mining project that provides no assurance whatsoever that any part of the investment
will be ultimately recouped.

At the same time, the contractor must comply with legally imposed environmental standards and the
social obligations, for which it also commits to make significant expenditures of funds. Throughout,
the contractor assumes all the risks79 of the business, as mentioned earlier. These risks are indeed
very high, considering that the rate of success in exploration is extremely low. The probability of
finding any mineral or petroleum in commercially viable quantities is estimated to be about 1:1,000
only. On that slim chance rides the contractor's hope of recouping investments and generating
profits. And when the contractor has recouped its initial investments in the project, the government
share increases to sixty percent of net benefits -- without the State ever being in peril of incurring
costs, expenses and losses.
And even in the worst possible scenario -- an absence of commercial quantities of minerals to justify
development -- the contractor would already have spent several million pesos for exploration works,
before arriving at the point in which it can make that determination and decide to cut its losses. In
fact, during the first year alone of the exploration period, the contractor was already committed to
spend not less than P24 million. The FTAA therefore clearly ensures benefits for the local economy,
courtesy of the contractor.

All in all, this setup cannot be regarded as disadvantageous to the State or the Filipino
people; it certainly cannot be said to convey beneficial ownership of our mineral resources to
foreign contractors.

Deductions Allowed by the

WMCP FTAA Reasonable

Petitioners question whether the State's weak control might render the sharing arrangements
ineffective. They cite the so-called "suspicious" deductions allowed by the WMCP FTAA in arriving at
the net mining revenue, which is the basis for computing the government share. The WMCP FTAA,
for instance, allows expenditures for "development within and outside the Contract Area relating to
the Mining Operations,"80 "consulting fees incurred both inside and outside the Philippines for work
related directly to the Mining Operations,"81 and "the establishment and administration of field offices
including administrative overheads incurred within and outside the Philippines which are properly
allocatable to the Mining Operations and reasonably related to the performance of the Contractor's
obligations and exercise of its rights under this Agreement."82

It is quite well known, however, that mining companies do perform some marketing activities abroad
in respect of selling their mineral products and by-products. Hence, it would not be improper to allow
the deduction of reasonable consulting fees incurred abroad, as well as administrative expenses and
overheads related to marketing offices also located abroad -- provided that these deductions are
directly related or properly allocatable to the mining operations and reasonably related to the
performance of the contractor's obligations and exercise of its rights. In any event, more facts are
needed. Until we see how these provisions actually operate, mere "suspicions" will not suffice to
propel this Court into taking action.

Section 7.9 of the WMCP FTAA

Invalid and Disadvantageous

Having defended the WMCP FTAA, we shall now turn to two defective provisos. Let us start with
Section 7.9 of the WMCP FTAA. While Section 7.7 gives the government a 60 percent share in the
net mining revenues of WMCP from the commencement of commercial production, Section 7.9
deprives the government of part or all of the said 60 percent. Under the latter provision, should
WMCP's foreign shareholders -- who originally owned 100 percent of the equity -- sell 60 percent or
more of its outstanding capital stock to a Filipino citizen or corporation, the State loses its right to
receive its 60 percent share in net mining revenues under Section 7.7.

Section 7.9 provides:

The percentage of Net Mining Revenues payable to the Government pursuant to Clause 7.7
shall be reduced by 1percent of Net Mining Revenues for every 1percent ownership interest
in the Contractor (i.e., WMCP) held by a Qualified Entity.83

Evidently, what Section 7.7 grants to the State is taken away in the next breath by Section
7.9 without any offsetting compensation to the State. Thus, in reality, the State has no vested right to
receive any income from the FTAA for the exploitation of its mineral resources. Worse, it would
seem that what is given to the State in Section 7.7 is by mere tolerance of WMCP's foreign
stockholders, who can at any time cut off the government's entire 60 percent share. They can do so
by simply selling 60 percent of WMCP's outstanding capital stock to a Philippine citizen or
corporation. Moreover, the proceeds of such sale will of course accrue to the foreign stockholders of
WMCP, not to the State.

The sale of 60 percent of WMCP's outstanding equity to a corporation that is 60 percent Filipino-
owned and 40 percent foreign-owned will still trigger the operation of Section 7.9. Effectively, the
State will lose its right to receive all 60 percent of the net mining revenues of WMCP; and foreign
stockholders will own beneficially up to 64 percent of WMCP, consisting of the remaining 40 percent
foreign equity therein, plus the 24 percent pro-rata share in the buyer-corporation.84

In fact, the January 23, 2001 sale by WMCP's foreign stockholder of the entire outstanding equity in
WMCP to Sagittarius Mines, Inc. -- a domestic corporation at least 60 percent Filipino owned -- may
be deemed to have automatically triggered the operation of Section 7.9, without need of further
action by any party, and removed the State's right to receive the 60 percent share in net mining
revenues.

At bottom, Section 7.9 has the effect of depriving the State of its 60 percent share in the net mining
revenues of WMCP without any offset or compensation whatsoever. It is possible that the inclusion
of the offending provision was initially prompted by the desire to provide some form of incentive for
the principal foreign stockholder in WMCP to eventually reduce its equity position and ultimately
divest in favor of Filipino citizens and corporations. However, as finally structured, Section 7.9 has
the deleterious effect of depriving government of the entire 60 percent share in WMCP's net mining
revenues, without any form of compensation whatsoever. Such an outcome is completely
unacceptable.

The whole point of developing the nation's natural resources is to benefit the Filipino people, future
generations included. And the State as sovereign and custodian of the nation's natural wealth is
mandated to protect, conserve, preserve and develop that part of the national patrimony for their
benefit. Hence, the Charter lays great emphasis on "real contributions to the economic growth and
general welfare of the country"85 as essential guiding principles to be kept in mind when negotiating
the terms and conditions of FTAAs.

Earlier, we held (1) that the State must be accorded the liberty and the utmost flexibility to deal,
negotiate and transact with contractors and third parties as it sees fit, and upon terms that it
ascertains to be most favorable or most acceptable under the circumstances, even if that should
mean agreeing to less than 60 percent; (2) that it is not necessary for the State to extract a 60
percent share in every case and regardless of circumstances; and (3) that should the State be
prevented from agreeing to a share less than 60 percent as it deems fit, it will be deprived of the full
control over mineral exploitation that the Charter has vested in it.

That full control is obviously not an end in itself; it exists and subsists precisely because of the need
to serve and protect the national interest. In this instance, national interest finds particular application
in the protection of the national patrimony and the development and exploitation of the country's
mineral resources for the benefit of the Filipino people and the enhancement of economic growth
and the general welfare of the country. Undoubtedly, such full control can be misused and
abused, as we now witness.

Section 7.9 of the WMCP FTAA effectively gives away the State's share of net mining revenues
(provided for in Section 7.7) without anything in exchange. Moreover, this outcome constitutes unjust
enrichment on the part of the local and foreign stockholders of WMCP. By their mere divestment of
up to 60 percent equity in WMCP in favor of Filipino citizens and/or corporations, the local and
foreign stockholders get a windfall. Their share in the net mining revenues of WMCP is automatically
increased, without their having to pay the government anything for it. In short, the provision in
question is without a doubt grossly disadvantageous to the government, detrimental to the interests
of the Filipino people, and violative of public policy.

Moreover, it has been reiterated in numerous decisions86 that the parties to a contract may establish
any agreements, terms and conditions that they deem convenient; but these should not be contrary
to law, morals, good customs, public order or public policy.87 Being precisely violative of anti-graft
provisions and contrary to public policy, Section 7.9 must therefore be stricken off as invalid.

Whether the government officials concerned acceded to that provision by sheer mistake or with full
awareness of the ill consequences, is of no moment. It is hornbook doctrine that the principle of
estoppel does not operate against the government for the act of its agents,88 and that it is never
estopped by any mistake or error on their part.89 It is therefore possible and proper to rectify the
situation at this time. Moreover, we may also say that the FTAA in question does not involve mere
contractual rights; being impressed as it is with public interest, the contractual provisions and
stipulations must yield to the common good and the national interest.

Since the offending provision is very much separable90 from Section 7.7 and the rest of the FTAA, the
deletion of Section 7.9 can be done without affecting or requiring the invalidation of the WMCP FTAA
itself. Such a deletion will preserve for the government its due share of the benefits. This way, the
mandates of the Constitution are complied with and the interests of the government fully protected,
while the business operations of the contractor are not needlessly disrupted.

Section 7.8(e) of the WMCP FTAA

Also Invalid and Disadvantageous

Section 7.8(e) of the WMCP FTAA is likewise invalid. It provides thus:

"7.8 The Government Share shall be deemed to include all of the following sums:

"(a) all Government taxes, fees, levies, costs, imposts, duties and royalties including
excise tax, corporate income tax, customs duty, sales tax, value added tax,
occupation and regulatory fees, Government controlled price stabilization schemes,
any other form of Government backed schemes, any tax on dividend payments by
the Contractor or its Affiliates in respect of revenues from the Mining Operations and
any tax on interest on domestic and foreign loans or other financial arrangements or
accommodations, including loans extended to the Contractor by its stockholders;

"(b) any payments to local and regional government, including taxes, fees, levies,
costs, imposts, duties, royalties, occupation and regulatory fees and infrastructure
contributions;

"(c) any payments to landowners, surface rights holders, occupiers, indigenous

people or Claimowners;

"(d) costs and expenses of fulfilling the Contractor's obligations to contribute to

national development in accordance with Clause 10.1(i) (1) and 10.1(i) (2);
 "(e) an amount equivalent to whatever benefits that may be extended in the future by
the Government to the Contractor or to financial or technical assistance agreement
contractors in general;

"(f) all of the foregoing items which have not previously been offset against the
Government Share in an earlier Fiscal Year, adjusted for inflation." (underscoring
supplied)

Section 7.8(e) is out of place in the FTAA. It makes no sense why, for instance, money spent by the
government for the benefit of the contractor in building roads leading to the mine site should still be
deductible from the State's share in net mining revenues. Allowing this deduction results in benefiting
the contractor twice over. It constitutes unjust enrichment on the part of the contractor at the
expense of the government, since the latter is effectively being made to pay twice for the same
item.91 For being grossly disadvantageous and prejudicial to the government and contrary to public
policy, Section 7.8(e) is undoubtedly invalid and must be declared to be without effect. Fortunately,
this provision can also easily be stricken off without affecting the rest of the FTAA.

Nothing Left Over

After Deductions?

In connection with Section 7.8, an objection has been raised: Specified in Section 7.8 are numerous
items of deduction from the State's 60 percent share. After taking these into account, will the State
ever receive anything for its ownership of the mineral resources?

We are confident that under normal circumstances, the answer will be yes. If we examine the
various items of "deduction" listed in Section 7.8 of the WMCP FTAA, we will find that they
correspond closely to the components or elements of the basic government share established in
DAO 99-56, as discussed in the earlier part of this Opinion.

Likewise, the balance of the government's 60 percent share -- after netting out the items of
deduction listed in Section 7.8 --corresponds closely to the additional government share provided
for in DAO 99-56 which, we once again stress, has nothing at all to do with indirect taxes. The
Ramos-DeVera paper92 concisely presents the fiscal contribution of an FTAA under DAO 99-56 in this
equation:

Receipts from an FTAA = basic gov't share + add'l gov't share

Transposed into a similar equation, the fiscal payments system from the WMCP FTAA assumes the
following formulation:

Government's 60 percent share in net mining revenues of WMCP = items listed in Sec. 7.8 of
the FTAA + balance of Gov't share, payable 4 months from the end of the fiscal year

It should become apparent that the fiscal arrangement under the WMCP FTAA is very similar to that
under DAO 99-56, with the "balance of government share payable 4 months from end of fiscal year"
being the equivalent of the additional government share computed in accordance with the "net-
mining-revenue-based option" under DAO 99-56, as discussed above. As we have emphasized
earlier, we find each of the three options for computing the additional government share -- as
presented in DAO 99-56 -- to be sound and reasonable.
We therefore conclude that there is nothing inherently wrong in the fiscal regime of the
WMCP FTAA, and certainly nothing to warrant the invalidation of the FTAA in its entirety.

Section 3.3 of the WMCP

FTAA Constitutional

Section 3.3 of the WMCP FTAA is assailed for violating supposed constitutional restrictions on the
term of FTAAs. The provision in question reads:

"3.3 This Agreement shall be renewed by the Government for a further period of twenty-five
(25) years under the same terms and conditions provided that the Contractor lodges a
request for renewal with the Government not less than sixty (60) days prior to the expiry of
the initial term of this Agreement and provided that the Contractor is not in breach of any of
the requirements of this Agreement."

Allegedly, the above provision runs afoul of Section 2 of Article XII of the 1987 Constitution, which
states:

"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."93

We hold that the term limitation of twenty-five years does not apply to FTAAs. The reason is that the
above provision is found within paragraph 1 of Section 2 of Article XII, which refers to mineral
agreements -- co-production agreements, joint venture agreements and mineral production-sharing
agreements -- which the government may enter into with Filipino citizens and corporations, at least
60 percent owned by Filipino citizens. The word "such" clearly refers to these three mineral
agreements -- CPAs, JVAs and MPSAs -- not to FTAAs.

Specifically, FTAAs are covered by paragraphs 4 and 5 of Section 2 of Article XII of the Constitution.
It will be noted that there are no term limitations provided for in the said paragraphs dealing with
FTAAs. This shows that FTAAs are sui generis, in a class of their own. This omission was obviously
a deliberate move on the part of the framers. They probably realized that FTAAs would be different
in many ways from MPSAs, JVAs and CPAs. The reason the framers did not fix term limitations
applicable to FTAAs is that they preferred to leave the matter to the discretion of the legislature
and/or the agencies involved in implementing the laws pertaining to FTAAs, in order to give the latter
enough flexibility and elbow room to meet changing circumstances.

Note also that, as previously stated, the exploratory phrases of an FTAA lasts up to eleven years.
Thereafter, a few more years would be gobbled up in start-up operations. It may take fifteen years
before an FTAA contractor can start earning profits. And thus, the period of 25 years may really be
short for an FTAA. Consider too that in this kind of agreement, the contractor assumes all
entrepreneurial risks. If no commercial quantities of minerals are found, the contractor bears all
financial losses. To compensate for this long gestation period and extra business risks, it would not
be totally unreasonable to allow it to continue EDU activities for another twenty five years.

In any event, the complaint is that, in essence, Section 3.3 gives the contractor the power to compel
the government to renew the WMCP FTAA for another 25 years and deprives the State of any say
on whether to renew the contract.

While we agree that Section 3.3 could have been worded so as to prevent it from favoring the
contractor, this provision does not violate any constitutional limits, since the said term limitation does
not apply at all to FTAAs. Neither can the provision be deemed in any manner to be illegal, as no law
is being violated thereby. It is certainly not illegal for the government to waive its option to refuse the
renewal of a commercial contract.

Verily, the government did not have to agree to Section 3.3. It could have said "No" to the stipulation,
but it did not. It appears that, in the process of negotiations, the other contracting party was able to
convince the government to agree to the renewal terms. Under the circumstances, it does not seem
proper for this Court to intervene and step in to undo what might have perhaps been a possible
miscalculation on the part of the State. If government believes that it is or will be aggrieved by the
effects of Section 3.3, the remedy is the renegotiation of the provision in order to provide the State
the option to not renew the FTAA.

Financial Benefits for Foreigners

Not Forbidden by the Constitution

Before leaving this subject matter, we find it necessary for us to rid ourselves of the false belief that
the Constitution somehow forbids foreign-owned corporations from deriving financial benefits from
the development of our natural or mineral resources.

The Constitution has never prohibited foreign corporations from acquiring and enjoying "beneficial
interest" in the development of Philippine natural resources. The State itself need not directly
undertake exploration, development, and utilization activities. Alternatively, the Constitution
authorizes the government to enter into joint venture agreements (JVAs), co-production agreements
(CPAs) and mineral production sharing agreements (MPSAs) with contractors who are Filipino
citizens or corporations that are at least 60 percent Filipino-owned. They may do the actual "dirty
work" -- the mining operations.

In the case of a 60 percent Filipino-owned corporation, the 40 percent individual and/or

corporate non-Filipino stakeholders obviously participate in the beneficial interest derived from the
development and utilization of our natural resources. They may receive by way of dividends, up to
40 percent of the contractor's earnings from the mining project. Likewise, they may have a say in the
decisions of the board of directors, since they are entitled to representation therein to the extent of
their equity participation, which the Constitution permits to be up to 40 percent of the contractor's
equity. Hence, the non-Filipino stakeholders may in that manner also participate in the management
of the contractor's natural resource development work. All of this is permitted by our Constitution, for
any natural resource, and without limitation even in regard to the magnitude of the mining project or
operations (see paragraph 1 of Section 2 of Article XII).

It is clear, then, that there is nothing inherently wrong with or constitutionally objectionable about the
idea of foreign individuals and entities having or enjoying "beneficial interest" in -- and participating in
the management of operations relative to -- the exploration, development and utilization of our
natural resources.

FTAA More Advantageous

Than Other Schemes
Like CPA, JVA and MPSA

A final point on the subject of beneficial interest. We believe the FTAA is a more advantageous
proposition for the government as compared with other agreements permitted by the Constitution. In
a CPA that the government enters into with one or more contractors, the government shall provide
inputs to the mining operations other than the mineral resource itself.94

In a JVA, a JV company is organized by the government and the contractor, with both parties having
equity shares (investments); and the contractor is granted the exclusive right to conduct mining
operations and to extract minerals found in the area.95 On the other hand, in an MPSA, the
government grants the contractor the exclusive right to conduct mining operations within the contract
area and shares in the gross output; and the contractor provides the necessary financing,
technology, management and manpower.

The point being made here is that, in two of the three types of agreements under consideration,
the government has to ante up some risk capital for the enterprise. In other words, government
funds (public moneys) are withdrawn from other possible uses, put to work in the venture and placed
at risk in case the venture fails. This notwithstanding, management and control of the operations of
the enterprise are -- in all three arrangements -- in the hands of the contractor, with the government
being mainly a silent partner. The three types of agreement mentioned above apply to any natural
resource, without limitation and regardless of the size or magnitude of the project or operations.

In contrast to the foregoing arrangements, and pursuant to paragraph 4 of Section 2 of Article XII,
the FTAA is limited to large-scale projects and only for minerals, petroleum and other mineral oils.
Here, the Constitution removes the 40 percent cap on foreign ownership and allows the foreign
corporation to own up to 100 percent of the equity. Filipino capital may not be sufficient on account
of the size of the project, so the foreign entity may have to ante up all the risk capital.

Correlatively, the foreign stakeholder bears up to 100 percent of the risk of loss if the project fails. In
respect of the particular FTAA granted to it, WMCP (then 100 percent foreign owned) was
responsible, as contractor, for providing the entire equity, including all the inputs for the project. It
was to bear 100 percent of the risk of loss if the project failed, but its maximum potential "beneficial
interest" consisted only of 40 percent of the net beneficial interest, because the other 60 percent is
the share of the government, which will never be exposed to any risk of loss whatsoever.

In consonance with the degree of risk assumed, the FTAA vested in WMCP the day-to-day
management of the mining operations. Still such management is subject to the overall control and
supervision of the State in terms of regular reporting, approvals of work programs and budgets, and
so on.

So, one needs to consider in relative terms, the costs of inputs for, degree of risk attendant to, and
benefits derived or to be derived from a CPA, a JVA or an MPSA vis-à-vis those pertaining to an
FTAA. It may not be realistically asserted that the foreign grantee of an FTAA is being unduly
favored or benefited as compared with a foreign stakeholder in a corporation holding a CPA, a JVA
or an MPSA. Seen the other way around, the government is definitely better off with an FTAA than a
CPA, a JVA or an MPSA.

Developmental Policy on the Mining Industry

During the Oral Argument and in their Final Memorandum, petitioners repeatedly urged the Court to
consider whether mining as an industry and economic activity deserved to be accorded priority,
preference and government support as against, say, agriculture and other activities in which Filipinos
and the Philippines may have an "economic advantage." For instance, a recent US study96 reportedly
examined the economic performance of all local US counties that were dependent on mining and 20
percent of whose labor earnings between 1970 and 2000 came from mining enterprises.

The study -- covering 100 US counties in 25 states dependent on mining -- showed that per capita
income grew about 30 percent less in mining-dependent communities in the 1980s and 25 percent
less for the entire period 1980 to 2000; the level of per capita income was also lower. Therefore,
given the slower rate of growth, the gap between these and other local counties increased.

Petitioners invite attention to the OXFAM America Report's warning to developing nations that
mining brings with it serious economic problems, including increased regional inequality,
unemployment and poverty. They also cite the final report97 of the Extractive Industries Review
project commissioned by the World Bank (the WB-EIR Report), which warns of environmental
degradation, social disruption, conflict, and uneven sharing of benefits with local communities that
bear the negative social and environmental impact. The Report suggests that countries need to
decide on the best way to exploit their natural resources, in order to maximize the value added from
the development of their resources and ensure that they are on the path to sustainable development
once the resources run out.

Whatever priority or preference may be given to mining vis-à-vis other economic or non-economic
activities is a question of policy that the President and Congress will have to address; it is not for this
Court to decide. This Court declares what the Constitution and the laws say, interprets only when
necessary, and refrains from delving into matters of policy.

Suffice it to say that the State control accorded by the Constitution over mining activities assures a
proper balancing of interests. More pointedly, such control will enable the President to demand the
best mining practices and the use of the best available technologies to protect the environment and
to rehabilitate mined-out areas. Indeed, under the Mining Law, the government can ensure the
protection of the environment during and after mining. It can likewise provide for the mechanisms to
protect the rights of indigenous communities, and thereby mold a more socially-responsive,
culturally-sensitive and sustainable mining industry.
Early on during the launching of the Presidential Mineral Industry Environmental Awards on
February 6, 1997, then President Fidel V. Ramos captured the essence of balanced and sustainable
mining in these words:

"Long term, high profit mining translates into higher revenues for government, more decent
jobs for the population, more raw materials to feed the engines of downstream and allied
industries, and improved chances of human resource and countryside development by
creating self-reliant communities away from urban centers.

xxxxxxxxx

"Against a fragile and finite environment, it is sustainability that holds the key. In sustainable
mining, we take a middle ground where both production and protection goals are balanced,
and where parties-in-interest come to terms."

Neither has the present leadership been remiss in addressing the concerns of sustainable mining
operations. Recently, on January 16, 2004 and April 20, 2004, President Gloria Macapagal Arroyo
issued Executive Orders Nos. 270 and 270-A, respectively, "to promote responsible mineral
resources exploration, development and utilization, in order to enhance economic growth, in a
manner that adheres to the principles of sustainable development and with due regard for justice
and equity, sensitivity to the culture of the Filipino people and respect for Philippine sovereignty."98

REFUTATION OF DISSENTS

The Court will now take up a number of other specific points raised in the dissents of Justices Carpio
and Morales.

1. Justice Morales introduced us to Hugh Morgan, former president and chief executive officer of
Western Mining Corporation (WMC) and former president of the Australian Mining Industry Council,
who spearheaded the vociferous opposition to the filing by aboriginal peoples of native title claims
against mining companies in Australia in the aftermath of the landmark Mabo decision by the
Australian High Court. According to sources quoted by our esteemed colleague, Morgan was also
a racist and a bigot. In the course of protesting Mabo, Morgan allegedly uttered derogatory remarks
belittling the aboriginal culture and race.

An unwritten caveat of this introduction is that this Court should be careful not to permit the entry
of the likes of Hugh Morgan and his hordes of alleged racist-bigots at WMC. With all due respect,
such scare tactics should have no place in the discussion of this case. We are deliberating on the
constitutionality of RA 7942, DAO 96-40 and the FTAA originally granted to WMCP, which had been
transferred to Sagittarius Mining, a Filipino corporation. We are not discussing the apparition of white
Anglo-Saxon racists/bigots massing at our gates.

2. On the proper interpretation of the phrase agreements involving either technical or financial
assistance, Justice Morales points out that at times we "conveniently omitted" the use of the
disjunctive either…or, which according to her denotes restriction; hence the phrase must be deemed
to connote restriction and limitation.

But, as Justice Carpio himself pointed out during the Oral Argument, the disjunctive phrase either
technical or financial assistance would, strictly speaking, literally mean that a foreign contractor
may provide only one or the other, but not both. And if both technical and financial assistance were
required for a project, the State would have to deal with at least two different foreign contractors --
one for financial and the other for technical assistance. And following on that, a foreign contractor,
though very much qualified to provide both kinds of assistance, would nevertheless be prohibited
from providing one kind as soon as it shall have agreed to provide the other.

But if the Court should follow this restrictive and literal construction, can we really find two (or more)
contractors who are willing to participate in one single project -- one to provide the "financial
assistance" only and the other the "technical assistance" exclusively; it would be excellent if these
two or more contractors happen to be willing and are able to cooperate and work closely together on
the same project (even if they are otherwise competitors). And it would be superb if no conflicts
would arise between or among them in the entire course of the contract. But what are the chances
things will turn out this way in the real world? To think that the framers deliberately imposed this kind
of restriction is to say that they were either exceedingly optimistic, or incredibly naïve. This begs the
question -- What laudable objective or purpose could possibly be served by such strict and restrictive
literal interpretation?

3. Citing Oposa v. Factoran Jr., Justice Morales claims that a service contract is not a contract or
property right which merits protection by the due process clause of the Constitution, but merely a
license or privilege which may be validly revoked, rescinded or withdrawn by executive action
whenever dictated by public interest or public welfare.

Oposa cites Tan v. Director of Forestry and Ysmael v. Deputy Executive Secretary as authority. The
latter cases dealt specifically with timber licenses only. Oposa allegedly reiterated that 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
property or a property right, nor does it create a vested right; nor is it taxation. Thus this Court held
that the granting of license does not create irrevocable rights, neither is it property or property rights.

Should Oposa be deemed applicable to the case at bar, on the argument that natural resources are
also involved in this situation? We do not think so. A grantee of a timber license, permit or license
agreement gets to cut the timber already growing on the surface; it need not dig up tons of earth to
get at the logs. In a logging concession, the investment of the licensee is not as substantial as the
investment of a large-scale mining contractor. If a timber license were revoked, the licensee packs
up its gear and moves to a new area applied for, and starts over; what it leaves behind are mainly
the trails leading to the logging site.

In contrast, the mining contractor will have sunk a great deal of money (tens of millions of dollars)
into the ground, so to speak, for exploration activities, for development of the mine site and
infrastructure, and for the actual excavation and extraction of minerals, including the extensive
tunneling work to reach the ore body. The cancellation of the mining contract will utterly deprive the
contractor of its investments (i.e., prevent recovery of investments), most of which cannot be pulled
out.

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. Such a pronouncement will surely discourage investments (local and
foreign) which are critically needed to fuel the engine of economic growth and move this country out
of the rut of poverty. In sum, Oposa is not applicable.
4. Justice Morales adverts to the supposedly "clear intention" of the framers of the Constitution to
reserve our natural resources exclusively for the Filipino people. She then quoted from the records
of the ConCom deliberations a passage in which then Commissioner Davide explained his vote,
arguing in the process that aliens ought not be allowed to participate in the enjoyment of our natural
resources. One passage does not suffice to capture the tenor or substance of the entire extensive
deliberations of the commissioners, or to reveal the clear intention of the framers as a group. A re-
reading of the entire deliberations (quoted here earlier) is necessary if we are to understand the true
intent of the framers.

5. Since 1935, the Filipino people, through their Constitution, have decided that the retardation or
delay in the exploration, development or utilization of the nation's natural resources is merely
secondary to the protection and preservation of their ownership of the natural resources, so says
Justice Morales, citing Aruego. If it is true that the framers of the 1987 Constitution did not care
much about alleviating the retardation or delay in the development and utilization of our natural
resources, why did they bother to write paragraph 4 at all? Were they merely paying lip service to
large-scale exploration, development and utilization? They could have just completely ignored the
subject matter and left it to be dealt with through a future constitutional amendment. But we have to
harmonize every part of the Constitution and to interpret each provision in a manner that would give
life and meaning to it and to the rest of the provisions. It is obvious that a literal interpretation of
paragraph 4 will render it utterly inutile and inoperative.

6. According to Justice Morales, the deliberations of the Constitutional Commission do not support
our contention that the framers, by specifying such agreements involving financial or technical
assistance, necessarily gave implied assent to everything that these agreements implicitly entailed,
or that could reasonably be deemed necessary to make them tenable and effective, including
management authority in the day-to-day operations. As proof thereof, she quotes one single
passage from the ConCom deliberations, consisting of an exchange among Commissioners
Tingson, Garcia and Monsod.

However, the quoted exchange does not serve to contradict our argument; it even bolsters it. Comm.
Christian Monsod was quoted as saying: "xxx I think we have to make a distinction that it is not really
realistic to say that we will borrow on our own terms. Maybe we can say that we inherited unjust
loans, and we would like to repay these on terms that are not prejudicial to our own growth. But the
general statement that we should only borrow on our own terms is a bit unrealistic." Comm. Monsod
is one who knew whereof he spoke.

7. Justice Morales also declares that the optimal time for the conversion of an FTAA into an MPSA is
after completion of the exploration phase and just before undertaking the development and
construction phase, on account of the fact that the requirement for a minimum investment of $50
million is applicable only during the development, construction and utilization phase, but not during
the exploration phase, when the foreign contractor need merely comply with minimum ground
expenditures. Thus by converting, the foreign contractor maximizes its profits by avoiding its
obligation to make the minimum investment of $50 million.

This argument forgets that the foreign contractor is in the game precisely to make money. In order to
come anywhere near profitability, the contractor must first extract and sell the mineral ore. In order to
do that, it must also develop and construct the mining facilities, set up its machineries and
equipment and dig the tunnels to get to the deposit. The contractor is thus compelled to expend
funds in order to make profits. If it decides to cut back on investments and expenditures, it will
necessarily sacrifice the pace of development and utilization; it will necessarily sacrifice the amount
of profits it can make from the mining operations. In fact, at certain less-than-optimal levels of
operation, the stream of revenues generated may not even be enough to cover variable expenses,
let alone overhead expenses; this is a dismal situation anyone would want to avoid. In order to make
money, one has to spend money. This truism applies to the mining industry as well.

8. Mortgaging the minerals to secure a foreign FTAA contractor's obligations is anomalous,

according to Justice Morales since the contractor was from the beginning obliged to provide all
financing needed for the mining operations. However, the mortgaging of minerals by the contractor
does not necessarily signify that the contractor is unable to provide all financing required for the
project, or that it does not have the financial capability to undertake large-scale operations.
Mortgaging of mineral products, just like the assignment (by way of security) of manufactured goods
and goods in inventory, and the assignment of receivables, is an ordinary requirement of banks,
even in the case of clients with more than sufficient financial resources. And nowadays, even the
richest and best managed corporations make use of bank credit facilities -- it does not necessarily
signify that they do not have the financial resources or are unable to provide the financing on their
own; it is just a manner of maximizing the use of their funds.

9. Does the contractor in reality acquire the surface rights "for free," by virtue of the fact that it is
entitled to reimbursement for the costs of acquisition and maintenance, adjusted for inflation? We
think not. The "reimbursement" is possible only at the end of the term of the contract, when the
surface rights will no longer be needed, and the land previously acquired will have to be disposed of,
in which case the contractor gets reimbursement from the sales proceeds. The contractor has to pay
out the acquisition price for the land. That money will belong to the seller of the land. Only if and
when the land is finally sold off will the contractor get any reimbursement. In other words, the
contractor will have been cash-out for the entire duration of the term of the contract -- 25 or 50 years,
depending. If we calculate the cost of money at say 12 percent per annum, that is the cost or
opportunity loss to the contractor, in addition to the amount of the acquisition price. 12 percent per
annum for 50 years is 600 percent; this, without any compounding yet. The cost of money is
therefore at least 600 percent of the original acquisition cost; it is in addition to the acquisition
cost. "For free"? Not by a long shot.

10. The contractor will acquire and hold up to 5,000 hectares? We doubt it. The acquisition by the
State of land for the contractor is just to enable the contractor to establish its mine site, build its
facilities, establish a tailings pond, set up its machinery and equipment, and dig mine shafts and
tunnels, etc. It is impossible that the surface requirement will aggregate 5,000 hectares. Much of the
operations will consist of the tunneling and digging underground, which will not require possessing or
using any land surface. 5,000 hectares is way too much for the needs of a mining operator. It simply
will not spend its cash to acquire property that it will not need; the cash may be better employed for
the actual mining operations, to yield a profit.

11. Justice Carpio claims that the phrase among other things (found in the second paragraph of
Section 81 of the Mining Act) is being incorrectly treated as a delegation of legislative power to the
DENR secretary to issue DAO 99-56 and prescribe the formulae therein on the State's share from
mining operations. He adds that the phrase among other things was not intended as a delegation of
legislative power to the DENR secretary, much less could it be deemed a valid delegation of
legislative power, since there is nothing in the second paragraph of Section 81 which can be said to
grant any delegated legislative power to the DENR secretary. And even if there were, such
delegation would be void, for lack of any standards by which the delegated power shall be exercised.

While there is nothing in the second paragraph of Section 81 which can directly be construed as a
delegation of legislative power to the DENR secretary, it does not mean that DAO 99-56 is invalid
per se, or that the secretary acted without any authority or jurisdiction in issuing DAO 99-56. As we
stated earlier in our Prologue, "Who or what organ of government actually exercises this power of
control on behalf of the State? The Constitution is crystal clear: the President. Indeed, the Chief
Executive is the official constitutionally mandated to 'enter into agreements with foreign owned
corporations.' On the other hand, Congress may review the action of the President once it is notified
of 'every contract entered into in accordance with this [constitutional] provision within thirty days from
its execution.'"It is the President who is constitutionally mandated to enter into FTAAs with foreign
corporations, and in doing so, it is within the President's prerogative to specify certain terms and
conditions of the FTAAs, for example, the fiscal regime of FTAAs -- i.e., the sharing of the net
mining revenues between the contractor and the State.

Being the President's alter ego with respect to the control and supervision of the mining industry, the
DENR secretary, acting for the President, is necessarily clothed with the requisite authority and
power to draw up guidelines delineating certain terms and conditions, and specifying therein the
terms of sharing of benefits from mining, to be applicable to FTAAs in general. It is important to
remember that DAO 99-56 has been in existence for almost six years, and has not been amended or
revoked by the President.

The issuance of DAO 99-56 did not involve the exercise of delegated legislative power. The
legislature did not delegate the power to determine the nature, extent and composition of the items
that would come under the phrase among other things. The legislature's power pertains to the
imposition of taxes, duties and fees. This power was not delegated to the DENR secretary. But the
power to negotiate and enter into FTAAs was withheld from Congress, and reserved for the
President. In determining the sharing of mining benefits, i.e., in specifying what the phrase among
other things include, the President (through the secretary acting in his/her behalf) was not
determining the amount or rate of taxes, duties and fees, but rather the amount of INCOME to be
derived from minerals to be extracted and sold, income which belongs to the State as owner of the
mineral resources. We may say that, in the second paragraph of Section 81, the legislature in a
sense intruded partially into the President's sphere of authority when the former provided that

"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." (Italics supplied)

But it did not usurp the President's authority since the provision merely included the enumerated
items as part of the government share, without foreclosing or in any way preventing (as in fact
Congress could not validly prevent) the President from determining what constitutes the State's
compensation derived from FTAAs. In this case, the President in effect directed the inclusion or
addition of "other things," viz., INCOME for the owner of the resources, in the government's share,
while adopting the items enumerated by Congress as part of the government share also.

12. Justice Carpio's insistence on applying the ejusdem generis rule of statutory construction to the
phrase among other things is therefore useless, and must fall by the wayside. There is no point
trying to construe that phrase in relation to the enumeration of taxes, duties and fees found in
paragraph 2 of Section 81, precisely because "the constitutional power to prescribe the sharing
of mining income between the State and mining companies,"to quote Justice Carpio pursuant to
an FTAA is constitutionally lodged with the President, not with Congress. It thus makes no
sense to persist in giving the phrase among other things a restricted meaning referring only to taxes,
duties and fees.

13. Strangely, Justice Carpio claims that the DENR secretary can change the formulae in DAO 99-
56 any time even without the approval of the President, and the secretary is the sole authority to
determine the amount of consideration that the State shall receive in an FTAA, because Section 5 of
the DAO states that "xxx any amendment of an FTAA other than the provision on fiscal regime shall
require the negotiation with the Negotiation Panel and the recommendation of the Secretary for
approval of the President xxx". Allegedly, because of that provision, if an amendment in the FTAA
involves non-fiscal matters, the amendment requires approval of the President, but if the amendment
involves a change in the fiscal regime, the DENR secretary has the final authority, and approval of
the President may be dispensed with; hence the secretary is more powerful than the President.

We believe there is some distortion resulting from the quoted provision being taken out of context.
Section 5 of DAO 99-56 reads as follows:

"Section 5. Status of Existing FTAAs. All FTAAs approved prior to the effectivity of this
Administrative Order shall remain valid and be recognized by the Government: Provided,
That should a Contractor desire to amend its FTAA, it shall do so by filing a Letter of Intent
(LOI) to the Secretary thru the Director. Provided, further, That if the Contractor desires to
amend the fiscal regime of its FTAA, it may do so by seeking for the amendment of its
FTAA's whole fiscal regime by adopting the fiscal regime provided hereof: Provided, finally,
That any amendment of an FTAA other than the provision on fiscal regime shall require the
negotiation with the Negotiating Panel and the recommendation of the Secretary for approval
of the President of the Republic of the Philippines." (underscoring supplied)

It looks like another case of misapprehension. The proviso being objected to by Justice Carpio is
actually preceded by a phrase that requires a contractor desiring to amend the fiscal regime of its
FTAA, to amend the same by adopting the fiscal regime prescribed in DAO 99-56 -- i.e., solely in
that manner, and in no other. Obviously, since DAO 99-56 was issued by the secretary under
the authority and with the presumed approval of the President, the amendment of an FTAA by
merely adopting the fiscal regime prescribed in said DAO 99-56 (and nothing more) need not
have the express clearance of the President anymore. It is as if the same had been pre-
approved. We cannot fathom the complaint that that makes the secretary more powerful than the
President, or that the former is trying to hide things from the President or Congress.

14. Based on the first sentence of Section 5 of DAO 99-56, which states "[A]ll FTAAs approved prior
to the effectivity of this Administrative Order shall remain valid and be recognized by the
Government", Justice Carpio concludes that said Administrative Order allegedly exempts FTAAs
approved prior to its effectivity -- like the WMCP FTAA -- from having to pay the State any share
from their mining income, apart from taxes, duties and fees.

We disagree. What we see in black and white is the statement that the FTAAs approved before the
DAO came into effect are to continue to be valid and will be recognized by the State. Nothing is said
about their fiscal regimes. Certainly, there is no basis to claim that the contractors under said FTAAs
were being exempted from paying the government a share in their mining incomes.

For the record, the WMCP FTAA is NOT and has never been exempt from paying the government
share. The WMCP FTAA has its own fiscal regime -- Section 7.7 -- which gives the government
a 60 percent share in the net mining revenues of WMCP from the commencement of
commercial production.

For that very reason, we have never said that DAO 99-56 is the basis for claiming that the WMCP
FTAA has a consideration. Hence, we find quite out of place Justice Carpio's statement
that ironically, DAO 99-56, the very authority cited to support the claim that the WMCP FTAA has a
consideration, does not apply to the WMCP FTAA. By its own express terms, DAO 99-56 does not
apply to FTAAs executed before the issuance of DAO 99-56, like the WMCP FTAA. The majority's
position has allegedly no leg to stand on since even DAO 99-56, assuming it is valid, cannot save
the WMCP FTAA from want of consideration. Even assuming arguendo that DAO 99-56 does not
apply to the WMCP FTAA, nevertheless, the WMCP FTAA has its own fiscal regime, found in
Section 7.7 thereof. Hence, there is no such thing as "want of consideration" here.

Still more startling is this claim: The majority supposedly agrees that the provisions of the WMCP
FTAA, which grant a sham consideration to the State, are void. Since the majority agrees that the
WMCP FTAA has a sham consideration, the WMCP FTAA thus lacks the third element of a valid
contract. The Decision should declare the WMCP FTAA void for want of consideration unless it
treats the contract as an MPSA under Section 80. Indeed the only recourse of WMCP to save the
validity of its contract is to convert it into an MPSA.

To clarify, we said that Sections 7.9 and 7.8(e) of the WMCP FTAA are provisions grossly
disadvantageous to government and detrimental to the interests of the Filipino people, as well as
violative of public policy, and must therefore be stricken off as invalid. Since the offending provisions
are very much separable from Section 7.7 and the rest of the FTAA, the deletion of Sections 7.9 and
7.8(e) can be done without affecting or requiring the invalidation of the WMCP FTAA itself, and such
deletion will preserve for government its due share of the 60 percent benefits. Therefore, the WMCP
FTAA is NOT bereft of a valid consideration (assuming for the nonce that indeed this is the
"consideration" of the FTAA).

SUMMATION

To conclude, a summary of the key points discussed above is now in order.

The Meaning of "Agreements Involving

Either Technical or Financial Assistance"

Applying familiar principles of constitutional construction to the phrase agreements involving either
technical or financial assistance, the framers' choice of words does not indicate the intent to exclude
other modes of assistance, but rather implies that there are other things being included or possibly
being made part of the agreement, apart from financial or technical assistance. The drafters avoided
the use of restrictive and stringent phraseology; a verba legis scrutiny of Section 2 of Article XII of
the Constitution discloses not even a hint of a desire to prohibit foreign involvement in the
management or operation of mining activities, or to eradicate service contracts. Such moves would
necessarily imply an underlying drastic shift in fundamental economic and developmental policies of
the State. That change requires a much more definite and irrefutable basis than mere omission of
the words "service contract" from the new Constitution.

Furthermore, a literal and restrictive interpretation of this paragraph leads to logical

inconsistencies. A constitutional provision specifically allowing foreign-owned corporations to render
financial or technical assistance in respect of mining or any other commercial activity was clearly
unnecessary; the provision was meant to refer to more than mere financial or technical assistance.

Also, if paragraph 4 permits only agreements for financial or technical assistance, there would be no
point in requiring that they be "based on real contributions to the economic growth and general
welfare of the country." And considering that there were various long-term service contracts still in
force and effect at the time the new Charter was being drafted, the absence of any transitory
provisions to govern the termination and closing-out of the then existing service contracts strongly
militates against the theory that the mere omission of "service contracts" signaled their prohibition by
the new Constitution.
Resort to the deliberations of the Constitutional Commission is therefore unavoidable, and a careful
scrutiny thereof conclusively shows that the ConCom members discussed agreements involving
either technical or financial assistance in the same sense as service contracts and used the terms
interchangeably. The drafters in fact knew that the agreements with foreign corporations were going
to entail not mere technical or financial assistance but, rather, foreign investment in and
management of an enterprise for large-scale exploration, development and utilization of minerals.

The framers spoke about service contracts as the concept was understood in the 1973 Constitution.
It is obvious from their discussions that they did not intend to ban or eradicate service contracts.
Instead, they were intent on crafting provisions to put in place safeguards that would eliminate or
minimize the abuses prevalent during the martial law regime. In brief, they were going to permit
service contracts with foreign corporations as contractors, but with safety measures to
prevent abuses, as an exception to the general norm established in the first paragraph of
Section 2 of Article XII, which reserves or limits to Filipino citizens and corporations at least
60 percent owned by such citizens the exploration, development and utilization of mineral or
petroleum resources. This was prompted by the perceived insufficiency of Filipino capital and the
felt need for foreign expertise in the EDU of mineral resources.

Despite strong opposition from some ConCom members during the final voting, the Article on the
National Economy and Patrimony -- including paragraph 4 allowing service contracts with foreign
corporations as an exception to the general norm in paragraph 1 of Section 2 of the same Article --
was resoundingly and overwhelmingly approved.

The drafters, many of whom were economists, academicians, lawyers, businesspersons and
politicians knew that foreign entities will not enter into agreements involving assistance without
requiring measures of protection to ensure the success of the venture and repayment of their
investments, loans and other financial assistance, and ultimately to protect the business reputation
of the foreign corporations. The drafters, by specifying such agreements involving assistance,
necessarily gave implied assent to everything that these agreements entailed or that could
reasonably be deemed necessary to make them tenable and effective -- including management
authority with respect to the day-to-day operations of the enterprise, and measures for the protection
of the interests of the foreign corporation, at least to the extent that they are consistent with
Philippine sovereignty over natural resources, the constitutional requirement of State control, and
beneficial ownership of natural resources remaining vested in the State.

From the foregoing, it is clear that agreements involving either technical or financial
assistance referred to in paragraph 4 are in fact service contracts, but such new service contracts
are between foreign corporations acting as contractors on the one hand, and on the other hand
government as principal or "owner" (of the works), whereby the foreign contractor provides the
capital, technology and technical know-how, and managerial expertise in the creation and operation
of the large-scale mining/extractive enterprise, and government through its agencies (DENR, MGB)
actively exercises full control and supervision over the entire enterprise.

Such service contracts may be entered into only with respect to minerals, petroleum and other
mineral oils. The grant of such service contracts is subject to several safeguards, among them: (1)
that the service contract be crafted in accordance with a general law setting standard or uniform
terms, conditions and requirements; (2) the President be the signatory for the government; and (3)
the President report the executed agreement to Congress within thirty days.

Ultimate Test: Full State Control

To repeat, the primacy of the principle of the State's sovereign ownership of all mineral resources,
and its full control and supervision over all aspects of exploration, development and utilization of
natural resources must be upheld. But "full control and supervision" cannot be taken literally to mean
that the State controls and supervises everything down to the minutest details and makes all
required actions, as this would render impossible the legitimate exercise by the contractor of a
reasonable degree of management prerogative and authority, indispensable to the proper
functioning of the mining enterprise. Also, government need not micro-manage mining operations
and day-to-day affairs of the enterprise in order to be considered as exercising full control and
supervision.

Control, as utilized in Section 2 of Article XII, must be taken to mean a degree of control sufficient to
enable the State to direct, restrain, regulate and govern the affairs of the extractive enterprises.
Control by the State may be on a macro level, through the establishment of policies, guidelines,
regulations, industry standards and similar measures that would enable government to regulate the
conduct of affairs in various enterprises, and restrain activities deemed not desirable or beneficial,
with the end in view of ensuring that these enterprises contribute to the economic development and
general welfare of the country, conserve the environment, and uplift the well-being of the local
affected communities. Such a degree of control would be compatible with permitting the foreign
contractor sufficient and reasonable management authority over the enterprise it has invested in, to
ensure efficient and profitable operation.

Government Granted Full Control

by RA 7942 and DAO 96-40

Baseless are petitioners' sweeping claims that RA 7942 and its Implementing Rules and Regulations
make it possible for FTAA contracts to cede full control and management of mining enterprises over
to fully foreign owned corporations. Equally wobbly is the assertion that the State is reduced to a
passive regulator dependent on submitted plans and reports, with weak review and audit powers
and little say in the decision-making of the enterprise, for which reasons "beneficial ownership" of the
mineral resources is allegedly ceded to the foreign contractor.

As discussed hereinabove, the State's full control and supervision over mining operations are
ensured through the following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e), (f), (g),
(h), (k), (l), (m) and (o)], 40, 57, 66, 69, 70, and Chapters XI and XVII; as well as the following
provisions of DAO 96-40: Sections7[(d) and (f)], 35(a-2), 53[(a-4) and (d)], 54, 56[(g), (h), (l), (m) and
(n)], 56(2), 60, 66, 144, 168, 171 and 270, and also Chapters XV, XVI and XXIV.

Through the foregoing provisions, the government agencies concerned are empowered to approve
or disapprove -- hence, in a position 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 enterprise. Once they have been approved, the contractor's compliance
with its commitments therein will be monitored. Figures for mineral production and sales are
regularly monitored and subjected to government review, to ensure that the products and by-
products are disposed of at the best prices; copies of sales agreements have to be submitted to and
registered with MGB.

The contractor is mandated to open its books of accounts and records for scrutiny, to enable the
State to determine that the government share has been fully paid. The State may likewise compel
compliance by the contractor with mandatory requirements on mine safety, health and environmental
protection, and the use of anti-pollution technology and facilities. The contractor is also obligated to
assist the development of the mining community, and pay royalties to the indigenous peoples
concerned. And violation of any of the FTAA's terms and conditions, and/or non-compliance with
statutes or regulations, may be penalized by cancellation of the FTAA. Such sanction is significant to
a contractor who may have yet to recover the tens or hundreds of millions of dollars sunk into a
mining project.

Overall, the State definitely has a pivotal say in the operation of the individual enterprises, and can
set directions and objectives, detect deviations and non-compliances by the contractor, and enforce
compliance and impose sanctions should the occasion arise. Hence, RA 7942 and DAO 96-40 vest
in government more than a sufficient degree of control and supervision over the conduct of mining
operations.

Section 3(aq) of RA 7942 was objected to as being unconstitutional for allowing a foreign contractor
to apply for and hold an exploration permit. During the exploration phase, the permit grantee (and
prospective contractor) is spending and investing heavily in exploration activities without yet being
able to extract minerals and generate revenues. The exploration permit issued under Sections 3(aq),
20 and 23 of RA 7942, which allows exploration but not extraction, serves to protect the interests
and rights of the exploration permit grantee (and would-be contractor), foreign or local. Otherwise,
the exploration works already conducted, and expenditures already made, may end up only
benefiting claim-jumpers. Thus, Section 3(aq) of RA 7942 is not unconstitutional.

WMCP FTAA Likewise Gives the

State Full Control and Supervision

The WMCP FTAA obligates the contractor to account for the value of production and sale of
minerals (Clause 1.4); requires that the contractor's work program, activities and budgets be
approved by the State (Clause 2.1); gives the DENR secretary power to extend the exploration
period (Clause 3.2-a); requires approval by the State for incorporation of lands into the contract area
(Clause 4.3-c); requires Bureau of Forest Development approval for inclusion of forest reserves as
part of the FTAA contract area (Clause 4.5); obligates the contractor to periodically relinquish parts
of the contract area not needed for exploration and development (Clause 4.6); requires submission
of a declaration of mining feasibility for approval by the State (Clause 4.6-b); obligates the contractor
to report to the State the results of its exploration activities (Clause 4.9); requires the contractor to
obtain State approval for its work programs for the succeeding two year periods, containing the
proposed work activities and expenditures budget related to exploration (Clause 5.1); requires the
contractor to obtain State approval for its proposed expenditures for exploration activities (Clause
5.2); requires the contractor to submit an annual report on geological, geophysical, geochemical and
other information relating to its explorations within the FTAA area (Clause 5.3-a); requires the
contractor to submit within six months after expiration of exploration period a final report on all its
findings in the contract area (Clause 5.3-b); requires the contractor after conducting feasibility
studies to submit a declaration of mining feasibility, along with a description of the area to be
developed and mined, a description of the proposed mining operations and the technology to be
employed, and the proposed work program for the development phase, for approval by the DENR
secretary (Clause 5.4); obligates the contractor to complete the development of the mine, including
construction of the production facilities, within the period stated in the approved work program
(Clause 6.1); requires the contractor to submit for approval a work program covering each period of
three fiscal years (Clause 6.2); requires the contractor to submit reports to the secretary on the
production, ore reserves, work accomplished and work in progress, profile of its work force and
management staff, and other technical information (Clause 6.3); subjects any expansions,
modifications, improvements and replacements of mining facilities to the approval of the secretary
(Clause 6.4); subjects to State control the amount of funds that the contractor may borrow within the
Philippines (Clause 7.2); subjects to State supervisory power any technical, financial and marketing
issues (Clause 10.1-a); obligates the contractor to ensure 60 percent Filipino equity in the contractor
within ten years of recovering specified expenditures unless not so required by subsequent
legislation (Clause 10.1); gives the State the right to terminate the FTAA for unremedied substantial
breach thereof by the contractor (Clause 13.2); requires State approval for any assignment of the
FTAA by the contractor to an entity other than an affiliate (Clause 14.1).

In short, the aforementioned provisions of the WMCP FTAA, far from constituting a surrender of
control and a grant of beneficial ownership of mineral resources to the contractor in question, vest
the State with control and supervision over practically all aspects of the operations of the FTAA
contractor, including the charging of pre-operating and operating expenses, and the disposition of
mineral products.

There is likewise no relinquishment of control on account of specific provisions of the WMCP FTAA.
Clause 8.2 provides a mechanism to prevent the mining operations from grinding to a complete halt
as a result of possible delays of more than 60 days in the government's processing and approval of
submitted work programs and budgets. Clause 8.3 seeks to provide a temporary, stop-gap solution
in case a disagreement between the State and the contractor (over the proposed work program or
budget submitted by the contractor) should result in a deadlock or impasse, to avoid unreasonably
long delays in the performance of the works.

The State, despite Clause 8.3, still has control over the contract area, and it may, as sovereign
authority, prohibit work thereon until the dispute is resolved, or it may terminate the FTAA, citing
substantial breach thereof. Hence, the State clearly retains full and effective control.

Clause 8.5, which allows the contractor to make changes to approved work programs and budgets
without the prior approval of the DENR secretary, subject to certain limitations with respect to the
variance/s, merely provides the contractor a certain amount of flexibility to meet unexpected
situations, while still guaranteeing that the approved work programs and budgets are not abandoned
altogether. And if the secretary disagrees with the actions taken by the contractor in this instance, he
may also resort to cancellation/termination of the FTAA as the ultimate sanction.

Clause 4.6 of the WMCP FTAA gives the contractor discretion to select parts of the contract area to
be relinquished. The State is not in a position to substitute its judgment for that of the contractor,
who knows exactly which portions of the contract area do not contain minerals in commercial
quantities and should be relinquished. Also, since the annual occupation fees paid to government
are based on the total hectarage of the contract area, net of the areas relinquished, the contractor's
self-interest will assure proper and efficient relinquishment.

Clause 10.2(e) of the WMCP FTAA does not mean that the contractor can compel government to
use its power of eminent domain. It contemplates a situation in which the contractor is a foreign-
owned corporation, hence, not qualified to own land. The contractor identifies the surface areas
needed for it to construct the infrastructure for mining operations, and the State then acquires the
surface rights on behalf of the former. The provision does not call for the exercise of the power of
eminent domain (or determination of just compensation); it seeks to avoid a violation of the anti-
dummy law.

Clause 10.2(l) of the WMCP FTAA giving the contractor the right to mortgage and encumber the
mineral products extracted may have been a result of conditions imposed by creditor-banks to
secure the loan obligations of WMCP. Banks lend also upon the security of encumbrances on goods
produced, which can be easily sold and converted into cash and applied to the repayment of loans.
Thus, Clause 10.2(l) is not something out of the ordinary. Neither is it objectionable, because even
though the contractor is allowed to mortgage or encumber the mineral end-products themselves, the
contractor is not thereby relieved of its obligation to pay the government its basic and additional
shares in the net mining revenue. The contractor's ability to mortgage the minerals does not negate
the State's right to receive its share of net mining revenues.
Clause 10.2(k) which gives the contractor authority "to change its equity structure at any time,"
means that WMCP, which was then 100 percent foreign owned, could permit Filipino equity
ownership. Moreover, what is important is that the contractor, regardless of its ownership, is always
in a position to render the services required under the FTAA, under the direction and control of the
government.

Clauses 10.4(e) and (i) bind government to allow amendments to the FTAA if required by banks and
other financial institutions as part of the conditions of new lendings. There is nothing objectionable
here, since Clause 10.4(e) also provides that such financing arrangements should in no event
reduce the contractor's obligations or the government's rights under the FTAA. Clause 10.4(i)
provides that government shall "favourably consider" any request for amendments of this agreement
necessary for the contractor to successfully obtain financing. There is no renunciation of control, as
the proviso does not say that government shall automatically grant any such request. Also, it is up to
the contractor to prove the need for the requested changes. The government always has the final
say on whether to approve or disapprove such requests.

In fine, the FTAA provisions do not reduce or abdicate State control.

No Surrender of Financial Benefits

The second paragraph of Section 81 of RA 7942 has been denounced for allegedly limiting the
State's share in FTAAs with foreign contractors to just taxes, fees and duties, and depriving the
State of a share in the after-tax income of the enterprise. However, the inclusion of the
phrase "among other things" in the second paragraph of Section 81 clearly and unmistakably reveals
the legislative intent to have the State collect more than just the usual taxes, duties and fees.

Thus, DAO 99-56, the "Guidelines Establishing the Fiscal Regime of Financial or Technical
Assistance Agreements," spells out the financial benefits government will receive from an FTAA, as
consisting of not only a basic government share, comprised of all direct taxes, fees and royalties,
as well as other payments made by the contractor during the term of the FTAA, but also
an additional government share, being a share in the earnings or cash flows of the mining
enterprise, so as to achieve a fifty-fifty sharing of net benefits from mining between the government
and the contractor.

The additional government share is computed using one of three (3) options or schemes detailed
in DAO 99-56, viz., (1) the fifty-fifty sharing of cumulative present value of cash flows; (2) the excess
profit-related additional government share; and (3) the additional sharing based on the cumulative
net mining revenue. Whichever option or computation is used, the additional government share has
nothing to do with taxes, duties, fees or charges. The portion of revenues remaining after the
deduction of the basic and additional government shares is what goes to the contractor.

The basic government share and the additional government share do not yet take into account the
indirect taxes and other financial contributions of mining projects, which are real and actual benefits
enjoyed by the Filipino people; if these are taken into account, total government share increases to
60 percent or higher (as much as 77 percent, and 89 percent in one instance) of the net present
value of total benefits from the project.

The third or last paragraph of Section 81 of RA 7942 is slammed for deferring the payment of the
government share in FTAAs until after the contractor shall have recovered its pre-operating
expenses, exploration and development expenditures. Allegedly, the collection of the State's share is
rendered uncertain, as there is no time limit in RA 7942 for this grace period or recovery period. But
although RA 7942 did not limit the grace period, the concerned agencies (DENR and MGB) in
formulating the 1995 and 1996 Implementing Rules and Regulations provided that the period of
recovery, reckoned from the date of commercial operation, shall be for a period not exceeding five
years, or until the date of actual recovery, whichever comes earlier.

And since RA 7942 allegedly does not require government approval for the pre-operating,
exploration and development expenses of the foreign contractors, it is feared that such expenses
could be bloated to wipe out mining revenues anticipated for 10 years, with the result that the State's
share is zero for the first 10 years. However, the argument is based on incorrect information.

Under Section 23 of RA 7942, the applicant for exploration permit is required to submit a proposed
work program for exploration, containing a yearly budget of proposed expenditures, which the State
passes upon and either approves or rejects; if approved, the same will subsequently be recorded as
pre-operating expenses that the contractor will have to recoup over the grace period.

Under Section 24, when an exploration permittee files with the MGB a declaration of mining project
feasibility, it must submit a work program for development, with corresponding budget, for approval
by the Bureau, before government may grant an FTAA or MPSA or other mineral agreements; again,
government has the opportunity to approve or reject the proposed work program and budgeted
expenditures for development works, which will become the pre-operating and development costs
that will have to be recovered. Government is able to know ahead of time the amounts of pre-
operating and other expenses to be recovered, and the approximate period of time needed therefor.
The aforecited provisions have counterparts in Section 35, which deals with the terms and conditions
exclusively applicable to FTAAs. In sum, the third or last paragraph of Section 81 of RA 7942 cannot
be deemed defective.

Section 80 of RA 7942 allegedly limits the State's share in a mineral production-sharing agreement
(MPSA) to just the excise tax on the mineral product, i.e., only 2 percent of market value of the
minerals. The colatilla in Section 84 reiterates the same limitation in Section 80. However, these
two provisions pertain only to MPSAs, and have no application to FTAAs. These particular
provisions do not come within the issues defined by this Court. Hence, on due process
grounds, no pronouncement can be made in this case in respect of the constitutionality of
Sections 80 and 84.

Section 112 is disparaged for reverting FTAAs and all mineral agreements to the old "license,
concession or lease" system, because it allegedly effectively reduces the government share in
FTAAs to just the 2 percent excise tax which pursuant to Section 80 comprises the government
share in MPSAs. However, Section 112 likewise does not come within the issues delineated by this
Court, and was never touched upon by the parties in their pleadings. Moreover, Section 112 may not
properly apply to FTAAs. The mining law obviously meant to treat FTAAs as a breed apart from
mineral agreements. There is absolutely no basis to believe that the law intends to exact from FTAA
contractors merely the same government share (i.e., the 2 percent excise tax) that it apparently
demands from contractors under the three forms of mineral agreements.

While there is ground to believe that Sections 80, 84 and 112 are indeed unconstitutional, they
cannot be ruled upon here. In any event, they are separable; thus, a later finding of nullity will not
affect the rest of RA 7942.

In fine, the challenged provisions of RA 7942 cannot be said to surrender financial benefits
from an FTAA to the foreign contractors.

Moreover, there is no concrete basis for the view that, in FTAAs with a foreign contractor, the State
must receive at least 60 percent of the after-tax income from the exploitation of its mineral
resources, and that such share is the equivalent of the constitutional requirement that at least 60
percent of the capital, and hence 60 percent of the income, of mining companies should remain in
Filipino hands. Even if the State is entitled to a 60 percent share from other mineral agreements
(CPA, JVA and MPSA), that would not create a parallel or analogous situation for FTAAs. We are
dealing with an essentially different equation. Here we have the old apples and oranges syndrome.

The Charter did not intend to fix an iron-clad rule of 60 percent share, applicable to all situations,
regardless of circumstances. There is no indication of such an intention on the part of the framers.
Moreover, the terms and conditions of petroleum FTAAs cannot serve as standards for mineral
mining FTAAs, because the technical and operational requirements, cost structures and
investment needs of off-shore petroleum exploration and drilling companies do not have the
remotest resemblance to those of on-shore mining companies.

To take the position that government's share must be not less than 60 percent of after-tax income of
FTAA contractors is nothing short of this Court dictating upon the government. The State resultantly
ends up losing control. To avoid compromising the State's full control and supervision over the
exploitation of mineral resources, there must be no attempt to impose a "minimum 60 percent" rule.
It is sufficient that the State has the power and means, should it so decide, to get a 60 percent share
(or greater); and it is not necessary that the State does so in every case.

Invalid Provisions of the WMCP FTAA

Section 7.9 of the WMCP FTAA clearly renders illusory the State's 60 percent share of WMCP's
revenues. Under Section 7.9, should WMCP's foreign stockholders (who originally owned 100
percent of the equity) sell 60 percent or more of their equity to a Filipino citizen or corporation, the
State loses its right to receive its share in net mining revenues under Section 7.7, without any
offsetting compensation to the State. And what is given to the State in Section 7.7 is by mere
tolerance of WMCP's foreign stockholders, who can at any time cut off the government's entire share
by simply selling 60 percent of WMCP's equity to a Philippine citizen or corporation.

In fact, the sale by WMCP's foreign stockholder on January 23, 2001 of the entire outstanding equity
in WMCP to Sagittarius Mines, Inc., a domestic corporation at least 60 percent Filipino owned, can
be deemed to have automatically triggered the operation of Section 7.9 and removed the State's
right to receive its 60 percent share. Section 7.9 of the WMCP FTAA has effectively given away the
State's share without anything in exchange.

Moreover, it constitutes unjust enrichment on the part of the local and foreign stockholders in
WMCP, because by the mere act of divestment, the local and foreign stockholders get a windfall, as
their share in the net mining revenues of WMCP is automatically increased, without having to pay
anything for it.

Being grossly disadvantageous to government and detrimental to the Filipino people, as well as
violative of public policy, Section 7.9 must therefore be stricken off as invalid. The FTAA in question
does not involve mere contractual rights but, being impressed as it is with public interest, the
contractual provisions and stipulations must yield to the common good and the national interest.
Since the offending provision is very much separable from the rest of the FTAA, the deletion of
Section 7.9 can be done without affecting or requiring the invalidation of the entire WMCP FTAA
itself.

Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent by
government for the benefit of the contractor to be deductible from the State's share in net mining
revenues, it results in benefiting the contractor twice over. This constitutes unjust enrichment on the
part of the contractor, at the expense of government. For being grossly disadvantageous and
prejudicial to government and contrary to public policy, Section 7.8(e) must also be declared without
effect. It may likewise be stricken off without affecting the rest of the FTAA.

EPILOGUE

AFTER ALL IS SAID AND DONE, it is clear that there is unanimous agreement in the Court upon
the key principle that the State must exercise full control and supervision over the exploration,
development and utilization of mineral resources.

The crux of the controversy is the amount of discretion to be accorded the Executive Department,
particularly the President of the Republic, in respect of negotiations over the terms of FTAAs,
particularly when it comes to the government share of financial benefits from FTAAs. The Court
believes that it is not unconstitutional to allow a wide degree of discretion to the Chief Executive,
given the nature and complexity of such agreements, the humongous amounts of capital and
financing required for large-scale mining operations, the complicated technology needed, and the
intricacies of international trade, coupled with the State's need to maintain flexibility in its dealings, in
order to preserve and enhance our country's competitiveness in world markets.

We are all, in one way or another, sorely affected by the recently reported scandals involving
corruption in high places, duplicity in the negotiation of multi-billion peso government contracts, huge
payoffs to government officials, and other malfeasances; and perhaps, there is the desire to see
some measures put in place to prevent further abuse. However, dictating upon the President
what minimum share to get from an FTAA is not the solution.It sets a bad precedent since such
a move institutionalizes the very reduction if not deprivation of the State's control. The remedy may
be worse than the problem it was meant to address. In any event, provisions in such future
agreements which may be suspected to be grossly disadvantageous or detrimental to government
may be challenged in court, and the culprits haled before the bar of justice.

Verily, under the doctrine of separation of powers and due respect for co-equal and coordinate
branches of government, this Court must restrain itself from intruding into policy matters and must
allow the President and Congress maximum discretion in using the resources of our country and in
securing the assistance of foreign groups to eradicate the grinding poverty of our people and answer
their cry for viable employment opportunities in the country.

"The judiciary is loath to interfere with the due exercise by coequal branches of government of their
official functions."99 As aptly spelled out seven decades ago by Justice George Malcolm, "Just as the
Supreme Court, as the guardian of constitutional rights, should not sanction usurpations by any
other department of government, so should it as strictly confine its own sphere of influence to the
powers expressly or by implication conferred on it by the Organic Act."100 Let the development of the
mining industry be the responsibility of the political branches of government. And let not this Court
interfere inordinately and unnecessarily.

The Constitution of the Philippines is the supreme law of the land. It is the repository of all the
aspirations and hopes of all the people. We fully sympathize with the plight of Petitioner La Bugal
B'laan and other tribal groups, and commend their efforts to uplift their communities. However, we
cannot justify the invalidation of an otherwise constitutional statute along with its implementing rules,
or the nullification of an otherwise legal and binding FTAA contract.

We must never forget that it is not only our less privileged brethren in tribal and cultural communities
who deserve the attention of this Court; rather, all parties concerned -- including the State itself, the
contractor (whether Filipino or foreign), and the vast majority of our citizens -- equally deserve the
protection of the law and of this Court. To stress, the benefits to be derived by the State from mining
activities must ultimately serve the great majority of our fellow citizens. They have as much right and
interest in the proper and well-ordered development and utilization of the country's mineral resources
as the petitioners.

Whether we consider the near term or take the longer view, we cannot overemphasize the need for
an appropriate balancing of interests and needs -- the need to develop our stagnating mining
industry and extract what NEDA Secretary Romulo Neri estimates is some US$840 billion (approx.
PhP47.04 trillion) worth of mineral wealth lying hidden in the ground, in order to jumpstart our
floundering economy on the one hand, and on the other, the need to enhance our nationalistic
aspirations, protect our indigenous communities, and prevent irreversible ecological damage.

This Court cannot but be mindful that any decision rendered in this case will ultimately impact not
only the cultural communities which lodged the instant Petition, and not only the larger community of
the Filipino people now struggling to survive amidst a fiscal/budgetary deficit, ever increasing prices
of fuel, food, and essential commodities and services, the shrinking value of the local currency, and
a government hamstrung in its delivery of basic services by a severe lack of resources, but also
countless future generations of Filipinos.

For this latter group of Filipinos yet to be born, their eventual access to education, health care and
basic services, their overall level of well-being, the very shape of their lives are even now being
determined and affected partly by the policies and directions being adopted and implemented by
government today. And in part by the this Resolution rendered by this Court today.

Verily, the mineral wealth and natural resources of this country are meant to benefit not merely a
select group of people living in the areas locally affected by mining activities, but the entire Filipino
nation, present and future, to whom the mineral wealth really belong. This Court has therefore
weighed carefully the rights and interests of all concerned, and decided for the greater good of the
greatest number. JUSTICE FOR ALL, not just for some; JUSTICE FOR THE PRESENT AND THE
FUTURE, not just for the here and now.

WHEREFORE, the Court RESOLVES to GRANT the respondents' and the intervenors' Motions for
Reconsideration; to REVERSE and SET ASIDE this Court's January 27, 2004 Decision;
to DISMISS the Petition; and to issue this new judgment declaring CONSTITUTIONAL (1) Republic
Act No. 7942 (the Philippine Mining Law), (2) its Implementing Rules and Regulations contained in
DENR Administrative Order (DAO) No. 9640 -- insofar as they relate to financial and technical
assistance agreements referred to in paragraph 4 of Section 2 of Article XII of the Constitution; and
(3) the Financial and Technical Assistance Agreement (FTAA) dated March 30, 1995 executed by
the government and Western Mining Corporation Philippines Inc. (WMCP), except Sections 7.8 and
7.9 of the subject FTAA which are hereby INVALIDATED for being contrary to public policy and for
being grossly disadvantageous to the government.

SO ORDERED

PRESIDENTIAL DECREE No. 1067 December 31, 1976

A DECREE INSTITUTING A WATER CODE, THEREBY REVISING AND CONSOLIDATING THE

LAWS GOVERNING THE OWNERSHIP, APPROPRIATION, UTILIZATION, EXPLOITATION,
DEVELOPMENT, CONSERVATION AND PROTECTION OF WATER RESOURCES
WHEREAS, Article XIV, Section 8 of the New Constitution of the Philippines provides, inter alia, that
all waters of the Philippines belong to the State;

WHEREAS, existing water legislations are piece-meal and inadequate to cope with increasing
scarcity of water and changing patterns of water use;

WHEREAS, there is a need for a Water Code based on rational concepts or integrated and
multipurpose management of water resources and sufficiently flexible to adequately meet future
developments;

WHEREAS, water is vital to national development and it has become increasingly necessary for
government to intervene actively in improving the management of water resources;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers in me vested by the Constitution, do hereby order and decree the enactment of the water
Code of the Philippines of 1976, as follows:

CHAPTER I
DECLARATION OF OBJECTIVES AND PRINCIPLES

Article 1. This Code shall be known as The Water Code of the Philippines.

Article 2. The objectives of this Code are:

(a) To establish the basic principles and framework relating to the appropriation, control and
conservation of water resources to achieve the optimum development and rational utilization
of these resources;

(b) To define the extent of the rights and obligations of water users and owners including the
protection and regulation of such rights;

(c) To adopt a basic law governing the ownership, appropriation, utilization, exploitation,
development, conservation and protection of water resources and rights to land related
thereto; and

(d) To identify the administrative agencies which will enforce this Code.

Article 3. The underlying principles of this code are:

(a) All waters belong to the State.

(b) All waters that belong to the State can not be the subject to acquisitive prescription.

(c) The State may allow the use or development of waters by administrative concession.

(d) The utilization, exploitation, development, conservation and protection of water resources
shall be subject to the control and regulation of the government through the National Water
Resources Council, hereinafter referred to as the Council.
 (e) Preference in the use and development of waters shall consider current usages and be
responsive to the changing needs of the country.

Article 4. Waters, as used in this Code, refers to water under the grounds, water above the ground,
water in the atmosphere and the waters of the sea within the territorial jurisdiction of the Philippines.

CHAPTER II
OWNERSHIP OF WATERS

Article 5. The following belong to the State:

(a) Rivers and their natural beds;

(b) Continuous or intermittent waters of springs and brooks running in their natural beds and
the beds themselves;

(c) Natural lakes and lagoons;

(d) All other categories of surface waters such as water flowing over lands, water from
rainfall whether natural, or artificial, and water from agriculture runoff, seepage and drainage;

(e) Atmospheric water;

(f) Subterranean or ground waters; and,

(g) Seawater.

Article 6. The following waters found on private lands belong to the State:

(a) Continuous or intermittent waters rising on such lands;

(b) Lakes and lagoons naturally occuring on such lands;

(c) Rain water falling on such lands;

(d) Subterranean or ground waters; and,

(e) Water in swamps and marshes.

The owner of the land where the water is found may use the same for domestic purposes without
securing a permit, provided that such use shall be registered, when required by the Council. The
Council, however, may regulate such when there is wastage, or in times of emergency.

Article 7. Subject to the provisions of this Code, any person who captures or collects water by
means of cisterns, tanks, or pools shall have exclusive control over such water and the right to
dispose of the same.

Article 8. Water legally appropriated shall be subject to the control of the appropriator from the
moment it reaches the appropriator's canal or aqueduct leading to the place where the water will be
used or stored and, thereafter, so long as it is being beneficially used for the purposes for which it
was appropriated.

CHAPTER III
APPROPRIATION OF WATERS

Article 9. Waters may be appropriated and used in accordance with the provisions of this Code.

Appropriation of water, as used in this Code, is the acquisition of rights over the use of waters or the
taking or diverting of waters from a natural source in the manner and for any purpose allowed by
law.

Article 10. Water may be appropriated for the following purposes:

(a) Domestic

(b) Municipal

(c) Irrigation

(d) Power generation

(e) Fisheries

(f) Livestock raising

(g) Industrial

(h) Recreational, and

(i) Other purposes

Use of water for domestic purposes is the utilization of water for drinking, washing, bathing, cooking
or other household needs, home gardens, and watering of lawns or domestic animals.

Use of water for municipal purposes is the utilization of water for supplying the water requirements of
the community.

Use of water for irrigation is the utilization of water for producing agricultural crops.

Use of water for power generation is the utilization of water for producing electrical or mechanical
power.

Use of water for fisheries is the utilization of water for the propagation and culture of fish as a
commercial enterprise.

Use of water for livestock raising is the utilization of water for large herds or flocks of animals raised
as a commercial enterprise.
Use of water for industrial purposes is the utilization of water in factories, industrial plants and mines,
including the use of water as an ingredient of a finished product.

Use of water for recreational purposes is the utilization of water for swimming pools, bath houses,
boating, water skiing, golf courses and other similar facilities in resorts and other places of
recreation.

Article 11. The State, for reasons of public policy, may declare waters not previously appropriated,
in whole or in part, exempt from appropriation for any or all purposes and, thereupon, such waters
may not be appropriated for those purposes.

Article 12. Waters appropriated for a particular purpose may be applied for another purpose only
upon prior approval of the Council and on condition that the new use does not unduly prejudice the
rights of other permittees, or require an increase in the volume of water.

Article 13. Except as otherwise herein provided, no person, including government instrumentalities
or government-owned or controlled corporations, shall appropriate water without a water right, which
shall be evidenced by a document known as a water permit.

Water right is the privilege granted by the government to appropriate and use water.

Article 14. Subject to the provisions of this Code concerning the control, protection, conservation,
and regulation of the appropriation and use of waters, any person may appropriate or use natural
bodies of water without securing a water permit for any of the following:

(a) Appropriation of water by means of handcarried receptacles; and

(b) Bathing or washing, watering or dipping of domestic or farm animals, and navigation of
watercrafts or transportation of logs and other objects by flotation.

Article 15. Only citizens of the Philippines, of legal age, as well as juridical persons, who are duly
qualified by law to exploit and develop water resources, may apply for water permits.

Article 16. Any person who desires to obtain a water permit shall file an application with the Council
who shall make known said application to the public for any protests.

In determining whether to grant or deny an application, the Council shall consider the following:
protests filed, if any; prior permits granted; the availability of water; the water supply needed for
beneficial use; possible adverse effects; land-use economics; and other relevant factors.

Upon approval of an application, a water permit shall be issued and recorded.

Article 17. The right to the use of water is deemed acquired as of the date of filing of the application
for a water permit in case of approved permits, or as of the date of actual use in a case where no
permit is required.

Article 18. All water permits granted shall be subject to conditions of beneficial use, adequate
standards of design and construction, and such other terms and conditions as may be imposed by
the Council.
Such permits shall specify the maximum amount of water which may be diverted or withdrawn, the
maximum rate of diversion or withdrawal, the time or times during the year when water may be
diverted or withdrawn, the points or points of diversion or location of wells, the place of use, the
purposes of which water may be used and such other requirements the Council deems desirable.

Article 19. Water rights may be leaded or transferred in whole or in part to another person with prior
approval of the Council, after due notice and hearing.

Article 20. The measure and limit of appropriation of water shall be beneficial use.

Beneficial use of water is the utilization of water in the right amount during the period that the water
is needed for producing the benefits for which the water is appropriated.

Article 21. Standards of beneficial use shall be prescribed by the council for the appropriator of
water for different purposes and conditions, and the use of waters which are appropriated shall be
measured and controlled in accordance therewith.

Excepting for domestic use, every appropriator of water shall maintain water control and measuring
devices, and keep records of water withdrawal. When required by the Council, all appropriators of
water shall furnish information on water use.

Article 22. Between two or more appropriators of water from the same sources of supply, priority in
time of appropriation shall give the better right, except that in times of emergency the use of water
for domestic and municipal purposes shall have a better right over all other uses; Provided, the
where water shortage is recurrent and the appropriator for municipal use has a lower priority in time
of appropriation, then it shall be his duty to find an alternative source of supply in accordance with
conditions prescribed by the Council.

Article 23. Priorities may be altered on grounds of greater beneficial use, multi-purpose use, and
other similar grounds after due notice and hearing, subject to payment of compensation is proper
cases.

Article 24. A water right shall be exercised in such a manner that the rights of third persons or of
other appropriators are not prejudiced thereby.

Article 25. A holder of water permit may demand the establishment of easements necessary for the
construction and maintenance of the works and facilities needed for the beneficial use of the waters
to be appropriated subject to the requirements of just compensation and to the following conditions:

(a) That he is the owner, lessee, mortgagee or one having real right over the land upon
which he proposes to use water; and

(b) That the proposed easement is the most convenient and the least onerous to the servient
estate.

Easements relating to the appropriation and use of waters may be modified by agreement of the
contracting parties provided the same is not contrary to law or prejudicial to third persons.

Article 26. Where water shortage is recurrent, the use of the water pursuant to a permit may, in the
interest of equitable distribution of the benefits among legal appropriators, reduce after due notice
and hearing.
Article 27. Water users shall bear the diminution of any water supply due to natural causes or force
majeure.

Article 28. Water permits shall continue to be valid as long as water is beneficially used; however, it
maybe suspended on the grounds of non-compliance with approved plans and specifications or
schedules of water distribution; use of water for a purpose other than that for which it was granted;
non-payment of water charges; wastage; failure to keep records of water diversion, when required;
and violation of any term or condition of any permit or rules and regulations promulgated by the
Council.

Temporary permits may be issued for the appropriation and use of water for short periods under
special circumstances.

Article 29. Water permits may be revoked after due notice and hearing on grounds of non-use;
gross violation of the conditions imposed in the permit; unauthorized sale of water; willful failure or
refusal to comply with rules and regulations of any lawful order; pollution, public nuisance or acts
detrimental to public health and safety; when the appropriator is found to be disqualified under the
law to exploit and develop natural resources of the Philippines; when, in the case, of irrigation, the
land is converted to non-agricultural purposes; and other similar grounds.

Article 30. All water permits are subject to modification or cancellation by the council, after due
notice and hearing, in favor of a project of greater beneficial use or for multi-purpose development,
and a water permittee who suffers thereby shall be duly compensated by the entity or person in
whose favor the cancellation was made.

CHAPTER IV
UTILIZATION OF WATERS

Article 31. Preference in the development of water resources shall consider security of the State,
multiple use, beneficial effects, adverse effects and costs of development.

Article 32. The utilization of subterranean or ground water shall be coordinated with that of surface
waters such as rivers, streams, springs and lakes, so that a superior right in one not adversely
affected by an inferior right in the other.

For this purpose the Council shall promulgate rules and regulations and declare the existence of
control areas for the coordinated development, protection, and utilization of subterranean or ground
water and surface waters.

Control area is an area of land where subterranean or ground water and surface water are so
interrelated that withdrawal and use in one similarly affects the other. The boundary of a control area
may be altered from time to time, as circumstances warrant.

Article 33. Water contained in open canals, aqueducts or reservoirs of private persons may be used
by any person for domestic purpose or for watering plants as long as the water is withdrawn by
manual methods without checking the stream or damaging the canal, aqueduct or reservoir;
Provided, That this right may be restricted by the owner should it result in loss or injury to him.

Article 34. A water permittee or appropriator may use any watercourse to convey water to another
point in the watercourse for the purpose stated in a permit and such water may be diverted or
recaptured at that point by said permittee in the same amount less allowance for normal losses in
transit.

Article 35. Works for the storage, diversion, distribution and utilization of water resources shall
contain adequate provision for the prevention and control of diseases that may be induced or spread
by such works when required by the Council.

Article 36. When the reuse of waste water is feasible, it shall be limited as much as possible, to
such uses other than direct human consumption. No person or agency shall distribute such water for
public consumption until it is demonstrated that such consumption will not adversely affect the health
and safety of the public.

Article 37. In the construction and operation of hydraulic works, due consideration shall be given to
the preservation of scenic places and historical relics and, in addition to the provisions of existing
laws, no works that would required the destruction or removal of such places or relics shall be
undertaken without showing that the distribution or removal is necessary and unaviodable.

Article 38. Authority for the construction of dams, bridges and other structures across of which may
interfere with the flow of navigable or flotable waterways shall first be secured from the Department
of Public Works, Transportation and Communications.

Article 39. Except in cases of emergency to save life or property, the construction or repair of the
following works shall be undertaken only after the plans and specifications therefor, as may be
required by the Council, are approved by the proper government agency; dams for the diversion or
storage of water; structures for the use of water power, installations for the utilization of
subterranean or ground water and other structures for utilization of water resources.

Article 40. No excavation for the purpose of emission of a hot spring or for the enlargement of the
existing opening thereof shall be made without prior permit.

Any person or agency who intends to develop a hot spring for human consumption must first obtain
a permit from the Department of Health.

Article 41. No person shall develop a stream, lake, or spring for recreational purposes without first
securing a permit from the Council.

Article 42. Unless-otherwise ordered by the President of the Philippines and only in time of national
calamity or emergency, no person shall induce or restrain rainfall by any method such as cloud
seeding without a permit from the proper government emergency.

Article 43. No person shall raise or lower the water level of a river stream, lake, lagoon, or marsh
nor drain the same without a permit.

Article 44. Drainage systems shall be so constructed that their outlets are rivers, lakes, the sea,
natural bodies of water, or such other water course as may be approved by the proper government
agency.

Article 45. When a drainage channel is constructed by a number of persons for their common
benefit, the cost of construction and maintenance of the channel shall be borne by each in proportion
to the benefits drived.
Article 46. When artificial means are employed to drain water from higher to lower land, the owner
of the higher land shall select the routes and methods of drainage that will cause the minimum
damage to the lower lands, subject to the requirements of just compensation.

Article 47. When the use, conveyance or storage of waters results in damage to another, the person
responsible for the damage shall pay compensation.

Article 48. When a water resources project interferes with the access of landowner to a portion of
his property or with the conveyance of irrigation or drainage water, the person or agency
constructing the project shall bear the cost of construction and maintenance of the bridges, flumes
and other structures necessary for maintaining access, irrigation, or drainage, in addition to paying
compensation for land and incidental damages.

Article 49. Any person having an easement for an aqueduct may enter upon the servient land for
the purpose of cleaning, repairing or replacing the aqueduct or the removal of obstructions
therefrom.

Article 50. Lower estates are obliged to receive the waters which naturally and without the
intervention of man flow from the higher estate, as well as the stone or earth which they carry with
them.

The owner of the lower estate can not construct works which will impede this natural flow, unless he
provides an alternative method of drainage; neither can the owner of the higher estate make works
which will increase this natural flow.

Article 51. The banks of rivers and streams and the shores of the seas and lakes throughout their
entire length and within a zone of three (3) meters in urban areas, twenty (20) meters in agricultural
areas and forty (40) meters in forest areas, along their margins are subject to the easement of public
use in the interest of recreation, navigation, floatage, fishing and salvage. No person shall be
allowed to stay in this zone longer than what is necessary for recreation, navigation, floatage, fishing
or salvage or to build structures of any kind.

Article 52. The establishment, extent, form, and conditions of easements of water not expressly
determined by the provisions of this Code shall be governed by the provisions of the Civil Code.

CHAPTER V
CONTROL OF WATERS

Article 53. To promote the best interest and the coordinated protection of flood plain lands, the
Secretary of Public Works, Transportation and Communications may declare flood control areas and
promulgate guidelines for governing flood plain management plans in these areas.

Article 54. In declared flood control areas, rules and regulations may be promulgated to prohibit or
control activities that may damage or cause deterioration or lakes and dikes, obstruct the flow of
water, change the natural flow of the river, increase flood losses or aggravate flood problems.

Article 55. The government may construct necessary flood control structures in declared flood
control areas, and for this purpose it shall have a legal easement as wide as may be needed along
and adjacent to the river bank and outside of the bed or channel of the river.
Article 56. River beds, sand bars and tidal flats may not be cultivated except upon prior permission
from the Secretary of the Department of Public Works, Transportation and Communication and such
permission shall not be granted where such cultivation obstructs the flow of water or increase flood
levels so as to cause damage to other areas.

Article 57. Any person may erect levees or revetments to protect his property from flood,
encroachment by the river or change in the course of the river, provided that such constructions
does not cause damage to the property of another.

Article 58. When a river or stream suddenly changes its course to traverse private lands, the owners
of the affected lands may not compel the government to restore the river to its former bed; nor can
they restrain the government from taking steps to revert the river or stream to its former course. The
owners of the land thus affected are not entitled to compensation for any damage sustained thereby.
However, the former owners of the new bed shall be the owners of the abandoned bed in proportion
to the area lost by each.

The owners of the affected lands may undertake to return the river or stream to its old bed at their
own expense; Provided, That a permit therefor is secured from the Secretary of Public Works,
Transportation and Communication and work pertaining thereto are commenced within two years
from the change in the course of the river or stream.

Article 59. Rivers, lakes and lagoons may, upon the recommendation of the Philippines Coast
Guard, be declared navigable either in whole or in part.

Article 60. The rafting of logs and other objects on rivers and lakes which are flotable may be
controlled or prohibited during designated season of the year with due regard to the needs of
irrigation and domestic water supply and other uses of water.

Article 61. The impounding of water in ponds or reservoirs may be prohibited by the Council upon
consultation with the Department of Health if it is dangerous to public health, or it may order that
such pond or reservoir be drained if such is necessary for the protection of public health.

Article 62. Waters of a stream may be stored in a reservoir by a permittee in such amount as will not
prejudice the right of any permittee downstream. Whoever operates the reservoir shall, when
required, release water for minimum stream flow.

All reservoir operations shall be subject to rules and regulations issued by the Council or any proper
government agency.

Article 63. The operator of a dam for the storage of water may be required to employ an engineer
possessing qualifications prescribed for the proper operations, maintenance and administration of
the dam.

Article 64. The Council shall approve the manner, location, depth, and spacing in which borings for
subterranean or ground water may be made, determine the requirements for the registration of every
boring or alteration to existing borings as well as other control measures for the exploitation of
subterranean or ground water resources, and in coordination with the Professional Regulation
Commission prescribe the qualifications of those who would drill such borings.

No person shall drill a well without prior permission from the Council.
Article 65. Water from one river basin may be transferred to another river basin only with approval
of the Council. In considering any request for such transfer, the Council shall take into account the
full costs of the transfer, the benefits that would accrue to the basin of origin without the transfer, the
benefits would accrue to the receiving basin on account of the transfer, alternative schemes for
supplying water to the receiving basin, and other relevant factors.

CHAPTER VI
CONSERVATION AND PROTECTION OF WATERS AND WATERSHEDS AND RELATED LAND
RESOURCES

Article 66. After due notice and hearing when warranted by circumstances, minimum stream flows
for rivers and streams, and minimum water levels for lakes may be established by the Council under
such conditions as may be necessary for the protection of the environment, control of pollution,
navigation, prevention of salt damage, and general public use.

Article 67. Any watershed or any area of land adjacent to any surface water or overlying any ground
water may declared by the Department of Natural Resources as protected area Rules and
regulations may be promulgated by such Department to prohibit or control such activities by the
owners or occupants thereof within the protected area which may damage or cause the deterioration
of the surface water or ground water or interfere with the investigation, use, control, protection,
management or administration of such waters.

Article 68. It shall be the duty of any person in control of a well to prevent the water from flowing on
the surface of the land, or into any surface water, or any porous stratum under neath the surface
without being beneficially used.

Article 69. It shall be the duty of any person in control of a well containing water with minerals or
other substances injurious to man, animals, agriculture, and vegetation to prevent such waters from
flowing on the surface of the land or into any surface water or into any other aquifer or porous
stratum.

Article 70. No person shall utilize an existing well or pond or spread waters for recharging
substerranean or ground water supplies without prior permission of the Council.

Article 71. To promote better water conservation and usage for irrigation purposes, the merger of
irrigation associations and the appropriation of waters by associations instead of by individuals shall
be encouraged.

No water permit shall be granted to an individual when his water requirement can be supplied
through an irrigation association.

Article 72. In the consideration of a proposed water resource project, due regard shall be given to
ecological changes resulting from the construction of the project in order to balance the needs of
development and the protection of the environment.

Article 73. The conservation of fish and wildlife shall receive proper consideration and shall be
coordinated with other features of water resources development programs to insure that fish and
wildlife values receive equal attention with other project purposes.
Article 74. Swamps and marshes which are owned by the State and which primary value for
waterfowl propagation or other wildlife purposes may be reserved and protected from drainage
operation and development.

Article 75. No person shall, without prior permission from the National Pollution Control
Commission, build any works that may produce dangerous or noxious substances or perform any
act which may result in the introduction of sewage, industrial waste, or any pollutant into any source
of water supply.

Water pollution is the impairment of the quality of water beyond a certain standard. This standard
may vary according to the use of the water and shall be set by the National Pollution Control
Commission.

Article 76. The establishment of cemeteries and waste disposal areas that may affect the source of
a water supply or a reservoir for domestic or municipal use shall be subject to the rules and
regulations promulgated by the Department of Health.

Article 77. Tailings from mining operations and sediments from placer mining shall not be dumped
into rivers and waterways without prior permission from the Council upon recommendation by the
National Pollution Control Commission.

Article 78. The application of agricultural fertilizers and pesticides may be prohibited or regulated by
the National Pollution Control Commission in the areas where such application may cause pollution
of a source of water supply.

CHAPTER VII
ADMINISTRATION OF WATERS AND ENFORCEMENT OF THE PROVISIONS OF THIS CODE

Article 79. The Administration and enforcement of the provisions of this Code, including the granting
of permits and the imposition of penalties for administrative violations hereof, are hereby vested in
the Council, and except in regard to those functions which under this Code are specifically conferred
upon other agencies of the government, the Council is hereby empowered to make all decisions and
determinations provided for in this Code.

Article 80. The Council may deputize any official or agency of the government to perform any of its
specific functions or activities.

Article 81. The Council shall provide a continuing program for data collection, research and
manpower development needed for the appropriation, utilization, exploitation, conservation, and
protection of the water resources of the country.

Article 82. In the implementation of the provisions of this code, the Council shall promulgate the
necessary rules and regulations which may provide for penalties consisting of a fine not exceeding
One Thousand Pesos (P1,000.00) and/or suspension or revocation of the water permit or other right
to the use of water. Violations of such rules and regulations may be administratively dealt with by the
Council.

Such rules and regulations prescribed by any government agency that pertain to the utilization,
exploitation, development, control, conservation, or protection of water resources shall, if the Council
so requires, be subject to its approval.
Article 83. The Council is hereby authorized to impose and collect reasonable fees or charges for
water resources development from water appropriators, except when it is for purely domestic
purposes.

Article 84. The Council and other agencies authorized to enforce this Code are empowered to enter
upon private lands, with previous notice to the owner, for the purpose of conducting surveys and
hydrologic investigations, and to perform such other acts as are necessary in carrying out their
functions including the power to exercise the right of eminent domain.

Article 85. No program or project involving the appropriation, utilization, exploitation, development,
control, conservation, or protection of water resources may be undertaken without prior approval of
the Council, except those which the Council may, in its discretion, exempt.

The Council may require consultation with the public prior to the implementation of certain water
resources development projects.

Article 86. When plans and specifications of a hydraulic structure are submitted for approval, the
government agency whose functions embrace the type of project for which the structure is intended,
shall review the plans and specifications and recommended to the Council proper action thereon and
the latter shall approve the same only when they are inconformity with the requirements of this Code
and the rules and regulations promulgated by the Council. Notwithstanding such approval, neither
the engineer who drew up the plans and specifications of the hydraulic structure, nor the constructor
who built it, shall be relieved of his liability for damages in case of failure thereof by reason of defect
in plans and specifications, or failure due to defect in construction, within ten (10) years from the
completion of the structure.

Any action recover such damages must be brought within five (5) years following such failure.

Article 87. The Council or its duly authorized representatives, in the exercise of its power to
investigate and decide cases brought to its cognizance, shall have the power to administer oaths,
compel the attendance of witnesses by subpoena and the production of relevant documents by
subpoena duces tecum.

Non-compliance of violation of such orders or subpoena and subpoena duces tecum shall be
punished in the same manner as indirect contempt of an inferior court upon application by the
aggrieved party with the proper Court of First Instance in accordance with the provisions of Rules 71
of the Rules of the Court.

Article 88. The Council shall have original jurisdiction over all disputes to relating to appropriation,
utilization, exploitation, development, control, conservation and protection of waters within the
meaning and context of the provisions of this Code.

The decisions of the Council on water rights controversies shall be immediately executory and the
enforcement thereof may be suspended only when a bond, in a amount fixed by the Council to
answer for damages occasioned by the suspension or stay of execution, shall have been filed by the
appealing party, unless the suspension is virtue of an order of a competent court.

All dispute shall be decided within sixty (60) days after the parties submit the same for decision or
resolution.
The Council shall have the power to issue writs of execution and enforce its decisions with the
assistance of local or national police agencies.

Article 89. The decisions of the Council on water rights controversies may be appealed to the Court
of First Instance of the province where the subject matter of the controversy is situated within fifteen
(15) days from the date the party appealing receives a copy of the decision, on any of the following
grounds; (1) grave abuse of discretion; (2) question of law; and (3) questions of fact and law.

CHAPTER VIII
PENAL PROVISIONS

Article 90. The following acts shall be penalized by suspension or revocation of the violator's water
permit or other right to the use of water and/or a fine of not exceeding One Thousand Pesos
(P1,000.00), in the discretion of the Council:

(a)Appropriation of subterranean or ground water for domestic use by an overlying

landowner without registration required by the Council.

(b) Non-observance of any standard of beneficial use of water.

(c) Failure of the appropriator to keep a record of water withdrawal, when required.

(d) Failure to comply with any of the terms or conditions in a water permit or a water rights
grant.

(e) Unauthorized use of water for a purpose other than that for which a right or permit was
granted.

(f) Construction or repair of any hydraulic work or structure without duly approved plans and
specifications, when required.

(g) Failure to install a regulating and measuring device for the control of the volume of water
appropriated, when required.

(h) Unauthorized sale, lease, or transfer of water and/or water rights.

(i) Failure to provide adequate facilities to prevent or control diseases when required by the
Council in the construction of any work for the storage, diversion, distribution and utilization
of water.

(j) Drilling of a well without permission of the Council.

(k) Utilization of an existing well or ponding or spreading of water for recharging

subterranean or ground water supplies without permission of the Council.

(l) Violation of or non-compliance with any order, rules, or regulations of the Council.

(m) Illegal taking or diversion of water in an open canal, aqueduct or reservoir.

(n) Malicious destruction of hydraulic works or structure valued at not exceeding P5,000.00.
Article 91. A. A fine of not exceeding Three Thousand Pesos (P3,000.00) or imprisonment for not
more than three (3) years, or both such fine and imprisonment, in the discretion of the Court, shall be
imposed upon any person who commits any of the following acts:

1. Appropriation of water without a water permit, unless such person is expressly

exempted from securing a permit by the provisions of this Code.

2. Unauthorized obstruction of an irrigation canal.

3. Cultivation of a river bed, sand bar or tidal flat without permission.

4. Malicious destruction of hydraulic works or structure valued at not exceeding

Twenty-Five Thousand Pesos (P25,000.00).

B. A fine exceeding Three Thousand Pesos P3,000.00) but not more than Six Thousand
Pesos P6,000.00) or imprisonment exceeding three (3) years but not more than six (6) years,
or both such fine and imprisonment in the discretion of the Court, shall be imposed on any
person who commits any of the following acts:

1. Distribution for public consumption of water which adversely affects the health and
safety of the public.

2. Excavation or enlargement of the opening of a hot spring without permission.

3. Unauthorized obstruction of a river or waterway, or occupancy of a river bank or

seashore without permission.

4. Establishment of a cemetery or a waste disposal area near a source of water

supply or reservoir for domestic municipal use without permission.

5. Constructing, without prior permission of the government agency concerned,

works that produce dangerous or noxious substances, or performing acts that result
in the introduction of sewage, industrial waste, or any substance that pollutes a
source of water supply.

6. Dumping mine tailings and sediments into rivers of waterways without permission.

7. Malicious destruction of hydraulic works or structure valued more than Twenty-

Five Thousand Pesos (P25,000.00) but at not exceeding One Hundred Thousand
Peso (100,000.00).

C. A fine exceeding Six Thousand Pesos (P6,000.00) but not more than Ten Thousand
Pesos (P10,000.00) or imprisonment exceeding six (6) years but not more than twelve (12)
years, or both such fine and imprisonment, in the discretion of the Court, shall be imposed
upon any person who commits any of the following acts:

1. Misrepresentation of citizenship in order to qualify for water permit.

2. Malicious destruction of a hydraulic works or structure, valued at more than One

Hundred Thousand Pesos (P100,000.00).
Article 92. If the offense is committed by a corporation, trust, firm, partnership, association or any
other juridical person, the penalty shall be imposed upon the President, General Manager, and other
guilty officer or officers of such corporation, trust firm, partnership, association or entity, without
prejudice to the filing of a civil action against said juridical person. If the offender is an alien, he shall
be deported after serving his sentence, without further proceedings.

After final judgment of conviction, the Court upon petition of the prosecution attorney in the same
proceedings, and after due hearing, may, when the public interest so requires, order suspension of
or dissolution of such corporation, trust, firm, partnership, association or juridical person.

Article 93. All actions for offenses punishable under Article 91 of this Code shall be brought before
the proper court.

Article 94. Actions for offenses punishable under this Code by a fine of not more than Three
Thousand Pesos (P3,000.00) or by an imprisonment of not more than three (3) years, or both such
fine and imprisonment, shall prescribe in five (5) years; those punishable by a fine exceeding Three
Thousand Pesos (P3,000.00) but not more than Six Thousand Pesos (P6,000.00) or an
imprisonment exceeding three (3) years but not more than six (6) years, or both such fine and
imprisonment, shall prescribe in seven (7) years; and those punishable by a fine exceeding Six
Thousand Pesos (P6,000.00) but not more than Ten Thousand Pesos (P10,000.00) or an
imprisonment exceeding six (6) years but not more than twelve (12) years, or both such fine and
imprisonment, shall prescribe in ten (10) years.

CHAPTER IX
TRANSITORY AND FINAL PROVISIONS

Article 95. Within two (2) years from the promulgation of this Code, all claims for a right to use water
existing on or before December 31, 1974 shall be registered with the Council which shall confirm
said rights in accordance with the provisions of this Code, and shall set their respective priorities.

When priority in time of appropriation from a certain source of supply cannot be determined, the
order of preference in the use of the waters shall be as follows:

(a) Domestic and municipal use

(b) Irrigation

(c) Power generation

(d) Fisheries

(e) Livestock raising

(f) Industrial use, and

(g) Other uses.

Any claim not registered within said period shall be considered waived and the use of the water
deemed abandoned, and the water shall thereupon be available for disposition as unappropriated
waters in accordance with the provisions of this Code.
Article 96. No vested or acquired right to the use of water can arise from acts or omissions which
are against the law or which infringe upon the rights of others.

Article 97. Acts and contract under the regime of old laws, if they are valid in accordance therewith,
shall be respected, subject to the limitations established in this Code. Any modification or extension
of these acts and contracts after the promulgation of this Code, shall be subject to the provisions
hereof.

Article 98. Interim rules and regulations promulgated by the Council shall continue to have binding
force and effect, when not in conflict with the provisions of this Code.

Article 99. If any provision or part of this Code, or the application thereof to any person or
circumstance, is declared unconstitutional or invalid for any reason, the other provisions or parts
therein shall not be affected.

Article 100. The following laws, parts and/or provisions of laws are hereby repealed:

(a) The provisions of the Spanish Law on Waters of August 3, 1866, the Civil Code of Spain
of 1889 and the Civil Code of the Philippines (R.A. 386) on ownership of waters, easements
relating to waters, use of public waters and acquisitive prescription on the use of waters,
which are inconsistent with the provisions of this Code;

(b) The provisions of R.A. 6395, otherwise known as the Revised Charter of National Power
Corporation, particularly section 3, paragraph (f), and section 12, insofar as they relate to the
appropriation of waters and the grant thereof;

(c) The provisions of Act No. 2152, as amended, otherwise known as the Irrigation Act,
section 3, paragraphs (k) and (m) of P.D. No. 813, R.A. 2056; Section 90, C.A. 137; and,

(d) All Decree, Laws, Acts, parts of Acts, rules of Court, executive orders, and administrative
regulations which are contrary to or inconsistent with the provisions of this Code.

Article 101. This Code shall take effect upon its promulgation.

Done in the City of Manila, this 31st day of December, Nineteen Hundred and Seventy-Six.

G.R. No. 152644 February 10, 2006

JOHN ERIC LONEY, STEVEN PAUL REID and PEDRO B. HERNANDEZ, Petitioners,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the Decision2 dated 5 November 2001 and the Resolution dated 14
March 2002 of the Court of Appeals. The 5 November 2001 Decision affirmed the ruling of the
Regional Trial Court, Boac, Marinduque, Branch 94, in a suit to quash Informations filed against
petitioners John Eric Loney, Steven Paul Reid, and Pedro B. Hernandez ("petitioners"). The 14
March 2002 Resolution denied petitioners’ motion for reconsideration.

The Facts

Petitioners John Eric Loney, Steven Paul Reid, and Pedro B. Hernandez are the President and Chief
Executive Officer, Senior Manager, and Resident Manager for Mining Operations, respectively, of
Marcopper Mining Corporation ("Marcopper"), a corporation engaged in mining in the province of
Marinduque.

Marcopper had been storing tailings3 from its operations in a pit in Mt. Tapian, Marinduque. At the
base of the pit ran a drainage tunnel leading to the Boac and Makalupnit rivers. It appears that
Marcopper had placed a concrete plug at the tunnel’s end. On 24 March 1994, tailings gushed out of
or near the tunnel’s end. In a few days, the Mt. Tapian pit had discharged millions of tons of tailings
into the Boac and Makalupnit rivers.

In August 1996, the Department of Justice separately charged petitioners in the Municipal Trial Court
of Boac, Marinduque ("MTC") with violation of Article 91(B),4 sub-paragraphs 5 and 6 of Presidential
Decree No. 1067 or the Water Code of the Philippines ("PD 1067"),5 Section 86 of Presidential
Decree No. 984 or the National Pollution Control Decree of 1976 ("PD 984"),7 Section 1088 of
Republic Act No. 7942 or the Philippine Mining Act of 1995 ("RA 7942"),9 and Article 36510 of the
Revised Penal Code ("RPC") for Reckless Imprudence Resulting in Damage to Property.11

Petitioners moved to quash the Informations on the following grounds: (1) the Informations were
"duplicitous" as the Department of Justice charged more than one offense for a single act; (2)
petitioners John Eric Loney and Steven Paul Reid were not yet officers of Marcopper when the
incident subject of the Informations took place; and (3) the Informations contain allegations which
constitute legal excuse or justification.

The Ruling of the MTC

In its Joint Order of 16 January 1997 ("Joint Order"), the MTC12 initially deferred ruling on petitioners’
motion for lack of "indubitable ground for the quashing of the [I]nformations x x x." The MTC
scheduled petitioners’ arraignment in February 1997. However, on petitioners’ motion, the MTC
issued a Consolidated Order on 28 April 1997 ("Consolidated Order"), granting partial
reconsideration to its Joint Order and quashing the Informations for violation of PD 1067 and PD
984. The MTC maintained the Informations for violation of RA 7942 and Article 365 of the RPC. The
MTC held:

[T]he 12 Informations have common allegations of pollutants pointing to "mine tailings" which were
precipitately discharged into the Makulapnit and Boac Rivers due to breach caused on the Tapian
drainage/tunnel due to negligence or failure to institute adequate measures to prevent pollution and
siltation of the Makulapnit and Boac River systems, the very term and condition required to be
undertaken under the Environmental Compliance Certificate issued on April 1, 1990.

The allegations in the informations point to same set [sic] of evidence required to prove the single
fact of pollution constituting violation of the Water Code and the Pollution Law which are the same
set of evidence necessary to prove the same single fact of pollution, in proving the elements
constituting violation of the conditions of ECC, issued pursuant to the Philippine Mining Act. In both
instances, the terms and conditions of the Environmental Compliance Certificate were allegedly
violated. In other words, the same set of evidence is required in proving violations of the three (3)
special laws.
After carefully analyzing and weighing the contending arguments of the parties and after taking into
consideration the applicable laws and jurisprudence, the Court is convinced that as far as the three
(3) aforesaid laws are concerned, only the Information for [v]iolation of Philippine Mining Act should
be maintained. In other words, the Informations for [v]iolation of Anti-Pollution Law (PD 984) and the
Water Code (PD 1067) should be dismissed/quashed because the elements constituting the
aforesaid violations are absorbed by the same elements which constitute violation of the Philippine
Mining Act (RA 7942).

Therefore, x x x Criminal Case[] Nos. 96-44, 96-45 and 96-46 for [v]iolation of the Water Code; and
Criminal Case[] Nos. 96-47, 96-48 and 96-49 for [v]iolation of the Anti-Pollution Law x x x are hereby
DISMISSED or QUASHED and Criminal Case[] Nos. 96-50, 96-51 and 96-52 for [v]iolation of the
Philippine Mining Act are hereby retained to be tried on the merits.

The Information for [v]iolation of Article 365 of the Revised Penal Code should also be maintained
and heard in a full blown trial because the common accusation therein is reckless imprudence
resulting to [sic] damage to property. It is the damage to property which the law punishes not the
negligent act of polluting the water system. The prosecution for the [v]iolation of Philippine Mining
Act is not a bar to the prosecution for reckless imprudence resulting to [sic] damage to property.13

The MTC re-scheduled petitioners’ arraignment on the remaining charges on 28 and 29 May 1997.
In the hearing of 28 May 1997, petitioners manifested that they were willing to be arraigned on the
charge for violation of Article 365 of the RPC but not on the charge for violation of RA 7942 as they
intended to appeal the Consolidated Order in so far as it maintained the Informations for that
offense. After making of record petitioners’ manifestation, the MTC proceeded with the arraignment
and ordered the entry of "not guilty" pleas on the charges for violation of RA 7942 and Article 365 of
the RPC.

Petitioners subsequently filed a petition for certiorari with the Regional Trial Court, Boac,
Marinduque, assailing that portion of the Consolidated Order maintaining the Informations for
violation of RA 7942. Petitioners’ petition was raffled to Branch 94. For its part, public respondent
filed an ordinary appeal with the same court assailing that portion of the Consolidated Order
quashing the Informations for violation of PD 1067 and PD 984. Public respondent’s appeal was
raffled to Branch 38. On public respondent’s motion, Branch 38 ordered public respondent’s appeal
consolidated with petitioners’ petition in Branch 94.

The Ruling of Branch 94

In its Resolution14 of 20 March 1998, Branch 94 granted public respondent’s appeal but denied
petitioners’ petition. Branch 94 set aside the Consolidated Order in so far as it quashed the
Informations for violation of PD 1067 and PD 984 and ordered those charges reinstated. Branch 94
affirmed the Consolidated Order in all other respects. Branch 94 held:

After a careful perusal of the laws concerned, this court is of the opinion that there can be no
absorption by one offense of the three other offenses, as [the] acts penalized by these laws are
separate and distinct from each other. The elements of proving each violation are not the same with
each other. Concededly, the single act of dumping mine tailings which resulted in the pollution of the
Makulapnit and Boac rivers was the basis for the information[s] filed against the accused each
charging a distinct offense. But it is also a well-established rule in this jurisdiction that –

"A single act may offend against two or more entirely distinct and unrelated provisions of law, and if
one provision requires proof of an additional fact or element which the other does not, an acquittal or
conviction or a dismissal of the information under one does not bar prosecution under the other. x x
x."

xxxx

[T]he different laws involve cannot absorb one another as the elements of each crime are different
from one another. Each of these laws require [sic] proof of an additional fact or element which the
other does not although they stemmed from a single act.15

Petitioners filed a petition for certiorari with the Court of Appeals alleging that Branch 94 acted with
grave abuse of discretion because (1) the Informations for violation of PD 1067, PD 984, RA 7942
and the Article 365 of the RPC "proceed from and are based on a single act or incident of polluting
the Boac and Makalupnit rivers thru dumping of mine tailings" and (2) the duplicitous nature of the
Informations contravenes the ruling in People v. Relova.16Petitioners further contended that since the
acts complained of in the charges for violation of PD 1067, PD 984, and RA 7942 are "the very same
acts complained of" in the charge for violation of Article 365 of the RPC, the latter absorbs the
former. Hence, petitioners should only be prosecuted for violation of Article 365 of the RPC.17

The Ruling of the Court of Appeals

In its Decision of 5 November 2001, the Court of Appeals affirmed Branch 94’s ruling. The appellate
court held:

The records of the case disclose that petitioners filed a motion to quash the aforementioned
Informations for being duplicitous in nature. Section 3 of Rule 117 of the Revised Rules of Court
specifically provides the grounds upon which an information may be quashed. x x x

xxxx

[D]uplicity of Informations is not among those included in x x x [Section 3, Rule 117].

xxxx

We now go to petitioners’ claim that the resolution of the public respondent contravened the doctrine
laid down in People vs. Relova for being violative of their right against multiple prosecutions.

In the said case, the Supreme Court found the People’s argument with respect to the variances in
the mens rea of the two offenses being charged to be correct. The Court, however, decided the case
in the context of the second sentence of Article IV (22) of the 1973 Constitution (now under Section
21 of Article III of the 1987 Constitution), rather than the first sentence of the same section. x x x

xxxx

[T]he doctrine laid down in the Relova case does not squarely apply to the case at Bench since the
Informations filed against the petitioners are for violation of four separate and distinct laws which are
national in character.

xxxx

This Court firmly agrees in the public respondent’s understanding that the laws by which the
petitioners have been [charged] could not possibly absorb one another as the elements of each
crime are different. Each of these laws require [sic] proof of an additional fact or element which the
other does not, although they stemmed from a single act. x x x

xxxx

[T]his Court finds that there is not even the slightest indicia of evidence that would give rise to any
suspicion that public respondent acted with grave abuse of discretion amounting to excess or lack of
jurisdiction in reversing the Municipal Trial Court’s quashal of the Informations against the petitioners
for violation of P.D. 1067 and P.D. 984. This Court equally finds no error in the trial court’s denial of
the petitioner’s motion to quash R.A. 7942 and Article 365 of the Revised Penal Code.18

Petitioners sought reconsideration but the Court of Appeals denied their motion in its Resolution of
14 March 2002.

Petitioners raise the following alleged errors of the Court of Appeals:

I. THE COURT OF APPEALS COMMITTED A R[E]VERSIBLE ERROR IN MAINTAINING

THE CHARGES FOR VIOLATION OF THE PHILIPPINE MINING ACT (R.A. 7942) AND
REINSTATING THE CHARGES FOR VIOLATION OF THE WATER CODE (P.D. 1067) AND
POLLUTION CONTROL LAW (P.D. 984), CONSIDERING THAT:

A. THE INFORMATIONS FOR VIOLATION OF THE WATER CODE (P.D. 1067),

THE POLLUTION CONTROL LAW (P.D. 984), THE PHILIPPINE MINING ACT (R.A.
7942) AND ARTICLE 365 OF THE REVISED PENAL CODE PROCEED FROM AND
ARE BASED ON A SINGLE ACT OR INCIDENT OF POLLUTING THE BOAC AND
MAKULAPNIT RIVERS THRU DUMPING OF MINE TAILINGS.

B. THE PROSECUTION OF PETITIONERS FOR DUPLICITOUS AND MULTIPLE

CHARGES CONTRAVENES THE DOCTRINE LAID DOWN IN PEOPLE VS.
RELOVA, 148 SCRA 292 [1986 THAT "AN ACCUSED SHOULD NOT BE
HARASSED BY MULTIPLE PROSECUTIONS FOR OFFENSES WHICH THOUGH
DIFFERENT FROM ONE ANOTHER ARE NONETHELESS EACH CONSTITUTED
BY A COMMON SET OR OVERLAPPING SETS OF TECHNICAL ELEMENTS."

II. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT

THE ELEMENT OF LACK OF NECESSARY OR ADEQUATE PRECAUTION,
NEGLIGENCE, RECKLESSNESS AND IMPRUDENCE UNDER ARTICLE 356 [sic] OF THE
REVISED PENAL CODE DOES NOT FALL WITHIN THE AMBIT OF ANY OF THE
ELEMENTS OF THE PERTINENT PROVISIONS OF THE WATER CODE, POLLUTION
CONTROL LAW AND PHILIPPINE MINING ACT CHARGED AGAINST PETITIONERS[.]19

The Issues

The petition raises these issues:

(1) Whether all the charges filed against petitioners except one should be quashed for
duplicity of charges and only the charge for Reckless Imprudence Resulting in Damage to
Property should stand; and

(2) Whether Branch 94’s ruling, as affirmed by the Court of Appeals, contravenes People v.
Relova.
 The Ruling of the Court

The petition has no merit.

No Duplicity of Charges in the Present Case

Duplicity of charges simply means a single complaint or information charges more than one offense,
as Section 13 of Rule 11020 of the 1985 Rules of Criminal Procedure clearly states:

Duplicity of offense. – A complaint or information must charge but one offense, except only in those
cases in which existing laws prescribe a single punishment for various offenses.

In short, there is duplicity (or multiplicity) of charges when a single Information charges more than
one offense.21

Under Section 3(e), Rule 11722 of the 1985 Rules of Criminal Procedure, duplicity of offenses in a
single information is a ground to quash the Information. The Rules prohibit the filing of such
Information to avoid confusing the accused in preparing his defense.23 Here, however, the
prosecution charged each petitioner with four offenses, with each Information charging only one
offense. Thus, petitioners erroneously invoke duplicity of charges as a ground to quash the
Informations. On this score alone, the petition deserves outright denial.

The Filing of Several Charges is Proper

Petitioners contend that they should be charged with one offense only — Reckless Imprudence
Resulting in Damage to Property — because (1) all the charges filed against them "proceed from
and are based on a single act or incident of polluting the Boac and Makalupnit rivers thru dumping of
mine tailings" and (2) the charge for violation of Article 365 of the RPC "absorbs" the other charges
since the element of "lack of necessary or adequate protection, negligence, recklessness and
imprudence" is common among them.

The contention has no merit.

As early as the start of the last century, this Court had ruled that a single act or incident might offend
against two or more entirely distinct and unrelated provisions of law thus justifying the prosecution of
the accused for more than one offense.24 The only limit to this rule is the Constitutional prohibition
that no person shall be twice put in jeopardy of punishment for "the same offense."25 In People v.
Doriquez,26 we held that two (or more) offenses arising from the same act are not "the same" —

x x x if one provision [of law] requires proof of an additional fact or element which the other does not,
x x x. Phrased elsewise, where two different laws (or articles of the same code) define two crimes,
prior jeopardy as to one of them is no obstacle to a prosecution of the other, although both offenses
arise from the same facts, if each crime involves some important act which is not an essential
element of the other.27 (Emphasis supplied)

Here, double jeopardy is not at issue because not all of its elements are present.28 However, for the
limited purpose of controverting petitioners’ claim that they should be charged with one offense only,
we quote with approval Branch 94’s comparative analysis of PD 1067, PD 984, RA 7942, and Article
365 of the RPC showing that in each of these laws on which petitioners were charged, there is one
essential element not required of the others, thus:
In P.D. 1067 (Philippines Water Code), the additional element to be established is the dumping of
mine tailings into the Makulapnit River and the entire Boac River System without prior permit from
the authorities concerned. The gravamen of the offense here is the absence of the proper permit to
dump said mine tailings. This element is not indispensable in the prosecution for violation of PD 984
(Anti-Pollution Law), [RA] 7942 (Philippine Mining Act) and Art. 365 of the Revised Penal Code. One
can be validly prosecuted for violating the Water Code even in the absence of actual pollution, or
even [if] it has complied with the terms of its Environmental Compliance Certificate, or further, even
[if] it did take the necessary precautions to prevent damage to property.

In P.D. 984 (Anti-Pollution Law), the additional fact that must be proved is the existence of actual
pollution. The gravamen is the pollution itself. In the absence of any pollution, the accused must be
exonerated under this law although there was unauthorized dumping of mine tailings or lack of
precaution on its part to prevent damage to property.

In R.A. 7942 (Philippine Mining Act), the additional fact that must be established is the willful
violation and gross neglect on the part of the accused to abide by the terms and conditions of the
Environmental Compliance Certificate, particularly that the Marcopper should ensure the
containment of run-off and silt materials from reaching the Mogpog and Boac Rivers. If there was no
violation or neglect, and that the accused satisfactorily proved [sic] that Marcopper had done
everything to ensure containment of the run-off and silt materials, they will not be liable. It does not
follow, however, that they cannot be prosecuted under the Water Code, Anti-Pollution Law and the
Revised Penal Code because violation of the Environmental Compliance Certificate is not an
essential element of these laws.

On the other hand, the additional element that must be established in Art. 365 of the Revised Penal
Code is the lack of necessary or adequate precaution, negligence, recklessness and imprudence on
the part of the accused to prevent damage to property. This element is not required under the
previous laws. Unquestionably, it is different from dumping of mine tailings without permit, or causing
pollution to the Boac river system, much more from violation or neglect to abide by the terms of the
Environmental Compliance Certificate. Moreover, the offenses punished by special law are mal[a]
prohibita in contrast with those punished by the Revised Penal Code which are mala in se.29

Consequently, the filing of the multiple charges against petitioners, although based on the same
incident, is consistent with settled doctrine.

On petitioners’ claim that the charge for violation of Article 365 of the RPC "absorbs" the charges for
violation of PD 1067, PD 984, and RA 7942, suffice it to say that a mala in se felony (such as
Reckless Imprudence Resulting in Damage to Property) cannot absorb mala prohibita crimes (such
as those violating PD 1067, PD 984, and RA 7942). What makes the former a felony is criminal
intent (dolo) or negligence (culpa); what makes the latter crimes are the special laws enacting them.

People v. Relova not in Point

Petitioners reiterate their contention in the Court of Appeals that their prosecution contravenes this
Court’s ruling in People v. Relova. In particular, petitioners cite the Court’s statement in Relova that
the law seeks to prevent harassment of the accused by "multiple prosecutions for offenses which
though different from one another are nonetheless each constituted by a common set or overlapping
sets of technical elements."

This contention is also without merit. 1avv phil.net

The issue in Relova is whether the act of the Batangas Acting City Fiscal in charging one Manuel
Opulencia ("Opulencia") with theft of electric power under the RPC, after the latter had been
acquitted of violating a City Ordinance penalizing the unauthorized installation of electrical wiring,
violated Opulencia’s right against double jeopardy. We held that it did, not because the offenses
punished by those two laws were the same but because the act giving rise to the charges was
punished by an ordinance and a national statute, thus falling within the proscription against multiple
prosecutions for the same act under the second sentence in Section 22, Article IV of the 1973
Constitution, now Section 21, Article III of the 1987 Constitution. We held:

The petitioner concludes that:

"The unauthorized installation punished by the ordinance [of Batangas City] is not the same as theft
of electricity [under the Revised Penal Code]; that the second offense is not an attempt to commit
the first or a frustration thereofand that the second offense is not necessarily included in the offense
charged in the first information."

The above argument[ ] made by the petitioner [is] of course correct. This is clear both from the
express terms of the constitutional provision involved – which reads as follows:

"No person shall be twice put in jeopardy of punishment for the same offense. If an act is punished
by a law and an ordinance, conviction or acquittal under either shall constitute a bar to another
prosecution for the same act." x x x

and from our case law on this point. The basic difficulty with the petitioner’s position is that it must be
examined, not under the terms of the first sentence of Article IV (22) of the 1973 Constitution, but
rather under the second sentence of the same section. The first sentence of Article IV (22) sets forth
the general rule: the constitutional protection against double jeopardy is not available where the
second prosecution is for an offense that is different from the offense charged in the first or prior
prosecution, although both the first and second offenses may be based upon the same act or set of
acts. The second sentence of Article IV (22) embodies an exception to the general proposition: the
constitutional protection, against double jeopardy is available although the prior offense charged
under an ordinance be different from the offense charged subsequently under a national statute
such as the Revised Penal Code, provided that both offenses spring from the same act or set of
acts. x x x30 (Italicization in the original; boldfacing supplied)

Thus, Relova is no authority for petitioners’ claim against multiple prosecutions based on a single act
not only because the question of double jeopardy is not at issue here, but also because, as the
Court of Appeals held, petitioners are being prosecuted for an act or incident punished by four
national statutes and not by an ordinance and a national statute. In short, petitioners, if ever, fall
under the first sentence of Section 21, Article III which prohibits multiple prosecution for the same
offense, and not, as in Relova, for offenses arising from the same incident.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 5 November 2001 and the
Resolution dated 14 March 2002 of the Court of Appeals.

SO ORDERED

G.R. Nos. 171947-48 December 18, 2008

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, DEPARTMENT OF ENVIRONMENT

AND NATURAL RESOURCES, DEPARTMENT OF EDUCATION, CULTURE AND
SPORTS,1 DEPARTMENT OF HEALTH, DEPARTMENT OF AGRICULTURE, DEPARTMENT OF
PUBLIC WORKS AND HIGHWAYS, DEPARTMENT OF BUDGET AND MANAGEMENT,
PHILIPPINE COAST GUARD, PHILIPPINE NATIONAL POLICE MARITIME GROUP, and
DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, petitioners,
vs.
CONCERNED RESIDENTS OF MANILA BAY, represented and joined by DIVINA V. ILAS,
SABINIANO ALBARRACIN, MANUEL SANTOS, JR., DINAH DELA PEÑA, PAUL DENNIS
QUINTERO, MA. VICTORIA LLENOS, DONNA CALOZA, FATIMA QUITAIN, VENICE SEGARRA,
FRITZIE TANGKIA, SARAH JOELLE LINTAG, HANNIBAL AUGUSTUS BOBIS, FELIMON
SANTIAGUEL, and JAIME AGUSTIN R. OPOSA, respondents.

DECISION

VELASCO, JR., J.:

The need to address environmental pollution, as a cause of climate change, has of late gained the
attention of the international community. Media have finally trained their sights on the ill effects of
pollution, the destruction of forests and other critical habitats, oil spills, and the unabated improper
disposal of garbage. And rightly so, for the magnitude of environmental destruction is now on a scale
few ever foresaw and the wound no longer simply heals by itself.2 But amidst hard evidence and
clear signs of a climate crisis that need bold action, the voice of cynicism, naysayers, and
procrastinators can still be heard.

This case turns on government agencies and their officers who, by the nature of their respective
offices or by direct statutory command, are tasked to protect and preserve, at the first instance, our
internal waters, rivers, shores, and seas polluted by human activities. To most of these agencies and
their official complement, the pollution menace does not seem to carry the high national priority it
deserves, if their track records are to be the norm. Their cavalier attitude towards solving, if not
mitigating, the environmental pollution problem, is a sad commentary on bureaucratic efficiency and
commitment.

At the core of the case is the Manila Bay, a place with a proud historic past, once brimming with
marine life and, for so many decades in the past, a spot for different contact recreation activities, but
now a dirty and slowly dying expanse mainly because of the abject official indifference of people and
institutions that could have otherwise made a difference.

This case started when, on January 29, 1999, respondents Concerned Residents of Manila Bay filed
a complaint before the Regional Trial Court (RTC) in Imus, Cavite against several government
agencies, among them the petitioners, for the cleanup, rehabilitation, and protection of the Manila
Bay. Raffled to Branch 20 and docketed as Civil Case No. 1851-99 of the RTC, the complaint
alleged that the water quality of the Manila Bay had fallen way below the allowable standards set by
law, specifically Presidential Decree No. (PD) 1152 or the Philippine Environment Code. This
environmental aberration, the complaint stated, stemmed from:

x x x [The] reckless, wholesale, accumulated and ongoing acts of omission or commission [of
the defendants] resulting in the clear and present danger to public health and in the depletion
and contamination of the marine life of Manila Bay, [for which reason] ALL defendants must
be held jointly and/or solidarily liable and be collectively ordered to clean up Manila Bay and
to restore its water quality to class B waters fit for swimming, skin-diving, and other forms of
contact recreation.3

In their individual causes of action, respondents alleged that the continued neglect of petitioners in
abating the pollution of the Manila Bay constitutes a violation of, among others:
 (1) Respondents’ constitutional right to life, health, and a balanced ecology;

(2) The Environment Code (PD 1152);

(3) The Pollution Control Law (PD 984);

(4) The Water Code (PD 1067);

(5) The Sanitation Code (PD 856);

(6) The Illegal Disposal of Wastes Decree (PD 825);

(7) The Marine Pollution Law (PD 979);

(8) Executive Order No. 192;

(9) The Toxic and Hazardous Wastes Law (Republic Act No. 6969);

(10) Civil Code provisions on nuisance and human relations;

(11) The Trust Doctrine and the Principle of Guardianship; and

(12) International Law

Inter alia, respondents, as plaintiffs a quo, prayed that petitioners be ordered to clean the Manila Bay
and submit to the RTC a concerted concrete plan of action for the purpose.

The trial of the case started off with a hearing at the Manila Yacht Club followed by an ocular
inspection of the Manila Bay. Renato T. Cruz, the Chief of the Water Quality Management Section,
Environmental Management Bureau, Department of Environment and Natural Resources (DENR),
testifying for petitioners, stated that water samples collected from different beaches around the
Manila Bay showed that the amount of fecal coliform content ranged from 50,000 to 80,000 most
probable number (MPN)/ml when what DENR Administrative Order No. 34-90 prescribed as a safe
level for bathing and other forms of contact recreational activities, or the "SB" level, is one not
exceeding 200 MPN/100 ml.4

Rebecca de Vera, for Metropolitan Waterworks and Sewerage System (MWSS) and in behalf of
other petitioners, testified about the MWSS’ efforts to reduce pollution along the Manila Bay through
the Manila Second Sewerage Project. For its part, the Philippine Ports Authority (PPA) presented, as
part of its evidence, its memorandum circulars on the study being conducted on ship-generated
waste treatment and disposal, and its Linis Dagat (Clean the Ocean) project for the cleaning of
wastes accumulated or washed to shore.

The RTC Ordered Petitioners to Clean Up and Rehabilitate Manila Bay

On September 13, 2002, the RTC rendered a Decision5 in favor of respondents. The dispositive
portion reads:

WHEREFORE, finding merit in the complaint, judgment is hereby rendered ordering the
abovenamed defendant-government agencies, jointly and solidarily, to clean up and
rehabilitate Manila Bay and restore its waters to SB classification to make it fit for swimming,
skin-diving and other forms of contact recreation. To attain this, defendant-agencies, with
defendant DENR as the lead agency, are directed, within six (6) months from receipt hereof,
to act and perform their respective duties by devising a consolidated, coordinated and
concerted scheme of action for the rehabilitation and restoration of the bay.

In particular:

Defendant MWSS is directed to install, operate and maintain adequate [sewerage] treatment
facilities in strategic places under its jurisdiction and increase their capacities.

Defendant LWUA, to see to it that the water districts under its wings, provide, construct and
operate sewage facilities for the proper disposal of waste.

Defendant DENR, which is the lead agency in cleaning up Manila Bay, to install, operate and
maintain waste facilities to rid the bay of toxic and hazardous substances.

Defendant PPA, to prevent and also to treat the discharge not only of ship-generated wastes
but also of other solid and liquid wastes from docking vessels that contribute to the pollution
of the bay.

Defendant MMDA, to establish, operate and maintain an adequate and appropriate sanitary
landfill and/or adequate solid waste and liquid disposal as well as other alternative garbage
disposal system such as re-use or recycling of wastes.

Defendant DA, through the Bureau of Fisheries and Aquatic Resources, to revitalize the
marine life in Manila Bay and restock its waters with indigenous fish and other aquatic
animals.

Defendant DBM, to provide and set aside an adequate budget solely for the purpose of
cleaning up and rehabilitation of Manila Bay.

Defendant DPWH, to remove and demolish structures and other nuisances that obstruct the
free flow of waters to the bay. These nuisances discharge solid and liquid wastes which
eventually end up in Manila Bay. As the construction and engineering arm of the
government, DPWH is ordered to actively participate in removing debris, such as carcass of
sunken vessels, and other non-biodegradable garbage in the bay.

Defendant DOH, to closely supervise and monitor the operations of septic and sludge
companies and require them to have proper facilities for the treatment and disposal of fecal
sludge and sewage coming from septic tanks.

Defendant DECS, to inculcate in the minds and hearts of the people through education the
importance of preserving and protecting the environment.

Defendant Philippine Coast Guard and the PNP Maritime Group, to protect at all costs the
Manila Bay from all forms of illegal fishing.

No pronouncement as to damages and costs.

SO ORDERED.
The MWSS, Local Water Utilities Administration (LWUA), and PPA filed before the Court of Appeals
(CA) individual Notices of Appeal which were eventually consolidated and docketed as CA-G.R. CV
No. 76528.

On the other hand, the DENR, Department of Public Works and Highways (DPWH), Metropolitan
Manila Development Authority (MMDA), Philippine Coast Guard (PCG), Philippine National Police
(PNP) Maritime Group, and five other executive departments and agencies filed directly with this
Court a petition for review under Rule 45. The Court, in a Resolution of December 9, 2002, sent the
said petition to the CA for consolidation with the consolidated appeals of MWSS, LWUA, and PPA,
docketed as CA-G.R. SP No. 74944.

Petitioners, before the CA, were one in arguing in the main that the pertinent provisions of the
Environment Code (PD 1152) relate only to the cleaning of specific pollution incidents and do not
cover cleaning in general. And apart from raising concerns about the lack of funds appropriated for
cleaning purposes, petitioners also asserted that the cleaning of the Manila Bay is not a ministerial
act which can be compelled by mandamus.

The CA Sustained the RTC

By a Decision6 of September 28, 2005, the CA denied petitioners’ appeal and affirmed the Decision
of the RTC in toto, stressing that the trial court’s decision did not require petitioners to do tasks
outside of their usual basic functions under existing laws.7

Petitioners are now before this Court praying for the allowance of their Rule 45 petition on the
following ground and supporting arguments:

THE [CA] DECIDED A QUESTION OF SUBSTANCE NOT HERETOFORE PASSED UPON

BY THE HONORABLE COURT, I.E., IT AFFIRMED THE TRIAL COURT’S DECISION
DECLARING THAT SECTION 20 OF [PD] 1152 REQUIRES CONCERNED GOVERNMENT
AGENCIES TO REMOVE ALL POLLUTANTS SPILLED AND DISCHARGED IN THE
WATER SUCH AS FECAL COLIFORMS.

ARGUMENTS

[SECTIONS] 17 AND 20 OF [PD] 1152 RELATE ONLY TO THE CLEANING OF SPECIFIC

POLLUTION INCIDENTS AND [DO] NOT COVER CLEANING IN GENERAL

II

THE CLEANING OR REHABILITATION OF THE MANILA BAY IS NOT A MINISTERIAL

ACT OF PETITIONERS THAT CAN BE COMPELLED BY MANDAMUS.

The issues before us are two-fold. First, do Sections 17 and 20 of PD 1152 under the
headings, Upgrading of Water Quality and Clean-up Operations, envisage a cleanup in general or
are they limited only to the cleanup of specific pollution incidents? And second, can petitioners be
compelled by mandamus to clean up and rehabilitate the Manila Bay?

On August 12, 2008, the Court conducted and heard the parties on oral arguments.
 Our Ruling

We shall first dwell on the propriety of the issuance of mandamus under the premises.

The Cleaning or Rehabilitation of Manila Bay

Can be Compelled by Mandamus

Generally, the writ of mandamus lies to require the execution of a ministerial duty.8 A ministerial duty
is one that "requires neither the exercise of official discretion nor judgment."9 It connotes an act in
which nothing is left to the discretion of the person executing it. It is a "simple, definite duty arising
under conditions admitted or proved to exist and imposed by law."10 Mandamus is available to
compel action, when refused, on matters involving discretion, but not to direct the exercise of
judgment or discretion one way or the other.

Petitioners maintain that the MMDA’s duty to take measures and maintain adequate solid waste and
liquid disposal systems necessarily involves policy evaluation and the exercise of judgment on the
part of the agency concerned. They argue that the MMDA, in carrying out its mandate, has to make
decisions, including choosing where a landfill should be located by undertaking feasibility studies
and cost estimates, all of which entail the exercise of discretion.

Respondents, on the other hand, counter that the statutory command is clear and that petitioners’
duty to comply with and act according to the clear mandate of the law does not require the exercise
of discretion. According to respondents, petitioners, the MMDA in particular, are without discretion,
for example, to choose which bodies of water they are to clean up, or which discharge or spill they
are to contain. By the same token, respondents maintain that petitioners are bereft of discretion on
whether or not to alleviate the problem of solid and liquid waste disposal; in other words, it is the
MMDA’s ministerial duty to attend to such services.

We agree with respondents.

First off, we wish to state that petitioners’ obligation to perform their duties as defined by law, on one
hand, and how they are to carry out such duties, on the other, are two different concepts. While the
implementation of the MMDA’s mandated tasks may entail a decision-making process, the
enforcement of the law or the very act of doing what the law exacts to be done is ministerial in nature
and may be compelled by mandamus. We said so in Social Justice Society v. Atienza11 in which the
Court directed the City of Manila to enforce, as a matter of ministerial duty, its Ordinance No. 8027
directing the three big local oil players to cease and desist from operating their business in the so-
called "Pandacan Terminals" within six months from the effectivity of the ordinance. But to illustrate
with respect to the instant case, the MMDA’s duty to put up an adequate and appropriate sanitary
landfill and solid waste and liquid disposal as well as other alternative garbage disposal systems is
ministerial, its duty being a statutory imposition. The MMDA’s duty in this regard is spelled out in
Sec. 3(c) of Republic Act No. (RA) 7924 creating the MMDA. This section defines and delineates the
scope of the MMDA’s waste disposal services to include:

Solid waste disposal and management which include formulation and implementation of
policies, standards, programs and projects for proper and sanitary waste disposal. It shall
likewise include the establishment and operation of sanitary land fill and related
facilities and the implementation of other alternative programs intended to reduce, reuse
and recycle solid waste. (Emphasis added.)

The MMDA is duty-bound to comply with Sec. 41 of the Ecological Solid Waste Management Act
(RA 9003) which prescribes the minimum criteria for the establishment of sanitary landfills and Sec.
42 which provides the minimum operating requirements that each site operator shall maintain in the
operation of a sanitary landfill. Complementing Sec. 41 are Secs. 36 and 37 of RA 9003,12 enjoining
the MMDA and local government units, among others, after the effectivity of the law on February 15,
2001, from using and operating open dumps for solid waste and disallowing, five years after such
effectivity, the use of controlled dumps.

The MMDA’s duty in the area of solid waste disposal, as may be noted, is set forth not only in the
Environment Code (PD 1152) and RA 9003, but in its charter as well. This duty of putting up a
proper waste disposal system cannot be characterized as discretionary, for, as earlier stated,
discretion presupposes the power or right given by law to public functionaries to act officially
according to their judgment or conscience.13 A discretionary duty is one that "allows a person to
exercise judgment and choose to perform or not to perform."14 Any suggestion that the MMDA has
the option whether or not to perform its solid waste disposal-related duties ought to be dismissed for
want of legal basis.

A perusal of other petitioners’ respective charters or like enabling statutes and pertinent laws would
yield this conclusion: these government agencies are enjoined, as a matter of statutory obligation, to
perform certain functions relating directly or indirectly to the cleanup, rehabilitation, protection, and
preservation of the Manila Bay. They are precluded from choosing not to perform these duties.
Consider:

(1) The DENR, under Executive Order No. (EO) 192,15 is the primary agency responsible for the
conservation, management, development, and proper use of the country’s environment and natural
resources. Sec. 19 of the Philippine Clean Water Act of 2004 (RA 9275), on the other hand,
designates the DENR as the primary government agency responsible for its enforcement and
implementation, more particularly over all aspects of water quality management. On water pollution,
the DENR, under the Act’s Sec. 19(k), exercises jurisdiction "over all aspects of water pollution,
determine[s] its location, magnitude, extent, severity, causes and effects and other pertinent
information on pollution, and [takes] measures, using available methods and technologies, to
prevent and abate such pollution."

The DENR, under RA 9275, is also tasked to prepare a National Water Quality Status Report, an
Integrated Water Quality Management Framework, and a 10-year Water Quality Management Area
Action Plan which is nationwide in scope covering the Manila Bay and adjoining areas. Sec. 19 of
RA 9275 provides:

Sec. 19 Lead Agency.––The [DENR] shall be the primary government agency responsible
for the implementation and enforcement of this Act x x x unless otherwise provided herein.
As such, it shall have the following functions, powers and responsibilities:

a) Prepare a National Water Quality Status report within twenty-four (24) months from the
effectivity of this Act: Provided, That the Department shall thereafter review or revise and
publish annually, or as the need arises, said report;

b) Prepare an Integrated Water Quality Management Framework within twelve (12) months
following the completion of the status report;

c) Prepare a ten (10) year Water Quality Management Area Action Plan within 12 months
following the completion of the framework for each designated water management area.
Such action plan shall be reviewed by the water quality management area governing board
every five (5) years or as need arises.
The DENR has prepared the status report for the period 2001 to 2005 and is in the process of
completing the preparation of the Integrated Water Quality Management Framework.16 Within twelve
(12) months thereafter, it has to submit a final Water Quality Management Area Action Plan.17 Again,
like the MMDA, the DENR should be made to accomplish the tasks assigned to it under RA 9275.

Parenthetically, during the oral arguments, the DENR Secretary manifested that the DENR, with the
assistance of and in partnership with various government agencies and non-government
organizations, has completed, as of December 2005, the final draft of a comprehensive action plan
with estimated budget and time frame, denominated as Operation Plan for the Manila Bay Coastal
Strategy, for the rehabilitation, restoration, and rehabilitation of the Manila Bay.

The completion of the said action plan and even the implementation of some of its phases should
more than ever prod the concerned agencies to fast track what are assigned them under existing
laws.

(2) The MWSS, under Sec. 3 of RA 6234,18 is vested with jurisdiction, supervision, and control over
all waterworks and sewerage systems in the territory comprising what is now the cities of Metro
Manila and several towns of the provinces of Rizal and Cavite, and charged with the duty:

(g) To construct, maintain, and operate such sanitary sewerages as may be necessary for
the proper sanitation and other uses of the cities and towns comprising the System; x x x

(3) The LWUA under PD 198 has the power of supervision and control over local water districts. It
can prescribe the minimum standards and regulations for the operations of these districts and shall
monitor and evaluate local water standards. The LWUA can direct these districts to construct,
operate, and furnish facilities and services for the collection, treatment, and disposal of sewerage,
waste, and storm water. Additionally, under RA 9275, the LWUA, as attached agency of the DPWH,
is tasked with providing sewerage and sanitation facilities, inclusive of the setting up of efficient and
safe collection, treatment, and sewage disposal system in the different parts of the country.19 In
relation to the instant petition, the LWUA is mandated to provide sewerage and sanitation facilities in
Laguna, Cavite, Bulacan, Pampanga, and Bataan to prevent pollution in the Manila Bay.

(4) The Department of Agriculture (DA), pursuant to the Administrative Code of 1987 (EO 292),20 is
designated as the agency tasked to promulgate and enforce all laws and issuances respecting the
conservation and proper utilization of agricultural and fishery resources. Furthermore, the DA, under
the Philippine Fisheries Code of 1998 (RA 8550), is, in coordination with local government units
(LGUs) and other concerned sectors, in charge of establishing a monitoring, control, and
surveillance system to ensure that fisheries and aquatic resources in Philippine waters are
judiciously utilized and managed on a sustainable basis.21 Likewise under RA 9275, the DA is
charged with coordinating with the PCG and DENR for the enforcement of water quality standards in
marine waters.22 More specifically, its Bureau of Fisheries and Aquatic Resources (BFAR) under
Sec. 22(c) of RA 9275 shall primarily be responsible for the prevention and control of water pollution
for the development, management, and conservation of the fisheries and aquatic resources.

(5) The DPWH, as the engineering and construction arm of the national government, is tasked under
EO 29223 to provide integrated planning, design, and construction services for, among others, flood
control and water resource development systems in accordance with national development
objectives and approved government plans and specifications.

In Metro Manila, however, the MMDA is authorized by Sec. 3(d), RA 7924 to perform metro-wide
services relating to "flood control and sewerage management which include the formulation and
implementation of policies, standards, programs and projects for an integrated flood control,
drainage and sewerage system."

On July 9, 2002, a Memorandum of Agreement was entered into between the DPWH and MMDA,
whereby MMDA was made the agency primarily responsible for flood control in Metro Manila. For
the rest of the country, DPWH shall remain as the implementing agency for flood control services.
The mandate of the MMDA and DPWH on flood control and drainage services shall include the
removal of structures, constructions, and encroachments built along rivers, waterways, and esteros
(drainages) in violation of RA 7279, PD 1067, and other pertinent laws.

(6) The PCG, in accordance with Sec. 5(p) of PD 601, or the Revised Coast Guard Law of 1974, and
Sec. 6 of PD 979,24 or the Marine Pollution Decree of 1976, shall have the primary responsibility of
enforcing laws, rules, and regulations governing marine pollution within the territorial waters of the
Philippines. It shall promulgate its own rules and regulations in accordance with the national rules
and policies set by the National Pollution Control Commission upon consultation with the latter for
the effective implementation and enforcement of PD 979. It shall, under Sec. 4 of the law, apprehend
violators who:

a. discharge, dump x x x harmful substances from or out of any ship, vessel, barge, or any
other floating craft, or other man-made structures at sea, by any method, means or manner,
into or upon the territorial and inland navigable waters of the Philippines;

b. throw, discharge or deposit, dump, or cause, suffer or procure to be thrown, discharged, or

deposited either from or out of any ship, barge, or other floating craft or vessel of any kind, or
from the shore, wharf, manufacturing establishment, or mill of any kind, any refuse matter of
any kind or description whatever other than that flowing from streets and sewers and passing
therefrom in a liquid state into tributary of any navigable water from which the same shall
float or be washed into such navigable water; and

c. deposit x x x material of any kind in any place on the bank of any navigable water or on
the bank of any tributary of any navigable water, where the same shall be liable to be
washed into such navigable water, either by ordinary or high tides, or by storms or floods, or
otherwise, whereby navigation shall or may be impeded or obstructed or increase the level of
pollution of such water.

(7) When RA 6975 or the Department of the Interior and Local Government (DILG) Act of 1990 was
signed into law on December 13, 1990, the PNP Maritime Group was tasked to "perform all police
functions over the Philippine territorial waters and rivers." Under Sec. 86, RA 6975, the police
functions of the PCG shall be taken over by the PNP when the latter acquires the capability to
perform such functions. Since the PNP Maritime Group has not yet attained the capability to assume
and perform the police functions of PCG over marine pollution, the PCG and PNP Maritime Group
shall coordinate with regard to the enforcement of laws, rules, and regulations governing marine
pollution within the territorial waters of the Philippines. This was made clear in Sec. 124, RA 8550 or
the Philippine Fisheries Code of 1998, in which both the PCG and PNP Maritime Group were
authorized to enforce said law and other fishery laws, rules, and regulations.25

(8) In accordance with Sec. 2 of EO 513, the PPA is mandated "to establish, develop, regulate,
manage and operate a rationalized national port system in support of trade and national
development."26 Moreover, Sec. 6-c of EO 513 states that the PPA has police authority within the
ports administered by it as may be necessary to carry out its powers and functions and attain its
purposes and objectives, without prejudice to the exercise of the functions of the Bureau of Customs
and other law enforcement bodies within the area. Such police authority shall include the following:
 xxxx

b) To regulate the entry to, exit from, and movement within the port, of persons and vehicles,
as well as movement within the port of watercraft.27

Lastly, as a member of the International Marine Organization and a signatory to the International
Convention for the Prevention of Pollution from Ships, as amended by MARPOL 73/78,28 the
Philippines, through the PPA, must ensure the provision of adequate reception facilities at ports and
terminals for the reception of sewage from the ships docking in Philippine ports. Thus, the PPA is
tasked to adopt such measures as are necessary to prevent the discharge and dumping of solid and
liquid wastes and other ship-generated wastes into the Manila Bay waters from vessels docked at
ports and apprehend the violators. When the vessels are not docked at ports but within Philippine
territorial waters, it is the PCG and PNP Maritime Group that have jurisdiction over said vessels.

(9) The MMDA, as earlier indicated, is duty-bound to put up and maintain adequate sanitary landfill
and solid waste and liquid disposal system as well as other alternative garbage disposal systems. It
is primarily responsible for the implementation and enforcement of the provisions of RA 9003, which
would necessary include its penal provisions, within its area of jurisdiction.29

Among the prohibited acts under Sec. 48, Chapter VI of RA 9003 that are frequently violated are
dumping of waste matters in public places, such as roads, canals or esteros, open burning of solid
waste, squatting in open dumps and landfills, open dumping, burying of biodegradable or non-
biodegradable materials in flood-prone areas, establishment or operation of open dumps as enjoined
in RA 9003, and operation of waste management facilities without an environmental compliance
certificate.

Under Sec. 28 of the Urban Development and Housing Act of 1992 (RA 7279), eviction or demolition
may be allowed "when persons or entities occupy danger areas such as esteros, railroad tracks,
garbage dumps, riverbanks, shorelines, waterways, and other public places such as sidewalks,
roads, parks and playgrounds." The MMDA, as lead agency, in coordination with the DPWH, LGUs,
and concerned agencies, can dismantle and remove all structures, constructions, and other
encroachments built in breach of RA 7279 and other pertinent laws along the rivers, waterways,
and esteros in Metro Manila. With respect to rivers, waterways, and esteros in Bulacan, Bataan,
Pampanga, Cavite, and Laguna that discharge wastewater directly or eventually into the Manila Bay,
the DILG shall direct the concerned LGUs to implement the demolition and removal of such
structures, constructions, and other encroachments built in violation of RA 7279 and other applicable
laws in coordination with the DPWH and concerned agencies.

(10) The Department of Health (DOH), under Article 76 of PD 1067 (the Water Code), is tasked to
promulgate rules and regulations for the establishment of waste disposal areas that affect the source
of a water supply or a reservoir for domestic or municipal use. And under Sec. 8 of RA 9275, the
DOH, in coordination with the DENR, DPWH, and other concerned agencies, shall formulate
guidelines and standards for the collection, treatment, and disposal of sewage and the establishment
and operation of a centralized sewage treatment system. In areas not considered as highly
urbanized cities, septage or a mix sewerage-septage management system shall be employed.

In accordance with Sec. 7230 of PD 856, the Code of Sanitation of the Philippines, and Sec. 5.1.131 of
Chapter XVII of its implementing rules, the DOH is also ordered to ensure the regulation and
monitoring of the proper disposal of wastes by private sludge companies through the strict
enforcement of the requirement to obtain an environmental sanitation clearance of sludge collection
treatment and disposal before these companies are issued their environmental sanitation permit.
(11) The Department of Education (DepEd), under the Philippine Environment Code (PD 1152), is
mandated to integrate subjects on environmental education in its school curricula at all
levels.32 Under Sec. 118 of RA 8550, the DepEd, in collaboration with the DA, Commission on
Higher Education, and Philippine Information Agency, shall launch and pursue a nationwide
educational campaign to promote the development, management, conservation, and proper use of
the environment. Under the Ecological Solid Waste Management Act (RA 9003), on the other hand,
it is directed to strengthen the integration of environmental concerns in school curricula at all levels,
with an emphasis on waste management principles.33

(12) The Department of Budget and Management (DBM) is tasked under Sec. 2, Title XVII of the
Administrative Code of 1987 to ensure the efficient and sound utilization of government funds and
revenues so as to effectively achieve the country’s development objectives.34

One of the country’s development objectives is enshrined in RA 9275 or the Philippine Clean Water
Act of 2004. This law stresses that the State shall pursue a policy of economic growth in a manner
consistent with the protection, preservation, and revival of the quality of our fresh, brackish, and
marine waters. It also provides that it is the policy of the government, among others, to streamline
processes and procedures in the prevention, control, and abatement of pollution mechanisms for the
protection of water resources; to promote environmental strategies and use of appropriate economic
instruments and of control mechanisms for the protection of water resources; to formulate a holistic
national program of water quality management that recognizes that issues related to this
management cannot be separated from concerns about water sources and ecological protection,
water supply, public health, and quality of life; and to provide a comprehensive management
program for water pollution focusing on pollution prevention.

Thus, the DBM shall then endeavor to provide an adequate budget to attain the noble objectives of
RA 9275 in line with the country’s development objectives.

All told, the aforementioned enabling laws and issuances are in themselves clear, categorical, and
complete as to what are the obligations and mandate of each agency/petitioner under the law. We
need not belabor the issue that their tasks include the cleanup of the Manila Bay.

Now, as to the crux of the petition. Do Secs. 17 and 20 of the Environment Code encompass the
cleanup of water pollution in general, not just specific pollution incidents?

Secs. 17 and 20 of the Environment Code

Include Cleaning in General

The disputed sections are quoted as follows:

Section 17. Upgrading of Water Quality.––Where the quality of water has deteriorated to a
degree where its state will adversely affect its best usage, the government agencies
concerned shall take such measures as may be necessary to upgrade the quality of such
water to meet the prescribed water quality standards.

Section 20. Clean-up Operations.––It shall be the responsibility of the polluter to contain,
remove and clean-up water pollution incidents at his own expense. In case of his failure to do
so, the government agencies concerned shall undertake containment, removal and clean-up
operations and expenses incurred in said operations shall be charged against the persons
and/or entities responsible for such pollution.
When the Clean Water Act (RA 9275) took effect, its Sec. 16 on the subject, o, amended the
counterpart provision (Sec. 20) of the Environment Code (PD 1152). Sec. 17 of PD 1152 continues,
however, to be operational.

The amendatory Sec. 16 of RA 9275 reads:

SEC. 16. Cleanup Operations.––Notwithstanding the provisions of Sections 15 and 26

hereof, any person who causes pollution in or pollutes water bodies in excess of the
applicable and prevailing standards shall be responsible to contain, remove and clean up
any pollution incident at his own expense to the extent that the same water bodies have
been rendered unfit for utilization and beneficial use: Provided, That in the event emergency
cleanup operations are necessary and the polluter fails to immediately undertake the same,
the [DENR] in coordination with other government agencies concerned, shall undertake
containment, removal and cleanup operations. Expenses incurred in said operations shall be
reimbursed by the persons found to have caused such pollution under proper administrative
determination x x x. Reimbursements of the cost incurred shall be made to the Water Quality
Management Fund or to such other funds where said disbursements were sourced.

As may be noted, the amendment to Sec. 20 of the Environment Code is more apparent than real
since the amendment, insofar as it is relevant to this case, merely consists in the designation of the
DENR as lead agency in the cleanup operations.

Petitioners contend at every turn that Secs. 17 and 20 of the Environment Code concern themselves
only with the matter of cleaning up in specific pollution incidents, as opposed to cleanup in general.
They aver that the twin provisions would have to be read alongside the succeeding Sec. 62(g) and
(h), which defines the terms "cleanup operations" and "accidental spills," as follows:

g. Clean-up Operations [refer] to activities conducted in removing the pollutants discharged

or spilled in water to restore it to pre-spill condition.

h. Accidental Spills [refer] to spills of oil or other hazardous substances in water that result
from accidents such as collisions and groundings.

Petitioners proffer the argument that Secs. 17 and 20 of PD 1152 merely direct the government
agencies concerned to undertake containment, removal, and cleaning operations of a specific
polluted portion or portions of the body of water concerned. They maintain that the application of
said Sec. 20 is limited only to "water pollution incidents," which are situations that presuppose the
occurrence of specific, isolated pollution events requiring the corresponding containment, removal,
and cleaning operations. Pushing the point further, they argue that the aforequoted Sec. 62(g)
requires "cleanup operations" to restore the body of water to pre-spill condition, which means that
there must have been a specific incident of either intentional or accidental spillage of oil or other
hazardous substances, as mentioned in Sec. 62(h).

As a counterpoint, respondents argue that petitioners erroneously read Sec. 62(g) as delimiting the
application of Sec. 20 to the containment, removal, and cleanup operations for accidental spills only.
Contrary to petitioners’ posture, respondents assert that Sec. 62(g), in fact, even expanded the
coverage of Sec. 20. Respondents explain that without its Sec. 62(g), PD 1152 may have indeed
covered only pollution accumulating from the day-to-day operations of businesses around the Manila
Bay and other sources of pollution that slowly accumulated in the bay. Respondents, however,
emphasize that Sec. 62(g), far from being a delimiting provision, in fact even enlarged the
operational scope of Sec. 20, by including accidental spills as among the water pollution incidents
contemplated in Sec. 17 in relation to Sec. 20 of PD 1152.
To respondents, petitioners’ parochial view on environmental issues, coupled with their narrow
reading of their respective mandated roles, has contributed to the worsening water quality of the
Manila Bay. Assuming, respondents assert, that petitioners are correct in saying that the cleanup
coverage of Sec. 20 of PD 1152 is constricted by the definition of the phrase "cleanup operations"
embodied in Sec. 62(g), Sec. 17 is not hobbled by such limiting definition. As pointed out, the
phrases "cleanup operations" and "accidental spills" do not appear in said Sec. 17, not even in the
chapter where said section is found.

Respondents are correct. For one thing, said Sec. 17 does not in any way state that the government
agencies concerned ought to confine themselves to the containment, removal, and cleaning
operations when a specific pollution incident occurs. On the contrary, Sec. 17 requires them to act
even in the absence of a specific pollution incident, as long as water quality "has deteriorated to a
degree where its state will adversely affect its best usage." This section, to stress, commands
concerned government agencies, when appropriate, "to take such measures as may be necessary
to meet the prescribed water quality standards." In fine, the underlying duty to upgrade the quality of
water is not conditional on the occurrence of any pollution incident.

For another, a perusal of Sec. 20 of the Environment Code, as couched, indicates that it is properly
applicable to a specific situation in which the pollution is caused by polluters who fail to clean up the
mess they left behind. In such instance, the concerned government agencies shall undertake the
cleanup work for the polluters’ account. Petitioners’ assertion, that they have to perform cleanup
operations in the Manila Bay only when there is a water pollution incident and the erring polluters do
not undertake the containment, removal, and cleanup operations, is quite off mark. As earlier
discussed, the complementary Sec. 17 of the Environment Code comes into play and the specific
duties of the agencies to clean up come in even if there are no pollution incidents staring at them.
Petitioners, thus, cannot plausibly invoke and hide behind Sec. 20 of PD 1152 or Sec. 16 of RA 9275
on the pretext that their cleanup mandate depends on the happening of a specific pollution incident.
In this regard, what the CA said with respect to the impasse over Secs. 17 and 20 of PD 1152 is at
once valid as it is practical. The appellate court wrote: "PD 1152 aims to introduce a comprehensive
program of environmental protection and management. This is better served by making Secs. 17 &
20 of general application rather than limiting them to specific pollution incidents."35

Granting arguendo that petitioners’ position thus described vis-à-vis the implementation of Sec. 20 is
correct, they seem to have overlooked the fact that the pollution of the Manila Bay is of such
magnitude and scope that it is well-nigh impossible to draw the line between a specific and a general
pollution incident. And such impossibility extends to pinpointing with reasonable certainty who the
polluters are. We note that Sec. 20 of PD 1152 mentions "water pollution incidents" which may be
caused by polluters in the waters of the Manila Bay itself or by polluters in adjoining lands and in
water bodies or waterways that empty into the bay. Sec. 16 of RA 9275, on the other hand,
specifically adverts to "any person who causes pollution in or pollutes water bodies," which may refer
to an individual or an establishment that pollutes the land mass near the Manila Bay or the
waterways, such that the contaminants eventually end up in the bay. In this situation, the water
pollution incidents are so numerous and involve nameless and faceless polluters that they can
validly be categorized as beyond the specific pollution incident level.

Not to be ignored of course is the reality that the government agencies concerned are so
undermanned that it would be almost impossible to apprehend the numerous polluters of the Manila
Bay. It may perhaps not be amiss to say that the apprehension, if any, of the Manila Bay polluters
has been few and far between. Hence, practically nobody has been required to contain, remove, or
clean up a given water pollution incident. In this kind of setting, it behooves the Government to step
in and undertake cleanup operations. Thus, Sec. 16 of RA 9275, previously Sec. 20 of PD 1152,
covers for all intents and purposes a general cleanup situation.
The cleanup and/or restoration of the Manila Bay is only an aspect and the initial stage of the long-
term solution. The preservation of the water quality of the bay after the rehabilitation process is as
important as the cleaning phase. It is imperative then that the wastes and contaminants found in the
rivers, inland bays, and other bodies of water be stopped from reaching the Manila Bay. Otherwise,
any cleanup effort would just be a futile, cosmetic exercise, for, in no time at all, the Manila Bay
water quality would again deteriorate below the ideal minimum standards set by PD 1152, RA 9275,
and other relevant laws. It thus behooves the Court to put the heads of the petitioner-department-
agencies and the bureaus and offices under them on continuing notice about, and to enjoin them to
perform, their mandates and duties towards cleaning up the Manila Bay and preserving the quality of
its water to the ideal level. Under what other judicial discipline describes as "continuing
mandamus,"36 the Court may, under extraordinary circumstances, issue directives with the end in
view of ensuring that its decision would not be set to naught by administrative inaction or
indifference. In India, the doctrine of continuing mandamus was used to enforce directives of the
court to clean up the length of the Ganges River from industrial and municipal pollution.37

The Court can take judicial notice of the presence of shanties and other unauthorized structures
which do not have septic tanks along the Pasig-Marikina-San Juan Rivers, the National Capital
Region (NCR) (Parañaque-Zapote, Las Piñas) Rivers, the Navotas-Malabon-Tullahan-Tenejeros
Rivers, the Meycuayan-Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan) River, the Imus
(Cavite) River, the Laguna De Bay, and other minor rivers and connecting waterways, river banks,
and esteros which discharge their waters, with all the accompanying filth, dirt, and garbage, into the
major rivers and eventually the Manila Bay. If there is one factor responsible for the pollution of the
major river systems and the Manila Bay, these unauthorized structures would be on top of the list.
And if the issue of illegal or unauthorized structures is not seriously addressed with sustained
resolve, then practically all efforts to cleanse these important bodies of water would be for naught.
The DENR Secretary said as much.38

Giving urgent dimension to the necessity of removing these illegal structures is Art. 51 of PD 1067 or
the Water Code,39 which prohibits the building of structures within a given length along banks of
rivers and other waterways. Art. 51 reads:

The banks of rivers and streams and the shores of the seas and lakes throughout their
entire length and within a zone of three (3) meters in urban areas, twenty (20) meters in
agricultural areas and forty (40) meters in forest areas, along their margins, are subject to
the easement of public use in the interest of recreation, navigation, floatage, fishing
and salvage. No person shall be allowed to stay in this zonelonger than what is
necessary for recreation, navigation, floatage, fishing or salvage or to build structures of
any kind. (Emphasis added.)

Judicial notice may likewise be taken of factories and other industrial establishments standing along
or near the banks of the Pasig River, other major rivers, and connecting waterways. But while they
may not be treated as unauthorized constructions, some of these establishments undoubtedly
contribute to the pollution of the Pasig River and waterways. The DILG and the concerned LGUs,
have, accordingly, the duty to see to it that non-complying industrial establishments set up, within a
reasonable period, the necessary waste water treatment facilities and infrastructure to prevent their
industrial discharge, including their sewage waters, from flowing into the Pasig River, other major
rivers, and connecting waterways. After such period, non-complying establishments shall be shut
down or asked to transfer their operations.

At this juncture, and if only to dramatize the urgency of the need for petitioners-agencies to comply
with their statutory tasks, we cite the Asian Development Bank-commissioned study on the garbage
problem in Metro Manila, the results of which are embodied in the The Garbage Book. As there
reported, the garbage crisis in the metropolitan area is as alarming as it is shocking. Some highlights
of the report:

1. As early as 2003, three land-filled dumpsites in Metro Manila - the Payatas, Catmon and
Rodriquez dumpsites - generate an alarming quantity of lead and leachate or liquid run-off.
Leachate are toxic liquids that flow along the surface and seep into the earth and poison the
surface and groundwater that are used for drinking, aquatic life, and the environment.

2. The high level of fecal coliform confirms the presence of a large amount of human waste
in the dump sites and surrounding areas, which is presumably generated by households that
lack alternatives to sanitation. To say that Manila Bay needs rehabilitation is an
understatement.

3. Most of the deadly leachate, lead and other dangerous contaminants and possibly strains
of pathogens seeps untreated into ground water and runs into the Marikina and Pasig River
systems and Manila Bay.40

Given the above perspective, sufficient sanitary landfills should now more than ever be established
as prescribed by the Ecological Solid Waste Management Act (RA 9003). Particular note should be
taken of the blatant violations by some LGUs and possibly the MMDA of Sec. 37, reproduced below:

Sec. 37. Prohibition against the Use of Open Dumps for Solid Waste.––No open dumps shall
be established and operated, nor any practice or disposal of solid waste by any person,
including LGUs which [constitute] the use of open dumps for solid waste, be allowed after the
effectivity of this Act: Provided, further that no controlled dumps shall be allowed (5)
years following the effectivity of this Act. (Emphasis added.)

RA 9003 took effect on February 15, 2001 and the adverted grace period of five (5) years which
ended on February 21, 2006 has come and gone, but no single sanitary landfill which strictly
complies with the prescribed standards under RA 9003 has yet been set up.

In addition, there are rampant and repeated violations of Sec. 48 of RA 9003, like littering, dumping
of waste matters in roads, canals, esteros, and other public places, operation of open dumps, open
burning of solid waste, and the like. Some sludge companies which do not have proper disposal
facilities simply discharge sludge into the Metro Manila sewerage system that ends up in the Manila
Bay. Equally unabated are violations of Sec. 27 of RA 9275, which enjoins the pollution of water
bodies, groundwater pollution, disposal of infectious wastes from vessels, and unauthorized
transport or dumping into sea waters of sewage or solid waste and of Secs. 4 and 102 of RA 8550
which proscribes the introduction by human or machine of substances to the aquatic environment
including "dumping/disposal of waste and other marine litters, discharge of petroleum or residual
products of petroleum of carbonaceous materials/substances [and other] radioactive, noxious or
harmful liquid, gaseous or solid substances, from any water, land or air transport or other human-
made structure."

In the light of the ongoing environmental degradation, the Court wishes to emphasize the extreme
necessity for all concerned executive departments and agencies to immediately act and discharge
their respective official duties and obligations. Indeed, time is of the essence; hence, there is a need
to set timetables for the performance and completion of the tasks, some of them as defined for them
by law and the nature of their respective offices and mandates.

The importance of the Manila Bay as a sea resource, playground, and as a historical landmark
cannot be over-emphasized. It is not yet too late in the day to restore the Manila Bay to its former
splendor and bring back the plants and sea life that once thrived in its blue waters. But the tasks
ahead, daunting as they may be, could only be accomplished if those mandated, with the help and
cooperation of all civic-minded individuals, would put their minds to these tasks and take
responsibility. This means that the State, through petitioners, has to take the lead in the preservation
and protection of the Manila Bay.

The era of delays, procrastination, and ad hoc measures is over. Petitioners must transcend their
limitations, real or imaginary, and buckle down to work before the problem at hand becomes
unmanageable. Thus, we must reiterate that different government agencies and instrumentalities
cannot shirk from their mandates; they must perform their basic functions in cleaning up and
rehabilitating the Manila Bay. We are disturbed by petitioners’ hiding behind two untenable claims:
(1) that there ought to be a specific pollution incident before they are required to act; and (2) that the
cleanup of the bay is a discretionary duty.

RA 9003 is a sweeping piece of legislation enacted to radically transform and improve waste
management. It implements Sec. 16, Art. II of the 1987 Constitution, which explicitly provides that
the State shall protect and advance the right of the people to a balanced and healthful ecology in
accord with the rhythm and harmony of nature.

So it was that in Oposa v. Factoran, Jr. the Court stated that the right to a balanced and healthful
ecology need not even be written in the Constitution for it is assumed, like other civil and political
rights guaranteed in the Bill of Rights, to exist from the inception of mankind and it is an issue of
transcendental importance with intergenerational implications.41 Even assuming the absence of a
categorical legal provision specifically prodding petitioners to clean up the bay, they and the men
and women representing them cannot escape their obligation to future generations of Filipinos to
keep the waters of the Manila Bay clean and clear as humanly as possible. Anything less would be a
betrayal of the trust reposed in them.

WHEREFORE, the petition is DENIED. The September 28, 2005 Decision of the CA in CA-G.R. CV
No. 76528 and SP No. 74944 and the September 13, 2002 Decision of the RTC in Civil Case No.
1851-99 are AFFIRMED but with MODIFICATIONS in view of subsequent developments or
supervening events in the case. The fallo of the RTC Decision shall now read:

WHEREFORE, judgment is hereby rendered ordering the abovenamed defendant-

government agencies to clean up, rehabilitate, and preserve Manila Bay, and restore and
maintain its waters to SB level (Class B sea waters per Water Classification Tables under
DENR Administrative Order No. 34 [1990]) to make them fit for swimming, skin-diving, and
other forms of contact recreation.

In particular:

(1) Pursuant to Sec. 4 of EO 192, assigning the DENR as the primary agency responsible for the
conservation, management, development, and proper use of the country’s environment and natural
resources, and Sec. 19 of RA 9275, designating the DENR as the primary government agency
responsible for its enforcement and implementation, the DENR is directed to fully implement
its Operational Plan for the Manila Bay Coastal Strategy for the rehabilitation, restoration, and
conservation of the Manila Bay at the earliest possible time. It is ordered to call regular coordination
meetings with concerned government departments and agencies to ensure the successful
implementation of the aforesaid plan of action in accordance with its indicated completion schedules.

(2) Pursuant to Title XII (Local Government) of the Administrative Code of 1987 and Sec. 25 of the
Local Government Code of 1991,42 the DILG, in exercising the President’s power of general
supervision and its duty to promulgate guidelines in establishing waste management programs
under Sec. 43 of the Philippine Environment Code (PD 1152), shall direct all LGUs in Metro Manila,
Rizal, Laguna, Cavite, Bulacan, Pampanga, and Bataan to inspect all factories, commercial
establishments, and private homes along the banks of the major river systems in their respective
areas of jurisdiction, such as but not limited to the Pasig-Marikina-San Juan Rivers, the NCR
(Parañaque-Zapote, Las Piñas) Rivers, the Navotas-Malabon-Tullahan-Tenejeros Rivers, the
Meycauayan-Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan) River, the Imus (Cavite) River,
the Laguna De Bay, and other minor rivers and waterways that eventually discharge water into the
Manila Bay; and the lands abutting the bay, to determine whether they have wastewater treatment
facilities or hygienic septic tanks as prescribed by existing laws, ordinances, and rules and
regulations. If none be found, these LGUs shall be ordered to require non-complying establishments
and homes to set up said facilities or septic tanks within a reasonable time to prevent industrial
wastes, sewage water, and human wastes from flowing into these rivers, waterways, esteros, and
the Manila Bay, under pain of closure or imposition of fines and other sanctions.

(3) As mandated by Sec. 8 of RA 9275,43 the MWSS is directed to provide, install, operate, and
maintain the necessary adequate waste water treatment facilities in Metro Manila, Rizal, and Cavite
where needed at the earliest possible time.

(4) Pursuant to RA 9275,44 the LWUA, through the local water districts and in coordination with the
DENR, is ordered to provide, install, operate, and maintain sewerage and sanitation facilities and the
efficient and safe collection, treatment, and disposal of sewage in the provinces of Laguna, Cavite,
Bulacan, Pampanga, and Bataan where needed at the earliest possible time.

(5) Pursuant to Sec. 65 of RA 8550,45 the DA, through the BFAR, is ordered to improve and restore
the marine life of the Manila Bay. It is also directed to assist the LGUs in Metro Manila, Rizal, Cavite,
Laguna, Bulacan, Pampanga, and Bataan in developing, using recognized methods, the fisheries
and aquatic resources in the Manila Bay.

(6) The PCG, pursuant to Secs. 4 and 6 of PD 979, and the PNP Maritime Group, in accordance
with Sec. 124 of RA 8550, in coordination with each other, shall apprehend violators of PD 979, RA
8550, and other existing laws and regulations designed to prevent marine pollution in the Manila
Bay.

(7) Pursuant to Secs. 2 and 6-c of EO 51346 and the International Convention for the Prevention of
Pollution from Ships, the PPA is ordered to immediately adopt such measures to prevent the
discharge and dumping of solid and liquid wastes and other ship-generated wastes into the Manila
Bay waters from vessels docked at ports and apprehend the violators.

(8) The MMDA, as the lead agency and implementor of programs and projects for flood control
projects and drainage services in Metro Manila, in coordination with the DPWH, DILG, affected
LGUs, PNP Maritime Group, Housing and Urban Development Coordinating Council (HUDCC), and
other agencies, shall dismantle and remove all structures, constructions, and other encroachments
established or built in violation of RA 7279, and other applicable laws along the Pasig-Marikina-San
Juan Rivers, the NCR (Parañaque-Zapote, Las Piñas) Rivers, the Navotas-Malabon-Tullahan-
Tenejeros Rivers, and connecting waterways and esteros in Metro Manila. The DPWH, as the
principal implementor of programs and projects for flood control services in the rest of the country
more particularly in Bulacan, Bataan, Pampanga, Cavite, and Laguna, in coordination with the DILG,
affected LGUs, PNP Maritime Group, HUDCC, and other concerned government agencies, shall
remove and demolish all structures, constructions, and other encroachments built in breach of RA
7279 and other applicable laws along the Meycauayan-Marilao-Obando (Bulacan) Rivers, the
Talisay (Bataan) River, the Imus (Cavite) River, the Laguna De Bay, and other rivers, connecting
waterways, and esteros that discharge wastewater into the Manila Bay.

In addition, the MMDA is ordered to establish, operate, and maintain a sanitary landfill, as prescribed
by RA 9003, within a period of one (1) year from finality of this Decision. On matters within its
territorial jurisdiction and in connection with the discharge of its duties on the maintenance of
sanitary landfills and like undertakings, it is also ordered to cause the apprehension and filing of the
appropriate criminal cases against violators of the respective penal provisions of RA 9003,47 Sec. 27
of RA 9275 (the Clean Water Act), and other existing laws on pollution.

(9) The DOH shall, as directed by Art. 76 of PD 1067 and Sec. 8 of RA 9275, within one (1) year
from finality of this Decision, determine if all licensed septic and sludge companies have the proper
facilities for the treatment and disposal of fecal sludge and sewage coming from septic tanks. The
DOH shall give the companies, if found to be non-complying, a reasonable time within which to set
up the necessary facilities under pain of cancellation of its environmental sanitation clearance.

(10) Pursuant to Sec. 53 of PD 1152,48 Sec. 118 of RA 8550, and Sec. 56 of RA 9003,49 the DepEd
shall integrate lessons on pollution prevention, waste management, environmental protection, and
like subjects in the school curricula of all levels to inculcate in the minds and hearts of students and,
through them, their parents and friends, the importance of their duty toward achieving and
maintaining a balanced and healthful ecosystem in the Manila Bay and the entire Philippine
archipelago.

(11) The DBM shall consider incorporating an adequate budget in the General Appropriations Act of
2010 and succeeding years to cover the expenses relating to the cleanup, restoration, and
preservation of the water quality of the Manila Bay, in line with the country’s development objective
to attain economic growth in a manner consistent with the protection, preservation, and revival of our
marine waters.

(12) The heads of petitioners-agencies MMDA, DENR, DepEd, DOH, DA, DPWH, DBM, PCG, PNP
Maritime Group, DILG, and also of MWSS, LWUA, and PPA, in line with the principle of "continuing
mandamus," shall, from finality of this Decision, each submit to the Court a quarterly progressive
report of the activities undertaken in accordance with this Decision.

No costs.

SO ORDERED

Republic Act No. 8550 February 25, 1998

AN ACT PROVIDING FOR THE DEVELOPMENT, MANAGEMENT AND CONSERVATION OF

THE FISHERIES AND AQUATIC RESOURCES, INTEGRATING ALL LAWS PERTINENT
THERETO, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled::

Section 1. Title. - This Act shall be known as "The Philippine Fisheries Code of 1998."

CHAPTER I
Declaration of Policy and Definitions
Section 2. Declaration of Policy. - It is hereby declared the policy of the State:

(a) to achieve food security as the overriding consideration in the utilization, management,
development, conservation and protection of fishery resources in order to provide the food
needs of the population. A flexible policy towards the attainment of food security shall be
adopted in response to changes in demographic trends for fish, emerging trends in the trade
of fish and other aquatic products in domestic and international markets, and the law of
supply and demand; lawphi1™

(b) to limit access to the fishery and aquatic resources of the Philippines for the exclusive
use and enjoyment of Filipino citizens;

(c) to ensure the rational and sustainable development, management and conservation of
the fishery and aquatic resources in Philippine waters including the Exclusive Economic
Zone (EEZ) and in the adjacent high seas, consistent with the primordial objective of
maintaining a sound ecological balance, protecting and enhancing the quality of the
environment;

(d) to protect the rights of fisherfolk, especially of the local communities with priority to
municipal fisherfolk, in the preferential use of the municipal waters. Such preferential use,
shall be based on, but not limited to, Maximum Sustainable Yield (MSY) or Total Allowable
Catch (TAC) on the basis of resources and ecological conditions, and shall be consistent
with our commitments under international treaties and agreements;

(e) to provide support to the fishery sector, primarily to the municipal fisherfolk, including
women and youth sectors, through appropriate technology and research, adequate financial,
production, construction of post-harvest facilities, marketing assistance, and other services.
The protection of municipal fisherfolk against foreign intrusion shall extend to offshore fishing
grounds. Fishworkers shall receive a just share for their labor in the utilization of marine and
fishery resources;

(f) to manage fishery and aquatic resources, in a manner consistent with the concept of an
integrated coastal area management in specific natural fishery management areas,
appropriately supported by research, technical services and guidance provided by the State;
and

(g) to grant the private sector the privilege to utilize fishery resources under the basic
concept that the grantee, licensee or permittee thereof shall not only be a privileged
beneficiary of the State but also active participant and partner of the Government in the
sustainable development, management, conservation and protection of the fishery and
aquatic resources of the country.

The state shall ensure the attainment of the following objectives of the fishery sector:

1. Conservation, protection and sustained management of the country's fishery and aquatic
resources;

2. Poverty alleviation and the provision of supplementary livelihood among municipal

fisherfolk;

3. Improvement of productivity of aquaculture within ecological limits;

 4. Optimal utilization of offshore and deep-sea resources; and

5. Upgrading of post-harvest technology.

Section 3. Application of its Provisions. - The provisions of this Code shall be enforced in:

(a) all Philippine waters including other waters over which the Philippines has sovereignty
and jurisdiction, and the country's 200-nautical mile Exclusive Economic Zone (EEZ) and
continental shelf;

(b) all aquatic and fishery resources whether inland, coastal or offshore fishing areas,
including but not limited to fishponds, fishpens/cages; and

(c) all lands devoted to aquaculture, or businesses and activities relating to fishery, whether
private or public lands.
lawphi 1©

Section 4. Definition of Terms. - As used in this Code, the following terms and phrases shall mean
as follows:

1. Ancillary Industries - firms or companies related to the supply, construction and

maintenance of fishing vessels, gears, nets and other fishing paraphernalia; fishery machine
shops; and other facilities such as hatcheries, nurseries, feed plants, cold storage and
refrigeration, processing plants and other pre-harvest and post-harvest facilities.

2. Appropriate Fishing Technology - adaptable technology, both in fishing and ancillary

industries, that is ecologically sound, locally source-based and labor intensive.

3. Aquaculture - fishery operations involving all forms of raising and culturing fish and other
fishery species in fresh, brackish and marine water areas.

4. Aquatic Pollution - the introduction by human or machine, directly or indirectly, of

substances or energy to the aquatic environment which result or is likely to result in such
deleterious effects as to harm living and non-living aquatic resources, pose potential and/or
real hazard to human health, hindrance to aquatic activities such as fishing and navigation,
including dumping/disposal of waste and other marine litters, discharge of petroleum or
residual products of petroleum or carbonaceous materials/substances, and other,
radioactive, noxious or harmful liquid, gaseous or solid substances, from any water, land or
air transport or other human-made structure. Deforestation, unsound agricultural practices
such as the use of banned chemicals and excessive use of chemicals, intensive use of
artificial fish feed, and wetland conversion, which cause similar hazards and deleterious
effects shall also constitute aquatic pollution.

5. Aquatic Resources - includes fish, all other aquatic flora and fauna and other living
resources of the aquatic environment, including, but not limited to, salt and corals.

6. Artificial Reefs - any structure of natural or man-made materials placed on a body of water
to serve as shelter and habitat, source of food, breeding areas for fishery species and
shoreline protection.
7. Catch Ceilings - refer to the annual catch limits allowed to be taken, gathered or harvested
from any fishing area in consideration of the need to prevent overfishing and harmful
depletion of breeding stocks of aquatic organisms.

8. Closed Season - the period during which the taking of specified fishery species by a
specified fishing gear is prohibited in a specified area or areas in Philippine waters.

9. Coastal Area/Zone - is a band of dry land and adjacent ocean space (water and
submerged land. in which terrestrial processes and uses directly affect oceanic processes
and uses, and vice versa; its geographic extent may include areas within a landmark limit of
one (1. kilometer from the shoreline at high tide to include mangrove swamps, brackish water
ponds, nipa swamps, estuarine rivers, sandy beaches and other areas within a seaward limit
of 200 meters isobath to include coral reefs, algal flats, seagrass beds and other soft-bottom
areas.

10. Commercial Fishing - the taking of fishery species by passive or active gear for trade,
business & profit beyond subsistence or sports fishing, to be further classified as:

(1) Small scale commercial fishing - fishing with passive or active gear utilizing
fishing vessels of 3.1 gross tons (GT) up to twenty (20) GT;

(2) Medium scale commercial fishing - fishing utilizing active gears and vessels of
20.1 GT up to one hundred fifty (150) GT; and

(3) Large commercial fishing - fishing utilizing active gears and vessels of more than
one hundred fifty (150) GT.

11. Commercial Scale - a scheme of producing a minimum harvest per hectare per year of
milkfish or other species including those raised in pens, cages, and tanks to be determined
by the Department in consultation with the concerned sectors;

12. Coral - the hard calcareous substance made up of the skeleton of marine coelenterate
polyps which include reefs, shelves and atolls or any of the marine coelenterate animals
living in colonies where their skeletons form a stony mass. They include: (a. skeletons of
anthozoan coelenterates characterized as having a rigid axis of compact calcareous or horny
spicules, belonging to the genus corallium as represented by the red, pink, and white corals
which are considered precious corals; (b. skeletons of anthozoan coelenterates
characterized by thorny, horny axis such as the antipatharians represented by the black
corals which are considered semi-precious corals; and (c. ordinary corals which are any kind
of corals that are not precious nor semi-precious.

13. Coral Reef - a natural aggregation of coral skeleton, with or without living coral polyps,
occurring in intertidal and subtidal marine waters.

14. Demarcated Areas - boundaries defined by markers and assigned exclusively to specific
individuals or organizations for certain specified and limited uses such as:

(a) Aquaculture, sea ranching and sea farming;

(b) Fish aggregating devices;

 (c) Fixed and passive fishing gears; and

(d) Fry and fingerlings gathering.

15. Department - shall mean the Department of Agriculture.

16. Electrofishing - the use of electricity generated by batteries, electric generators and other
source of electric power to kill, stupefy, disable or render unconscious fishery species,
whether or not the same are subsequently recovered.

17. Endangered Rare and/or Threatened Species - aquatic plants, animals, including some
varieties of corals and sea shells in danger of extinction as provided for in existing fishery
laws, rules and regulations or in the Protected Areas and Wildlife Bureau of the Department
of Environment and Natural Resources (DENR. and in the Convention on the International
Trade of Endangered Species of Flora and Fauna (CITES).

18. Exclusive Economic Zone (EEZ. - an area beyond and adjacent to the territorial sea
which shall not extend beyond 200 nautical miles from the baselines as defined under
existing laws.

19. FARMCs - the Fisheries and Aquatic Resources Management Councils.

20. Farm-to-Market Roads - shall include roads linking the fisheries production sites, coastal
landing points and other post-harvest facilities to major market and arterial roads and
highways.

21. Fine Mesh Net - net with mesh size of less than three centimeters (3 cm.. measured
between two (2. opposite knots of a full mesh when stretched or as otherwise determined by
the appropriate government agency.

22. Fish and Fishery/Aquatic Products - include not only finfish but also mollusks,
crustaceans, echinoderms, marine mammals, and all other species of aquatic flora and
fauna and all other products of aquatic living resources in any form.

23. Fish Cage - refers to an enclosure which is either stationary or floating made up of nets
or screens sewn or fastened together and installed in the water with opening at the surface
or covered and held in a place by wooden/bamboo posts or various types of anchors and
floats.

24. Fish Corral or "Baklad" - a stationary weir or trap devised to intercept and capture fish
consisting of rows of bamboo stakes, plastic nets and other materials fenced with split blood
mattings or wire mattings with one or more enclosures, usually with easy entrance but
difficult exit, and with or without leaders to direct the fish to the catching chambers, purse or
bags.

25. Fish fingerlings - a stage in the life cycle of the fish measuring to about 6-13 cm.
depending on the species.

26. Fish fry - a stage at which a fish has just been hatched usually with sizes from 1-2.5 cm.
27. Fish pen - an artificial enclosure constructed within a body of water for culturing fish and
fishery/aquatic resources made up of poles closely arranged in an enclosure with wooden
materials, screen or nylon netting to prevent escape of fish.

28. Fisherfolk - people directly or personally and physically engaged in taking and/or
culturing and processing fishery and/or aquatic resources. lawphi 1™

29. Fisherfolk Cooperative - a duly registered association of fisherfolk with a common bond
of interest, who have voluntarily joined together to achieve a lawful common social or
economic end, making equitable contribution to the capital requirement and accepting a fair
share of the risks and benefits of the undertakings in accordance with universally accepted
cooperative principles.

30. Fisherfolk Organization - an organized group, association, federation, alliance or an

institution of fisherfolk which has at least fifteen (15. members, a set of officers, a constitution
and by-laws, an organizational structure and a program of action.

31. Fisheries - refers to all activities relating to the act or business of fishing, culturing,
preserving, processing, marketing, developing, conserving and managing aquatic resources
and the fishery areas, including the privilege to fish or take aquatic resource thereof.

32. Fish Pond - a land-based facility enclosed with earthen or stone material to impound
water for growing fish.

33. Fishing Boat/Gear License - a permit to operate specific types of fishing boat/gear for
specific duration in areas beyond municipal waters for demersal or pelagic fishery resources.

34. Fishery Management Areas - a bay, gulf, lake or any other fishery area which may be
delineated for fishery resource management purposes.

35. Fishery Operator - one who owns and provides the means including land, labor, capital,
fishing gears and vessels, but does not personally engage in fishery.

36. Fishery Refuge and Sanctuaries - a designated area where fishing or other forms of
activities which may damage the ecosystem of the area is prohibited and human access may
be restricted.

37. Fishery Reserve - a designated area where activities are regulated and set aside for
educational and research purposes.

38. Fishery Species - all aquatic flora and fauna including, but not restricted to, fish, algae,
coelenterates, mollusks, crustaceans, echinoderms and cetaceans.

39. Fishing - the taking of fishery species from their wild state of habitat, with or without the
use of fishing vessels.

40. Fishing gear - any instrument or device and its accessories utilized in taking fish and
other fishery species.

(a) Active fishing gear - is a fishing device characterized by gear movements, and/or
the pursuit of the target species by towing, lifting, and pushing the gears,
 surrounding, covering, dredging, pumping and scaring the target species to
impoundments; such as, but not limited to, trawl, purse seines, Danish seines, bag
nets, paaling, drift gill net and tuna longline.

(b) Passive fishing gear - is characterized by the absence of gear movements and/or
the pursuit of the target species; such as, but not limited to, hook and line, fishpots,
traps and gill nets across the path of the fish.

41. Fishing vessel - any boat, ship or other watercraft equipped to be used for taking of
fishery species or aiding or assisting one (1. or more vessels in the performance of any
activity relating to fishing, including, but not limited to, preservation, supply, storage,
refrigeration, transportation and/or processing.

42. Fishing with Explosives - the use of the dynamite, other explosives or other chemical
compounds that contain combustible elements or ingredients which upon ignition by friction,
concussion, percussion or detonation of all or parts of the compound, will kill, stupefy,
disable or render unconscious any fishery species. It also refers to the use of any other
substance and/or device which causes an explosion that is capable of producing the said
harmful effects on any fishery species and aquatic resources and capable of damaging and
altering the natural habitat.

43. Fishing with Noxious or Poisonous Substances - the use of any substance, plant extracts
or juice thereof, sodium cyanide and/or cyanide compounds or other chemicals either in a
raw or processed form, harmful or harmless to human beings, which will kill, stupefy, disable
or render unconscious any fishery species and aquatic resources and capable of damaging
and altering the natural habitat.

44. Fishworker - a person regularly or not regularly employed in commercial fishing and
related industries, whose income is either in wage, profit-sharing or stratified sharing basis,
including those working in fish pens, fish cages, fish corrals/traps, fishponds, prawn farms,
sea farms, salt beds, fish ports, fishing boat or trawlers, or fish processing and/or packing
plants. Excluded from this category are administrators, security guards and overseers.

45. Food Security - refers to any plan, policy or strategy aimed at ensuring adequate
supplies of appropriate food at affordable prices. Food security may be achieved through
self-sufficiency (i.e. ensuring adequate food supplies from domestic production), through
self-reliance (i.e. ensuring adequate food supplies through a combination of domestic
production and importation), or through pure importation.

46. Foreshore Land - a string of land margining a body of water; the part of a seashore
between the low-water line usually at the seaward margin of a low tide terrace and the upper
limit of wave wash at high tide usually marked by a beach scarp or berm.

47. Fully-developed Fishpond Area - a clean leveled area enclosed by dikes, at least one
foot higher than the highest floodwater level in the locality and strong enough to resist
pressure at the highest flood tide; consists of at least a nursery pond, a transition pond, a
rearing pond or a combination of any or all said classes of ponds, and a functional water
control system and producing in a commercial scale.

48. Gross Tonnage - includes the underdeck tonnage, permanently enclosed spaces above
the tonnage deck, except for certain exemptions. In broad terms, all the vessel's 'closed-in'
spaces expressed in volume terms on the bases of one hundred cubic feet (that equals one
gross ton).

49. Inland Fishery - the freshwater fishery and brackishwater fishponds.

50. Lake - an inland body of water, an expanded part of a river, a reservoir formed by a dam,
or a lake basin intermittently or formerly covered by water.

51. Limited Access - a fishery policy by which a system of equitable resource and allocation
is established by law through fishery rights granting and licensing procedure as provided by
this Code.

52. Mangroves - a community of intertidal plants including all species of trees, shrubs, vines
and herbs found on coasts, swamps, or border of swamps.

53. Maximum Sustainable Yield (MSY. - is the largest average quantity of fish that can be
harvested from a fish stocks/resource within a period of time (e.g. one year. on a sustainable
basis under existing environmental conditions.

54. Migratory species - refers to any fishery species which in the course of their life could
travel from freshwater to marine water or vice versa, or any marine species which travel over
great distances in waters of the ocean as part of their behavioral adaptation for survival and
speciation:

(a) Anadromous species - marine fishes which migrate to freshwater areas to spawn;

(b) Catadromous species - freshwater fishes which migrate to marine areas to

spawn.

55. Monitoring, control and surveillance -

(a) Monitoring - the requirement of continuously observing: (1) fishing effort which
can be expressed by the number of days or hours of fishing, number of fishing gears
and number of fisherfolk; (2) characteristics of fishery resources; and (3) resource
yields (catch);

(b) Control - the regulatory conditions (legal framework) under which the exploitation,
utilization and disposition of the resources may be conducted; and

(c) Surveillance - the degree and types of observations required to maintain

compliance with regulations. lawphi1™ ALF

56. Municipal fisherfolk - persons who are directly or indirectly engaged in municipal fishing
and other related fishing activities.

57. Municipal fishing - refers to fishing within municipal waters using fishing vessels of three
(3. gross tons or less, or fishing not requiring the use of fishing vessels.

58. Municipal waters - include not only streams, lakes, inland bodies of water and tidal
waters within the municipality which are not included within the protected areas as defined
under Republic Act No. 7586 (The NIPAS Law), public forest, timber lands, forest reserves or
fishery reserves, but also marine waters included between two (2. lines drawn perpendicular
to the general coastline from points where the boundary lines of the municipality touch the
sea at low tide and a third line parallel with the general coastline including offshore islands
and fifteen (15. kilometers from such coastline. Where two (2. municipalities are so situated
on opposite shores that there is less than thirty (30. kilometers of marine waters between
them, the third line shall be equally distant from opposite shore of the respective
municipalities.

59. Non-governmental organization (NGO. - an agency, institution, a foundation or a group of

persons whose purpose is to assist peoples organizations/associations in various ways
including, but not limited to, organizing, education, training, research and/or resource
accessing.

60. Payao - a fish aggregating device consisting of a loating raft anchored by a weighted line
with suspended materials such as palm fronds to attract pelagic and schooling species
common in deep waters.

61. Pearl Farm Lease - public waters leased for the purpose of producing cultured pearls.

62. People's Organization - a bona fide association of citizens with demonstrated capacity to
promote the public interest and with identifiable leadership, membership and structure. Its
members belong to a sector/s who voluntarily band themselves together to work for and by
themselves for their own upliftment, development and greater good.

63. Person - natural or juridical entities such as individuals, associations, partnership,

cooperatives or corporations.

64. Philippine waters - include all bodies of water within the Philippine territory such as lakes,
rivers, streams, creeks, brooks, ponds, swamps, lagoons, gulfs, bays and seas and other
bodies of water now existing or which may hereafter exist in the provinces, cities,
municipalities, and barangays and the waters around, between and connecting the islands of
the archipelago regardless of their breadth and dimensions, the territorial sea, the sea beds,
the insular shelves, and all other waters over which the Philippines has sovereignty and
jurisdiction including the 200-nautical miles Exclusive Economic Zone and the continental
shelf.

65. Post-harvest facilities - these facilities include, but are not limited to, fishport, fishlanding,
ice plants and cold storages, fish processing plants.

66. Purse Seine - a form of encircling net having a line at the bottom passing through rings
attached to the net, which can be drawn or pursed. In general, the net is set from a boat or
pair of boats around the school of fish. The bottom of the net is pulled closed with the purse
line. The net is then pulled aboard the fishing boat or boats until the fish are concentrated in
the bunt or fish bag.

67. Resource Rent - the difference between the value of the products produced from
harvesting a publicly owned resource less the cost of producing it, where cost includes the
normal return to capital and normal return to labor.

68. Sea farming - the stocking of natural or hatchery-produced marine plants or animals,
under controlled conditions, for purposes of rearing and harvesting, but not limited to
 commercially-important fishes, mollusks (such as pearl and giant clam culture), including
seaweeds and seagrasses.

69. Sea ranching - the release of the young of fishery species reared in hatcheries and
nurseries into natural bodies of water for subsequent harvest at maturity or the manipulation
of fishery habitat, to encourage the growth of the wild stocks.

70. Secretary - the Secretary of the Department of Agriculture.

71. Superlight - also called magic light, is a type of light using halogen or metal halide bulb
which may be located above the sea surface or submerged in the water. It consists of a
ballast, regulator, electric cable and socket. The source of energy comes from a generator,
battery or dynamo coupled with the main engine.

72. Total Allowable Catch (TAC. - the maximum harvest allowed to be taken during a given
period of time from any fishery area, or from any fishery species or group of fishery species,
or a combination of area and species and normally would not exceed the MSY.

73. Trawl - an active fishing gear consisting of a bag shaped net with or without otter boards
to open its opening which is dragged or towed along the bottom or through the water column
to take fishery species by straining them from the water, including all variations and
modifications of trawls (bottom, mid-water, and baby trawls) and tow nets.

CHAPTER II
Utilization, Management, Development, Conservation and Allocation System of Fisheries and
Aquatic Resources

Section 5. Use of Philippine Waters. - The use and exploitation of the fishery and aquatic
resources in Philippine waters shall be reserved exclusively to Filipinos: Provided, however, That
research and survey activities may be allowed under strict regulations, for purely research, scientific,
technological and educational purposes that would also benefit Filipino citizens.

Section 6. Fees and Other Fishery Charges. - The rentals for fishpond areas covered by the
Fishpond Lease Agreement (FLA) and license fees for Commercial Fishing Boat Licenses (CFBL)
shall be set at levels that reflect resource rent accruing from the utilization of resources and shall be
determined by the Department: Provided, That the Department shall also prescribe fees and other
fishery charges and issue the corresponding license or permit for fishing gear, fishing accessories
and other fishery activities beyond the municipal waters: Provided, further, That the license fees of
fishery activity in municipal waters shall be determined by the Local Government Units (LGUs) in
consultation with the FARMCs. The FARMCs may also recommend the appropriate license fees that
will be imposed.

Section 7. Access to Fishery Resources. - The Department shall issue such number of licenses
and permits for the conduct of fishery activities subject to the limits of the MSY of the resource as
determined by scientific studies or best available evidence. Preference shall be given to resource
users in the local communities adjacent or nearest to the municipal waters.

Section 8. Catch Ceiling Limitations. - The Secretary may prescribe limitations or quota on the
total quantity of fish captured, for a specified period of time and specified area based on the best
available evidence. Such a catch ceiling may be imposed per species of fish whenever necessary
and practicable: Provided, however, That in municipal waters and fishery management areas, and
waters under the jurisdiction of special agencies, catch ceilings may be established upon the
concurrence and approval or recommendation of such special agency and the concerned LGU in
consultation with the FARMC for conservation or ecological purposes.

Section 9. Establishment of Closed Season. - The Secretary may declare, through public notice in
at least two (2) newspapers of general circulation or in public service announcements, whichever is
applicable, at least five (5) days before the declaration, a closed season in any or all Philippine
waters outside the boundary of municipal waters and in bays, for conservation and ecological
purposes. The Secretary may include waters under the jurisdiction of special agencies, municipal
waters and bays, and/or other areas reserved for the use of the municipal fisherfolk in the area to be
covered by the closed season: Provided, however, That this shall be done only upon the
concurrence and approval or recommendation of such special agency and the concerned LGU and
FARMC: Provided, further, That in municipal waters, fishery management areas and other areas
reserved for the use of the municipal fisherfolk, closed season may be established by the concerned
LGU in consultation with the FARMC for conservation or ecological purposes. The FARMCs may
also recommend the establishment of closed seasons in municipal waters, fisheries management
and other areas reserved for the use of the municipal fisherfolk.

Section 10. Introduction of Foreign Aquatic Species. - No foreign finfish, mollusk, crustacean or
aquatic plants shall be introduced in Philippine waters without a sound ecological, biological and
environmental justification based on scientific studies subject to the bio-safety standard as provided
for by existing laws: Provided, however, That the Department may approve the introduction of
foreign aquatic species for scientific/research purposes.

Section 11. Protection of Rare, Threatened and Endangered Species. - The Department shall
declare closed seasons and take conservation and rehabilitation measures for rare, threatened and
endangered species, as it may determine, and shall ban the fishing and/or taking of rare, threatened
and/or endangered species, including their eggs/offspring as identified by existing laws in
concurrence with concerned government agencies.

Section 12. Environmental Impact Statement (EIS). - All government agencies as well as private
corporations, firms and entities who intend to undertake activities or projects which will affect the
quality of the environment shall be required to prepare a detailed Environmental Impact Statement
(EIS) prior to undertaking such development activity. The preparation of the EIS shall form an
integral part of the entire planning process pursuant to the provisions of Presidential Decree No.
1586 as well as its implementing rules and regulations.

Section 13. Environmental Compliance Certificate (ECC). - All Environmental Impact Statements
(EIS) shall be submitted to the Department of Environment and Natural Resources (DENR) for
review and evaluation. No person, natural or juridical, shall undertake any development project
without first securing an Environmental Compliance Certificate (ECC) from the Secretary of the
DENR.

Section 14. Monitoring, Control and Surveillance of Philippine Waters. - A monitoring, control
and surveillance system shall be established by the Department in coordination with LGUs,
FARMCs, the private sector and other agencies concerned to ensure that the fisheries and aquatic
resources in Philippine waters are judiciously and wisely utilized and managed on a sustainable
basis and conserved for the benefit and enjoyment exclusively of Filipino citizens.

Section 15. Auxiliary Invoices. - All fish and fishery products must have an auxiliary invoice to be
issued by the LGUs or their duly authorized representatives prior to their transport from their point of
origin to their point of destination in the Philippines and/or export purposes upon payment of a fee to
be determined by the LGUs to defray administrative costs therefor.
 ARTICLE I
MUNICIPAL FISHERIES

Section 16. Jurisdiction of Municipal/City Government. - The municipal/city government shall

have jurisdiction over municipal waters as defined in this Code. The municipal/city government, in
consultation with the FARMC shall be responsible for the management, conservation, development,
protection, utilization, and disposition of all fish and fishery/aquatic resources within their respective
municipal waters.

The municipal/city government may, in consultation with the FARMC, enact appropriate ordinances
for this purpose and in accordance with the National Fisheries Policy. The ordinances enacted by
the municipality and component city shall be reviewed pursuant to Republic Act No. 7160 by the
sanggunian of the province which has jurisdiction over the same.

The LGUs shall also enforce all fishery laws, rules and regulations as well as valid fishery
ordinances enacted by the municipal/city council.

The management of contiguous fishery resources such as bays which straddle several
municipalities, cities or provinces, shall be done in an integrated manner, and shall not be based on
political subdivisions of municipal waters in order to facilitate their management as single resource
systems. The LGUs which share or border such resources may group themselves and coordinate
with each other to achieve the objectives of integrated fishery resource management. The Integrated
Fisheries and Aquatic Resources Management Councils (FARMCs) established under Section 76 of
this Code shall serve as the venues for close collaboration among LGUs in the management of
contiguous resources.

Section 17. Grant of Fishing Privileges in Municipal Waters. - The duly registered fisherfolk
organizations/cooperatives shall have preference in the grant of fishery rights by the Municipal/City
Council pursuant to Section 149 of the Local Government Code: Provided, That in areas where there
are special agencies or offices vested with jurisdiction over municipal waters by virtue of special laws
creating these agencies such as, but not limited to, the Laguna Lake Development Authority and the
Palawan Council for Sustainable Development, said offices and agencies shall continue to grant
permits for proper management and implementation of the aforementioned structures.

Section 18. Users of Municipal Waters. - All fishery related activities in municipal waters, as
defined in this Code, shall be utilized by municipal fisherfolk and their cooperatives/organizations
who are listed as such in the registry of municipal fisherfolk.

The municipal or city government, however, may, through its local chief executive and acting
pursuant to an appropriate ordinance, authorize or permit small and medium commercial fishing
vessels to operate within the ten point one (10.1) to fifteen (15) kilometer area from the shoreline in
municipal waters as defined herein, provided, that all the following are met:

(a) no commercial fishing in municipal waters with depth less than seven (7) fathoms as
certified by the appropriate agency;

(b) fishing activities utilizing methods and gears that are determined to be consistent with
national policies set by the Department;

(c) prior consultation, through public hearing, with the M/CFARMC has been conducted; and
 (d) the applicant vessel as well as the shipowner, employer, captain and crew have been
certified by the appropriate agency as not having violated this Code, environmental laws and
related laws.

In no case shall the authorization or permit mentioned above be granted for fishing in bays as
determined by the Department to be in an environmentally critical condition and during closed
season as provided for in Section 9 of this Code.

Section 19. Registry of Municipal Fisherfolk. - The LGU shall maintain a registry of municipal
fisherfolk, who are fishing or may desire to fish in municipal waters for the purpose of determining
priorities among them, of limiting entry into the municipal waters, and of monitoring fishing activities
an/or other related purposes: Provided, That the FARMC shall submit to the LGU the list of priorities
for its consideration.

Such list or registry shall be updated annually or as may be necessary, and shall be posted in
barangay halls or other strategic locations where it shall be open to public inspection, for the
purpose of validating the correctness and completeness of the list. The LGU, in consultation with the
FARMCs, shall formulate the necessary mechanisms for inclusion or exclusion procedures that shall
be most beneficial to the resident municipal fisherfolk. The FARMCs may likewise recommend such
mechanisms.

The LGUs shall also maintain a registry of municipal fishing vessels by type of gear and other boat
particulars with the assistance of the FARMC.

Section 20. Fisherfolk Organizations and/or Cooperatives. - Fisherfolk

organizations/cooperatives whose members are listed in the registry of municipal fisherfolk, may be
granted use of demarcated fishery areas to engage in fish capture, mariculture and/or fish farming:
Provided, however, That an organization/cooperative member whose household is already in
possession of a fishery right other than for fish capture cannot enjoy the fishing rights granted to the
organization or cooperative.

Section 21. Priority of Resident Municipal Fisherfolk. - Resident municipal fisherfolk of the
municipality concerned and their organizations/cooperatives shall have priority to exploit municipal
and demarcated fishery areas of the said municipality.

Section 22. Demarcated Fishery Right. - The LGU concerned shall grant demarcated fishery rights
to fishery organizations/cooperatives for mariculture operation in specific areas identified by the
Department.

Section 23. Limited Entry Into Overfished Areas. - Whenever it is determined by the LGUs and
the Department that a municipal water is overfished based on available data or information or in
danger of being overfished, and that there is a need to regenerate the fishery resources in that
water, the LGU shall prohibit or limit fishery activities in the said waters.

Section 24. Support to Municipal Fisherfolk. - The Department and the LGUs shall provide
support to municipal fisherfolk through appropriate technology and research, credit, production and
marketing assistance and other services such as, but not limited to training for
additional/supplementary livelihood.

Section 25. Rights and Privileges of Fishworkers. - The fishworkers shall be entitled to the
privileges accorded to other workers under the Labor Code, Social Security System and other
benefits under other laws or social legislation for workers: Provided, That fishworkers on board any
fishing vessels engaged in fishing operations are hereby covered by the Philippine Labor Code, as
amended.

ARTICLE II
COMMERCIAL FISHERIES

Section 26. Commercial Fishing Vessel License and Other Licenses. - No person shall operate
a commercial fishing vessel, pearl fishing vessel or fishing vessel for scientific, research or
educational purposes, or engage in any fishery activity, or seek employment as a fishworker or pearl
diver without first securing a license from the Department, the period of which shall be prescribed by
the Department: Provided, That no such license shall be required of a fishing vessel engaged in
scientific, research or educational purposes within Philippine waters pursuant to an international
agreement of which the Philippines is a signatory and which agreement defines the status, privileges
and obligations of said vessel and its crew and the non-Filipino officials of the international agency
under which said vessel operates: Provided, further, That members of the crew of a fishing vessel
used for commercial fishing except the duly licensed and/or authorized patrons, marine engineers,
radio operators and cooks shall be considered as fisherfolk: Provided, furthermore, That all
skippers/master fishers shall be required to undertake an orientation training on detection of fish
caught by illegal means before they can be issued their fishworker licenses: Provided, finally, That
the large commercial fishing vessels license herein authorized to be granted shall allow the licensee
to operate only in Philippine waters seven (7) or more fathoms deep, the depth to be certified by the
NAMRIA, and subject to the conditions that may be stated therein and the rules and regulations that
may be promulgated by the Department.

Section 27. Persons Eligible for Commercial Fishing Vessel License. - No commercial fishing
vessel license shall be issued except to citizens of the Philippines, partnerships or to associations,
cooperatives or corporations duly registered in the Philippines at least sixty percent (60%) of the
capital stock of which is owned by Filipino citizens. No person to whom a license has been issued
shall sell, transfer or assign, directly or indirectly, his stock or interest therein to any person not
qualified to hold a license. Any such transfer, sale or assignment shall be null and void and shall not
be registered in the books of the association, cooperative or corporation.

For purposes of commercial fishing, fishing vessels owned by citizens of the Philippines,
partnerships, corporations, cooperatives or associations qualified under this section shall secure
Certificates of Philippine Registry and such other documents as are necessary for fishing operations
from the concerned agencies: Provided, That the commercial fishing vessel license shall be valid for
a period to be determined by the Department.

Section 28. Commercial Fishing Vessel Registration. - The registration, documentation,

inspection and manning of the operation of all types of fishing vessels plying Philippine waters shall
be in accordance with laws, rules and regulations.

Section 29. Registration and Licensing of Fishing Gears Used in Commercial Fishing. - Before
a commercial fishing vessel holding a commercial fishing vessel license may begin fishing
operations in Philippine waters, the fishing gear it will utilize in fishing shall be registered and a
license granted therefor. The Department shall promulgate guidelines to implement this provision
within sixty (60) days from approval of this Code.

Section 30. Renewal of Commercial Boat License. - The commercial fishing boat license shall be
renewed every three (3) years.
The owner/operator of a fishing vessel has a period of sixty (60) days prior to the expiration of the
license within which to renew the same.

Section 31. Report of Transfer of Ownership. - The owner/operator of a registered fishing vessel
shall notify the Department in writing of the transfer of the ownership of the vessel with a copy of
such document within ten (10) days after its transfer to another person.

Section 32. Fishing by Philippine Commercial Fishing Fleet in International Waters. - Fishing
vessels of Philippine registry may operate in international waters or waters of other countries which
allow such fishing operations: Provided, That they comply with the safety, manning and other
requirements of the Philippine Coast Guard, Maritime Industry Authority and other agencies
concerned: Provided, however, That they secure an international fishing permit and certificate of
clearance from the Department: Provided, further, That the fish caught by such vessels shall be
considered as caught in Philippine waters and therefore not subject to all import duties and taxes
only when the same is landed in duly designated fish landings and fish ports in the Philippines:
Provided, furthermore, That landing ports established by canneries, seafood processors and all fish
landing sites established prior to the effectivity of this Code shall be considered authorized landing
sites: Provided, finally, That fishworkers on board Philippine registered fishing vessels conducting
fishing activities beyond the Philippine Exclusive Economic Zone are not considered as overseas
Filipino workers.

Section 33. Importation of Fishing Vessels or Construction of New Fishing Boats. - Prior to the
importation of fishing vessels and the construction of new fishing vessels, the approval/clearance of
the Department must first be obtained.

Section 34. Incentives for Municipal and Small-Scale Commercial Fisherfolk. - Municipal and
small-scale commercial fisherfolk shall be granted incentives which shall include, but are not limited
to, the following:

(a) at least ten percent (10%) of the credit and the guarantee funds of government financing
institutions shall be made available for post-harvest and marketing projects for the purpose
of enhancing our fisherfolk competitiveness by reducing post-harvest losses. Qualified
projects shall include, but shall not be limited to, ice plants, cold storage, canning,
warehouse, transport and other related infrastructure projects and facilities; and

(b) the Department shall undertake the following programs:

1. a capability-building program for targeted parties shall be developed by the

Department to promote greater bankability and credit worthiness of municipal and
small-scale commercial fishers. Such program shall include organizing activities,
technology transfer, and skills training related to commercial fishing as well as credit
management. Groups and cooperatives organized under the program shall have
priority access over credit and guarantee funds established under this Code; and

2. an information campaign shall be conducted to promote the capability building and

credit programs. The campaign shall ensure greater information dissemination and
accessibility to targeted fisherfolk.

Section 35. Incentives for Commercial Fishers to Fish Farther into the Exclusive Economic
Zone. - In order to encourage fishing vessel operators to fish farther in the EEZ and beyond, new
incentives for improvement of fishing vessels and acquisition of fishing equipment shall be granted in
addition to incentives already available from the Board of Investments (BOI). Such incentives shall
be granted subject to exhaustive evaluation of resource and exploitation conditions in the specified
areas of fishing operations. The incentive shall include, but not be limited to:

(a) long term loans supported by guarantee facilities to finance the building and acquisition
and/or improvement of fishing vessels and equipment;

(b) commercial fishing vessel operators of Philippine registry shall enjoy a limited period of
tax and duty exemptions on the importation of fishing vessels not more than five (5) years
old, equipment and paraphernalia, the period of exemption and guidelines shall be fixed by
the Department within ninety (90) days from the effectivity of this Code;

(c) commercial fishing operator of Philippine registry engaged in fisheries in the high seas
shall be entitled to duty and tax rebates on fuel consumption for commercial fisheries
operations. Guidelines shall be promulgated within ninety (90) days from the effectivity of this
Code by the Department; and

(d) all applicable incentives available under the Omnibus Investment Code of 1987:
Provided, That the fishing operation project is qualified for registration and is duly registered
with the BOI.

Section 36. Complement of Fishing Vessels. - Every commercial fishing vessel of Philippine
registry when actually operated, shall be manned in accordance with the requirements of the
Philippine Merchant Marine rules and regulations.

Section 37. Medical Supplies and Life-Saving Devices. - All fishing vessels shall be provided with
adequate medical supplies and life-saving devices to be determined by the Occupational Safety and
Health Center: Provided, That a fishing vessel of twenty (20) GT or more shall have as a member of
its crew a person qualified as a first aider duly certified by the Philippine National Red Cross.

Section 38. Reportorial Requirements. - Each commercial fishing vessel shall keep a daily record
of fish catch and spoilage, landing points, and quantity and value of fish caught, and off-loaded for
transshipment, sale and/or other disposal. Detailed information shall be duly certified by the vessel's
captain and transmitted monthly to the officer or representative of the Department, at the nearest
designated landing point.

Section 39. Report of Meteorological and Other Data. - All vessels and crafts passing
navigational lanes or engaged in fisheries activity shall be required to contribute to meteorological
and other data, and shall assist the Department in documentation or reporting of information vital to
navigation and the fishing industry.

Section 40. Color Code and Radio Frequency. - For administrative efficiency and enforcement of
regulations, registered fishing vessels shall bear a color code as may be determined by the
Department and may be assigned a radio frequency specific and distinct to its area of operation.

Section 41. Passage. - Commercial and other passage not in the regular conduct of fisheries
activity shall be made at designated navigational lanes.

Section 42. Transshipment. - Foreign fishing vessels wishing to avail of land, air and sea facilities
available in the Philippines to transport fishery products which are caught outside Philippine
territorial waters to its final destination shall call only at duly designated government-owned or -
controlled regional fishport complexes after securing clearance from the Department.
Section 43. Operation of Radio Communication Facilities on Board Fishing Vessels. - The
Department shall promulgate guidelines in the operation of radio communication facilities on board
fishing vessels and the assignment of radio frequencies specific and distinct to area of operation in
coordination with the National Telecommunications Commission.

Section 44. Use of Superlight. - The number and wattage of superlights used in commercial fishing
vessels shall be regulated by the Department: Provided, That the use of superlights is banned within
municipal waters and bays.

ARTICLE III
AQUACULTURE

Section 45. Disposition of Public Lands for Fishery Purposes. - Public lands such as tidal
swamps, mangroves, marshes, foreshore lands and ponds suitable for fishery operations shall not
be disposed or alienated. Upon effectivity of this Code, FLA may be issued for public lands that may
be declared available for fishpond development primarily to qualified fisherfolk
cooperatives/associations: Provided, however, That upon the expiration of existing FLAs the current
lessees shall be given priority and be entitled to an extension of twenty-five (25) years in the
utilization of their respective leased areas. Thereafter, such FLAs shall be granted to any Filipino
citizen with preference, primarily to qualified fisherfolk cooperatives/associations as well as small
and medium enterprises as defined under Republic Act No. 8289: Provided, further, That the
Department shall declare as reservation, portions of available public lands certified as suitable for
fishpond purposes for fish sanctuary, conservation, and ecological purposes: Provided, finally, That
two (2) years after the approval of this Act, no fish pens or fish cages or fish traps shall be allowed in
lakes.

Section 46. Lease of Fishponds. - Fishpond leased to qualified persons and fisherfolk
organizations/cooperatives shall be subject to the following conditions:

(a) Areas leased for fishpond purposes shall be no more than 50 hectares for individuals and
250 hectares for corporations or fisherfolk organizations;

(b) The lease shall be for a period of twenty-five (25) years and renewable for another
twenty-five (25) years: Provided, That in case of the death of the lessee, his spouse and/or
children, as his heirs, shall have preemptive rights to the unexpired term of his Fishpond
Lease Agreement subject to the same terms and conditions provided herein provided that
the said heirs are qualified;

(c) Lease rates for fishpond areas shall be determined by the Department: Provided, That all
fees collected shall be remitted to the National Fisheries Research and Development
Institute and other qualified research institutions to be used for aquaculture research
development;

(d) The area leased shall be developed and producing on a commercial scale within three (3)
years from the approval of the lease contract: Provided, however, That all areas not fully
producing within five (5) years from the date of approval of the lease contract shall
automatically revert to the public domain for reforestation;

(e) The fishpond shall not be subleased, in whole or in part, and failure to comply with this
provision shall mean cancellation of FLA;
 (f) The transfer or assignment of rights to FLA shall be allowed only upon prior written
approval of the Department;

(g) The lessee shall undertake reforestation for river banks, bays, streams, and seashore
fronting the dike of his fishpond subject to the rules and regulations to be promulgated
thereon; and

(h) The lessee shall provide facilities that will minimize environmental pollution, i.e., settling
ponds, reservoirs, etc: Provided, That failure to comply with this provision shall mean
cancellation of FLA.

Section 47. Code of Practice for Aquaculture. - The Department shall establish a code of practice
for aquaculture that will outline general principles and guidelines for environmentally-sound design
and operation to promote the sustainable development of the industry. Such Code shall be
developed through a consultative process with the DENR, the fishworkers, FLA holders, fishpond
owners, fisherfolk cooperatives, small-scale operators, research institutions and the academe, and
other potential stakeholders. The Department may consult with specialized international
organizations in the formulation of the code of practice.

Section 48. Incentives and Disincentives for Sustainable Aquaculture Practices. - The
Department shall formulate incentives and disincentives, such as, but not limited to, effluent charges,
user fees and negotiable permits, to encourage compliance with the environmental standards and to
promote sustainable management practices.

Section 49. Reversion of All Abandoned, Undeveloped or Underutilized Fishponds. - The

DENR, in coordination with the Department, LGUs, other concerned agencies and FARMCs shall
determine which abandoned, underdeveloped or underutilized fishponds covered by FLAs can be
reverted to their original mangrove state and after having made such determination shall take all
steps necessary to restore such areas in their original mangrove state.

Section 50. Absentee Fishpond Lease Agreement Holders. - Holders of fishpond lease
agreements who have acquired citizenship in another country during the existence of the FLA shall
have their lease automatically cancelled and the improvements thereon to be forfeited in favor of the
government and disposed of in accordance with rules and regulations promulgated thereon.

Section 51. License to Operate Fish Pens, Fish Cages, Fish Traps and Other Structures for
the Culture of Fish and Other Fishery Products. - Fish pens, fish cages, fish traps and other
structures for the culture of fish and other fishery products shall be constructed and shall operate
only within established zones duly designated by LGUs in consultation with the FARMCs concerned
consistent with national fisheries policies after the corresponding licenses thereof have been
secured. The area to be utilized for this purpose for individual person shall be determined by the
LGUs in consultation with the concerned FARMC: Provided, however, That not over ten percent
(10%) of the suitable water surface area of all lakes and rivers shall be allotted for aquaculture
purposes like fish pens, fish cages and fish traps; and the stocking density and feeding requirement
which shall be controlled and determined by its carrying capacity: Provided, further, That fish pens
and fish cages located outside municipal waters shall be constructed and operated only within fish
pen and fish cage belts designated by the Department and after corresponding licenses therefor
have been secured and the fees thereof paid.

Section 52. Pearl Farm Leases. - The foregoing provisions notwithstanding, existing pearl farm
leases shall be respected and allowed to operate under the terms thereof. New leases may be
granted to qualified persons who possess the necessary capital and technology, by the LGUs having
jurisdiction over the area.

Section 53. Grant of Privileges for Operations of Fish Pens, Cages, Corrals/Traps and Similar
Structures. - No new concessions, licenses, permits, leases and similar privileges for the
establishment or operation of fish pens, fish cages, fish corrals/traps and other similar structures in
municipal areas shall be granted except to municipal fisherfolk and their organizations.

Section 54. Insurance for Fishponds, Fish Cages and Fish Pens. - Inland fishponds, fish cages
and fish pens shall be covered under the insurance program of the Philippine Crop Insurance
Corporation for losses caused by force majeure and fortuitous events.

Section 55. Non-Obstruction to Navigation. - Nothing in the foregoing sections shall be construed
as permitting the lessee, licensee, or permittee to undertake any construction which will obstruct the
free navigation in any stream, river, lakes, or bays flowing through or adjoining the fish pens, fish
cages, fish traps and fishponds, or impede the flow of the tide to and from the area. Any construction
made in violation hereof shall be removed upon the order of the Department in coordination with the
other government agencies concerned at the expense of the lessee, licensee, or occupants thereof,
whenever applicable. The Department shall within thirty (30) days after the effectivity of this Code
formulate and implement rules and regulations for the immediate dismantling of existing obstruction
to navigation.

Section 56. Non-Obstruction to Defined Migration Paths. - Nothing in the foregoing sections shall
be construed as permitting the lessee, permittee, or licensee to undertake any construction which
will obstruct any defined migration path of migratory fish species such as river mouths and estuaries
with a distance determined by the concerned LGUs in consultation with and upon the
recommendation of the FARMCs.

Section 57. Registration of Fish Hatcheries and Private Fishponds, etc. - All fish hatcheries, fish
breeding facilities and private fishponds must be registered with the LGUs which shall prescribe
minimum standards for such facilities in consultation with the Department: Provided, That the
Department shall conduct a yearly inventory of all fishponds, fish pens and fish cages whether in
public or private lands: Provided, further, That all fishpond, fish pens and fish cage operators shall
annually report to the Department the type of species and volume of production in areas devoted to
aquaculture.

ARTICLE IV
POST-HARVEST FACILITIES, ACTIVITIES AND TRADES

Section 58. Comprehensive Post-harvest and Ancillary Industries Plan. - The Department shall
conduct a regular study of fisheries post-harvest operations and ancillary industries, in the
formulation of a comprehensive plan for post-harvest and ancillary industries. It shall take into
account among others, the following:

(a) detailed and clear guidelines on the distribution, construction, maintenance and use of
post-harvest infrastructure facilities;

(b) extension of credit and incentives for post-harvest operations;

(c) promotion and strengthening of semi-processing, processing and handling;

 (d) development of domestic fishmeal industry;

(e) development of fisheries ship-building and repair as a viable industry;

(f) development and strengthening of marketing facilities and activities, including the pricing
system, with emphasis on collective marketing and the elimination of middlemen;

(g) increased participation of cooperatives and non-governmental organizations in post-

harvest operations and ancillary industries; and

(h) integration of fisheries post-harvest operations into the national fisheries plan.

Section 59. Establishment of Post-Harvest Facilities for Fishing Communities. - The LGUs
shall coordinate with the private sector and other concerned agencies and FARMCs in the
establishment of post-harvest facilities for fishing communities such as, but not limited to, municipal
fish landing sites, fish ports, ice plants and cold storage and other fish processing establishments to
serve primarily the needs of municipal fisherfolk: Provided, That such post-harvest facilities shall be
consistent with the Comprehensive Post-harvest and Ancillary Industries Plan.

Section 60. Registration and Licensing of all Post-Harvest Facilities. - All post-harvest facilities
such as fish processing plants, ice plants, and cold storages, fish ports/landings and other fishery
business establishments must register with and be licensed by the LGUs which shall prescribe
minimum standards for such facilities in consultation with the Department.

Section 61. Importation and Exportation of Fishery Products. -

(a) Export of fishery products shall be regulated whenever such exportation affects domestic
food security and production: Provided, That exportation of live fish shall be prohibited
except those which are hatched or propagated in accredited hatcheries and ponds;

(b) To protect and maintain the local biodiversity or ensure the sufficiency of domestic
supply, spawners, breeders, eggs and fry of bangus, prawn and other endemic species, as
may be determined by the Department, shall not be exported or caused to be exported by
any person;

(c) Fishery products may be imported only when the importation has been certified as
necessary by the Department in consultation with the FARMC, and all the requirements of
this Code, as well as all existing rules and regulations have been complied with: Provided,
That fish imports for canning/processing purposes only may be allowed without the
necessary certification, but within the provisions of Section 61(d) of this Code; and

(d) No person, shall import and/or export fishery products of whatever size, stage or form for
any purpose without securing a permit from the Department.

The Department in consultation with the FARMC shall promulgate rules and regulations on
importation and exportation of fish and fishery/aquatic resources with the Government's
export/import simplification procedures.

Section 62. Instruments of Weights and Measures, and Quality Grades/Standards. - Standards
for weights, volume and other measurements for all fishery transactions shall be set by the
Department.
All fish and fishery products for export, import and domestic consumption shall meet the quality
grades/standards as determined by the Department.

The LGU concerned shall, by appropriate ordinance, penalize fraudulent practices and unlawful
possession or use of instruments of weights and measures.

CHAPTER III
Reconstitution of The Bureau of Fisheries and Aquatic Resources and Creation of Fisheries
and Aquatic Resources Management Councils

ARTICLE I
RECONSTITUTION OF THE BUREAU OF FISHERIES AND AQUATIC RESOURCES

Section 63. Creation of the Position of Undersecretary for Fisheries and Aquatic Resources. -
There is hereby created in the Department of Agriculture the position of Undersecretary for Fisheries
and Aquatic Resources, solely for the purpose of attending to the needs of the fishing industry, to be
appointed by the President. Such Undersecretary shall have the following functions:

(a) set policies and formulate standards for the effective, efficient and economical operations
of the fishing industry in accordance with the programs of the government;

(b) exercise overall supervision over all functions and activities of all offices and
instrumentalities and other offices related to fisheries including its officers;

(c) establish, with the assistance of the director, such regional, provincial and other fishery
officers as may be necessary and appropriate and organize the internal structure of BFAR in
such manner as is necessary for the efficient and effective attainment of its objectives and
purposes; and

(d) perform such other functions as may be necessary or proper to attain the objectives of
this Code.

Section 64. Reconstitution of the BFAR. - The Bureau of Fisheries and Aquatic Resources
(BFAR) is hereby reconstituted as a line bureau under the Department of Agriculture.

Section 65. Functions of the Bureau of Fisheries and Aquatic Resources. - As a line bureau,
the BFAR shall have the following functions:

(a) prepare and implement a Comprehensive National Fisheries Industry Development Plan;

(b) issue licenses for the operation of commercial fishing vessels;

(c) issue identification cards free of charge to fishworkers engaged in commercial fishing;

(d) monitor and review joint fishing agreements between Filipino citizens and foreigners who
conduct fishing activities in international waters, and ensure that such agreements are not
contrary to Philippine commitment under international treaties and convention on fishing in
the high seas;

(e) formulate and implement a Comprehensive Fishery Research and Development

Program, such as, but not limited to, sea farming, sea ranching, tropical/ornamental fish and
seaweed culture, aimed at increasing resource productivity, improving resource use
efficiency, and ensuring the long-term sustainability of the country's fishery and aquatic
resources;

(f) establish and maintain a Comprehensive Fishery Information System;

(g) provide extensive development support services in all aspects of fisheries production,
processing and marketing;

(h) provide advisory services and technical assistance on the improvement of quality of fish
from the time it is caught (i.e. on board fishing vessel, at landing areas, fish markets, to the
processing plants and to the distribution and marketing chain);

(i) coordinate efforts relating to fishery production undertaken by the primary fishery
producers, LGUs, FARMCs, fishery and organizations/cooperatives;

(j) advise and coordinate with LGUs on the maintenance of proper sanitation and hygienic
practices in fish markets and fish landing areas;

(k) establish a corps of specialists in collaboration with the Department of National Defense,
Department of the Interior and Local Government, Department of Foreign Affairs for the
efficient monitoring, control and surveillance of fishing activities within Philippine territorial
waters and provide the necessary facilities, equipment and training therefor;

(l) implement an inspection system for import and export of fishery/aquatic products and fish
processing establishments, consistent with international standards to ensure product quality
and safety;

(m) coordinate with LGUs and other concerned agencies for the establishment of productivity
enhancing and market development programs in fishing communities to enable women to
engage in other fisheries/economic activities and contribute significantly to development
efforts;

(n) enforce all laws, formulate and enforce all rules and regulations governing the
conservation and management of fishery resources, except in municipal waters, and to settle
conflicts of resource use and allocation in consultation with the NFARMC, LGUs and local
FARMCs;

(o) develop value-added fishery-products for domestic consumption and export; lawphi 1™

(p) recommend measures for the protection/enhancement of the fishery industries;

(q) assist the LGUs in developing their technical capability in the development, management,
regulation, conservation, and protection of the fishery resources;

(r) formulate rules and regulations for the conservation and management of straddling fish
stocks and highly migratory fish stocks; and

(s) perform such other related functions which shall promote the development, conservation,
management, protection and utilization of fisheries and aquatic resources.
Section 66. Composition of BFAR. - As a line bureau, the BFAR shall be headed by a Director and
assisted by two (2) Assistant Directors who shall supervise the administrative and technical services
of the bureau respectively. It shall establish regional, provincial and municipal offices as may be
appropriate and necessary to carry out effectively and efficiently the provisions of this Code.

Section 67. Fisheries Inspection and Quarantine Service. - For purposes of monitoring and
regulating the importation and exportation of fish and fishery/aquatic resources, the Fisheries
Inspection and Quarantine Service in the BFAR is hereby strengthened and shall have the following
functions:

(a) conduct fisheries quarantine and quality inspection of all fish and fishery/aquatic products
coming into and going out of the country by air or water transport, to detect the presence of
fish pest and diseases and if found to harbor fish pests or diseases shall be confiscated and
disposed of in accordance with environmental standards and practices;

(b) implement international agreements/commitments on bio-safety and bio-diversity as well

as prevent the movement or trade of endemic fishery and aquatic resources to ensure that
the same are not taken out of the country;

(c) quarantine such aquatic animals and other fishery products determined or suspected to
be with fishery pests and diseases and prevent the movement or trade from and/or into the
country of these products so prohibited or regulated under existing laws, rules and
regulations as well as international agreements of which the Philippines is a State Party;

(d) examine all fish and fishery products coming into or going out of the country which may
be a source or medium of fish pests or diseases and/or regulated by existing fishery
regulations and ensure that the quality of fish import and export meet international standards;
and

(e) document and authorize the movement or trade of fish and fishery products when found
free of fish pests or diseases and collect necessary fees prescribed by law and regulations.

ARTICLE II
THE FISHERIES AND AQUATIC RESOURCES MANAGEMENT COUNCILS (FARMCs)

Section 68. Development of Fisheries and Aquatic Resources in Municipal Waters and Bays. -
Fisherfolk and their organizations residing within the geographical jurisdiction of the barangays,
municipalities or cities with the concerned LGUs shall develop the fishery/aquatic resources in
municipal waters and bays.

Section 69. Creation of Fisheries and Aquatic Resources Management Councils (FARMCs). -
FARMCs shall be established in the national level and in all municipalities/cities abutting municipal
waters as defined by this Code. The FARMCs shall be formed by fisherfolk
organizations/cooperatives and NGOs in the locality and be assisted by the LGUs and other
government entities. Before organizing FARMCs, the LGUs, NGOs, fisherfolk, and other concerned
POs shall undergo consultation and orientation on the formation of FARMCs.

Section 70. Creation and Composition of the National Fisheries and Aquatic Resources
Management Council (NFARMC). - There is hereby created a National Fisheries and Aquatic
Resources Management Council hereinafter referred to as NFARMC as an
advisory/recommendatory body to the Department. The NFARMC shall be composed of fifteen (15)
members consisting of:
 (a) the Undersecretary of Agriculture, as Chairman;

(b) the Undersecretary of the Interior and Local Government;

(c) five (5) members representing the fisherfolk and fishworkers;

(d) five (5) members representing commercial fishing and aquaculture operators and the
processing sectors;

(e) two (2) members from the academe; and

(f) one (1) representative of NGOs involved in fisheries.

The members of the NFARMC, except for the Undersecretary of Agriculture and the Undersecretary
of the Interior and Local Government, shall be appointed by the President upon the nomination of
their respective organizations.

Section 71. Terms of Office. - The members of NFARMC, except the Undersecretary of Agriculture
and the Undersecretary of the Interior and Local Government, shall serve for a term of three (3)
years without reappointment.

Section 72. Functions of the NFARMC. - The NFARMC shall have the following functions:

(a) assist in the formulation of national policies for the protection, sustainable development
and management of fishery and aquatic resources for the approval of the Secretary;

(b) assist the Department in the preparation of the National Fisheries and Industry
Development Plan; and

(c) perform such other functions as may be provided by law.

Section 73. The Municipal/City Fisheries and Aquatic Resources Management Councils
(M/CFARMCs). - The M/CFARMCs shall be created in each of the municipalities and cities abutting
municipal waters. However, the LGU may create the Barangay Fisheries and Aquatic Resources
Management Councils (BFARMCs) and the Lakewide Fisheries and Aquatic Resources
Management Councils (LFARMCs) whenever necessary. Such BFARMCs and LFARMCs shall
serve in an advisory capacity to the LGUs.

Section 74. Functions of the M/CFARMCs. - The M/CFARMCs shall exercise the following
functions:

(a) assist in the preparation of the Municipal Fishery Development Plan and submit such plan
to the Municipal Development Council;

(b) recommend the enactment of municipal fishery ordinances to the sangguniang

bayan/sangguniang panlungsod through its Committee on Fisheries;

(c) assist in the enforcement of fishery laws, rules and regulations in municipal waters;
 (d) advise the sangguniang bayan/panlungsod on fishery matters through its Committee on
Fisheries, if such has been organized; and

(e) perform such other functions which may be assigned by the sangguniang
bayan/panlungsod.

Section 75. Composition of the M/CFARMC . - The regular member of the M/CFARMCs shall be
composed of:

(a) Municipal/City Planning Development Officer;

(b) Chairperson, Agriculture/Fishery Committee of the Sangguniang Bayan/Panlungsod;

(c) representative of the Municipal/City Development Council;

(d) representative from the accredited non-government organization;

(e) representative from the private sector;

(f) representative from the Department of Agriculture; and

(g) at least eleven (11) fisherfolk representatives (seven (7) municipal fisherfolk, one (1)
fishworker and three (3) commercial fishers) in each municipality/city which include
representative from youth and women sector.

The Council shall adopt rules and regulations necessary to govern its proceedings and election.

Section 76. The Integrated Fisheries and Aquatic Resources Management Councils
(IFARMCs). - The IFARMCs shall be created in bays, gulfs, lakes and rivers and dams bounded by
two (2) or more municipalities/cities.

Section 77. Functions of the IFARMCs. - The IFARMC shall have the following functions:

(a) assist in the preparation of the Integrated Fishery Development Plan and submit such
plan to the concerned Municipal Development Councils;

(b) recommend the enactment of integrated fishery ordinances to the concerned

sangguniang bayan/panlungsod through its Committee on Fisheries, if such has been
organized;

(c) assist in the enforcement of fishery laws, rules and regulations in concerned municipal
waters;

(d) advice the concerned sangguniang bayan/panlungsod on fishery matters through its
Committee on Fisheries, if such has been organized; and

(e) perform such other functions which may be assigned by the concerned sangguniang
bayan/panlungsod.
Section 78. Composition of the IFARMCs. - The regular members of the IFARMCs shall be
composed of the following:

(a) the chairperson of the Committee on Agriculture/Fisheries of the concerned sangguniang

bayan/panlungsod;

(b) the Municipal/City Fisheries Officers of the concerned municipalities/cities;

(c) the Municipal/City Development Officers of the concerned municipalities/cities;

(d) one (1) representative from NGO;

(e) one (1) representative from private sector; and

(f) at least nine (9) representatives from the fisherfolk sector which include representatives
from the youth and women sector.

The Council shall adopt rules and regulations necessary to govern its proceedings and election.

Section 79. Source of Funds of the FARMCs. - A separate fund for the NFARMC, IFARMCs and
M/CFARMCs shall be established and administered by the Department from the regular annual
budgetary appropriations.

CHAPTER IV
Fishery Reserves, Refuge and Sanctuaries

Section 80. Fishing Areas Reserves for Exclusive Use of Government. - The Department may
designate area or areas in Philippine waters beyond fifteen (15) kilometers from shoreline as fishery
reservation for the exclusive use of the government or any of its political subdivisions, agencies or
instrumentalities, for propagation, educational, research and scientific purposes: Provided, That in
municipalities or cities, the concerned LGUs in consultation with the FARMCs may recommend to
the Department that portion of the municipal waters be declared as fishery reserves for special or
limited use, for educational, research, and/or special management purposes. The FARMCs may
recommend to the Department portions of the municipal waters which can be declared as fisheries
reserves for special or limited use for educational, research and special management purposes.

Section 81. Fish Refuge and Sanctuaries. - The Department may establish fish refuge and
sanctuaries to be administered in the manner to be prescribed by the BFAR at least twenty-five
percent (25%) but not more than forty percent (40%) of bays, foreshore lands, continental shelf or
any fishing ground shall be set aside for the cultivation of mangroves to strengthen the habitat and
the spawning grounds of fish. Within these areas no commercial fishing shall be allowed. All marine
fishery reserves, fish sanctuaries and mangrove swamp reservations already declared or proclaimed
by the President or legislated by the Congress of the Philippines shall be continuously administered
and supervised by the concerned agency: Provided, however, That in municipal waters, the
concerned LGU in consultation with the FARMCs may establish fishery refuge and sanctuaries. The
FARMCs may also recommend fishery refuge and sanctuaries: Provided, further, That at least
fifteen percent (15%) where applicable of the total coastal areas in each municipality shall be
identified, based on the best available scientific data and in consultation with the Department, and
automatically designated as fish sanctuaries by the LGUs in consultation with the concerned
FARMCs.
 CHAPTER V
Fisheries Research and Development

Section 82. Creation of a National Fisheries Research and Development Institute (NFRDI). - In
recognition of the important role of fisheries research in the development, management,
conservation and protection of the country's fisheries and aquatic resources, there is hereby created
a National Fisheries Research and Development Institute (NFRDI).

The Institute shall form part of the National Research and Development Network of the Department
of Science and Technology (DOST).

The Institute, which shall be attached to the Department shall serve as the primary research arm of
the BFAR. The overall governance of the Institute shall be vested in the Governing Board which
shall formulate policy guidelines for its operation. The plans, programs and operational budget shall
be passed by the Board. The Board may create such committees as it may deem necessary for the
proper and effective performance of its functions. The composition of the Governing Board shall be
as follows:

(a) Undersecretary for Fisheries - Chairman

(b) BFAR Director - Vice Chairman

(c) NFRDI Executive Director - Member

(d) PCAMRD Executive Director - Member

(e) Representative from the academe - Member

(f) four (4) representatives from the private sector who shall come from the following
subsectors: - Members

 Municipal Fisherfolk
 Commercial Fishing Operator
 Aquaculture Operator
 Post-Harvest/Processor

The NFRDI shall have a separate budget specific to its manpower requirements and operations to
ensure the independent and objective implementation of its research activities.

Section 83. Qualification Standard. - The Institute shall be headed by an Executive Director to be
appointed by the President of the Philippines upon the recommendation of the governing board. The
Executive Director shall hold a Doctorate degree in fisheries and/or other related disciplines. The
organizational structure and staffing pattern shall be approved by the Department: Provided,
however, That the staffing pattern and remunerations for scientific and technical staff shall be based
on the qualification standards for science and technology personnel.

Section 84. Research and Development Objectives. - Researches to be done by the NFRDI are
expected to result in the following:

(a) To raise the income of the fisherfolk and to elevate the Philippines among the top five (5)
in the world ranking in the fish productions;
 (b) to make the country's fishing industry in the high seas competitive;

(c) to conduct social research on fisherfolk families for a better understanding of their
conditions and needs; and

(d) to coordinate with the fisheries schools, LGUs and private sectors regarding the
maximum utilization of available technology, including the transfer of such technology to the
industry particularly the fisherfolk.

Section 85. Functions of the NFRDI . - As a national institute, the NFRDI shall have the following
functions:

(a) establish a national infrastructure unit complete with technologically-advanced features

and modern scientific equipment, which shall facilitate, monitor, and implement various
research needs and activities of the fisheries sector;

(b) provide a venue for intensive training and development of human resources in the field of
fisheries, a repository of all fisheries researches and scientific information;

(c) provide intensive training and development of human resources in the field of fisheries for
the maximum utilization of available technology;

(d) hasten the realization of the economic potential of the fisheries sector by maximizing
developmental research efforts in accordance with the requirements of the national fisheries
conservations and development programs, also possibly through collaborative effort with
international institutions; and

(e) formally establish, strengthen and expand the network of fisheries-researching

communities through effective communication linkages nationwide.

CHAPTER VI
Prohibitions and Penalties

Section 86. Unauthorized Fishing or Engaging in Other Unauthorized Fisheries Activities. - No

person shall exploit, occupy, produce, breed, culture, capture or gather fish, fry or fingerlings of any
fishery species or fishery products, or engage in any fishery activity in Philippine waters without a
license, lease or permit.

Discovery of any person in an area where he has no permit or registration papers for a fishing vessel
shall constitute a prima facie presumption that the person and/or vessel is engaged in unauthorized
fishing: Provided, That fishing for daily food sustenance or for leisure which is not for commercial,
occupation or livelihood purposes may be allowed.

It shall be unlawful for any commercial fishing vessel to fish in bays and in such other fishery
management areas which may hereinafter be declared as over-exploited.

Any commercial fishing boat captain or the three (3) highest officers of the boat who commit any of
the above prohibited acts upon conviction shall be punished by a fine equivalent to the value of
catch or Ten thousand pesos (P10,000.00) whichever is higher, and imprisonment of six (6) months,
confiscation of catch and fishing gears, and automatic revocation of license.
It shall be unlawful for any person not listed in the registry of municipal fisherfolk to engage in any
commercial fishing activity in municipal waters. Any municipal fisherfolk who commits such violation
shall be punished by confiscation of catch and a fine of Five hundred pesos (500.00).

Section 87. Poaching in Philippine Waters. - It shall be unlawful for any foreign person,
corporation or entity to fish or operate any fishing vessel in Philippine waters.

The entry of any foreign fishing vessel in Philippine waters shall constitute a prima facie evidence
that the vessel is engaged in fishing in Philippine waters.

Violation of the above shall be punished by a fine of One hundred thousand U.S. Dollars
(US$100,000.00), in addition to the confiscation of its catch, fishing equipment and fishing vessel:
Provided, That the Department is empowered to impose an administrative fine of not less than Fifty
thousand U.S. Dollars (US$50,000.00) but not more than Two hundred thousand U.S. Dollars
(US$200,000.00) or its equivalent in the Philippine Currency.

Section 88. Fishing Through Explosives, Noxious or Poisonous Substance, and/or

Electricity. -

(1) It shall be unlawful for any person to catch, take or gather or cause to be caught, taken or
gathered, fish or any fishery species in Philippine waters with the use of electricity,
explosives, noxious or poisonous substance such as sodium cyanide in the Philippine fishery
areas, which will kill, stupefy, disable or render unconscious fish or fishery species: Provided,
That the Department, subject to such safeguards and conditions deemed necessary and
endorsement from the concerned LGUs, may allow, for research, educational or scientific
purposes only, the use of electricity, poisonous or noxious substances to catch, take or
gather fish or fishery species: Provided, further, That the use of poisonous or noxious
substances to eradicate predators in fishponds in accordance with accepted scientific
practices and without causing adverse environmental impact in neighboring waters and
grounds shall not be construed as illegal fishing.

It will likewise be unlawful for any person, corporation or entity to possess, deal in, sell or in
any manner dispose of, any fish or fishery species which have been illegally caught, taken or
gathered.

The discovery of dynamite, other explosives and chemical compounds which contain
combustible elements, or noxious or poisonous substances, or equipment or device for
electro-fishing in any fishing vessel or in the possession of any fisherfolk, operator, fishing
boat official or fishworker shall constitute prima facie evidence, that the same was used for
fishing in violation of this Code. The discovery in any fishing vessel of fish caught or killed
with the use of explosive, noxious or poisonous substances or by electricity shall constitute
prima facie evidence that the fisherfolk, operator, boat official or fishworker is fishing with the
use thereof.

(2) Mere possession of explosive, noxious or poisonous substances or electrofishing devices

for illegal fishing shall be punishable by imprisonment ranging from six (6) months to two (2)
years.

(3) Actual use of explosives, noxious or poisonous substances or electrofishing devices for
illegal fishing shall be punishable by imprisonment ranging from five (5) years to ten (10)
years without prejudice to the filing of separate criminal cases when the use of the same
result to physical injury or loss of human life.
 (4) Dealing in, selling, or in any manner disposing of, for profit, illegally caught/gathered
fisheries species shall be punished by imprisonment ranging from six (6) months to two (2)
years.

(5) In all cases enumerated above, the explosives, noxious or poisonous substances and/or
electrical devices, as well as the fishing vessels, fishing equipment and catch shall be
forfeited.

Section 89. Use of Fine Mesh Net. - It shall be unlawful to engage in fishing using nets with mesh
smaller than that which may be fixed by the Department: Provided, That the prohibition on the use of
fine mesh net shall not apply to the gathering of fry, glass eels, elvers, tabios, and alamang and such
species which by their nature are small but already mature to be identified in the implementing rules
and regulations by the Department.

Violation of the above shall subject the offender to a fine from Two thousand pesos (P2,000.00) to
Twenty thousand pesos (P20,000.00) or imprisonment from six (6) months to two (2) years or both
such fine and imprisonment at the discretion of the court: Provided, That if the offense is committed
by a commercial fishing vessel, the boat captain and the master fisherman shall also be subject to
the penalties provided herein: Provided, further, That the owner/operator of the commercial fishing
vessel who violates this provision shall be subjected to the same penalties provided herein:
Provided, finally, That the Department is hereby empowered to impose upon the offender an
administrative fine and/or cancel his permit or license or both.

Section 90. Use of Active Gear in the Municipal Waters and Bays and Other Fishery
Management Areas. - It shall be unlawful to engage in fishing in municipal waters and in all bays as
well as other fishery management areas using active fishing gears as defined in this Code.

Violators of the above prohibitions shall suffer the following penalties:

(1) The boat captain and master fisherman of the vessels who participated in the violation
shall suffer the penalty of imprisonment from two (2) years to six (6) years;

(2) The owner/operator of the vessel shall be fined from Two thousand pesos (P2,000.00) to
Twenty thousand pesos (20,000.00) upon the discretion of the court.

If the owner/operator is a corporation, the penalty shall be imposed on the chief executive
officer of the Corporation.

If the owner/operator is a partnership the penalty shall be imposed on the managing partner.

(3) The catch shall be confiscated and forfeited.

Section 91. Ban on Coral Exploitation and Exportation. - It shall be unlawful for any person or
corporation to gather, possess, sell or export ordinary precious and semi-precious corals, whether
raw or in processed form, except for scientific or research purposes.

Violations of this provision shall be punished by imprisonment from six (6) months to two (2) years
and a fine from Two thousand pesos (P2,000.00) to Twenty thousand pesos (20,000.00), or both
such fine and imprisonment, at the discretion of the court, and forfeiture of the subject corals,
including the vessel and its proper disposition.
The confiscated corals shall either be returned to the sea or donated to schools and museums for
educational or scientific purposes or disposed through other means.

Section 92. Ban on Muro-Ami Other Methods and Gear Destructive to Coral Reefs and Other
Marine Habitat.- It shall be unlawful for any person, natural or juridical, to fish with gear method that
destroys coral reefs, seagrass beds, and other fishery marine life habitat as may be determined by
the Department. "Muro-Ami" and any of its variation, and such similar gear and methods that require
diving, other physical or mechanical acts to pound the coral reefs and other habitat to entrap, gather
or catch fish and other fishery species are also prohibited.

The operator, boat captain, master fisherman, and recruiter or organizer of fishworkers who violate
this provision shall suffer a penalty of two (2) years to ten (10) years imprisonment and a fine of not
less than One hundred thousand pesos (P100,000.00) to Five hundred thousand pesos
(P500,000.00) or both such fine and imprisonment, at the discretion of the court. The catch and gear
used shall be confiscated.

It shall likewise be unlawful for any person or corporation to gather, sell or export white sand, silica,
pebbles and any other substances which make up any marine habitat.

The person or corporation who violates this provision shall suffer a penalty of two (2) years to ten
(10) years imprisonment and a fine of not less than One hundred thousand pesos (P100,000.00) to
Five hundred thousand pesos (P500,000.00) or both such fine and imprisonment, at the discretion of
the court. The substance taken from its marine habitat shall be confiscated.

Section 93. Illegal Use of Superlights. - It shall be unlawful to engage in fishing with the use of
superlights in municipal waters or in violation of the rules and regulations which may be promulgated
by the Department on the use of superlights outside municipal waters.

Violations of this provision shall be punished by imprisonment from six (6) months to two (2) years or
a fine of Five thousand pesos (P5,000.00) per superlight, or both such fine and imprisonment at the
discretion of the courts. The superlight, fishing gears and vessel shall be confiscated.

Section 94. Conversion of Mangroves. - It shall be unlawful for any person to convert mangroves
into fishponds or for any other purposes.

Violation of the provision of this section shall be punished by imprisonment of six (6) years and one
(1) day to twelve (12) years and/or a fine of Eighty thousand pesos (P80,000.00): Provided, That if
the area requires rehabilitation or restoration as determined by the court, the offender should also be
required to restore or compensate for the restoration of the damage.

Section 95. Fishing in Overfished Area and During Closed Season. - It shall be unlawful to fish
in overfished area and during closed season.

Violation of the provision of this section shall be punished by imprisonment of six (6) months and one
(1) day to six (6) years and/or fine of Six thousand pesos (P6,000.00) and by forfeiture of the catch
and cancellation of fishing permit or license.

Section 96. Fishing in Fishery Reserves, Refuge and Sanctuaries. - It shall be unlawful to fish in
fishery areas declared by the Department as fishery reserves, refuge and sanctuaries.
Violation of the provision of this section shall be punished by imprisonment of two (2) years to six (6)
years and/or fine of Two thousand pesos (P2,000.00) to Twenty thousand pesos (P20,000.00) and
by forfeiture of the catch and the cancellation of fishing permit or license.

Section 97. Fishing Or Taking of Rare, Threatened or Endangered Species. - It shall be unlawful
to fish or take rare, threatened or endangered species as listed in the CITES and as determined by
the Department.

Violation of the provision of this section shall be punished by imprisonment of twelve (12) years to
twenty (20) years and/or a fine of One hundred and twenty thousand pesos (P120,000.00) and
forfeiture of the catch, and the cancellation of fishing permit.

Section 98. Capture of Sabalo and Other Breeders/Spawners. - It shall be unlawful for any
person to catch, gather, capture or possess mature milkfish or "sabalo" and such other breeders or
spawners of other fishery species as may be determined by the Department: Provided, That
catching of "sabalo" and other breeders/spawners for local breeding purposes or scientific or
research purposes may be allowed subject to guidelines to be promulgated by the Department.

Violation of the provision of this section shall be punished by imprisonment of six (6) months and one
(1) day to eight (8) years and/or a fine of Eighty thousand pesos (P80,000.00) and forfeiture of the
catch, and fishing equipment used and revocation of license.

Section 99. Exportation of Breeders, Spawners, Eggs or Fry. - Exportation of breeders,

spawners, eggs or fry as prohibited in this Code shall be punished by imprisonment of eight (8)
years, confiscation of the same or a fine equivalent to double the value of the same, and revocation
of the fishing and/or export license/permit.

Section 100. Importation or Exportation of Fish or Fishery Species. - Any importation or

exportation of fish or fisheries species in violation of this Code shall be punished by eight (8) years of
imprisonment, a fine of Eighty thousand pesos (P80,000.00) and destruction of live fishery species
or forfeiture of non-live fishery species in favor of the department for its proper disposition: Provided,
That violator of this provision shall be banned from being members or stock holders of companies
currently engaged in fisheries or companies to be created in the future, the guidelines for which shall
be promulgated by the Department.

Section 101. Violation of Catch Ceilings. - It shall be unlawful for any person to fish in violation of
catch ceilings as determined by the Department. Violation of the provision of this section shall be
punished by imprisonment of six (6) months and one (1) day to six (6) years and/or a fine of Fifty
thousand pesos (P50,000.00) and forfeiture of the catch, and fishing equipment used and revocation
of license.

Section 102. Aquatic Pollution. - Aquatic pollution, as defined in this Code shall be unlawful.

Violation of the provision of this section shall be punished by imprisonment of six (6) years and one
(1) day to twelve (12) years and/or a fine of Eighty thousand pesos (P80,000.00) plus an additional
fine of Eight thousand pesos (P8,000.00) per day until such violation ceases and the fines paid.

Section 103. Other Violations. - The following fisheries activities shall also be considered as a
violation of this Code:
 (a) Failure to Comply with Minimum Safety Standards. - The owner and captain of a
commercial fishing vessel engaged in fishing who, upon demand by proper authorities, fails
to exhibit or show proof of compliance with the safety standards provided in this Code, shall
be immediately prevented from continuing with his fishing activity and escorted to the nearest
port or landing point. The license to operate the commercial fishing vessel shall be
suspended until the safety standard has been complied with.

(b) Failure to Conduct a Yearly Report on all Fishponds, Fish Pens and Fish Cages. - The
FLA of the holder who fails to render a yearly report shall be immediately cancelled:
Provided, That if the offender be the owner of the fishpond, fish pen or fish cage, he shall be
subjected to the following penalties: (1) first offense, a fine of Five hundred pesos (P500.00)
per unreported hectare; (2) subsequent offenses, a fine of One thousand pesos (1,000.00)
per unreported hectare.

(c) Gathering and Marketing of Shell Fishes. - It shall be unlawful for any person to take, sell,
transfer, or have in possession for any purpose any shell fish which is sexually mature or
below the minimum size or above the maximum quantities prescribed for the particular
species.

(d) Obstruction to Navigation or Flow and Ebb of Tide in any Stream, River, Lake or Bay. - It
shall be unlawful for any person who causes obstruction to navigation or flow or ebb of tide.

(e) Construction and Operation of Fish Corrals/Traps, Fish Pens and Fish Cages. - It shall be
unlawful to construct and operate fish corrals/traps, fish pens and fish cages without a
license/permit.

Subject to the provision of subparagraph (b) of this section, violation of the above-enumerated
prohibited acts shall subject the offender to a fine ranging from Two thousand pesos (P2,000.00) to
Ten thousand pesos (P10,000.00) or imprisonment from one (1) month and one (1) day to six (6)
months, or both such fine and imprisonment, upon the discretion of the court: Provided, That the
Secretary is hereby empowered to impose upon the offender an administrative fine of not more than
Ten thousand pesos (P10,000.00) or to cancel his permit or license, or to impose such fine and to
cancel his permit or license, in the discretion of the Secretary: Provided, further, That the Secretary,
or his duly authorized representative, and law enforcement agents are hereby empowered to
impound with the assistance of the Philippine Coast Guard, PNP-Maritime Command: Provided,
finally, That any person who unlawfully obstructs or delays the inspection and/or movement of fish
and fishery/aquatic products when such inspection and/or movement is authorized under this Code,
shall be subject to a fine of not more than Ten thousand pesos (P10,000.00) or imprisonment of not
more than two (2) years, or both such fine and imprisonment, upon the discretion of the court.

Every penalty imposed for the commission of an offense shall carry with it the forfeiture of the
proceeds of such offense and the instruments or tools with which it was committed.

Such proceeds and instruments or tools shall be confiscated and forfeited in favor of the
Government, unless they be the property of a third person not liable for the offense, but those
articles which are not subject of lawful commerce shall be destroyed.

Section 104. Commercial Fishing Vessel Operators Employing Unlicensed Fisherfolk or

Fishworker or Crew.- The owner/operator of a commercial fishing vessel employing unlicensed
fisherfolk or fishworker shall be fined Five hundred pesos (P500.00) each for every month that the
same has been employed and/or One thousand pesos (P1,000.00) for every month for each
unlicensed crew member who has been employed.
Section 105. Obstruction of Defined Migration Paths. - Obstruction of any defined migration
paths of anadromous, catadromous and other migratory species, in areas including, but not limited
to river mouths and estuaries within a distance determined by the concerned FARMCs shall be
punished by imprisonment of seven (7) years to twelve (12) years or a fine from Fifty thousand
pesos (P50,000.00) to One hundred thousand pesos (P100,000.00)or both imprisonment and fine at
the discretion of the court, and cancellation of permit/license, if any, and dismantling of obstruction
shall be at his own expense and confiscation of same.

Section 106. Obstruction to Fishery Law Enforcement Officer. - The boat owner, master or
operator or any person acting on his behalf of any fishing vessel who evades, obstructs or hinders
any fishery law enforcement officer of the Department to perform his duty, shall be fined Ten
thousand pesos (P10,000.00). In addition, the registration, permit and/or license of the vessel
including the license of the master fisherman shall be canceled.

Section 107. Promulgation of Administrative Orders. - For purposes of fishery regulation or other
fishery adjustments, the Department in consultation with the LGUs and local FARMCs, shall issue
Fishery Administrative Orders or regulations for the conservation, preservation, management and
sustainable development of fishery and aquatic resources.

CHAPTER VII
General Provisions

Section 108. Fisherfolk Settlement Areas. - The Department shall establish and create fisherfolk
settlement areas in coordination with concerned agencies of the government, where certain areas of
the public domain, specifically near the fishing grounds, shall be reserved for the settlement of the
municipal fisherfolk. Nothing in this section shall be construed to vest ownership of any resettlement
area to a municipal fisherfolk for whom said areas may have been reserved for or had been actually
granted to.

Section 109. Municipal Fisheries Grant Fund. - For the development, management and
conservation of the municipal resources, there is hereby created a Fishery Grant Fund to finance
fishery projects of the LGUs primarily for the upliftment of the municipal fisherfolk. The amount of
One hundred million pesos (P100,000,000.00) is hereby appropriated out of the Department's
allocation in the General Appropriations Act (GAA) to support the Grant Fund.

For this purpose, the Department may seek financial assistance from any source and may receive
any donation therefore.

Section 110. Fishery Loan and Guarantee Fund. - Pursuant to Section 7, Article XIII of the
Constitution, there is hereby created a Fishery Loan and Guarantee Fund with an initial of One
hundred million pesos (P100,000,000.00), which shall be administered by the Land Bank of the
Philippines. The fund shall be made available for lending to qualified borrowers to finance the
development of the fishery industry under a program to be prescribed by the Department.

For the same purpose, the Department may seek financial assistance from any source and may
receive any donation therefrom.

Section 111. Fishing Vessels Development Fund. - There is hereby created a Fishing Vessels
Development Fund to enhance the building and/or acquisition of fishing vessels. This shall be a
long-term loan facility that shall be administered by the Development Bank of the Philippines. The
amount of Two hundred and fifty million pesos (P250,000,000.00) per year for five (5) years is
hereby appropriated out of the Department's allocation in the GAA to support this Development
Fund.

Section 112. Special Fisheries Science and Approfishtech Fund. - The Department shall provide
subsidy for full technical and financial support to the development of appropriate technology, both in
fishery and ancillary industries, that are ecologically sound, locally source-based and labor intensive,
based on the requirement and needs of the FARMCs. An initial amount of One hundred million
pesos (100,000,000.00) shall be authorized for the purpose of a Special Fisheries Science and
Approfishtech Fund, and thereafter shall be included in the GAA.

Section 113. Aquaculture Investment Fund. - An Aquaculture Investment Fund in the minimum
amount of Fifty million pesos (P50,000,000.00) shall be established for soft loans which shall be
extended to municipal fisherfolk and their organization who will engage in aquaculture, and for the
development of underdeveloped or underutilized inland fishponds.

Section 114. Other Fisheries Financing Facilities. - In addition to fisheries credit guarantee, grant
and other similar facilities granted under this Code, qualified Filipino fisherfolk and fisheries
enterprises shall enjoy such other facilities granted them under existing and/or new laws, specially
as to rural credit, with preference being given to fisheries cooperatives.

Section 115. Professionalization of Fisheries Graduates. - There is hereby created a Fisheries

Board of Examiners in the Professional Regulation Commission to upgrade the Fisheries Profession:
Provided, however, That those who have passed the Civil Service Examination for Fisheries shall
automatically be granted eligibility by the Fisheries Board of Examiners: Provided, further, That they
have served the industry in either public or private capacity for not less than five (5) years: Provided,
finally, That the first Board Examination for B.S. Fisheries Graduates shall be conducted within one
(1) year from the approval of this Code.

Section 116. Upgrading of State Fisheries Schools/Colleges. - The Department, in coordination

with the Commission on Higher Education (CHED), Department of Education, Culture and Sports
(DECS), and Technical Education and Skills Development Authority (TESDA), shall upgrade State
Fisheries Schools/Colleges which provide both formal and non-formal education: Provided, however,
That the CHED shall incorporate Approfishtech in the curricula of fisheries schools/colleges.

The Department and the CHED shall jointly formulate standards to upgrade all fisheries
schools/colleges. Fisheries schools/colleges that do not meet minimum standards shall be closed.

Section 117. Inclusion of Fisheries Conservation Subjects in School Curriculum. - Fisheries

conservation subjects shall be incorporated in the curricula of elementary and secondary schools
both private and public.

Section 118. Educational campaign at all levels. - The Department, the CHED, the DECS and the
Philippine Information Agency shall launch and pursue a nationwide educational campaign to:

(a) help realize the policies and implement the provisions of this Code;

(b) promote the development, management, conservation and proper use of the
environment;

(c) promote the principle of sustainable development; and

 (d) promote the development of truly Filipino-oriented fishing and ancillary industries.

Section 119. Infrastructure Support. - The Department in cooperation with concerned agencies
shall:

(a) prepare and implement a nationwide plan for the development of municipal fishing ports
and markets;

(b) prioritize the construction of farm-to-market roads linking the fisheries production sites,
coastal landing points and other post-harvest facilities to major market and arterial
roads/highways;

(c) identity community infrastructure facilities such as fish landing ports, ice plant and cold
storage facilities in consultation with fishery cooperatives/associations and prepare plans and
designs for their construction that would be consistent with international environmental
impact;

(d) establish and maintain quality laboratories in major fish ports and prescribe the highest
standards for the operation and maintenance of such post-harvest facilities;

(e) arrange and make representations with appropriate funding institutions to finance such
facilities for the use of the fishery cooperatives/associations;

(f) develop and strengthen marketing facilities and promote cooperative marketing systems;
and

(g) promote and strengthen local fisheries ship-building and repair industry.

Section 120. Extension Services. - The Department shall develop cost-effective, practical and
efficient extension services on a sustained basis, in addition to those provided by state educational
institutions, especially to municipal fisherfolk in undeveloped areas, utilizing practicable and
indigenous resources and government agencies available, and based upon a system of self-reliance
and self-help.

Section 121. Protection of Sensitive Technical Information. - The Department shall take such
measures as may be necessary in order to protect trade, industrial and policy information of Filipino
fisherfolk, fisheries owners/operators, entrepreneurs, manufacturers and researchers, when
disclosure of such information will injure the competitiveness or viability of domestic fisheries.

Section 122. Assistance in Collecting Information. - The Department, in coordination with other
government entities concerned, may require Filipino representatives abroad and foreign-based
personnel to assist in the collection of fisheries data and information.

Section 123. Charting of Navigational Lanes and Delineation of Municipal Waters. - The
Department shall authorize the National Mapping and Resource Information Authority (NAMRIA) for
the designation and charting of navigational lanes in fishery areas and delineation of municipal
waters. The Philippine Coast Guard shall exercise control and supervision over such designated
navigational lanes.

Section 124. Persons and Deputies Authorized to Enforce this Code and Other Fishery Laws,
Rules and Regulations. - The law enforcement officers of the Department, the Philippine Navy,
Philippine Coast Guard, Philippine National Police (PNP), PNP-Maritime Command, law
enforcement officers of the LGUs and other government enforcement agencies, are hereby
authorized to enforce this Code and other fishery laws, rules and regulations. Other competent
government officials and employees, punong barangays and officers and members of fisherfolk
associations who have undergone training on law enforcement may be designated in writing by the
Department as deputy fish wardens in the enforcement of this Code and other fishery laws, rules
and regulations.

Section 125. Strengthening Prosecution and Conviction of Violators of Fishery Laws. - The
Department of Justice (DOJ) shall embark on a program to strengthen the prosecution and
conviction aspects of fishery law enforcement through augmentation of the current complement of
state prosecutors and through their continuous training and reorientation on fishery laws, rules and
regulations.

Section 126. Foreign Grants and Aids. - All foreign grants, aids, exchange programs, loans,
researches and the like shall be evaluated and regulated by the Department to ensure that such are
consistent with the Filipinization, democratization and industrialization of fishing industry and the
development of the entire country.

Section 127. Mandatory Review. - The Congress of the Philippines shall undertake a mandatory
review of this Code at least once every five (5) years and as often as it may deem necessary, to
ensure that fisheries policies and guidelines remain responsive to changing circumstances.

CHAPTER VIII
Transitory Provisions

Section 128. Moratoria. - The Department shall, upon the recommendation of the Bureau, have the
power to declare a moratorium on the issuance of licenses for commercial fishing vessels to operate
in specified area or areas in Philippine waters for a limited period of time if there are indications of
overfishing brought about by a decrease in the volume and sizes of fish caught therein or for
conservation or ecological purposes.

No new licenses and similar privileges on exploitation of specific fishery areas in Philippine waters
and aquaculture production areas shall be issued in accordance with this Code. Such moratoria shall
not exceed five (5) years from the effectivity of this Code.

Section 129. Formulation of Implementing Rules and Regulations. - An Inter-agency Committee

is hereby created to formulate rules and regulations for the full implementation of this Code within
ninety (90) days of its effectivity: Provided, however, That the formulated rules and regulations shall
be submitted to both Houses of Congress for information and guidance. Such rules and regulations
shall take effect upon publication in a newspaper of general circulation.

The Inter-agency Committee shall be composed of the following:

(a) Secretary of Agriculture as Chairman;

(b) Secretary of the Interior and Local Government;

(c) Secretary of Environment and Natural Resources;

(d) Secretary of Justice;

 (e) Secretary of Finance;

(f) Secretary of Budget and Management;

(g) Secretary of Labor and Employment;

(h) Secretary of National Defense;

(i) Commissioner of Civil Service Commission;

(j) Director of BFAR;

(k) Executive Director of PCAMRD;

(l) General Manager of PFDA;

(m) One (1) representative from each of the following:

(a.1) The League of Provinces;

(a.2) The League of Cities;

(a.3) The League of Municipalities;

(a.4) The Liga ng mga Barangay;

(n) Representative of the municipal fisherfolk; lawphi 1™

(o) Representative of the commercial fishers;

(p) Representative of the non-government organizations involved in fishing concerns; and

(q) A representative from the academe coming from the specialized fisheries institution.

CHAPTER IX
Final Provisions

Section 130. Appropriation. - The sum necessary to effectively carry out the provisions of this Act
during the first year of implementation shall be sourced from the budget of the DA/BFAR and other
agencies performing fisheries-related functions: Provided, however, That such amount as may be
necessary to carry out the provisions of Sections 79, 109, 110, 111, 112, 113 are hereby
appropriated out of the unappropriated funds of the National Treasury. The Congress of the
Philippines shall provide for the appropriations of the Department, the NFRDI and the Fisheries
Scholarship Program for the succeeding years to be included in the annual GAA.

Section 131. Repealing Clause. - Presidential Decree No. 704, as amended by Presidential Decree
Nos. 1015 and 1058, Presidential Decree No. 977, as amended, Executive Order No. 967, Series of
1984, Executive Order No. 116, Series of 1987, Executive Order No. 292, Series of 1987, Executive
Order No. 473, Series of 1991 and other existing laws except Republic Act No. 7611, decrees,
executive orders, and rules and regulations or parts thereof, which are inconsistent with this Code,
are hereby repealed or modified accordingly.

Section 132. Separability Clause. - If any portion or provision of this Code is declared
unconstitutional or invalid, the other portions or provisions hereof, which are not affected thereby,
shall continue in full force and effect.

Section 133. Effectivity. - This Code shall take effect fifteen (15) days after its publication in the
Official Gazette or in two (2) newspapers of general publication.

Approved: February 25, 1998 lawphi1™

G.R. No. 110249 August 21, 1997

ALFREDO TANO, BALDOMERO TANO, DANILO TANO, ROMUALDO TANO, TEOCENES

MIDELLO, ANGEL DE MESA, EULOGIO TREMOCHA, FELIPE ONGONION, JR., ANDRES
LINIJAN, ROBERT LIM, VIRGINIA LIM, FELIMON DE MESA, GENEROSO ARAGON,
TEODORICO ANDRE, ROMULO DEL ROSARIO, CHOLITO ANDRE, ERICK MONTANO,
ANDRES OLIVA, VITTORIO SALVADOR, LEOPOLDO ARAGON, RAFAEL RIBA, ALEJANDRO
LEONILA, JOSE DAMACINTO, RAMIRO MANAEG, RUBEN MARGATE, ROBERTO REYES,
DANILO PANGARUTAN, NOE GOLPAN, ESTANISLAO ROMERO, NICANOR DOMINGO,
ROLDAN TABANG, ADRIANO TABANG, FREDDIE SACAMAY, MIGUEL TRIMOCHA,
PACENCIO LABABIT, PABLO H. OMPAD, CELESTINO A. ABANO, ALLAN ALMODAI, BILLY D.
BARTOLAY, ALBINO D. LIQUE, MECHOR J. LAYSON, MELANIE AMANTE, CLARO E. YATOC,
MERGELDO B. BALDEO, EDGAR M. ALMASETA, JOSELITO MANAEG, LIBERATO ANDRADA,
JR., ROBERTO BERRY, RONALD VILLANUEVA, EDUARDO VALMORIA, WILFREDO
MENDOZA, NAPOLEON BABANGGA, ROBERTO TADEPA, RUBEN ASINGUA, SILVERIO
GABO, JERRY ROMERO, DAVID PANGGARUTAN, DANIEL PANGGARUTAN, ROMEO
AGAWIN, FERNANDO EQUIZ, DITO LEQUIZ, RONILO MODERABLE, BENEDICTO TORRES,
ROSITO A. VALDEZ, CRESENCIO A. SAYANG, NICOMEDES S. ACOSTA, ERENEO A.
SEGARINO, JR., WILFREDO A. RAUTO, DIOSDADO A. ACOSTA, BONIFACIO G. SISMO,
TACIO ALUBA, DANIEL B. BATERZAL, ELISEO YBAÑEZ, DIOSDADO E. HANCHIC, EDDIE
ESCALICAS, ELEAZAR B. BATERZAL, DOMINADOR HALICHIC, ROOSEVELT RISMO-AN,
ROBERT C. MERCADER, TIRSO ARESGADO, DANIEL CHAVEZ, DANILO CHAVEZ, VICTOR
VILLAROEL, ERNESTO C. YBAÑEZ, ARMANDO T. SANTILLAN, RUDY S. SANTILLAN,
JODJEN ILUSTRISIMO, NESTOR SALANGRON, ALBERTO SALANGRON, ROGER L. ROXAS,
FRANCISCO T. ANTICANO, PASTOR SALANGRON, BIENVENIDO SANTILLAN, GILBUENA
LADDY, FIDEL BENJAMIN, JOVELITO BELGANO, HONEY PARIOL, ANTONIO SALANGRON,
NICASIO SALANGRON, & AIRLINE SHIPPERS ASSOCIATION OF PALAWAN, petitioners,
vs.
HON. GOV. SALVADOR P. SOCRATES, MEMBERS OF SANGGUNIANG PANLALAWIGAN OF
PALAWAN, namely, VICE-GOVERNOR JOEL T. REYES, JOSE D. ZABALA, ROSALINO R.
ACOSTA, JOSELITO A. CADLAON, ANDRES R. BAACO, NELSON P. PENEYRA, CIPRIANO C.
BARROMA, CLARO E. ORDINARIO, ERNESTO A. LLACUNA, RODOLFO C. FLORDELIZA,
GILBERT S. BAACO, WINSTON G. ARZAGA, NAPOLEON F. ORDONEZ and GIL P. ACOSTA,
CITY MAYOR EDWARD HAGEDORN, MEMBERS OF SANGGUNIANG PANLUNGSOD NG
PUERTO PRINCESA, ALL MEMBERS OF BANTAY DAGAT, MEMBERS OF PHILIPPINE
NATIONAL POLICE OF PALAWAN, PROVINCIAL AND CITY PROSECUTORS OF PALAWAN
and PUERTO PRINCESA CITY, and ALL JUDGES OF PALAWAN, REGIONAL, MUNICIPAL
AND METROPOLITAN, respondents.
DAVIDE, JR., J.:

Petitioners caption their petition as one for "Certiorari, Injunction With Preliminary and Mandatory
Injunction, with Prayer for Temporary Restraining Order" and pray that this Court: (1) declare as
unconstitutional: (a) Ordinance No. 15-92, dated 15 December 1992, of the Sangguniang
Panglungsod of Puerto Princesa; (b) Office Order No. 23, Series of 1993, dated 22 January 1993,
issued by Acting City Mayor Amado L. Lucero of Puerto Princesa City; and (c) Resolution No. 33,
Ordinance No. 2, Series of 1993, dated 19 February 1993, of the Sangguniang Panlalawigan of
Palawan; (2) enjoin the enforcement thereof; and (3) restrain respondents Provincial and City
Prosecutors of Palawan and Puerto Princesa City and Judges of the Regional Trial Courts,
Metropolitan Trial Courts 1 and Municipal Circuit Trial Courts in Palawan from assuming jurisdiction over and hearing cases
concerning the violation of the Ordinances and of the Office Order.

More appropriately, the petition is, and shall be treated as, a special civil action for certiorari and
prohibition.

The following is petitioners' summary of the factual antecedents giving rise to the petition:

1. On December 15, 1992, the Sangguniang Panlungsod ng Puerto Princesa City enacted
Ordinance No. 15-92 which took effect on January 1, 1993 entitled: "AN ORDINANCE
BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER OUTSIDE PUERTO
PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1, 1998 AND PROVIDING
EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES THEREOF", the full text of
which reads as follows:

Sec. 1. Title of the Ordinance. — This Ordinance is entitled: AN

ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH AND
LOBSTER OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993
TO JANUARY 1, 1998 AND PROVIDING EXEMPTIONS, PENALTIES AND
FOR OTHER PURPOSES THEREOF.

Sec. 2. Purpose, Scope and Coverage. — To effectively free our City Sea
Waters from Cyanide and other Obnoxious substance[s], and shall cover all
persons and/or entities operating within and outside the City of Puerto
Princesa who is are (sic) directly or indirectly in the business or shipment of
live fish and lobster outside the City.

Sec. 3. Definition of terms. — For purpose of this Ordinance the following are
hereby defined:

A. SEA BASS — A kind of fish under the

family of Centropomidae, better known as
APAHAP;

B. CATFISH — A kind of fish under the family

of Plotosidae, better known as HITO-HITO;

C. MUDFISH — A kind of fish under the family

of Orphicaphalisae better known as DALAG;
 D. ALL LIVE FISH — All alive, breathing not
necessarily moving of all specie[s] use[d] for
food and for aquarium purposes.

E. LIVE LOBSTER — Several relatively, large

marine crusteceans [sic] of the genus
Homarus that are alive and breathing not
necessarily moving.

Sec. 4. It shall be unlawful [for] any person or any business enterprise or

company to ship out from Puerto Princesa City to any point of destination
either via aircraft or seacraft of any live fish and lobster except SEA BASS,
CATFISH, MUDFISH, AND MILKFISH FRIES.

Sec. 5. Penalty Clause. — Any person/s and or business entity violating this
Ordinance shall be penalized with a fine of not more than P5,000.00 or
imprisonment of not more than twelve (12) months, cancellation of their
permit to do business in the City of Puerto Princesa or all of the herein stated
penalties, upon the discretion of the court.

Sec. 6. If the owner and/or operator of the establishment found violating the
provisions of this ordinance is a corporation or a partnership, the penalty
prescribed in Section 5 hereof shall be imposed upon its president and/or
General Manager or Managing Partner and/or Manager, as the case maybe
[sic].

Sec. 7. Any existing ordinance or any provision of any ordinance inconsistent

to [sic] this ordinance is deemed repealed.

Sec. 8. This Ordinance shall take effect on January 1, 1993.

SO ORDAINED.

xxx xxx xxx

2. To implement said city ordinance, then Acting City Mayor Amado L. Lucero issued Office
Order No. 23, Series of 1993 dated January 22, 1993 which reads as follows:

In the interest of public service and for purposes of City Ordinance No. PD 426-14-74,
otherwise known as "AN ORDINANCE REQUIRING ANY PERSON ENGAGED OR
INTENDING TO ENGAGE IN ANY BUSINESS, TRADE, OCCUPATION, CALLING OR
PROFESSION OR HAVING IN HIS POSSESSION ANY OF THE ARTICLES FOR WHICH A
PERMIT IS REQUIRED TO BE HAD, TO OBTAIN FIRST A MAYOR'S PERMIT" and "City
Ordinance No. 15-92, AN ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH
AND LOBSTER OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO
JANUARY 1, 1998, you are hereby authorized and directed to check or conduct necessary
inspections on cargoes containing live fish and lobster being shipped out from the Puerto
Princesa Airport, Puerto Princesa Wharf or at any port within the jurisdiction of the City to
any point of destinations [sic] either via aircraft or seacraft.
The purpose of the inspection is to ascertain whether the shipper possessed the required
Mayor's Permit issued by this Office and the shipment is covered by invoice or clearance
issued by the local office of the Bureau of Fisheries and Aquatic Resources and as to
compliance with all other existing rules and regulations on the matter.

Any cargo containing live fish and lobster without the required documents as stated herein
must be held for proper disposition.

In the pursuit of this Order, you are hereby authorized to coordinate with the PAL Manager,
the PPA Manager, the local PNP Station and other offices concerned for the needed support
and cooperation. Further, that the usual courtesy and diplomacy must be observed at all
times in the conduct of the inspection.

Please be guided accordingly.

xxx xxx xxx

3. On February 19, 1993, the Sangguniang Panlalawigan, Provincial Government of Palawan

enacted Resolution No. 33 entitled: "A RESOLUTION PROHIBITING THE CATCHING,
GATHERING, POSSESSING, BUYING, SELLING AND SHIPMENT OF LIVE MARINE
CORAL DWELLING AQUATIC ORGANISMS, TO WIT:
FAMILY: SCARIDAE (MAMENG), EPINE PHELUS FASCIATUS (SUNO). CROMILEPTES
ALTIVELIS(PANTHER OR SENORITA), LOBSTER BELOW 200 GRAMS AND
SPAWNING, TRIDACNA GIGAS(TAKLOBO), PINCTADA MARGARITEFERA (MOTHER
PEARL, OYSTERS, GIANT CLAMS AND OTHER SPECIES), PENAEUS
MONODON (TIGER PRAWN-BREEDER SIZE OR MOTHER), EPINEPHELUS
SUILLUS (LOBA OR GREEN GROUPER) AND FAMILY: BALISTIDAE (TROPICAL
AQUARIUM FISHES) FOR A PERIOD FIVE (5) YEARS IN AND COMING FROM
PALAWAN WATERS", the full text of which reads as follows:

WHEREAS, scientific and factual researches [sic] and studies disclose that
only five (5) percent of the corals of our province remain to be in excellent
condition as [a] habitat of marine coral dwelling aquatic organisms;

WHEREAS, it cannot be gainsaid that the destruction and devastation of the

corals of our province were principally due to illegal fishing activities like
dynamite fishing, sodium cyanide fishing, use of other obnoxious substances
and other related activities;

WHEREAS, there is an imperative and urgent need to protect and preserve

the existence of the remaining excellent corals and allow the devastated
ones to reinvigorate and regenerate themselves into vitality within the span of
five (5) years;

WHEREAS, Sec. 468, Par. 1, Sub-Par. VI of the [sic] R.A. 7160 otherwise
known as the Local Government Code of 1991 empowers the Sangguniang
Panlalawigan to protect the environment and impose appropriate penalties
[upon] acts which endanger the environment such as dynamite fishing and
other forms of destructive fishing, among others.

NOW, THEREFORE, on motion by Kagawad Nelson P. Peneyra and upon

unanimous decision of all the members present;
 Be it resolved as it is hereby resolved, to approve Resolution No. 33, Series
of 1993 of the Sangguniang Panlalawigan and to enact Ordinance No. 2 for
the purpose, to wit:

ORDINANCE NO. 2
Series of 1993

BE IT ORDAINED BY THE SANGGUNIANG PANLALAWIGAN IN SESSION ASSEMBLED:

Sec. 1. TITLE — This Ordinance shall be known as an "Ordinance

Prohibiting the catching, gathering, possessing, buying, selling and shipment
of live marine coral dwelling aquatic organisms, to wit: 1. Family: Scaridae
(Mameng), 2. Epinephelus Fasciatus (Suno) 3. Cromileptes altivelis (Panther
or Senorita), lobster below 200 grams and spawning), 4. Tridacna Gigas
(Taklobo), 5. Pinctada Margaretefera (Mother Pearl, Oysters, Giant Clams
and other species), 6. Penaeus Monodon (Tiger Prawn-breeder size or
mother), 7. Epinephelus Suillus (Loba or Green Grouper) and 8. Family:
Balistidae (T[r]opical Aquarium Fishes) for a period of five (5) years in and
coming from Palawan Waters.

Sec. II. PRELIMINARY CONSIDERATIONS

1. Sec. 2-A (Rep. Act 7160). It is hereby declared, the policy of the state that
the territorial and political subdivisions of the State shall enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development
as self-reliant communities and make them more effective partners in the
attainment of national goals. Toward this end, the State shall provide for [a]
more responsive and accountable local government structure instituted
through a system of decentralization whereby local government units shall be
given more powers, authority, responsibilities and resources.

2. Sec. 5-A (R.A. 7160). Any provision on a power of [a] local Government
Unit shall be liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor of devolution of powers and of the
lower government units. "Any fair and reasonable doubts as to the existence
of the power shall be interpreted in favor of the Local Government Unit
concerned."

3. Sec. 5-C (R.A. 7160). The general welfare provisions in this Code shall be
liberally interpreted to give more powers to local government units in
accelerating economic development and upgrading the quality of life for the
people in the community.

4. Sec. 16 (R.A. 7160). General Welfare. — Every local government unit shall
exercise the powers expressly granted, those necessarily implied therefrom,
as well as powers necessary, appropriate, or incidental for its efficient and
effective governance; and those which are essential to the promotion of the
general welfare.

Sec. III. DECLARATION OF POLICY. — It is hereby declared to be the policy

of the Province of Palawan to protect and conserve the marine resources of
Palawan not only for the greatest good of the majority of the present
 generation but with [the] proper perspective and consideration of [sic] their
prosperity, and to attain this end, the Sangguniang Panlalawigan henceforth
declares that is (sic) shall be unlawful for any person or any business entity
to engage in catching, gathering, possessing, buying, selling and shipment of
live marine coral dwelling aquatic organisms as enumerated in Section 1
hereof in and coming out of Palawan Waters for a period of five (5) years;

Sec. IV. PENALTY CLAUSE. — Any person and/or business entity violating
this Ordinance shall be penalized with a fine of not more than Five Thousand
Pesos (P5,000.00), Philippine Currency, and/or imprisonment of six (6)
months to twelve (12) months and confiscation and forfeiture of
paraphernalias [sic] and equipment in favor of the government at the
discretion of the Court;

Sec. V. SEPARABILITY CLAUSE. — If for any reason, a Section or provision

of this Ordinance shall be held as unconditional [sic] or invalid, it shall not
affect the other provisions hereof.

Sec. VI. REPEALING CLAUSE. — Any existing Ordinance or a provision of

any ordinance inconsistent herewith is deemed modified, amended or
repealed.

Sec. VII. EFFECTIVITY — This Ordinance shall take effect ten (10) days
after its publication.

SO ORDAINED.

xxx xxx xxx

4. The respondents implemented the said ordinances, Annexes "A" and "C" hereof thereby
depriving all the fishermen of the whole province of Palawan and the City of Puerto Princesa
of their only means of livelihood and the petitioners Airline Shippers Association of Palawan
and other marine merchants from performing their lawful occupation and trade;

5. Petitioners Alfredo Tano, Baldomero Tano, Teocenes Midello, Angel de Mesa, Eulogio
Tremocha, and Felipe Ongonion, Jr. were even charged criminally under criminal case no.
93-05-C in the 1st Municipal Circuit Trial Court of Cuyo-Agutaya-Magsaysay, an original
carbon copy of the criminal complaint dated April 12, 1993 is hereto attached as Annex "D";
while xerox copies are attached as Annex "D" to the copies of the petition;

6. Petitioners Robert Lim and Virginia Lim, on the other hand, were charged by the
respondent PNP with the respondent City Prosecutor of Puerto Princess City, a xerox copy
of the complaint is hereto attached as Annex "E";

Without seeking redress from the concerned local government units, prosecutor's office and courts,
petitioners directly invoked our original jurisdiction by filing this petition on 4 June 1993. In sum,
petitioners contend that:

First, the Ordinances deprived them of due process of law, their livelihood, and unduly restricted
them from the practice of their trade, in violation of Section 2, Article XII and Sections 2 and 7 of
Article XIII of the 1987 Constitution.
Second, Office Order No. 23 contained no regulation nor condition under which the Mayor's permit
could be granted or denied; in other words, the Mayor had the absolute authority to determine
whether or not to issue the permit.

Third, as Ordinance No. 2 of the Province of Palawan "altogether prohibited the catching, gathering,
possession, buying, selling and shipping of live marine coral dwelling organisms, without any
distinction whether it was caught or gathered through lawful fishing method," the Ordinance took
away the right of petitioners-fishermen to earn their livelihood in lawful ways; and insofar as
petitioners-members of Airline Shippers Association are concerned, they were unduly prevented
from pursuing their vocation and entering "into contracts which are proper, necessary, and essential
to carry out their business endeavors to a successful conclusion."

Finally, as Ordinance No. 2 of the Sangguniang Panlalawigan is null and void, the criminal cases
based thereon against petitioners Tano and the others have to be dismissed.

In the Resolution of 15 June 1993 we required respondents to comment on the petition, and
furnished the Office of the Solicitor General with a copy thereof.

In their comment filed on 13 August 1993, public respondents Governor Socrates and Members of
the Sangguniang Panlalawigan of Palawan defended the validity of Ordinance No. 2, Series of 1993,
as a valid exercise of the Provincial Government's power under the general welfare clause (Section
16 of the Local Government Code of 1991 [hereafter, LGC]), and its specific power to protect the
environment and impose appropriate penalties for acts which endanger the environment, such as
dynamite fishing and other forms of destructive fishing under Section 447 (a) (1) (vi), Section 458 (a)
(1) (vi), and Section 468 (a) (1) (vi), of the LGC. They claimed that in the exercise of such powers,
the Province of Palawan had "the right and responsibility . . . to insure that the remaining coral reefs,
where fish dwells [sic], within its territory remain healthy for the future generation." The Ordinance,
they further asserted, covered only live marine coral dwelling aquatic organisms which were
enumerated in the ordinance and excluded other kinds of live marine aquatic organisms not dwelling
in coral reefs; besides the prohibition was for only five (5) years to protect and preserve the pristine
coral and allow those damaged to regenerate.

Aforementioned respondents likewise maintained that there was no violation of the due process and
equal protection clauses of the Constitution. As to the former, public hearings were conducted before
the enactment of the Ordinance which, undoubtedly, had a lawful purpose and employed reasonable
means; while as to the latter, a substantial distinction existed "between a fisherman who catches live
fish with the intention of selling it live, and a fisherman who catches live fish with no intention at all of
selling it live," i.e., "the former uses sodium cyanide while the latter does not." Further, the Ordinance
applied equally to all those belonging to one class.

On 25 October 1993 petitioners filed an Urgent Plea for the Immediate Issuance of a Temporary
Restraining Order, claiming that despite the pendency of this case, Branch 50 of the Regional Trial
Court of Palawan was bent on proceeding with Criminal Case No. 11223 against petitioners Danilo
Tano, Alfredo Tano, Eulogio Tremocha, Romualdo Tano, Baldomero Tano, Andres Linijan and Angel
de Mesa for violation of Ordinance No. 2 of the Sangguniang Panlalawigan of Palawan. Acting on
said plea, we issued on 11 November 1993 a temporary restraining order directing Judge Angel
Miclat of said court to cease and desist from proceeding with the arraignment and pre-trial of
Criminal Case No. 11223.

On 12 July 1994, we excused the Office of the Solicitor General from filing a comment, considering
that as claimed by said office in its Manifestation of 28 June 1994, respondents were already
represented by counsel.
The rest of the respondents did not file any comment on the petition.

In the resolution of 15 September 1994, we resolved to consider the comment on the petition as the
Answer, gave due course to the petition and required the parties to submit their respective
memoranda. 2

On 22 April 1997 we ordered impleaded as party respondents the Department of Agriculture and the Bureau of Fisheries and Aquatic
Resources and required the Office of the Solicitor General to comment on their behalf. But in light of the latter's motion of 9 July 1997 for an
extension of time to file the comment which would only result in further delay, we dispensed with said comment.

After due deliberation on the pleadings filed, we resolved to dismiss this petition for want of merit,
and on 22 July 1997, assigned it to the ponente to write the opinion of the Court.

There are actually two sets of petitioners in this case. The first is composed of Alfredo Tano,
Baldomero Tano, Danilo Tano, Romualdo Tano, Teocenes Midello, Angel de Mesa, Eulogio
Tremocha, Felipe Ongonion, Jr., Andres Linijan, and Felimon de Mesa, who were criminally charged
with violating Sangguniang Panlalawigan Resolution No. 33 and Ordinance No. 2, Series of 1993, of
the Province of Palawan, in Criminal Case No. 93-05-C of the 1st Municipal Circuit Trial Court
(MCTC) of Palawan; 3 and Robert Lim and Virginia Lim who were charged with violating City Ordinance No. 15-92 of Puerto
Princesa City and Ordinance No. 2, Series of 1993, of the Province of Palawan before the Office of the City Prosecutor of Puerto
Princesa. 4 All of them, with the exception of Teocenes Midello, Felipe Ongonion, Jr., Felimon de Mesa, Robert Lim and Virginia Lim, are
likewise the accused in Criminal Case No. 11223 for the violation of Ordinance No. 2 of the Sangguniang Panlalawigan of Palawan, pending
before Branch 50 of the Regional Trial Court of Palawan. 5

The second set of petitioners is composed of the rest of the petitioners numbering seventy-seven (77), all of whom, except the Airline
Shippers Association of Palawan — an alleged private association of several marine merchants — are natural persons who claim to be
fishermen.

The primary interest of the first set of petitioners is, of course, to prevent the prosecution, trial and
determination of the criminal cases until the constitutionality or legality of the Ordinances they
allegedly violated shall have been resolved. The second set of petitioners merely claim that being
fishermen or marine merchants, they would be adversely affected by the ordinance's.

As to the first set of petitioners, this special civil for certiorari must fail on the ground of prematurity
amounting to a lack of cause of action. There is no showing that said petitioners, as the accused in
the criminal cases, have filed motions to quash the informations therein and that the same were
denied. The ground available for such motions is that the facts charged therein do not constitute an
offense because the ordinances in question are unconstitutional. 6It cannot then be said that the lower courts acted
without or in excess of jurisdiction or with grave abuse of discretion to justify recourse to the extraordinary remedy of certiorari or prohibition.
It must further be stressed that even if petitioners did file motions to quash, the denial thereof would not forthwith give rise to a cause of
action under Rule 65 of the Rules of Court. The general rule is that where a motion to quash is denied, the remedy therefrom is not certiorari,
but for the party aggrieved thereby to go to trial without prejudice to reiterating special defenses involved in said motion, and if, after trial on
the merits an adverse decision is rendered, to appeal therefrom in the manner authorized by law. 7 And, even where in an exceptional
circumstance such denial may be the subject of a special civil action for certiorari, a motion for reconsideration must have to be filed to allow
the court concerned an opportunity to correct its errors, unless such motion may be dispensed with because of existing exceptional
circumstances. 8 Finally, even if a motion for reconsideration has been filed and denied, the remedy under Rule 65 is still unavailable absent
any showing of the grounds provided for in Section 1 thereof. 9 For obvious reasons, the petition at bar does not, and could not have, alleged
any of such grounds.

As to the second set of petitioners, the instant petition is obviously one for DECLARATORY
RELIEF, i.e., for a declaration that the Ordinances in question are a "nullity . . . for being
unconstitutional."10 As such, their petition must likewise fail, as this Court is not possessed of original
jurisdiction over petitions for declaratory relief even if only questions of law are involved,11 it being
settled that the Court merely exercises appellate jurisdiction over such petitions.12
 II

Even granting arguendo that the first set of petitioners have a cause of action ripe for the
extraordinary writ of certiorari, there is here a clear disregard of the hierarchy of courts, and no
special and important reason or exceptional and compelling circumstance has been adduced why
direct recourse to us should be allowed. While we have concurrent jurisdiction with Regional Trial
courts and with the Court of Appeals to issue writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction, such concurrence gives petitioners no unrestricted freedom
of choice of court forum, so we held in People v. Cuaresma.13

This concurrence of jurisdiction is not . . . to be taken as according to parties seeking any of

the writs an absolute unrestrained freedom of choice of the court to which application
therefor will be directed. There is after all hierarchy of courts. That hierarchy is determinative
of the venue of appeals, and should also serve as a general determinant of the appropriate
forum for petitions for the extraordinary writs. A becoming regard for that 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 when 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. . . .

The Court feels the need to reaffirm that policy at this time, and to enjoin strict adherence
thereto in the light of what it perceives to be a growing tendency on the part of litigants and
lawyers to have their applications for the so-called extraordinary writs, and sometimes even
their appeals, passed upon and adjudicated directly and immediately by the highest tribunal
of the land. . . .

In Santiago v. Vasquez,14 this Court forcefully expressed that the propensity of litigants and lawyers
to disregard the hierarchy of courts must be put to a halt, not only because of the imposition upon
the precious time of this Court, but also because of the inevitable and resultant delay, intended or
otherwise, in the adjudication of the case which often has to be remanded or referred to the lower
court, the proper forum under the rules of procedure, or as better equipped to resolve the issues
since this Court is not a trier of facts. We reiterated "the judicial policy that this Court will not
entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify availment of a remedy within and calling for
the exercise of [its] primary jurisdiction."

III

Notwithstanding the foregoing procedural obstacles against the first set of petitioners, we opt to
resolve this case on its merits considering that the lifetime of the challenged Ordinances is about to
end. Ordinance No. 15-92 of the City of Puerto Princesa is effective only up to 1 January 1998, while
Ordinance No. 2 of the Province of Palawan, enacted on 19 February 1993, is effective for only five
(5) years. Besides, these Ordinances were undoubtedly enacted in the exercise of powers under the
new LGC relative to the protection and preservation of the environment and are thus novel and of
paramount importance. No further delay then may be allowed in the resolution of the issues raised.

It is of course settled that laws (including ordinances enacted by local government units) enjoy the
presumption of constitutionality. 15 To overthrow this presumption, there must be a clear and
unequivocal breach of the Constitution, not merely a doubtful or argumentative contradiction. In
short, the conflict with the Constitution must be shown beyond reasonable doubt.16 Where doubt
exists, even if well-founded, there can be no finding of unconstitutionality. To doubt is to sustain.17

After a scrutiny of the challenged Ordinances and the provisions of the Constitution petitioners claim
to have been violated, we find petitioners' contentions baseless and so hold that the former do not
suffer from any infirmity, both under the Constitution and applicable laws.

Petitioners specifically point to Section 2, Article XII and Sections 2 and 7, Article XIII of the
Constitution as having been transgressed by the Ordinances.

The pertinent portion of Section 2 of Article XII reads:

Sec. 2. . . .

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
fishworkers in rivers, lakes, bays, and lagoons.

Sections 2 and 7 of Article XIII provide:

Sec. 2. The promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance.

xxx xxx xxx

Sec. 7. The State shall protect the rights of subsistence fishermen, especially of local
communities, to the preferential use of the communal marine and fishing resources,
both inland and offshore. It shall provide support to such fishermen through
appropriate technology and research, adequate financial, production, and marketing
assistance, and other services. The State shall also protect, develop, and conserve
such resources. The protection shall extend to offshore fishing grounds of
subsistence fishermen against foreign intrusion. Fishworkers shall receive a just
share from their labor in the utilization of marine and fishing resources.

There is absolutely no showing that any of the petitioners qualifies as a subsistence or

marginal fisherman. In their petition, petitioner Airline Shippers Association of Palawan is
self-described as "a private association composed of Marine Merchants;" petitioners Robert
Lim and Virginia Lim, as "merchants;" while the rest of the petitioners claim to be
"fishermen," without any qualification, however, as to their status.

Since the Constitution does not specifically provide a definition of the terms "subsistence" or
"marginal" fishermen,18 they should be construed in their general and ordinary sense.
A marginal fisherman is an individual engaged in fishing whose margin of return or reward in
his harvest of fish as measured by existing price levels is barely sufficient to yield a profit or
cover the cost of gathering the fish,19 while a subsistence fisherman is one whose catch
yields but the irreducible minimum for his livelihood.20 Section 131(p) of the LGC (R.A. No.
7160) defines a marginal farmer or fisherman as "an individual engaged in subsistence
farming or fishing which shall be limited to the sale, barter or exchange of agricultural or
marine products produced by himself and his immediate family." It bears repeating that
nothing in the record supports a finding that any petitioner falls within these definitions.

Besides, Section 2 of Article XII aims primarily not to bestow any right to subsistence
fishermen, but to lay stress on the duty of the State to protect the nation's marine wealth.
What the provision merely recognizes is that the State may allow, by law, cooperative fish
farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, bays and
lagoons. Our survey of the statute books reveals that the only provision of law which speaks
of a preferential right of marginal fishermen is Section 149 of the LGC, which pertinently
provides:

Sec. 149. Fishery Rentals, Fees and Charges. — . . .

(b) The sangguniang bayan may:

(1) Grant fishery privileges to erect fish corrals,

oyster, mussels or other aquatic beds or bangus fry
areas, within a definite zone of the municipal waters,
as determined by it: Provided, however, That duly
registered organizations and cooperatives of marginal
fishermen shall have the preferential right to such
fishery privileges . . . .

In a Joint Administrative Order No. 3 dated 25 April 1996, the Secretary of the Department of
Agriculture and the Secretary of the Department of Interior and Local Government prescribed
guidelines concerning the preferential treatment of small fisherfolk relative to the fishery right
mentioned in Section 149. This case, however, does not involve such fishery right.

Anent Section 7 of Article XIII, it speaks not only of the use of communal marine and fishing
resources, but of their protection, development and conservation. As hereafter shown, the
ordinances in question are meant precisely to protect and conserve our marine resources to
the end that their enjoyment may be guaranteed not only for the present generation, but also
for the generations to come.

The so-called "preferential right" of subsistence or marginal fishermen to the use of marine
resources is not at all absolute. In accordance with the Regalian Doctrine, marine resources
belong to the State, and, pursuant to the first paragraph of Section 2, Article XII of the
Constitution, their "exploration, development and utilization . . . shall be under the full control
and supervision of the State." Moreover, their mandated protection, development and
conservation as necessarily recognized by the framers of the Constitution, imply certain
restrictions on whatever right of enjoyment there may be in favor of anyone. Thus, as to the
curtailment of the preferential treatment of marginal fishermen, the following exchange
between Commissioner Francisco Rodrigo and Commissioner Jose F.S. Bengzon, Jr., took
place at the plenary session of the Constitutional Commission:

MR. RODRIGO:

Let us discuss the implementation of this because I would not raise

the hopes of our people, and afterwards fail in the implementation.
How will this be implemented? Will there be a licensing or giving of
 permits so that government officials will know that one is really a
marginal fisherman? Or if policeman say that a person is not a
marginal fisherman, he can show his permit, to prove that indeed he
is one.

MR. BENGZON:

Certainly, there will be some mode of licensing insofar as this is

concerned and this particular question could be tackled when we
discuss the Article on Local Governments — whether we will leave to
the local governments or to Congress on how these things will be
implemented. But certainly, I think our congressmen and our local
officials will not be bereft of ideas on how to implement this mandate.

xxx xxx xxx

MR. RODRIGO:

So, once one is licensed as a marginal fisherman, he can go

anywhere in the Philippines and fish in any fishing grounds.

MR. BENGZON:

Subject to whatever rules and regulations and local laws that may be
passed, may be existing or will be passed.21 (emphasis supplied)

What must likewise be borne in mind is the state policy enshrined in the Constitution
regarding the duty of the State to protect and advance the right of the people to a balanced
and healthful ecology in accord with the rhythm and harmony of nature. 22 On this score,
in Oposa v. Factoran, 23 this Court declared:

While the right to a balanced and healthful ecology is to be found under the
Declaration of Principles the State Policies and not under the Bill of Rights, it does
not follow that it is less important than any of the civil and political rights enumerated
in the latter. Such a right belongs to a different category of rights altogether for it
concerns nothing less than self-preservation and self-perpetuation — aptly and
fittingly stressed by the petitioners — the advancement of which may even be said to
predate all governments and constitutions. As a matter of fact, these basic rights
need not even be written in the Constitution for they are assumed to exist from the
inception of humankind. If they are now explicitly mentioned in the fundamental
charter, it is because of the well-founded fear of its framers that unless the rights to a
balanced and healthful ecology and to health are mandated as state policies by the
Constitution itself, thereby highlighting their continuing importance and imposing
upon the state a solemn obligation to preserve the first and protect and advance the
second, the day would not be too far when all else would be lost not only for the
present generation, but also for those to come — generations which stand to inherit
nothing but parched earth incapable of sustaining life.

The right to a balanced and healthful ecology carries with it a correlative duty to
refrain from impairing the environment. . . .
The LGC provisions invoked by private respondents merely seek to give flesh and blood to
the right of the people to a balanced and healthful ecology. In fact, the General Welfare
Clause, expressly mentions this right:

Sec. 16. General Welfare. — Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers
necessary, appropriate, or incidental for its efficient and effective governance, and
those which are essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall ensure and support,
among other things, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological
capabilities, improve public morals, enhance economic prosperity and social justice,
promote full employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants. (emphasis supplied).

Moreover, Section 5(c) of the LGC explicitly mandates that the general welfare provisions of
the LGC "shall be liberally interpreted to give more powers to the local government units in
accelerating economic development and upgrading the quality of life for the people of the
community."

The LGC vests municipalities with the power to grant fishery privileges in municipal waters
and impose rentals, fees or charges therefor; to penalize, by appropriate ordinances, the use
of explosives, noxious or poisonous substances, electricity, muro-ami, and other deleterious
methods of fishing; and to prosecute any violation of the provisions of applicable fishery
laws.24 Further, the sangguniang bayan, the sangguniang panlungsod and the sangguniang
panlalawigan are directed to enact ordinances for the general welfare of the municipality and
its inhabitants, which shall include, inter alia, ordinances that "[p]rotect the environment and
impose appropriate penalties for acts which endanger the environment such as dynamite
fishing and other forms of destructive fishing . . . and such other activities which result in
pollution, acceleration of eutrophication of rivers and lakes, or of ecological
imbalance."25

Finally, the centerpiece of LGC is the system of decentralization26 as expressly mandated by

the Constitution.27 Indispensable to decentralization is devolution and the LGC expressly
provides that "[a]ny provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor
of devolution of powers and of the lower local government unit. Any fair and reasonable
doubt as to the existence of the power shall be interpreted in favor of the local government
unit concerned."28 Devolution refers to the act by which the National Government confers
power and authority upon the various local government units to perform specific functions
and responsibilities.29

One of the devolved powers enumerated in the section of the LGC on devolution is the
enforcement of fishery laws in municipal waters including the conservation of
mangroves.30 This necessarily includes the enactment of ordinances to effectively carry out
such fishery laws within the municipal waters.

The term "municipal waters," in turn, includes not only streams, lakes, and tidal waters within
the municipality, not being the subject of private ownership and not comprised within the
national parks, public forest, timber lands, forest reserves, or fishery reserves, but also
marine waters included between two lines drawn perpendicularly to the general coastline
from points where the boundary lines of the municipality or city touch the sea at low tide and
a third line parallel with the general coastline and fifteen kilometers from
it.31 Under P.D. No. 704, the marine waters included in municipal waters is limited to three
nautical miles from the general coastline using the above perpendicular lines and a third
parallel line.

These "fishery laws" which local government units may enforce under Section 17(b)(2)(i) in
municipal waters include: (1) P.D. No. 704; (2) P.D. No. 1015 which, inter alia, authorizes the
establishment of a "closed season" in any Philippine water if necessary for conservation or
ecological purposes; (3) P.D. No. 1219 which provides for the exploration, exploitation,
utilization and conservation of coral resources; (4) R.A. No. 5474, as amended by B.P. Blg.
58, which makes it unlawful for any person, association or corporation to catch or cause to
be caught, sell, offer to sell, purchase, or have in possession any of the fish specie
called gobiidae or "ipon" during closed season; and (5) R.A. No. 6451 which prohibits and
punishes electrofishing, as well as various issuances of the BFAR.

To those specifically devolved insofar as the control and regulation of fishing in municipal
waters and the protection of its marine environment are concerned, must be added the
following:

1. Issuance of permits to construct fish cages within municipal waters;

2. Issuance of permits to gather aquarium fishes within municipal

waters;

3. Issuance of permits to gather kapis shells within municipal waters;

4. Issuance of permits to gather/culture shelled mollusks within

municipal waters;

5. Issuance of licenses to establish seaweed farms within municipal

waters;

6. Issuance of licenses to establish culture pearls within municipal

waters;

7. Issuance of auxiliary invoice to transport fish and fishery products;

and

8. Establishment of "closed season" in municipal waters.

These functions are covered in the Memorandum of Agreement of 5 April 1994 between the
Department of Agriculture and the Department of Interior and Local Government.

In light then of the principles of decentralization and devolution enshrined in the LGC and the
powers granted therein to local government units under Section 16 (the General Welfare
Clause), and under Sections 149, 447(a) (1) (vi), 458 (a) (1) (vi) and 468 (a) (1) (vi), which
unquestionably involve the exercise of police power, the validity of the questioned
Ordinances cannot be doubted.
Parenthetically, we wish to add that these Ordinances find full support under R.A. No. 7611,
otherwise known as the Strategic Environmental Plan (SEP) for Palawan Act, approved on
19 June 1992. This statute adopts a "comprehensive framework for the sustainable
development of Palawan compatible with protecting and enhancing the natural resources
and endangered environment of the province," which "shall serve to guide the local
government of Palawan and the government agencies concerned in the formulation and
implementation of plans, programs and projects affecting said province."32

At this time then, it would be appropriate to determine the relation between the assailed
Ordinances and the aforesaid powers of the Sangguniang Panlungsod of the City of Puerto
Princesa and the Sangguniang Panlalawigan of the Province of Palawan to protect the
environment. To begin, we ascertain the purpose of the Ordinances as set forth in the
statement of purposes or declaration of policies quoted earlier.

It is clear to the Court that both Ordinances have two principal objectives or purposes: (1) to
establish a "closed season" for the species of fish or aquatic animals covered therein for a
period of five years; and (2) to protect the coral in the marine waters of the City of Puerto
Princesa and the Province of Palawan from further destruction due to illegal fishing activities.

The accomplishment of the first objective is well within the devolved power to enforce fishery
laws in municipal waters, such as P.D. No. 1015, which allows the establishment of "closed
seasons." The devolution of such power has been expressly confirmed in the Memorandum
of Agreement of 5 April 1994 between the Department of Agriculture and the Department of
Interior and Local Government.

The realization of the second objective clearly falls within both the general welfare clause of
the LGC and the express mandate thereunder to cities and provinces to protect the
environment and impose appropriate penalties for acts which endanger the environment.33

The destruction of coral reefs results in serious, if not irreparable, ecological imbalance, for
coral reefs are among nature's life-support systems.34 They collect, retain and recycle
nutrients for adjacent nearshore areas such as mangroves, seagrass beds, and reef flats;
provide food for marine plants and animals; and serve as a protective shelter for aquatic
organisms.35 It is said that "[e]cologically, the reefs are to the oceans what forests are to
continents: they are shelter and breeding grounds for fish and plant species that will
disappear without them."36

The prohibition against catching live fish stems, in part, from the modern phenomenon of
live-fish trade which entails the catching of so-called exotic species of tropical fish, not only
for aquarium use in the West, but also for "the market for live banquet fish [which] is virtually
insatiable in ever more affluent Asia.37 These exotic species are coral-dwellers, and
fishermen catch them by "diving in shallow water with corraline habitats and squirting sodium
cyanide poison at passing fish directly or onto coral crevices; once affected the fish are
immobilized [merely stunned] and then scooped by hand."38 The diver then surfaces and
dumps his catch into a submerged net attached to the skiff. Twenty minutes later, the fish
can swim normally. Back on shore, they are placed in holding pens, and within a few weeks,
they expel the cyanide from their system and are ready to be hauled. They are then placed in
saltwater tanks or packaged in plastic bags filled with seawater for shipment by air freight to
major markets for live food fish.39 While the fish are meant to survive, the opposite holds true
for their former home as "[a]fter the fisherman squirts the cyanide, the first thing to perish is
the reef algae, on which fish feed. Days later, the living coral starts to expire. Soon the reef
loses its function as habitat for the fish, which eat both the algae and invertebrates that cling
to the coral. The reef becomes an underwater graveyard, its skeletal remains brittle,
bleached of all color and vulnerable to erosion from the pounding of the waves."40 It has been
found that cyanide fishing kills most hard and soft corals within three months of repeated
application.41

The nexus then between the activities barred by Ordinance No. 15-92 of the City of Puerto
Princesa and the prohibited acts provided in Ordinance No. 2, Series of 1993 of the Province
of Palawan, on one hand, and the use of sodium cyanide, on the other, is painfully obvious.
In sum, the public purpose and reasonableness of the Ordinances may not then be
controverted.

As to Office Order No. 23, Series of 1993, issued by Acting City Mayor Amado L. Lucero of
the City of Puerto Princesa, we find nothing therein violative of any constitutional or statutory
provision. The Order refers to the implementation of the challenged ordinance and is not the
Mayor's Permit.

The dissenting opinion of Mr. Justice Josue N. Bellosillo relies upon the lack of authority on
the part of the Sangguniang Panglungsod of Puerto Princesa to enact Ordinance No. 15,
Series of 1992, on the theory that the subject thereof is within the jurisdiction and
responsibility of the Bureau of Fisheries and Aquatic Resources (BFAR) under P.D. No. 704,
otherwise known as the Fisheries Decree of 1975; and that, in any event, the Ordinance is
unenforceable for lack of approval by the Secretary of the Department of Natural Resources
(DNR), likewise in accordance with P.D. No. 704.

The majority is unable to accommodate this view. The jurisdiction and responsibility of the
BFAR under P.D. No. 704, over the management, conservation, development, protection,
utilization and disposition of all fishery and aquatic resources of the country is not all-
encompassing. First, Section 4 thereof excludes from such jurisdiction and responsibility
municipal waters, which shall be under the municipal or city government concerned, except
insofar as fishpens and seaweed culture in municipal centers are concerned. This section
provides, however, that all municipal or city ordinances and resolutions affecting fishing and
fisheries and any disposition thereunder shall be submitted to the Secretary of the
Department of Natural Resources for appropriate action and shall have full force and effect
only upon his approval.42

Second, it must at once be pointed out that the BFAR is no longer under the Department of
Natural Resources (now Department of Environment and Natural Resources). Executive
Order No. 967 of 30 June 1984 transferred the BFAR from the control and supervision of the
Minister (formerly Secretary) Of Natural Resources to the Ministry of Agriculture and Food
(MAF) and converted it into a mere staff agency thereof, integrating its functions with the
regional offices of the MAF.

In Executive Order No. 116 of 30 January 1987, which reorganized the MAF, the BFAR was
retained as an attached agency of the MAF. And under the Administrative Code of
1987,43 the BFAR is placed under the Title concerning the Department of Agriculture.44

Therefore, it is incorrect to say that the challenged Ordinance of the City of Puerto Princesa
is invalid or unenforceable because it was not approved by the Secretary of the DENR. If at
all, the approval that should be sought would be that of the Secretary of the Department of
Agriculture. However, the requirement of approval by the Secretary of the Department of
Agriculture (not DENR) of municipal ordinances affecting fishing and fisheries in municipal
waters has been dispensed with in view of the following reasons:
 (1) Section 534 (Repealing Clause) of the LGC expressly repeals or amends Sections 16
and 29 of P.D. No. 70445 insofar as they are inconsistent with the provisions of the LGC.

(2) As discussed earlier, under the general welfare clause of the LGC, local government
units have the power, inter alia, to enact ordinances to enhance the right of the people to a
balanced ecology. It likewise specifically vests municipalities with the power to grant fishery
privileges in municipal waters, and impose rentals, fees or charges therefor; to penalize, by
appropriate ordinances, the use of explosives, noxious or poisonous substances,
electricity, muro-ami, and other deleterious methods of fishing; and to prosecute any violation
of the provisions of applicable fishery laws.46 Finally, it imposes upon the sangguniang bayan,
the sangguniang panlungsod, and the sangguniang panlalawigan the duty to enact
ordinances to "[p]rotect the environment and impose appropriate penalties for acts which
endanger the environment such as dynamite fishing and other forms of destructive fishing . .
. and such other activities which result in pollution, acceleration of eutrophication of rivers
and lakes or of ecological imbalance."47

In closing, we commend the Sangguniang Panlungsod of the City of Puerto Princesa and
Sangguniang Panlalawigan of the Province of Palawan for exercising the requisite political
will to enact urgently needed legislation to protect and enhance the marine environment,
thereby sharing in the herculean task of arresting the tide of ecological destruction. We hope
that other local government units shall now be roused from their lethargy and adopt a more
vigilant stand in the battle against the decimation of our legacy to future generations. At this
time, the repercussions of any further delay in their response may prove disastrous, if not,
irreversible.

WHEREFORE, the instant petition is DISMISSED for lack of merit and the temporary
restraining order issued on 11 November 1993 is LIFTED.

No pronouncement as to costs.

SO ORDERED.

REPUBLIC ACT 9003 January 26, 2001

AN ACT PROVIDING FOR AN ECOLOGICAL SOLID WASTE MANAGEMENT PROGRAM,

CREATING THE NECESSARY INSTITUTIONAL MECHANISMS AND INCENTIVES, DECLARING
CERTAIN ACTS PROHIBITED AND PROVIDING PENALTIES, APPROPRIATING FUNDS
THEREFOR, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representative of the Philippines in Congress assembled:

CHAPTER I
BASIC POLICIES

Article 1
General Provisions
Section 1. Short Title - This Act shall be known as the "Ecological Solid Waste Management Act of
2000."

Section 2. Declaration of Policies - It is hereby declared the policy of the State to adopt a
systematic, comprehensive and ecological solid waste management program which shall:

(a) Ensure the protection of the public health and environment;

(b) Utilize environmentally-sound methods that maximize the utilization of valuable resources
and encourage resource conservation and recovery;

(c) Set guidelines and targets for solid waste avoidance and volume reduction through
source reduction and waste minimization measures, including composting, recycling, re-use,
recovery, green charcoal process, and others, before collection, treatment and disposal in
appropriate and environmentally sound solid waste management facilities in accordance with
ecologically sustainable development principles;

(d) Ensure the proper segregation, collection, transport, storage, treatment and disposal of
solid waste through the formulation and adoption of the best environmental practice in
ecological waste management excluding incineration;

(e) Promote national research and development programs for improved solid waste
management and resource conservation techniques, more effective institutional arrangement
and indigenous and improved methods of waste reduction, collection, separation and
recovery;

(f) Encourage greater private sector participation in solid waste management;

(g) Retain primary enforcement and responsibility of solid waste management with local
government units while establishing a cooperative effort among the national government,
other local government units, non- government organizations, and the private sector;

(h) Encourage cooperation and self-regulation among waste generators through the
application of market-based instruments;

(i) Institutionalize public participation in the development and implementation of national and
local integrated, comprehensive, and ecological waste management programs; and

(j) Strength the integration of ecological solid waste management and resource conservation
and recovery topics into the academic curricula of formal and non-formal education in order
to promote environmental awareness and action among the citizenry.

Article 2
Definition of Terms

Section 3. Definition of Terms - For the purposes of this Act:

(a) Agricultural waste shall refer to waste generated from planting or harvesting of crops,
trimming or pruning of plants and wastes or run-off materials from farms or fields;
(b) Bulky wastes shall refer to waste materials which cannot be appropriately placed in
separate containers because of either its bulky size, shape or other physical attributes.
These include large worn-out or broken household, commercial, and industrial items such as
furniture, lamps, bookcases, filing cabinets, and other similar items;

(c) Bureau shall refer to the Environmental Management Bureau;

(d) Buy-back center shall refer to a recycling center that purchases of otherwise accepts
recyclable materials from the public for the purpose of recycling such materials;

(e) Collection shall refer to the act of removing solid waste from the source or from a
communal storage point;

(f) Composting shall refer to the controlled decomposition of organic matter by micro-
organisms, mainly bacteria and fungi, into a humus-like product;

(g) Consumer electronics shall refer to special waste that includes worn-out, broken, and
other discarded items such as radios, stereos, and TV sets;

(h) Controlled dump shall refer to a disposal site at which solid waste is deposited in
accordance with the minimum prescribed standards of site operation;

(i) Department shall refer to the Department of Environment and Natural Resources;

(j) Disposal shall refer to the discharge, deposit, dumping, spilling, leaking or placing of any
solid waste into or in an land;

(k) Disposal site shall refer to a site where solid waste is finally discharged and deposited;

(l) Ecological solid waste management shall refer to the systematic administration of
activities which provide for segregation at source, segregated transportation, storage,
transfer, processing, treatment, and disposal of solid waste and all other waste management
activities which do not harm the environment;

(m) Environmentally acceptable shall refer to the quality of being re-usable, biodegradable or
compostable, recyclable and not toxic or hazardous to the environment;

(n) Generation shall refer to the act or process of producing solid waste;

(o) Generator shall refer to a person, natural or juridical, who last uses a material and makes
it available for disposal or recycling;

(p) Hazardous waste shall refer to solid waste management or combination of solid waste
which because of its quantity, concentration or physical, chemical or infectious
characteristics may:

(1) cause, or significantly contribute to an increase in mortality or an increase in

serious irreversible, or incapacitating reversible, illness; or
 (2) pose a substantial present or potential hazard to human health or the
environment when improperly treated, stored, transported, or disposed of, or
otherwise managed;

(q) Leachate shall refer to the liquid produced when waste undergo decomposition, and
when water percolate through solid waste undergoing decomposition. It is contaminated
liquid that contains dissolved and suspended materials;

(r) Materials recovery facility - includes a solid waste transfer station or sorting station, drop-
off center, a composting facility, and a recycling facility;

(s) Municipal waste shall refer to wastes produced from activities within local government
units which include a combination of domestic, commercial, institutional and industrial wastes
and street litters;

(t) Open dump shall refer to a disposal area wherein the solid wastes are indiscriminately
thrown or disposed of without due planning and consideration for environmental and Health
standards;

(u) Opportunity to recycle shall refer to the act of providing a place for collecting source-
separated recyclable material, located either at a disposal site or at another location more
convenient to the population being served, and collection at least once a month of source-
separated recyclable material from collection service customers and to providing a public
education and promotion program that gives notice to each person of the opportunity to
recycle and encourage source separation of recyclable material;

(v) Person(s) shall refer to any being, natural or judicial, susceptible of rights and obligations,
or of being the subject of legal relations;

(w) Post-consumer material shall refer only to those materials or products generated by a
business or consumer which have served their intended end use, and which have been
separated or diverted from solid waste for the purpose of being collected, processed and
used as a raw material in the manufacturing of recycled product, excluding materials and by-
products generated from, and by-products generated from, and commonly used within an
original manufacturing process, such as mill scrap;

(x) Receptacles shall refer to individual containers used for the source separation and the
collection of recyclable materials;

(y) Recovered material shall refer to material and by products that have been recovered or
diverted from solid waste for the purpose of being collected, processed and used as a raw
material in the manufacture of a recycled product;

(z) Recyclable material shall refer to any waste material retrieved from the waste stream and
free from contamination that can still be converted into suitable beneficial use or for other
purposes, including, but not limited to, newspaper, ferrous scrap metal, non-ferrous scrap
metal, used oil, corrugated cardboard, aluminum, glass, office paper, tin cans and other
materials as may be determined by the Commission;

(aa) Recycled material shall refer to post-consumer material that has been recycled and
returned to the economy;
(bb) Recycling shall refer to the treating of used or waste materials through a process of
making them suitable for beneficial use and for other purposes, and includes any process by
which solid waste materials are transformed into new products in such a manner that the
original product may lose their identity, and which maybe used as raw materials for the
production of other goods or services: Provided, That the collection, segregation and re-use
of previously used packaging material shall be deemed recycling under this Act;

(cc) Resource conversation shall refer to the reduction of the amount of solid waste that are
generated or the reduction of overall resource consumption, and utilization of recovered
resources;

(dd) Resources recovery shall refer to the collection, extraction or recovery of recyclable
materials from the waste stream for the purpose of recycling, generating energy or producing
a product suitable for beneficial use: Provided, That such resource recovery facilities exclude
incineration;

(ee) Re-use shall refer to the process of recovering materials intended for the same or
different purpose without the alteration of physical and chemical characteristics;

(ff) Sanitary landfill shall refer to a waste disposal site designed, constructed, operated and
maintained in a manner that exerts engineering control over significant potential environment
impacts arising from the development and operation of the facility;

(gg) Schedule of Compliance shall refer to an enforceable sequence of actions or operations

to be accomplished within a stipulated time frame leading to compliance with a limitation,
prohibition or standard set forth in this Act or any rule of regulation issued pursuant thereto;

(hh) Secretary landfill shall refer to the Secretary of the Department of Environment and
Natural Resources;

(ii) Segregation shall refer to a solid waste management practice of separating different
materials found in solid waste in order to promote recycling and re-use of resources and to
reduce the volume of waste for collection and disposal;

(jj) Segregation at source shall refer to a solid waste management practice of separating, at
the point of origin, different materials found in solid waste in order to promote recycling and
re-use of resources and to reduce the volume of waste for collection and disposal;

(kk) Solid waste shall refer to all discarded household, commercial waste, non-hazardous
institutional and industrial waste, street sweepings, construction debris, agricultural waste,
and other non-hazardous/non-toxic solid waste.

Unless specifically noted otherwise, the term "solid waste" as used in this Act shall not
include:

(1) Waste identified or listed as hazardous waste of a solid, liquid, contained gaseous
or semisolid form which may cause or contribute to an increase in mortality or in
serious or incapacitating reversible illness, or acute/chronic effect on the health of
persons and other organisms;
 (2) Infectious waste from hospitals such as equipment, instruments, utensils, and
fomites of a disposable nature from patients who are suspected to have or have
been diagnosed as having communicable diseases and must therefore be isolated
as required by public health agencies, laboratory wastes such as pathological
specimens (i.e. all tissues, specimens of blood elements, excreta, and secretions
obtained from patients or laboratory animals) and disposable fomites that may harbor
or transmit pathogenic organisms, and surgical operating room pathologic materials
from outpatient areas and emergency rooms; and

(3) Waste resulting from mining activities, including contaminated soil and debris.

(ll) Solid waste management shall refer to the discipline associated with the control of
generation, storage, collection, transfer and transport, processing, and disposal of solid
wastes in a manner that is in accord with the best principles of public health, economics,
engineering, conservation, aesthetics, and other environmental considerations, and that is
also responsive to public attitudes;

(mm) Solid waste management facility shall refer to any resource recovery system or
component thereof; any system, program, or facility for resource conservation; any facility for
the collection, source separation, storage, transportation, transfer, processing, treatment, or
disposal of solid waste;

(nn) Source reduction shall refer to the reduction of solid waste before it enters the solid
waste stream by methods such as product design, materials substitution, materials re-use
and packaging restrictions;

(oo) Source separation shall refer to the sorting of solid waste into some or all of its
component parts at the point of generation;

(pp) Special wastes shall refer to household hazardous wastes such as paints, thinners,
household batteries, lead-acid batteries, spray canisters and the like. These include wastes
from residential and commercial sources that comprise of bulky wastes, consumer
electronics, white goods, yard wastes that are collected separately, batteries, oil, and tires.
These wastes are usually handled separately from other residential and commercial wastes;

(qq) Storage shall refer to the interim containment of solid wastes after generation and prior
to collection for ultimate recovery or disposal;

(rr) Transfer stations shall refer to those facilities utilized to receive solid wastes, temporarily
store, separate, convert, or otherwise process the materials in the solid wastes, or to transfer
the solid wastes directly from smaller to larger vehicles for transport. This term does not
include any of the following:

(1) a facility whose principal function is to receive, store, separate, convert or

otherwise process in accordance with national minimum standards, manure;

(2) a facility, whose principal function is to receive, store, convert, or otherwise

process wastes which have already been separated for re-use and are intended for
disposals, and
 (3) the operations premises of a duly licensed solid waste handling operator who is
receives, stores, transfers, or otherwise processes wastes as an activity incidental to
the conduct of a refuse collection and disposal business.

(ss) Waste diversion shall refer to activities which reduce or eliminate the amount of solid
waste from waste disposal facilities;

(tt) White goods shall refer to large worn-out or broken household, commercial, and industrial
appliances such as stoves, refrigerators, dishwashers, and clothes washers and dryers
collected separately. White goods ate usually dismantled for the recovery of specific
materials (e.g., copper, aluminum, etc.);

(uu) Yard waste shall refer to wood, small or chipped branches, leaves, grass clippings,
garden debris, vegetable residue that is recognized as part of a plant or vegetable and other
materials identified by the Commission.

CHAPTER II
INSTITUTIONAL MECHANISM

Section 4. National Solid Waste Management Commission - There is hereby established a National
Solid Waste Management Commission, hereinafter referred to as the Commission, under the Office
of the President. The Commissioner shall be composed of fourteen (14) members from the
government sector and three members from the private sector. The government sector shall be
represented by the heads of the following agencies in their ex officio capacity:

(1) Department of Environment and Natural Resources (DENR);

(2) Department of the Interior and Local Government (DILG);

(3) Department of Science and Technology (DOST);

(4) Department of Public Works and Highways (DPWH);

(5) Department of Health (DOH);

(6) Department of Trade and Industry (DTI);

(7) Department of Agriculture (DA);

(8) Metro Manila Development Authority (MMDA);

(9) League of provincial governors;

(10) League of city mayors;

(11) League of municipal mayors;

(12) Association of barangay councils;

(13) Technical Education and Skills Development Authority (TESDA); and

 (14) Philippine Information Agency.

The private sector shall be represented by the following:

(a) A representative from nongovernment organizations (NGOs) whose principal purpose is

to promote recycling and the protection of air and water quality;

(b) A representative from the recycling industry; and

(c) A representative from the manufacturing or packaging industry;

The Commission may, from time to time, call on any other concerned agencies or sectors as it may
deem necessary.

Provided, That representatives from the NGOs, recycling and manufacturing or packaging industries
shall be nominated through a process designed by themselves and shall be appointed by the
President for a term of three (3) years.

Provided, further, That the Secretaries of the member agencies of the Commission shall formulate
action plans for their respective agencies to complement the National Solid Waste Management
Framework.

The Department Secretary and a private sector representative of the Commission shall serve as
chairman and vice chairman, respectively. The private sector representatives of the Commission
shall be appointed on the basis of their integrity, high decree of professionalism and having
distinguished themselves in environmental and resource management. The members of the
Commission shall serve and continue to hold office until their successors shall have been appointed
and qualified. Should a member of the Commission fail to complete his/her term, the unexpired
portion of the term. Finally, the members shall be entitled to reasonable traveling expenses and
honoraria.

The Department, through the Environmental Management Bureau, shall provide secretariat support
to the Commission. The Secretariat shall be headed by an executive director who shall be
nominated by the members of the Commission and appointed by the chairman.

Section 5. Powers and Functions of the Commission - The Commission shall oversee the
implementation of solid waste management plans and prescribe policies to achieve the objectives of
this Act. The Commission shall undertake the following activities.

(a) Prepare the national solid waste management framework;

(b) Approve local solid waste management plans in accordance with its rules and
regulations;

(c) Review and monitor the implementation of local solid waste management plans;

(d) Coordinate the operation of local solid waste management boards in the provincial and
city/municipal levels;

(e) To the maximum extent feasible, utilizing existing resources, assist provincial, city and
municipal solid waste management plans;
(f) Develop a model provincial, city and municipal solid waste management plan that will
establish prototypes of the content and format which provinces, cities and municipalities may
use in meeting the requirements of the National Solid Waste Management Framework;

(g) Adopt a program to provide technical and other capability building assistance and support
to local government units in the development and implementation of source reduction
programs;

(h) Develop and implement a program to assist local government units in the identification of
markets for materials that are diverted from disposal facilities through re-use, recycling, and
composting, and other environment-friendly methods;

(i) Develop a mechanism for the imposition of sanctions for the violations environmental rules
and regulations;

(j) Manage the Solid Waste Management Fund;

(k) Develop and prescribe procedures for the issuance of appropriate permits and
clearances.

(l) Review the incentives scheme for effective solid waste management, for purpose of
ensuring relevance and efficiency in achieving the objectives of this Act;

(m) Formulate the necessary education promotion and information campaign strategies;

(n) Establish, after notice and hearing of the parties concerned, standards, criteria,
guidelines, and formula that are fair, equitable and reasonable, in establishing tipping
charges and rates that the proponent will charge in the operation and management of solid
waste management facilities and technologies.

(o) Develop safety nets and alternative livelihood programs for small recyclers and other
sectors that will be affected as a result of the construction and/or operation of solid waste
management recycling plant or facility.

(p) Formulate and update a list of non-environmentally acceptable materials in accordance

with the provisions of this Act. For this purpose, it shall be necessary that proper consultation
be conducted by the Commission with all concerned industries to ensure a list that is based
on technological and economic viability.

(q) Encourage private sector initiatives, community participation and investments resource
recovery-based livelihood programs for local communities.

(r) Encourage all local government agencies and all local government units to patronize
products manufactured using recycled and recyclable materials;

(s) Propose and adopt regulations requiring the source separation and post separation
collection, segregated collection, processing, marketing and sale of organic and designated
recyclable material generated in each local government unit; and

(t) Study and review of the following:

 (i) Standards, criteria and guidelines for promulgation and implementation of an
integrated national solid waste management framework; and

(ii) Criteria and guidelines for siting, design, operation and maintenance of solid
waste management facilities.

Section 6. Meetings - The Commission shall meet at least once a month. The presence of at least a
majority of the members shall constitute a quorum. The chairman, or in his absence the vice-
chairman, shall be the presiding officer. In the absence of the heads of the agencies mentioned in
Sec. 4 of this Act, they may designate permanent representatives to attend the meetings.

Section 7. The National Ecology Center - There shall be established a National Ecology Center
under the Commission which shall provide consulting, information, training, and networking services
for the implementation of the provisions of this Act.

In this regard, it shall perform the following functions:

(a) Facilitate training and education in integrated ecological solid waste management;

(b) Establish and manage a solid waste management information data base, in coordination
with the DTI and other concerned agencies:

(1) on solid waste generation and management techniques as well as the

management, technical and operational approaches to resource recovery; and

(2) of processors/recyclers, the list of materials being recycled or bought by them and
their respective prices;

(c) Promote the development of a recycling market through the establishment of a national
recycling network that will enhance the opportunity to recycle;

(d) Provide or facilitate expert assistance in pilot modeling of solid waste management
facilities; and

(e) Develop, test, and disseminate model waste minimization and reduction auditing
procedures for evaluating options.

The National Ecology Center shall be headed by the director of the Bureau in his ex officio capacity.
It shall maintain a multi-sectoral, multi-disciplinary pool of experts including those from the academe,
inventors, practicing professionals, business and industry, youth , women and other concerned
sectors, who shall be screened according to qualifications set by the Commission.

Section 8. Role of the Departmen. - For the furtherance of the objectives of this Act, the Department
shall have the following functions:

(a) Chair the Commission created pursuant to this Act;

(b) Prepare an annual National Solid Waste Management Status Report;

(c) Prepare and distribute information, education and communication materials on solid
waste management;
 (d) Establish methods and other parameters for the measurement of waste reduction,
collection and disposal;

(e) Provide technical and other capability building assistance and support to the LGUs in the
development and implementation of local solid waste management plans and programs;

(f) Recommend policies to eliminate barriers to waste reduction programs;

(g) Exercise visitorial and enforcement powers to ensure strict compliance with this Act;

(h) Perform such other powers and functions necessary to achieve the objectives of this Act;
and

(i) Issue rules and regulations to effectively implement the provisions of this Act.

Section 9. Visitorial Powers of the Department. - The Department or its duly authorized
representative shall have access to, and the right to copy therefrom, the records required to be
maintained pursuant to the provisions of this Act. The Secretary or the duly authorized
representative shall likewise have the right to enter the premises of any generator, recycler or
manufacturer, or other facilities any time to question any employee or investigate any fact, condition
or matter which may be necessary to determine any violation, or which may aid in the effective
enforcement of this Act and its implementing rules and regulations. This Section shall not apply to
private dwelling places unless the visitorial power is otherwise judicially authorized.

Section 10. Role of LGUs in Solid Waste Management - Pursuant to the relevant provisions of R.A.
No. 7160, otherwise known as the Local government code, the LGUs shall be primarily responsible
for the implementation and enforcement of the provisions of this Act within their respective
jurisdictions.

Segregation and collection of solid waste shall be conducted at the barangay level specifically for
biodegradable, compostable and reusable wastes: Provided, That the collection of non-recyclable
materials and special wastes shall be the responsibility of the municipality or city.

Section 11. Provincial Solid Waste Management Board - A Provincial Solid Waste Management
board shall be established in every province, to be chaired by the governor. Its members shall
include:

(a) All the mayors of its component cities and municipalities;

(b) One (1) representative from the Sangguniang Panlalawigan to be represented by the
chairperson of either the Committees on Environment or Health or their equivalent
committees, to be nominated by the presiding officer;

(c) The provincial health and/or general services officers, whichever may be recommended
by the governor;

(d) The provincial environment and natural resources officer;

(e) The provincial engineer;

(f) Congressional representatives from each congressional district within the province;
 (g) A representative from the NGO sector whose principal purpose is to promote recycling
and the protection of air and water quality;

(h) A representative from the recycling industry;

(i) A representative from the manufacturing or packaging industry; and

(j) A representative of each concerned government agency possessing relevant technical

and marketing expertise as may be determined by the board.

The Provincial Solid Waste Management Board may, from time to time, call on any other concerned
agencies or sectors as it may deem necessary.

Provided, That representatives from the NGOs, recycling and manufacturing or packaging industries
shall be selected through a process designed by themselves and shall be endorsed by the
government agency of representatives of the Board: Provided, further, that in the Province of
Palawan, the Board shall be chaired by the chairman of the Palawan Council for Sustainable
Development, pursuant to Republic Act No. 7611.

In the case of Metro Manila, the Board shall be chaired by the chairperson of the MMDA and its
members shall include:

(i) all mayors of its component cities and municipalities;

(ii) a representative from the NGO sector whose principal purpose is to promote recycling
and the protection of air and water quality;

(iii) a representative from the recycling industry; and

(iv) a representative from the manufacturing or packaging industry.

The Board may, from time to time, call on any other concerned agencies or sectors as it may deem
necessary.

Provided, That representatives from the NGOs, recycling and manufacturing or packaging industries
shall be selected through a process designed by themselves and shall be endorsed by the
government agency representatives of the Board.

The Provincial Solid Waste Management Board shall have the following functions and
responsibilities:

(1) Develop a provincial solid waste management plan from the submitted solid waste
management plans of the respective city and municipal solid waste management boards
herein created. It shall review and integrate the submitted plans of all its component cities
and municipalities and ensure that the various plan complement each other, and have the
requisite components. The Provincial Solid Waste Management Plan shall be submitted to
the Commission for approval.

The Provincial Plans shall reflect the general program of action and initiatives of the
provincial government and implementing a solid waste management program that would
support the various initiatives of its component cities and municipalities.
 (2) Provide the necessary logistical and operational support to its component cities and
municipalities in consonance with subsection (f) of Sec.17 of the Local Government Code;

(3) Recommend measures and safeguards against pollution and for the preservation of the
natural ecosystem;

(4) Recommend measures to generate resources, funding and implementation of project and
activities as specified in the duly approved solid waste management plans;

(5) Identify areas within its jurisdiction which have common solid waste management
problems and are appropriate units are planning local solid waste management services in
accordance with Section 41 hereof;

(6) Coordinate the efforts of the component cities and municipalities in the implementation of
the Provincial Solid Waste Management Plan;

(7) Develop an appropriate incentive scheme as an integral component of the Provincial

Solid Waste Management Plan;

(8) Convene joint meetings of the provincial, city and municipal solid waste management
boards at least every quarter for purposes of integrating, synchronizing, monitoring and
evaluating the development and implementation of its provincial solid waste management
plan;

(9) Represent any of its component city or municipality in coordinating its resource and
operational requirements with agencies of the national government;

(10) Oversee the implementation of the Provincial Solid Waste Management Plant;

(11) Review every two (2) years or as the need arises the Provincial Solid Waste
Management Plan for purposes of ensuring its sustainability, viability, effectiveness and
relevance in relation to local and international development in the field of solid waste
management; and

(12) Allow for the clustering of LGUs for the solution of common solid waste management
problems.

Section 12. City and Municipal Solid Waste Management Board - Each city or municipality shall
form a City or Municipal Waste Management Board that shall prepare, submit and implement a plan
for the safe and sanitary management of solid waste generated in areas under in geographic and
political coverage.

The City or Municipal Solid Waste Management Board shall be composed of the city or municipal
mayor as head with the following as members:

a) One (1) representative of Sangguniang Panlungsod or the Sangguniang Bayan, preferably

chairpersons of either the Committees on Environment or Health, who will be designated by
the presiding officer;

b) President of the Association of Barangay Councils in the municipality or city;

 c) Chairperson of the Sangguniang Kabataan Federation;

d) A representative from NGOs whose principal purpose is to promote recycling and the
protection of air and water quality;

e) A representative from the recycling industry;

f) A representative from the manufacturing or packaging industry; and

g) A representative of each concerned government agency possessing relevant technical

and marketing expertise as may be determined by the Board.

The City or Municipal Solid Waste Management Board may, from time to time, call on any concerned
agencies or sectors as it may deem necessary.

Provided, That representatives from NGOs, recycling and manufacturing or packaging industries
shall be selected through a process designed by themselves and shall be endorsed by the
government agency representatives of the Board.

The City and Municipal Solid Waste Management Boards shall have the following duties and
responsibilities:

(1) Develop the City or Municipal Solid Waste Management Plan that shall ensure the long-
term management of solid waste, as well as integrate the various solid waste management
plans and strategies of the barangays in its area of jurisdiction. In the development of the
Solid Waste Management Plan, it shall conduct consultations with the various sectors of the
community;

(2) Adopt measures to promote and ensure the viability and effective implementation of solid
waste management programs in its component barangays;

(3) Monitor the implementation of the City or Municipal Solid Waste Management Plan
through its various political subdivisions and in cooperation with the private sector and the
NGOs;

(4) Adopt specific revenue-generating measures to promote the viability of its Solid Waste
Management Plan;

(5) Convene regular meetings for purposes of planning and coordinating the implementation
of the solid waste management plans of the respective component barangays;

(6) Oversee the implementation of the City or Municipal Solid Waste Management Plan;

(7) Review every two (2) years or as the need arises the City or Municipal Solid Waste
Management Plan for purposes of ensuring its sustainability, viability, effectiveness and
relevance in relation to local and international developments in the field of solid waste
management;

(8) Develop the specific mechanics and guidelines for the implementation of the City or
Municipal Solid Waste Management Plan;
 (9) Recommended to appropriate local government authorities specific measures or
proposals for franchise or build-operate-transfer agreements with duly recognized
institutions, pursuant to R.A.6957, to provide either exclusive or non-exclusive authority for
the collection, transfer, storage, processing, recycling or disposal of municipal solid waste.
The proposals shall take into consideration appropriate government rules and regulations on
contracts, franchise and build-operate-transfer agreements;

(10) Provide the necessary logistical and operational support to its component cities and
municipalities in consonance with subsection (f) of Sec. 17 of the Local Government Code;

(11) Recommended measures and safeguards against pollution and for the preservation of
the natural ecosystem; and

(12) Coordinates the efforts of its components barangays in the implementation of the city or
municipal Solid Waste Management Plan.

Section13. Establishment of Multi-Purpose Environment Cooperatives or Association in Every LGU -

Multi-purpose cooperatives and associations that shall undertake activities to promote the
implementation and/ or directly undertake projects in compliance with the provisions of this Act shall
be encouraged and promoted in every LGU.

CHAPTER III
COMPREHENSIVE SOLID WASTE MANAGEMENT

Article 1
General Provisions

Section 14. National Solid Waste Management Status Report - The Department, in coordination
with the DOH and other concerned agencies, shall within six (6) months after the effectivity of this
Act, prepare a National Solid Waste Management Status Report which shall be used as a basis in
formulating the National Solid Waste Management Framework provided in Sec. 15 of this Act. The
concerned agencies shall submit to the Department relevant data necessary for the completion of
the said report within three (3) months following the effectivity of this Act. The said report shall
include, but shall not be limited to, the following:

(a) Inventory of existing solid waste facilities;

(b) General waste characterization, taking into account the type, quantity of waste generated
and estimation of volume and type of waste for reduction and recycling;

(c) Projection of waste generation;

(d) The varying regional geologic, hydrologic, climatic, and other factors vital in the
implementation of solid waste practices to ensure the reasonable protection of:

(1) the quality of surface and groundwater from leachate contamination;

(2) the quality of surface waters from surface run-off contamination; and

(3) ambient air quality.

 (e) Population density, distribution and projected growth;

(f) The political, economic, organizational, financial and management problems affecting
comprehensive solid waste management;

(g) Systems and techniques of waste reduction, re-use and recycling;

(h) Available markets for recyclable materials;

(i) Estimated cost of collecting, storing, transporting, marketing and disposal of wastes and
recyclable materials; and

(j) Pertinent qualitative and quantitative information concerning the extent of solid waste
management problems and solid waste management activities undertaken by local
government units and the waste generators.

Provided, That the Department, in consultation with concerned agencies, shall review, update and
publish a National Solid Waste Management Status Report every two (2) years or as the need
arises.

Section 15. National Solid Waste Management Framework - Within six (6) months from the
completion of the national solid waste management status report under Sec. 14 of this Act, the
Commission created under Sec. 4 of this Act shall, with public participation, formulate and implement
a National Solid Waste Management Framework. Such framework shall consider and include:

(a) Analysis and evaluation of the current state, trends, projections of solid waste
management on the national, provincial and municipal levels;

(b) Identification of critical solid waste facilities and local government units which will need
closer monitoring and/or regulation;

(c) Characteristics and conditions of collection, storage, processing, disposal, operating

methods, techniques and practices, location of facilities where such operating methods,
techniques and practices are conducted, taking into account the nature of the waste;

(d) Waste diversion goal pursuant to Sec. 20 of this Act;

(e) Schedule for the closure and/or upgrading of open and controlled dumps pursuant to Sec.
37 of this Act;

(f) Methods of closing or upgrading open dumps for purposes of eliminating potential health
hazards;

(g) The profile of sources, including industrial, commercial, domestic, and other sources;

(h) Practical applications of environmentally sound techniques of water minimization such as,
but not limited to, resource conservation, segregation at source, recycling, resource
recovery, including waste-to-energy generation, re-use and composting;
 (i) A technical and economic description of the level of performance that can be attained by
various available solid waste management practices which provide for the protection of
public health and the environment;

(j) Appropriate solid waste facilities and conservation systems;

(k) Recycling programs for the recyclable materials, such as but not limited to glass, paper,
plastic and metal;

(l) Venues for public participation from all sectors at all phases/stages of the waste
management program/project;

(m) Information and education campaign strategies;

(n) A description of levels of performance and appropriate methods and degrees of control
that provide, at the minimum, for protection of public health and welfare through:

(1) Protection of the quality of groundwater and surface waters from leachate and
run-off contamination;

(2) Disease and epidemic prevention and control;

(3) Prevention and control of offensive odor; and

(4) Safety and aesthetics.

(o) Minimum criteria to be used by the local government units to define ecological solid waste
management practices. As much as practicable, such guidelines shall also include minimum
information for use in deciding the adequate location, design and construction of facilities
associated with solid waste management practices, including the consideration of regional,
geographic, demographic and climatic factors; and

(p) The method and procedure for the phaseout and the eventual closure within eighteen
(18) months from the effectivity of this Act in case of existing open dumps and/or sanitary
landfills located within an aquifer, groundwater reservoir or watershed area.

Section 16. Local Government Solid Waste Management Plans - The province, city or municipality,
through its local solid waste management boards, shall prepare its respective 10-year solid waste
management plans consistent with the national solid waste management framework: Provided, That
the waste management plan shall be for the re-use, recycling and composting of wastes generated
in their respective jurisdictions: Provided, further, That the solid waste management plan of the LGU
shall ensure the efficient management of solid waste generated within its jurisdiction. The plan shall
place primary emphasis on implementation of all feasible re-use, recycling, and composting
programs while identifying the amount of landfill and transformation capacity that will be needed for
solid waste which cannot be re-used, recycled, or composted. The plan shall contain all the
components provided in Sec. 17 of this Act and a timetable for the implementation of the solid waste
management program in accordance with the National Framework and pursuant to the provisions of
this Act: Provided, finally, That it shall be reviewed and updated every year by the provincial, city or
municipal solid waste management board.
For LGUs which have considered solid waste management alternatives to comply with Sec. 37 of
this Act, but are unable to utilize such alternatives, a timetable or schedule of compliance specifying
the remedial measure and eventual compliance shall be included in the plan.

All local government solid waste management plans shall be subjected to the approval of the
Commission. The plan shall be consistent with the national framework and in accordance with the
provisions of this Act and of the policies set by the Commission; Provided, That in the province of
Palawan, the local government solid waste management plan shall be approved by the Palawan
Council for Sustainable Development, pursuant to R.A. No. 7611.

Section 17. The Components of the Local Government Solid Waste Management Plan - The solid
waste management plan shall include, but not limited to, the following components:

(a) City or Municipal Profile - The plan shall indicate the following background information on
the city or municipality and its component barangays, covering important highlights of the
distinct geographic and other conditions:

(1) Estimated population of each barangay within the city or municipality and
population project for a 10-year period;

(2) Illustration or map of the city/municipality, indicating locations of residential,

commercial, and industrial centers, and agricultural area, as well as dump, landfills
and other solid waste facilities. The illustration shall indicate as well, the proposed
sites for disposal and other solid waste facilities;

(3) Estimated solid waste generation and projection by source, such as residential,
market, commercial, industrial, construction/ demolition, street waste,agricultural,
agro-industrial, institutional, other waste; and

(4) Inventory of existing waste disposal and other solid waste facilities and
capacities.

(b) Waste characterization - For the initial source reduction and recycling element of a local
waste management plan, the LGU waste characterization component shall identify the
constituent materials which comprise the solid waste generated within the jurisdiction of the
LGU. The information shall be representative of the solid waste generated and disposed of
within the area. The constituent materials shall be identified by volume, percentage in weight
or its volumetric equivalent, material type, and source of generation which includes
residential, commercial, industrial, governmental, or other materials. Future revisions of
waste characterization studies shall identify the constituent materials which comprise the
solid waste disposed of at permitted disposal facilities.

(c) Collection and Transfer - The plan shall take into account the geographic subdivisions to
define the coverage of the solid waste collection area in every barangay. The barangay shall
be responsible for ensuring that a 100% collection efficiency from residential, commercial,
industrial and agricultural sources, where necessary within its area of coverage, is achieved.
Toward this end, the plan shall define and identify the specific strategies and activities to be
undertaken by its component barangays, taking into account the following concerns:

(1) Availability and provision of properly designed containers or receptacles in

selected collection points for the temporary storage of solid waste while awaiting
collection and transfer to processing sites or to final disposal sites;
 (2) Segregation of different types of solid waste for re-use, recycling and composting;

(3) Hauling and transfer of solid waste from source or collection points to processing
sites or final disposal sites;

(4) Issuance and enforcement of ordinances to effectively implement a collection

system in the barangay; and

(5) Provision of properly trained officers and workers to handle solid waste disposal.

The plan shall define and specify the methods and systems for the transfer of solid waste
from specific collection points to solid waste management facilities.

(d) Processing - The Plan shall define the methods and the facilities required to process the
solid waste, including the use of intermediate treatment facilities for composting, recycling,
conversion and other waste processing systems. Other appropriate waste processing
technologies may also be considered provided that such technologies conform with
internationally-acceptable and other standards set in other standards set in other laws and
regulations.

(e) Source reduction - The source reduction component shall include a program and
implementation schedule which shows the methods by which the LGU will, in combination
with the recycling and composting components, reduce a sufficient amount of solid waste
disposed of in accordance with the diversion requirements of Sec. 20.

The source reduction component shall describe the following:

(1) strategies in reducing the volume of solid waste generated at source;

(2) measures for implementing such strategies and the resources necessary to carry
out such activities;

(3) other appropriate waste reduction technologies that may also be considered,
provided that such technologies conform with the standards set pursuant to this Act;

(4) the types of wastes to be reduced pursuant to Sec. 15 of this Act;

(5) the methods that the LGU will use to determine the categories of solid wastes to
be diverted from disposal at a disposal facility through re-use, recycling and
composting; and

(6) new facilities and expansion of existing facilities which will be needed to
implement re-use, recycling and composting.

The LGU source reduction component shall include the evaluation and identification of rate
structures and fees for the purpose of reducing the amount of waste generated, an other
source reduction strategies, including but not limited to, programs and economic incentives
provided under Sec. 46 of this Act to reduce the use of non-recyclable materials, replace
disposable materials and products with reusable materials and products, reduce packaging,
and increase the efficiency of the use of paper, cardboard, glass, metal, and other materials.
The waste reduction activities of the community shall also take into account, among others,
local capability, economic viability, technical requirements, social concerns' disposition of
residual waste and environmental impact: Provided, That, projection of future facilities
needed and estimated cost shall be incorporated in the plan.

(f) Recycling - The recycling component shall include a program and implementation
schedule which shows the methods by which the LGU shall, in combination with source
reduction and composting components, reduce a sufficient amount of solid waste disposed
of in accordance with the diversion requirements set in Sec .20.

The LGU recycling component shall describe the following:

(1) The types of materials to be recycled under the programs;

(2) The methods for determining the categories of solid wastes to be diverted from
disposal at a disposal facility through recycling; and

(3) New facilities and expansion of existing facilities needed to implement the
recycling component.

The LGU recycling component shall described methods for developing the markets for
recycled materials, including, but not limited to, an evaluation of the feasibility of procurement
preferences for the purchase of recycled products. Each LGU may determine and grant a
price preference to encourage the purchase of recycled products.

The five-year strategy for collecting, processing, marketing and selling the designated
recyclable materials shall take into account persons engaged in the business of recycling or
persons otherwise providing recycling services before the effectivity of this Act. Such
strategy may be base upon the results of the waste composition analysis performed pursuant
to this Section or information obtained in the course of past collection of solid waste by the
local government unit, and may include recommendations with respect to increasing the
number of materials designated for recycling pursuant to this Act.

The LGU recycling component shall evaluate industrial, commercial, residential, agricultural,
governmental and other curbside, mobile, drop-off and buy-back recycling programs, manual
and automated materials recovery facilities, zoning, building code changes and rate
structures which encourage recycling of materials. The Solid Waste Management Plan shall
indicate the specific measures to be undertaken to meet the waste diversion specified under
Sec. 20 of this Act.

Recommended revisions to the building ordinances, requiring newly-constructed buildings

and buildings undergoing specified alterations to contain storage space, devices or
mechanisms that facilitate source separation and storage of designated recyclable materials
to enable the local government unit to efficiently collect, process, market and sell the
designated materials. Such recommendations shall include, but shall not be limited to
separate chutes to facilitate source separation in multi-family dwellings, storage areas that
conform to fire and safety code regulations, and specialized storage containers.

The Solid Waste Management Plan shall indicate the specific measures to be undertaken to
meet the recycling goals pursuant to the objectives of this Act.
(g) Composting - The composting component shall include a program and implementation
schedule which shows the methods by which the LGU shall, in combination with the source
reduction and recycling components, reduce a sufficient amount of solid waste disposed of
within its jurisdiction to comply with the diversion requirements of Sec. 20 hereof.

The LGU composting component shall describe the following:

(1) The types of materials which will be composted under the programs;

(2) The methods for determining the categories of solid wastes to be diverted from
disposal at a disposal facility through composting; and

(3) New facilities, and expansion of existing facilities needed to implement the
composting component.

The LGU composting component shall describe methods for developing the markets for
composted materials, including, but not limited to, an evaluation of the feasibility of
procurement preferences for the purchase of composted products. Each LGU may determine
and grant a price preference to encourage the purchase of composted products.

(h) Solid waste facility capacity and final disposal - The solid waste facility component shall
include, but shall not be limited to, a projection of the amount of disposal capacity needed to
accommodate the solid waste generated, reduced by the following:

(1) Implementation of source reduction, recycling and composting programs required

in this Section or through implementation of other waste diversion activities pursuant
to Sec. 20 of this Act;

(2) Any permitted disposal facility which will be available during the 10-year planning
period; and

(3) All disposal capacity which has been secured through an agreement with another
LGU, or through an agreement with a solid waste enterprise.

The plan shall identify existing and proposed disposal sites and waste management facilities
in the city or municipality or in other areas. The plan shall specify the strategies for the
efficient disposal of waste through existing disposal facilities and the identification of
prospective sites for future use. The selection and development of disposal sites shall be
made on the basis of internationally accepted standards and on the guidelines set in Sec. 41
and 42 of this Act.

Strategies shall be included to improve said existing sites to reduce adverse impact on
health and the environment, and to extent life span and capacity. The plan shall clearly
define projections for future disposal site requirements and the estimated cost for these
efforts.

Open dump sites shall not be allowed as final disposal sites. If an open dump site is existing
within the city or municipality, the plan shall make provisions for its closure or eventual phase
out within the period specified under the framework and pursuant to the provisions under
Sec. 37 of this Act. As an alternative, sanitary landfill sites shall be developed and operated
as a final disposal site for solid and, eventually, residual wastes of a municipality or city or a
 cluster of municipality and/or cities. Sanitary landfills shall be designed and operated in
accordance with the guidelines set under Secs. 40 and 41 of this Act.

(i) Education and public information - The education and public information component shall
describe how the LGU will educate and inform its citizens about the source reduction,
recycling and composting programs.

The plan shall make provisions to ensure that information on waste collection services, solid
waste management and related health and environmental concerns are widely disseminated
among the public. This shall be undertaken through the print and broadcast media and other
government agencies in the municipality. The DECS and the Commission on Higher
Education shall ensure that waste management shall be incorporated in the curriculum of
primary, secondary and college students.

(j) Special Waste - The special waste component shall include existing waste handling and
disposal practices for special wastes or household hazardous wastes, and the identification
of current and proposed programs to ensure the proper handling, re-use, and long-term
disposal of special wastes;

(k) Resource requirement and funding - The funding component includes identification and
description of project costs, revenues, and revenue sources the LGU will use to implement
all components of the LGU solid waste management plan;

The plan shall likewise indicate specific projects, activities, equipment and technological
requirements for which outside sourcing of funds or materials may be necessary to carry out
the specific components of the plan. It shall define the specific uses for its resource
requirement s and indicate its costs. The plan shall likewise indicate how the province, city or
municipality intends to generate the funds for the acquisition of its resource requirements. It
shall also indicate if certain resource requirements are being or will be sourced from fees,
grants, donations, local funding and other means. This will serve as basis for the
determination and assessment of incentives which may be extended to the province, city or
municipality as provided for in Sec. 45 of this Act.

(l) Privatization of solid waste management projects - The plan shall likewise indicate specific
measures to promote the participation of the private sector in the management of solid
wastes, particularly in the generation and development of the essential technologies for solid
waste management. Specific projects or component activities of the plan which may be
offered as private sector investment activity shall be identified and promoted as such.
Appropriate incentives for private sector involvement in solid waste management shall
likewise be established and provided for in the plan, in consonance with Sec. 45 hereof and
other existing laws, policies and regulations; and

(m) Incentive programs - A program providing for incentives, cash or otherwise, which shall
encourage the participation of concerned sectors shall likewise be included in the plan.

Section 18. Owner and Operator - Responsibility for compliance with the standards in this Act shall
rest with the owner and/or operator. If specifically designated, the operator is considered to have
primary responsibility for compliance; however, this does not relieve the owner of the duty to take all
reasonable steps to assure compliance with these standards and any assigned conditions. When the
title to a disposal is transferred to another person, the new owner shall be notified by the previous
owner of the existence of these standards and of the conditions assigned to assure compliance.
Section 19. Waste characterization - The Department in coordination with the LGUs, shall be
responsible for the establishment of the guidelines for the accurate characterization of wastes
including determination of whether or not wastes will be compatible with containment features and
other wastes, and whether or not wastes are required to be managed as hazardous wastes under
R.A. 6969, otherwise known as the Toxic Substance and Hazardous and Nuclear Wastes Control
Act.

Section 20. Establishing Mandatory Solid Waste Diversion - Each LGU plan shall include an
implementation schedule which shows that within five (5) years after the effectivity of this Act, the
LGU shall divert at least 25% of all solid waste from waste disposal facilities through re-use,
recycling and composting activities and other resource recovery activities; Provided, That the waste
diversion goals shall be increased every three (3) years thereafter; Provided, further, That nothing in
this Section prohibits a local government unit from implementing re-use, recycling, and composting
activities designed to exceed the goal.

Article 2
Segregation of Wastes

Section 21. Mandatory Segregation of Solid Wastes - The LGUs shall evaluate alternative roles for
the public and private sectors in providing collection services, type of collection system, or
combination of systems, that best meet their needs: Provided, That segregation of wastes shall
primarily be conducted at the source, to include household, institutional, industrial, commercial and
agricultural sources: Provided, further; That wastes shall be segregated into the categories provided
in Sec. 22 of this Act.

For premises containing six (6) or more residential units, the local government unit shall promulgate
regulations requiring the owner or person in charge of such premises to:

(a) provide for the residents a designated area and containers in which to accumulate source
separated recyclable materials to be collected by the municipality or private center; and

(b) notify the occupants of each buildings of the requirements of this Act and the regulations
promulgated pursuant thereto.

Section 22. Requirements for the Segregation and Storage of Solid Waste - The following shall be
the minimum standards and requirements for segregation and storage of solid waste pending
collection:

(a) There shall be a separate container for each type of waste from all sources: Provided,
That in the case of bulky waste, it will suffice that the same be collected and placed in a
separate designated area; and

(b) The solid waste container depending on its use shall be properly marked or identified for
on-site collection as "compostable", "non-recyclable", "recyclable" or "special waste", or any
other classification as may be determined by the Commission.

Article 3
Collection and Transport of Solid Wastes

Section 23. Requirements for Collection of Solid Wastes - The following shall be the minimum
standards and requirements for the collection of solid waste:
 (a) All collectors and other personnel directly dealing with collection of solid waste shall be
equipped with personal protective equipment to protect them from the hazards of handling
wastes;

(b) Necessary training shall be given to the collectors and personnel to ensure that the solid
wastes are handled properly and in accordance with the guidelines pursuant to this Act; and

(c) Collection of solid waste shall be done in a manner which prevents damage to the
container and spillage or scattering of solid waste within the collection vicinity.

Section 24. Requirements for the Transport of Solid Waste - The use of separate collection
schedules and/or separate trucks or haulers shall be required for specific types of wastes.
Otherwise, vehicles used for the collection and transport of solid wastes shall have the appropriate
compartments to facilitate efficient storing of sorted wastes while in transit.

Vehicles shall be designed to consider road size, condition and capacity to ensure the sage and
efficient collection and transport of solid wastes.

The waste compartment shall have a cover to ensure the containment of solid wastes while in
transit.

For the purpose of identification, vehicles shall bear the body number, the name, and the telephone
number of the contractor/agency collecting solid waste.

Section 25. Guidelines for Transfer Stations - Transfer stations shall be designed and operated for
efficient waste handling capacity and in compliance with environmental standards and guidelines set
pursuant to this Act and other regulations: Provided, That no waste shall be stored in such station
beyond twenty-four (24) hours.

The siting of the transfer station shall consider the land use plan, proximity to collection area, and
accessibility of haul routes to disposal facility. The design shall give primary consideration to size
and space sufficiency in order to accommodate the waste for storage and vehicles for loading and
unloading of wastes.

Article 4
Recycling Program

Section 26. Inventory of Existing Markets for Recyclable Materials - The DTI shall within six (6)
months from the effectivity of this Act and in cooperation with the Department, the DILG and other
concerned agencies and sectors, publish a study of existing markets for processing and purchasing
recyclable materials and the potential steps necessary to expand these markets. Such study shall
include, but not be limited to, an inventory of existing markets for recyclable materials, product
standards for recyclable and recycled materials, and a proposal, developed in conjunction with the
appropriate agencies, to stimulate the demand for the production of products containing post
consumer and recovered materials.

Section 27. Requirement for Eco-Labeling - The DTI shall formulate and implement a coding system
for packaging materials and products to facilitate waste and recycling and re-use.

Section 28. Reclamation Programs and Buy-back Centers for Recyclables and Toxics - The
National Ecology Center shall assist LGUs in establishing and implementing deposit or reclamation
programs in coordination with manufacturers, recyclers and generators to provide separate
collection systems or convenient drop-off locations for recyclable materials and particularly for
separated toxic components of the waste stream like dry cell batteries and tires to ensure that they
are not incinerated or disposed of in a landfill. Upon effectivity of this Act, toxic materials present in
the waste stream should be separated at source, collected separately and further screened and sent
to appropriate hazardous waste treatment and disposal plants, consistent with the provisions of R.A.
No. 6969.

Section 29. Non-Environmentally Acceptable Products - Within one (1) year from the effectivity of
this Act, the Commission shall, after public notice and hearing, prepare a list of nonenvironmentally
acceptable products as defined in this Act that shall be prohibited according to a schedule that shall
be prepared by the Commission: Provided, however, That non-environmentally acceptable products
shall not be prohibited unless the Commission first finds that there are alternatives available which
are available to consumers at no more than ten percent (10%) greater cost than the disposable
product.

Notwithstanding any other provisions to the contrary, this section shall not apply to:

(a) Packaging used at hospitals, nursing homes or other medical facilities; and

(b) Any packaging which is not environmentally acceptable, but for which there is no
commercially available alternatives as determined by the Commission.

The Commission shall annually review and update the list of prohibited non-environmentally
acceptable products.

Section 30. Prohibition on the Use of Non-Environmentally Acceptable Packaging - No person

owning, operating or conducting a commercial establishment in the country shall sell or convey at
retail or possess with the intent to sell or convey at retail any products that are placed, wrapped or
packaged in or on packaging which is not environmentally acceptable packaging: Provided, That the
Commission shall determine a phaseout period after proper consultation and hearing with the
stakeholders or with the sectors concerned. The presence in the commercial establishment of non-
environmentally acceptable packaging shall constitute a rebuttable presumption of intent to sell or
convey the same at retail to customers.

Any person who is a manufacturer, broker or warehouse operator engaging in the distribution or
transportation of commercial products within the country shall file a report with the concerned local
government within one (1) year from the effectivity of this Act, and annually thereafter, a listing of
any products in packaging which is not environmentally acceptable. The Commission shall prescribe
the form of such report in its regulations.

A violation of this Section shall be sufficient grounds for the revocation, suspension, denial or non-
renewal of any license for the establishment in which the violation occurs.

Section 31. Recycling Market Development - The Commission together with the National Ecology
Center, the DTI and the Department of Finance shall establish procedures, standards and strategies
to market recyclable materials and develop the local market for recycle goods, including but not
limited to:

(a) measures providing economic incentives and assistance including loans and grants for
the establishment of privately-owned facilities to manufacture finished products from post-
consumer materials;
 (b) guarantees by the national and local governments to purchase a percentage of the output
of the facility; and

(c) maintaining a list of prospective buyers, establishing contact with prospective buyers and
reviewing and making any necessary changes in collecting or processing the materials to
improve their marketability.

In order to encourage establishments of new facilities to produce goods from post-consumer and
recovered materials generated within local government units, and to conserve energy by reducing
materials transportation, whenever appropriate, each local government unit may arranged for long-
term contracts to purchase a substantial share of the product output of a proposed facility which will
be based in the jurisdiction of the local government unit if such facility will manufacture such finished
products form post-consumer and recovered materials.

Section 32. Establishment of LGU Materials Recovery Facility. - There shall be established a
Materials Recovery Facility (MRF) in every barangay or cluster of barangays. The facility shall be
established in a barangay-owned or -leased land or any suitable open space to be determined by
the barangay through its Sanggunian. For this purpose, the barangay or cluster of barangays shall
allocate a certain parcel of land for the MRF. The MRF shall receive mixed waste for final sorting,
segregation, composting, and recycling. The resulting residual wastes shall be transferred to a long
term storage or disposal facility or sanitary landfill.

Section 33. Guidelines for Establishment of Materials Recovery Facility - Materials recovery facilities
shall be designed to receive, sort, process and store compostable and recyclable material efficiently
and in an environmentally sound manner. The facility shall address the following considerations:

(a) The building and/or land layout and equipment must be designed to accommodate
efficient and safe materials processing, movement, and storage; and

(b) The building must be designed to allow efficient and safe external access and to
accommodate internal flow.

Article 5
Composting

Section 34. Inventory of Markets of Composts - Within six (6) months after the effectivity of this Act,
the DA shall publish an inventory of existing markets and demands for composts. Said inventory
shall thereafter be updated and published annually: Provided, That the composting of agricultural
wastes and other compostable materials, including but not limited to garden wastes, shall be
encouraged.

Section 35. Guidelines for Compost Quality - Compost products intended to be distributed
commercially shall conform with the standards for organic fertilizers set by the DA. The DA shall
assist the compost producers to ensure that the compost products conform to such standards.

Article 6
Waste Management Facilities

Section 36. Inventory of Waste Disposal Facilities - Within six (6) months from the effectivity of this
Act, the Department, in cooperation with the DOH, DILG and other concerned agencies, shall
publish an inventory of all solid waste disposal facilities or sites in the country.
Section 37. Prohibition Against the Use of Open Dumps for Solid Waste - No open dumps shall be
established and operated, nor any practice or disposal of solid waste by any person, including LGUs,
which constitutes the use of open dumps for solid wastes, be allowed after the effectivity of this
Acts: Provided, That within three (3) years after the effectivity of this Act, every LGU shall convert its
open dumps into controlled dumps, in accordance with the guidelines set in Sec. 41 of this
Act: Provided, further, That no controlled dumps shall be allowed five (5) years following the
effectivity of this Act.

Section 38. Permit for Solid Waste Management Facility Construction and Expansion - No person
shall commence operation, including site preparation and construction of a new solid waste
management facility or the expansion of an existing facility until said person obtains an Environment
Compliance Certificate (ECC) from the Department pursuant to P.D. 1586 and other permits and
clearances form concerned agencies.

Section 39. Guidelines for Controlled Dumps - The following shall be the minimum considerations
for the establishments of controlled dumps:

(a) Regular inert cover;

(b) Surface water and peripheral site drainage control;

(c) Provision for aerobic and anaerobic decomposition;

(d) Restriction of waste deposition to small working areas;

(e) Fence, including provisions for litter control;

(f) Basic record-keeping;

(g) Provision of maintained access road;

(h) Controlled waste picking and trading;

(i) Post-closure site cover and vegetation; and

(j) Hydro geological siting.

Section 40. Criteria for Siting a Sanitary Landfill - The following shall be the minimum criteria for the
siting of sanitary landfills:

(a) The site selected must be consistent with the overall land use plan of the LGU;

(b) The site must be accessible from major roadways or thoroughfares;

(c) The site should have an adequate quantity of earth cover material that is easily handled
and compacted;

(d) The site must be chosen with regard for the sensitivities of the community's residents;
 (e) The site must be located in an area where the landfill's operation will not detrimentally
affect environmentally sensitive resources such as aquifer, groundwater reservoir or
watershed area;

(f) The site should be large enough to accommodate the community's wastes for a period of
five (5) years during which people must internalize the value of environmentally sound and
sustainable solid waste disposal;

(g) The site chosen should facilitate developing a landfill that will satisfy budgetary
constraints, including site development, operation for many years, closure, post-closure care
and possible remediation costs;

(h) Operating plans must include provisions for coordinating with recycling and resource
recovery projects; and

(i) Designation of a separate containment area for household hazardous wastes.

Section 41. Criteria for Establishment of Sanitary Landfill - The following shall be the minimum
criteria for the establishment of sanitary landfills:

(a) Liners - a system of clay layers and/or geosynthethic membranes used to contain
leachate and reduce or prevent contaminant flow to groundwater;

(b) Leachate collection and treatment system - installation of pipes at the low areas of the
liner to collect leachate for storage and eventual treatment and discharge;

(c) Gas control and recovery system - a series of vertical wells or horizontal trenches
containing permeable materials and perforated piping placed in the landfill to collect gas for
treatment or productive use as an energy source;

(d) Groundwater monitoring well system - wells placed at an appropriate location and depth
for taking water that are representative of ground water quality;

(e) Cover - two (2) forms of cover consisting of soil and geosynthetic materials to protect the
waste from long-term contact with the environment:

(i) a daily cover placed over the waste at the close of each day's operations, and;

(ii) a final cover, or cap, which is the material placed over the completed landfill to
control infiltration of water, gas emission to the atmosphere, and erosion.

(f) Closure procedure with the objectives of establishing low maintenance cover systems and
final cover that minimizes the infiltration of precipitation into the waste. Installation of the final
cover must be completed within six (6) months of the last receipt of waste;

(g) Post-closure care procedure - During this period, the landfill owner shall be responsible
for providing for the general upkeep of the landfill, maintaining all of the landfill's
environmental protection features, operating monitoring equipment, remediating groundwater
should it become contaminated and controlling landfill gas migration or emission.
Section 42. Operating Criteria for Sanitary Landfills - In the operation of a sanitary land fill, each site
operator shall maintain the following minimum operating equipments:

(a) Disposal site records of, but not limited to:

(1) Records of weights or volumes accepted in a form and manner approved by the
Department. Such records shall be submitted to the Department upon request,
accurate to within ten percent (10%) and adequate for overall planning purposes and
forecasting the rate of site filling;

(2) Records of excavations which may affect the safe and proper operation of the site
or cause damage to adjoining properties;

(3) Daily log book or file of the following information: fires, landslides, earthquake
damage, unusual and sudden settlement, injury and property damage, accidents,
explosions, receipts or rejection of unpermitted wastes, flooding and other unusual
occurrences;

(4) Record of personnel training; and

(5) Copy of written notification to the Department, local health agency, and fire
authority of names, addresses and telephone numbers of the operator or responsible
party of the site;

(b) Water quality monitoring of surface and ground waters and effluent, and gas emissions;

(c) Documentation of approvals, determinations and other requirements by the Department;

(d) Signs:

(1) Each point of access from a public road shall be posted with an easily visible sigh
indicating the facility name and other pertinent information as required by the
Department;

(2) If the site is open to the public, there shall be an easily visible sign at the primary
entrance of the site indicating the name of the site operator, the operator's telephone
number, and hours of operation; an easily visible sign at an appropriate point shall
indicate the schedule of changes and the general types of materials which will either
be accepted or not;

(3) If the site is open to the public, there shall be an easily visible road sign and/or
traffic control measures which direct traffic to the active face and other areas where
wastes or recyclable materials will be deposited; and

(4) Additional signs and/or measures may be required at a disposal site by the
Department to protect personnel and public health and safety;

(e) Monitoring of quality of surface, ground and effluent waters, and gas emissions;

(f) The site shall be designed to discourage unauthorized access by persons and vehicles by
using a perimeter barrier or topographic constraints. Areas within the site where open
storage, or pounding of hazardous materials occurs shall be separately fenced or otherwise
secured as determined by the Department. The Department may also require that other
areas of the site be fenced to create an appropriate level of security;

(g) Roads within the permitted facility boundary shall be designed to minimize the generation
of dust and the tracking of material onto adjacent public roads. Such roads shall be kept in
safe condition and maintained such that vehicle access and unloading can be conducted
during inclement weather;

(h) Sanitary facilities consisting of adequate number of toilets and handwashing facilities,
shall be available to personnel at or in the immediate vicinity of the site;

(i) Safe and adequate drinking water supply for the site personnel shall be available;

(j) The site shall have communication facilities available to site personnel to allow quick
response to emergencies;

(k) Where operations are conducted during hours of darkness, the site and/or equipment
shall be equipped with adequate lighting as approved by the Department to ensure safety
and to monitor the effectiveness of operations;

(l) Operating and maintenance personnel shall wear and use appropriate safety equipment
as required by the Department;

(m) Personnel assigned to operate the site shall be adequately trained in subject pertinent to
the site operation and maintenance, hazardous materials recognition and screening, and
heavy equipment operations, with emphasis on safety, health, environmental controls and
emergency procedures. A record of such training shall be placed in the operating record;

(n) The site operator shall provide adequate supervision of a sufficient number of qualified
personnel to ensure proper operation of the site in compliance with all applicable laws,
regulations, permit conditions and other requirements. The operator shall notify the
Department and local health agency in writing of the names, addresses, and telephone
number of the operator or responsible party. A copy of the written notification shall be placed
in the operation record;

(o) Any disposal site open to the public shall have an attendant present during public
operating hours or the site shall be inspected by the operator on a regularly scheduled basis,
as determined by the Department;

(p) Unloading of solid wastes shall be confined to a small area as possible to accommodate
the number of vehicles using the area without resulting in traffic, personnel, or public safety
hazards. Waste materials shall normally be deposited at the toe of the fill, or as otherwise
approved by the Department;

(q) Solid waste shall be spread and compacted in layers with repeated passages of the
landfill equipment to minimize voids within the cell and maximize compaction. The loose
layer shall not exceed a depth approximately two feet before compaction. Spreading and
compacting shall be accomplished as rapidly as practicable, unless otherwise approved by
the Department;
 (r) Covered surfaces of the disposal area shall be graded to promote lateral runoff of
precipitation and to prevent pounding. Grades shall be established of sufficient slopes to
account for future settlement of the fill surface. Other effective maintenance methods may be
allowed by the Department; and

(s) Cover material or native material unsuitable for cover, stockpiled on the site for use or
removal, shall be placed so as not to cause problems or interfere with unloading, spreading,
compacting, access, safety drainage, or other operations.

Article 7
Local Government Solid Waste Management

Section 43. Guidelines for Identification of Common Solid Waste Management Problems - For
purposes of encouraging and facilitating the development of local government plans for solid waste
management, the Commission shall, as soon as practicable but not later than six (6) months from
the effectivity of this Act, publish guidelines for the identification of those areas which have common
solid waste management problems and are appropriate units for clustered solid waste management
services. The guidelines shall be based on the following:

(a) the size and location of areas which should be included;

(b) the volume of solid waste which would be generated;

(c) the available means of coordinating local government planning between and among the
LGUs and for the integration of such with the national plan; and

(d) possible lifespan of the disposal facilities.

Section 44. Establishment of Common Waste Treatment and Disposal Facilities - Pursuant to Sec.
33 of R.A.7160, otherwise known as the Local Government Code, all provinces, cities, municipalities
and barangays, through appropriate ordinances, are hereby mandated to consolidate, or coordinate
their efforts, services, and resources for purposes of jointly addressing common solid waste
management problems and/or establishing common waste disposal facilities.

The Department, the Commission and local solid waste management boards shall provide technical
and marketing assistance to the LGUs.

CHAPTER IV
INCENTIVES

Section 45. Incentives. -

(a) Rewards, monetary or otherwise, shall be provided to individuals, private organizations

and entitles, including non-government organizations, that have undertaken outstanding and
innovative projects, technologies, processes and techniques or activities in re-use, recycling
and reduction. Said rewards shall be sourced from the Fund herein created.

(b) An incentive scheme is hereby provided for the purpose of encouraging LGUs,
enterprises, or private entities, including NGOs, to develop or undertake an effective solid
waste management, or actively participate in any program geared towards the promotion
thereof as provided for in this Act.
(1) Fiscal Incentives. - Consistent with the provisions of E.O. 226, otherwise known as the Omnibus
Investments Code, the following tax incentives shall be granted:

(a) Tax and Duty Exemption on Imported Capital Equipment and Vehicles - Within ten (10)
years upon effectively of this Act, LGUs, enterprises or private entities shall enjoy tax and
duty free importation of machinery, equipment, vehicles and spare parts used for collection,
transportation, segregation, recycling, re-use and composing of solid wastes: Provided, That
the importation of such machinery, equipment, vehicle and spare parts shall comply with the
following conditions:

(i) They are not manufactured domestically in sufficient quantity, of comparable

quality and at reasonable prices;

(ii) They are reasonably needed and will be used actually, directly and exclusively for
the above mentioned activities;

(iii) The approval of the Board of Investment (BOI) of the DTI for the importation of
such machinery, equipment, vehicle and spare parts.

Provided, further, That the sale, transfer or disposition of such machinery, equipment, vehicle
and spare parts, without prior approval of the (BOI), within five (5) years from the date of
acquisition shall be prohibited, otherwise, the LGU concerned, enterprise or private entities
and the vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of
tax and duty exemption given it.

(b) Tax Credit on Domestic Equipment - Within ten (10) years from the effectivity of this Act,
a tax credit equivalent to 50% of the value of the national internal revenue taxes and
customs duties that would have been waived on the machinery, equipment, vehicle and
spare parts, had these items been imported shall be given to enterprises, private entities,
including NGOs, subject to the same conditions and prohibition cited in the preceding
paragraph.

(c) Tax and Duty Exemption of Donations, Legacies and Gift - All legacies, gifts and
donations to LGUs, enterprises or private entities, including NGOs, for the support and
maintenance of the program for effective solid waste management shall be exempt from all
internal revenue taxes and customs duties, and shall be deductible in full from the gross
income of the donor for income tax purposes.

(2) Non-Fiscal Incentives. - LGUs, enterprises or private entities availing of tax incentives under this
Act shall also be entitled to applicable non-fiscal incentives provided for under E.O. 226, otherwise
known as the Omnibus Investments Code.

The Commission shall provide incentives to businesses and industries that are engaged in the
recycling of wastes and which are registered with the Commission and have been issued ECCs in
accordance with the guidelines established by the Commission. Such incentives shall include
simplified procedures for the importation of equipment, spare parts, new materials, and supplies, and
for the export of processed products.

(3) Financial Assistance Program. - Government financial institutions such as the Development Bank
of the Philippines (DBP), Landbank of the Philippines (LBP), Government Service Insurance System
(GSIS), and such other government institutions providing financial services shall, in accordance with
and to the extent allowed by the enabling provisions of their respective charters or applicable laws,
accord high priority to extend financial services to individuals, enterprises, or private entities
engaged in solid waste management.

(4) Extension of Grants to LGUs. - Provinces, cities and municipalities whose solid waste
management plans have been duly approved by the Commission or who have been commended by
the Commission for adopting innovative solid waste management programs may be entitled to
receive grants for the purpose of developing their technical capacities toward actively participating in
the program for effectively and sustainable solid waste management.

(5) Incentives to Host LGUs. - Local government units who host common waste management
facilities shall be entitled to incentives.

CHAPTER V
FINANCING SOLID WASTE MANAGEMENT

Section 46. Solid Waste Management Fund - There is hereby created, as a special account in the
National Treasury, a Solid Waste Management Fund to be administered by the Commission. Such
fund shall be sourced from the following:

(a) Fines and penalties imposed, proceeds of permits and licenses issued by the Department
under this Act, donations, endowments, grants and contributions from domestic and foreign
sources; and

(b) Amounts specifically appropriated for the Fund under the annual General Appropriations
Act;

The Fund shall be used to finance the following:

(1) products, facilities, technologies and processes to enhance proper solid waste
management;

(2) awards and incentives;

(3) research programs;

(4) information, education, communication and monitoring activities;

(5) technical assistance; and

(6) capability building activities.

LGUs are entitled to avail of the Fund on the basis of their approved solid waste management plan.
Specific criteria for the availment of the Fund shall be prepared by the Commission.

The fines collected under Sec. 49 shall be allocated to the LGU where the fined prohibited acts are
committed in order to finance the solid waste management of said LGU. Such allocation shall be
based on a sharing scheme between the Fund and the LGU concerned.

In no case, however, shall the Fund be used for the creation of positions or payment of salaries and
wages.
Section 47. Authority to Collect Solid Waste Management Fees - The local government unit shall
impose fees in amounts sufficient to pay the costs of preparing, adopting, and implementing a solid
waste management plan prepared pursuant to this Act. The fees shall be based on the following
minimum factors:

(a) types of solid waste;

(b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local fees. In
determining the amounts of the fees, an LGU shall include only those costs directly related to the
adoption and implementation of the plan and the setting and collection of the local fees.

CHAPTER VI
PENAL PROVISIONS

Section 48. Prohibited Acts - The following acts are prohibited:

(1) Littering, throwing, dumping of waste matters in public places, such as roads, sidewalks,
canals, esteros or parks, and establishment, or causing or permitting the same;

(2) Undertaking activities or operating, collecting or transporting equipment in violation of

sanitation operation and other requirements or permits set forth in established pursuant;

(3) The open burning of solid waste;

(4) Causing or permitting the collection of non-segregated or unsorted wastes;

(5) Squatting in open dumps and landfills;

(6) Open dumping, burying of biodegradable or non-biodegradable materials in flood prone

areas;

(7) Unauthorized removal of recyclable material intended for collection by authorized

persons;

(8) The mixing of source-separated recyclable material with other solid waste in any vehicle,
box, container or receptacle used in solid waste collection or disposal;

(9) Establishment or operation of open dumps as enjoined in this Act, or closure of said
dumps in violation of Sec. 37;

(10) The manufacture, distribution or use of non-environmentally acceptable packaging

materials;

(11) Importation of consumer products packaged in non-environmentally acceptable

materials;
 (12) Importation of toxic wastes misrepresented as "recyclable" or "with recyclable content";

(13) Transport and dumplog in bulk of collected domestic, industrial, commercial, and
institutional wastes in areas other than centers or facilities prescribe under this Act;

(14) Site preparation, construction, expansion or operation of waste management facilities

without an Environmental Compliance Certificate required pursuant to Presidential Decree
No. 1586 and this Act and not conforming with the land use plan of the LGU;

(15) The construction of any establishment within two hundred (200) meters from open
dumps or controlled dumps, or sanitary landfill; and

(16) The construction or operation of landfills or any waste disposal facility on any aquifer,
groundwater reservoir, or watershed area and or any portions thereof.

Section 49. Fines and Penalties -

(a) Any person who violates Sec. 48 paragraph (1) shall, upon conviction, be punished with a
fine of not less than Three hundred pesos (P300.00) but not more than One thousand pesos
(P1,000.00) or render community service for not less than one (1) day to not more than
fifteen (15) days to an LGU where such prohibited acts are committed, or both;

(b) Any person who violates Sec. 48, pars. (2) and (3), shall, upon conviction be punished
with a fine of not less than Three hundred pesos (P300.00) but not more than One thousand
pesos (P1,000.00) or imprisonment of not less than one (1) day but to not more than fifteen
(15) days, or both;

(c) Any person who violates Sec. 48, pars. (4), (5), (6) and (7) shall, upon conviction, be
punished with a fine of not less than One thousand pesos (P1,000.00) but not more than
Three thousand pesos (P3,000.00) or imprisonment of not less than fifteen (15) day but to
not more than six (6) months, or both;

(d) Any person who violates Sec. 48, pars (8), (9), (10) and (11) for the first time shall, upon
conviction, pay a fine of Five hundred thousand pesos (P500,000.00) plus and amount not
less than five percent (5%) but not more than ten percent (10%) of his net annual income
during the previous year.

The additional penalty of imprisonment of a minimum period of one (1) year but not to
exceed three (3) years at the discretion of the court, shall be imposed for second or
subsequent violations of Sec. 48, pars. (9) and (10).

(e) Any person who violates Sec. 48, pars. (12) and (13) shall, upon conviction, be punished
with a fine not less than Ten thousand pesos (P10,000.00) but not more than Two hundred
thousand pesos (P200,000.00) or imprisonment of not less than thirty (30) days but not more
than three (3) years, or both;

(f) Any person who violates Sec. 48, pars. (14), (15) and (16) shall, upon conviction, be
punished with a fine not less than One hundred thousand pesos (P100,000.00) but not more
than One million pesos (P1,000,000.00), or imprisonment not less than one (1) year but not
more than six (6) years, or both.
If the offense is committed by a corporation, partnership, or other juridical identity duly recognized in
accordance with the law, the chief executive officer, president, general manager, managing partner
or such other officer-in-charge shall be liable for the commission of the offense penalized under this
Act.

If the offender is an alien, he shall, after service of the sentence prescribed above, be deported
without further administrative proceedings.

The fines herein prescribed shall be increased by at lest ten (10%) percent every three (3) years to
compensate for inflation and to maintain the deterrent functions of such fines.

Section 50. Administrative Sanctions - Local government officials and officials of government
agencies concerned who fail to comply with and enforce rules and regulations promulgated relative
to this Act shall be charged administratively in accordance with R.A. 7160 and other existing laws,
rules and regulations

CHAPTER VII
MISCELLANEOUS PROVISIONS

Section 51. Mandatory Public Hearings - Mandatory public hearings for national framework and
local government solid waste management plans shall be undertaken by the Commission and the
respective Boards in accordance with process to be formulated in the implementing rules and
regulations.

Section 52. Citizens Suits - For the purposes of enforcing the provisions of this Act or its
implementing rules and regulations, any citizen may file an appropriate civil, criminal or
administrative action in the proper courts/bodies against:

(a) Any person who violates or fails to comply with the provisions of this Act its implementing
rules and regulations; or

(b) The Department or other implementing agencies with respect to orders, rules and
regulations issued inconsistent with this Act; and/or

(c) Any public officer who willfully or grossly neglects the performance of an act specifically
enjoined as a duty by this Act or its implementing rules and regulations; or abuses his
authority in the performance of his duty; or, in any many improperly performs his duties
under this Act or its implementing rules and regulations; Provided, however, That no suit can
be filed until after thirty-day (30) notice has been given to the public officer and the alleged
violator concerned and no appropriate action has been taken thereon.

The Court shall exempt such action from the payment of filing fees and statements likewise,
upon prima facieshowing of the non-enforcement or violation complained of, exempt the plaintiff from
the filing of an injunction bond for the issuance of preliminary injunction.

In the event that the citizen should prevail, the Court shall award reasonable attorney's fees, moral
damages and litigation costs as appropriate.

Section 53. Suits and Strategic Legal Action Against Public Participation (SLAPP) and the
Enforcement of this Act - Where a suit is brought against a person who filed an action as provided in
Sec. 52 of this Act, or against any person, institution or government agency that implements this Act,
it shall be the duty of the investigating prosecutor or the Court, as the case may be, to immediately
make a determination not exceeding thirty (30) days whether said legal action has been filed to
harass, vex, exert undue pressure or stifle such legal recourses of the person complaining of or
enforcing the provisions of this Act. Upon determination thereof, evidence warranting the same, the
Court shall dismiss the complaint and award the attorney's fees and double damages.

This provision shall also apply and benefit public officers who are sued for acts committed in their
official capacity, there being no grave abuse of authority, and done in the course of enforcing this
Act.

Section 54. Research on Solid Waste Management - The Department after consultations with the
cooperating agencies, shall encourage, cooperate with, and render financial and other assistance to
appropriate government agencies and private agencies, institutions and individuals in the conduct
and promotion researches, experiments, and other studies on solid waste management, particularly
those relating to:

>

(a) adverse health effects of the release into the environment of materials present in solid
wastes, and methods to eliminate said effects;

(b) the operation and financing of solid waste disposal programs;

(c) the planning, implementing and operation of resource recovery and resource
conservation systems;

(d) the production of usable forms of recovered resources, including fuel from solid waste;

(e) the development and application of new and improved methods of collecting and
disposing of solid waste and processing and recovering materials and energy from solid
waste;

(f) improvements in land disposal practices for solid waste (including sludge); and

(g) development of new uses of recovered resources and identification of existing or potential
markets of recovered resources.

In carrying out solid waste researches and studies, the Secretary of the Department or the
authorized representative may make grants or enter into contracts with government agencies,
nongovernment organizations and private persons.

Section 55. Public Education and Information - The Commission shall, in coordination with DECS,
TESDA, CHED, DILG and PIA, conduct a continuing education and information campaign on solid
waste management, such education and information program shall:

(a) Aim to develop public awareness of the ill-effects of and the community based solutions
to the solid waste problem;

(b) Concentrate on activities which are feasible and which will have the greatest impact on
the solid waste problem of the country, like resource conservation and recovery, recycling,
segregation at source, re-use, reduction, and composing of solid waste; and
 (c) Encourage the general public, accredited NGOs and people's organizations to publicity
endorse and patronize environmentally acceptable products and packaging materials.

Section 56. Environmental Education in the Formal and Nonformal Sectors - The national
government, through the DECS and in coordination with concerned government agencies, NGOs
and private institutions, shall strengthen the integration of environmental concerns in school curricula
at all levels, with particular emphasis on the theory and practice of waste management principles like
waste minimization, specifically resource conservation and recovery, segregation at source,
reduction, recycling, re-use,and composing, in order to promote environmental awareness and
action among the citizenry.

Section 57. Business and Industry Role - The Commission shall encourage commercial and
industrial establishments, through appropriate incentives other than tax incentives to initiate,
participate and invest in integrated ecological solid waste management projects to manufacture
environment-friendly products, to introduce develop and adopt innovative processes that shall
recycle and re-use materials, conserve raw materials and energy, reduce waste, and prevent
pollution and to undertake community activities to promote and propagate effective solid waste
management practices.

Section 58. Appropriations - For the initial operating expenses of the Commission and the National
Ecology Center as well as the expensed of the local government units to carry out the mandate of
this Act, the amount of Twenty million pesos (P20,000,000.00) is hereby appropriated from the
Organizational Adjustment Fund on the year this Act is approved. Thereafter, it shall submit to the
Department of Budget and Management its proposed budget for inclusion in the General
Appropriations Act.

Section 59. Implementing Rules and Regulations (IRR) - The Department, in coordination with the
Committees on Environment and Ecology of the Senate and House of Representative, respectively,
the representatives of the Leagues of Provinces, Cities, Municipalities and Barangay Councils, the
MMDA and other concerned agencies, shall promulgate the implementing rules and regulations of
this Act, within one (1) year after its enactment: Provided, That rules and regulations issued by other
government agencies and instrumentalities for the prevention and/or abatement of the solid waste
management problem not inconsistent with this Act shall supplement the rules and regulations
issued by the Department, pursuant to the provisions of this Act.

The draft of the IRR shall be published and be the subject of public consultation with affected
sectors. It shall be submitted to the Committee on Environment Ecology of the Senate and House of
Representatives, respectively, for review before approved by the Secretary.

Section 60. Joint Congressional Oversight Committee - There is hereby created a Joint
Congressional Oversight Committee to monitor the implementation of the Act and to oversee the
functions of the Commission. The Committee shall be composed of five (5) Senators and five (5)
Representatives to be appointed by the Senate President and Speaker of the House of
Representatives, respectively. The Oversight Committee shall be co-chaired by a Senator and a
Representative designated by the Senate President and the Speaker of the House of
Representatives, respectively.

Section 61. Abolition of the Presidential Task Force On Waste Management and the Project
Management Office on Solid Waste Management - The Presidential Task Force on Waste
Management which was created by virtue of Memorandum Circular No. 39 dated November 2, 1987,
as amended by Memorandum Circular No. 39A and 88 is hereby abolished.
Further, pursuant to Administrative Order No. 90 dated October 19, 1992, the Project Management
Office on Solid Waste Management is likewise hereby abolished. Consequently their powers and
functions shall be absorbed by the Commission pursuant to the provisions of this Act.

Section 62. Transitory Provision - Pending the establishment of the framework under Sec. 15
hereof, plans under Sec. 16 and promulgation of the IRR under Sec. 59 of this Act, existing laws,
regulations, programs and projects on solid waste management shall

be enforced: Provided, That for specific undertaking, the same may be revised in the interim in
accordance with the intentions of this Act.

Section 63. Report to Congress - The Commission shall report to Congress not later than March 30
of every year following the approval of this Act, giving a detailed account of its accomplishments and
progress on solid waste management during the year and make the necessary recommendations in
areas where there is need for legislative action.

Section 64. Separability Clause - If any provision of this Act or the application of such provision to
any person or circumstances is declared unconstitutional, the remainder of the Act or the application
of such provision to other persons or circumstances shall not be affected by such declaration.

Section 65. Repealing Clause - All laws, decrees, issuances, rules and regulations or parts thereof
inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Section 66. Effectivity - This Act shall take effect fifteen (15) days after its publication in at least two
(2) newspapers of general circulation.

Approved: January 26, 2001

(Sgd.)

GLORIA MACAPAGAL-ARROYO
President of the Philippines

G.R. No. 129546 December 13, 2005

PROVINCE OF RIZAL, MUNICIPALITY OF SAN MATEO, PINTONG BOCAUE MULTIPURPOSE

COOPERATIVE, CONCERNED CITIZENS OF RIZAL, INC., ROLANDO E. VILLACORTE,
BERNARDO HIDALGO, ANANIAS EBUENGA, VILMA T. MONTAJES, FEDERICO MUNAR, JR.,
ROLANDO BEÑAS, SR., ET AL., and KILOSBAYAN, INC., Petitioners,
vs.
EXECUTIVE SECRETARY, SECRETARY OF ENVIRONMENT & NATURAL RESOURCES,
LAGUNA LAKE DEVELOPMENT AUTHORITY, SECRETARY OF PUBLIC WORKS &
HIGHWAYS, SECRETARY OF BUDGET & MANAGEMENT, METRO MANILA DEVELOPMENT
AUTHORITY and THE HONORABLE COURT OF APPEALS,Respondents.

DECISION

CHICO-NAZARIO, J.:
The earth belongs in usufruct to the living.1

At the height of the garbage crisis plaguing Metro Manila and its environs, parts of the Marikina
Watershed Reservation were set aside by the Office of the President, through Proclamation No. 635
dated 28 August 1995, for use as a sanitary landfill and similar waste disposal applications. In fact,
this site, extending to more or less 18 hectares, had already been in operation since 19 February
19902 for the solid wastes of Quezon City, Marikina, San Juan, Mandaluyong, Pateros, Pasig, and
Taguig.3

This is a petition filed by the Province of Rizal, the municipality of San Mateo, and various concerned
citizens for review on certiorari of the Decision of the Court of Appeals in CA-G.R. SP No. 41330,
denying, for lack of cause of action, the petition for certiorari, prohibition and mandamus with
application for a temporary restraining order/writ of preliminary injunction assailing the legality and
constitutionality of Proclamation No. 635.

The facts are documented in painstaking detail.

On 17 November 1988, the respondent Secretaries of the Department of Public Works and
Highways (DPWH) and the Department of Environment and Natural Resources (DENR) and the
Governor of the Metropolitan Manila Commission (MMC) entered into a Memorandum of Agreement
(MOA),4 which provides in part:

1. The DENR agrees to immediately allow the utilization by the Metropolitan Manila Commission of
its land property located at Pintong Bocaue in San Mateo, Rizal as a sanitary landfill site, subject to
whatever restrictions that the government impact assessment might require.

2. Upon signing of this Agreement, the DPWH shall commence the construction/development of said
dumpsite.

3. The MMC shall: a) take charge of the relocation of the families within and around the site; b)
oversee the development of the areas as a sanitary landfill; c) coordinate/monitor the construction of
infrastructure facilities by the DPWH in the said site; and d) ensure that the necessary civil works are
properly undertaken to safeguard against any negative environmental impact in the area.

On 7, 8 and 10 February 1989, the Sangguniang Bayan of San Mateo wrote Gov. Elfren Cruz of the
MMC, Sec. Fiorello Estuar of the DPWH, the Presidential Task Force on Solid Waste Management,
Executive Secretary Catalino Macaraig, and Sec. Fulgencio Factoran, Jr., pointing out that it had
recently passed a Resolution banning the creation of dumpsites for Metro Manila garbage within its
jurisdiction, asking that their side be heard, and that the addressees "suspend and temporarily hold
in abeyance all and any part of your operations with respect to the San Mateo Landfill Dumpsite." No
action was taken on these letters.

It turns out that the land subject of the MOA of 17 November 1988 and owned by the DENR was part
of the Marikina Watershed Reservation Area. Thus, on 31 May 1989, forest officers of the Forest
Engineering and Infrastructure Unit of the Community Environment and Natural Resource Office,
(CENRO) DENR-IV, Rizal Province, submitted a Memorandum5 on the "On-going Dumping Site
Operation of the MMC inside (the) Upper Portion of Marikina Watershed Reservation, located at
Barangay Pintong Bocaue, San Mateo, Rizal, and nearby localities." Said Memorandum reads in
part:

Observations:
3.1 The subject area is arable and agricultural in nature;

3.2 Soil type and its topography are favorable for agricultural and forestry productions;

...

3.5 Said Dumping Site is observed to be confined within the said Watershed Reservation,
bearing in the northeastern part of Lungsod Silangan Townsite Reservation. Such illegal Dumping
Site operation inside (the) Watershed Reservation is in violation of P.D. 705, otherwise known
as the Revised Forestry Code, as amended. . .

Recommendations:

5.1 The MMC Dumping Site Inside Marikina Watershed Reservation, particularly at Brgy. Pintong
Bocaue, San Mateo, Rizal and at Bo. Pinugay, Baras/Antipolo, Rizal which are the present garbage
zones must totally be stopped and discouraged without any political intervention and delay in
order to save our healthy ecosystems found therein, to avoid much destruction, useless
efforts and lost (sic) of millions of public funds over the land in question; (Emphasis ours)

On 19 June 1989, the CENRO submitted another Investigation Report6 to the Regional Executive
Director which states in part that:

1. About two (2) hectares had been excavated by bulldozers and garbage dumping operations are
going on.

2. The dumping site is without the concurrence of the Provincial Governor, Rizal Province and
without any permit from DENR who has functional jurisdiction over the Watershed Reservation; and

3. About 1,192 families residing and cultivating areas covered by four (4) Barangays surrounding the
dumping site will adversely be affected by the dumping operations of MMC including their sources of
domestic water supply. x x x x

On 22 January 1990, the CENRO submitted still another Investigation Report7 to the Regional
Executive Director which states that:

Findings show that the areas used as Dumping Site of the MMC are found to be within the Marikina
Watershed which are part of the Integrated Social Forestry Project (ISF) as per recorded inventory of
Forest Occupancy of this office.

It also appears that as per record, there was no permit issued to the MMC to utilize these portions of
land for dumping purposes.

It is further observed that the use of the areas as dumping site greatly affects the ecological balance
and environmental factors in this community.

On 19 February 1990, the DENR Environmental Management Bureau, through Undersecretary for
Environment and Research Celso R. Roque, granted the Metro Manila Authority (MMA [formerly
MMC]) an Environmental Compliance Certificate (ECC) for the operation of a two-and-a-half-hectare
garbage dumpsite.
The ECC was sought and granted to comply with the requirement of Presidential Decree No. 1586
"Establishing an Environmental Impact Statement System," Section 4 of which states in part that,
"No persons, partnership or corporation shall undertake or operate any such declared
environmentally critical project or area without first securing an Environmental Compliance
Certificate." Proclamation No. 2146, passed on 14 December 1981, designates "all areas declared
by law as national parks, watershed reserves, wildlife preserves, and sanctuaries" as
"Environmentally Critical Areas."

On 09 March 1990, respondent Laguna Lake Development Authority (LLDA), through its Acting
General Manager, sent a letter8 to the MMA, which reads in part:

Through this letter we would like to convey our reservation on the choice of the sites for solid waste
disposal inside the watershed of Laguna Lake. As you may already know, the Metropolitan
Waterworks and Sewerage System (MWSS) has scheduled the abstraction of water from the
lake to serve the needs of about 1.2 million residents of Muntinlupa, Paranaque, Las Pinas
and Bacoor, Cavite by 1992. Accordingly, the Laguna Lake Development Authority (LLDA) is
accelerating its environmental management program to upgrade the water quality of the lake in
order to make it suitable as a source of domestic water supply the whole year round. The said
program regards dumpsites as incompatible within the watershed because of the heavy
pollution, including the risk of diseases, generated by such activities which would negate the
government’s efforts to upgrade the water quality of the lake. Consequently, please consider
our objection to the proposed location of the dumpsites within the watershed. (Emphasis supplied by
petitioners)

On 31 July 1990, less than six months after the issuance of the ECC, Undersecretary Roque
suspended the ECC in a letter9 addressed to the respondent Secretary of DPWH, stating in part that:

Upon site investigation conducted by Environmental Management Bureau staff on development

activities at the San Mateo Landfill Site, it was ascertained that ground slumping and erosion
have resulted from improper development of the site. We believe that this will adversely affect
the environmental quality in the area if the proper remedial measures are not instituted in the design
of the landfill site. This is therefore contradictory to statements made in the Environmental Impact
Statement (EIS) submitted that above occurrences will be properly mitigated.

In view of this, we are forced to suspend the Environmental Compliance Certificate (ECC) issued
until appropriate modified plans are submitted and approved by this Office for
implementation. (Emphasis ours)

On 21 June 1993, the Acting Mayor of San Mateo, Enrique Rodriguez, Jr., Barangay Captain
Dominador Vergara, and petitioner Rolando E. Villacorte, Chairman of the Pintong Bocaue
Multipurpose Cooperative (PBMC) wrote10then President Fidel V. Ramos expressing their objections
to the continued operation of the MMA dumpsite for causing "unabated pollution and degradation of
the Marikina Watershed Reservation."

On 14 July 1993, another Investigation Report11 submitted by the Regional Technical Director to the
DENR Undersecretary for Environment and Research contained the following findings and
recommendations:

Remarks and Findings:

....
5. Interview with Mr. Dayrit, whose lot is now being endangered because soil erosion have (sic)
caused severe siltation and sedimentation of the Dayrit Creek which water is greatly polluted by the
dumping of soil bulldozed to the creek;

6. Also interview with Mrs. Vilma Montajes, the multi-grade teacher of Pintong Bocaue Primary
School which is located only about 100 meters from the landfill site. She disclosed that bad odor
have (sic) greatly affected the pupils who are sometimes sick with respiratory illnesses. These odors
show that MMA have (sic) not instituted/sprayed any disinfectant chemicals to prevent air pollution in
the area. Besides large flies (Bangaw) are swarming all over the playground of the school. The
teacher also informed the undersigned that plastic debris are being blown whenever the wind blows
in their direction.

7. As per investigation report … there are now 15 hectares being used as landfill disposal sites by
the MMA. The MMA is intending to expand its operation within the 50 hectares.

8. Lots occupied within 50 hectares are fully planted with fruit bearing trees like Mangoes, Santol,
Jackfruit, Kasoy, Guyabano, Kalamansi and Citrus which are now bearing fruits and being harvested
and marketed to nearby San Mateo Market and Masinag Market in Antipolo.

....

Recommendations:

1. As previously recommended, the undersigned also strongly recommend(s) that the MMA be made
to relocate the landfill site because the area is within the Marikina Watershed Reservation and
Lungsod Silangan. The leachate treatment plant ha(s) been eroded twice already and contaminated
the nearby creeks which is the source of potable water of the residents. The contaminated water
also flows to Wawa Dam and Boso-boso River which also flows to Laguna de Bay.

2. The proposed Integrated Social Forestry Project be pushed through or be approved. ISF project
will not only uplift the socio-economic conditions of the participants but will enhance the rehabilitation
of the Watershed considering that fruit bearing trees are vigorously growing in the area. Some timber
producing species are also planted like Mahogany and Gmelina Arboiea. There are also portions
where dipterocarp residuals abound in the area.

3. The sanitary landfill should be relocated to some other area, in order to avoid any conflict with the
local government of San Mateo and the nearby affected residents who have been in the area for
almost 10-20 years.

On 16 November 1993, DENR Secretary Angel C. Alcala sent MMA Chairman Ismael A. Mathay, Jr.
a letter12 stating that "after a series of investigations by field officials" of the DENR, the agency
realized that the MOA entered into on 17 November 1988 "is a very costly error because the area
agreed to be a garbage dumpsite is inside the Marikina Watershed Reservation." He then strongly
recommended that all facilities and infrastructure in the garbage dumpsite in Pintong Bocaue be
dismantled, and the garbage disposal operations be transferred to another area outside the Marikina
Watershed Reservation to protect "the health and general welfare of the residents of San Mateo in
particular and the residents of Metro Manila in general."

On 06 June 1995, petitioner Villacorte, Chairman of the PBMC, wrote13 President Ramos, through the
Executive Secretary, informing the President of the issues involved, that the dumpsite is located
near three public elementary schools, the closest of which is only fifty meters away, and that its
location "violates the municipal zoning ordinance of San Mateo and, in truth, the Housing and Land
Use Regulatory Board had denied the then MMA chairman’s application for a locational clearance on
this ground."

On 21 August 1995, the Sangguniang Bayan of San Mateo issued a Resolution14 "expressing a
strong objection to the planned expansion of the landfill operation in Pintong Bocaue and requesting
President Ramos to disapprove the draft Presidential Proclamation segregating 71.6 Hectares from
Marikina Watershed Reservation for the landfill site in Pintong Bocaue, San Mateo, Rizal."

Despite the various objections and recommendations raised by the government agencies
aforementioned, the Office of the President, through Executive Secretary Ruben Torres, signed and
issued Proclamation No. 635 on 28 August 1995, "Excluding from the Marikina Watershed
Reservation Certain Parcels of Land Embraced Therein for Use as Sanitary Landfill Sites and
Similar Waste Disposal Under the Administration of the Metropolitan Manila Development Authority."
The pertinent portions thereof state:

WHEREAS, to cope with the requirements of the growing population in Metro Manila and the
adjoining provinces and municipalities, certain developed and open portions of the Marikina
Watershed Reservation, upon the recommendation of the Secretary of the Department of
Environment and Natural Resources should now be excluded form the scope of the reservation;

WHEREAS, while the areas delineated as part of the Watershed Reservations are intended primarily
for use in projects and/or activities designed to contain and preserve the underground water supply,
other peripheral areas had been included within the scope of the reservation to provide for such
space as may be needed for the construction of the necessary structures, other related facilities, as
well as other priority projects of government as may be eventually determined;

WHEREAS, there is now an urgent need to provide for, and develop, the necessary facilities for the
disposal of the waste generated by the population of Metro Manila and the adjoining provinces and
municipalities, to ensure their sanitary and /or hygienic disposal;

WHEREAS, to cope with the requirements for the development of the waste disposal facilities that
may be used, portions of the peripheral areas of the Marikina Watershed Reservation, after due
consideration and study, have now been identified as suitable sites that may be used for the
purpose;

WHEREAS, the Secretary of the Department of Environment and Natural Resources has
recommended the exclusion of these areas that have been so identified from the Marikina
Watershed Reservation so that they may then be developed for the purpose;

NOW, THEREFORE, for and in consideration of the aforecited premises, I, Fidel V. Ramos,
President of the Philippines, by virtue of the powers vested in me by law, do hereby ordain:

Section 1. General – That certain parcels of land, embraced by the Marikina Watershed Reservation,
were found needed for use in the solid waste disposal program of the government in Metropolitan
Manila, are hereby excluded from that which is held in reserve and are now made available for use
as sanitary landfill and such other related waste disposal applications.

Section 2. Purpose – The areas being excluded from the Marikina Watershed Reservation are
hereby placed under the administration of the Metropolitan Manila Development Authority, for
development as Sanitary Landfill, and/or for use in the development of such other related waste
disposal facilities that may be used by the cities and municipalities of Metro Manila and the adjoining
province of Rizal and its municipalities.
Section 3. Technical Description – Specifically, the areas being hereby excluded from the Marikina
Watershed Reservation consist of two (2) parcels, with an aggregate area of approximately ONE
MILLION SIXTY THOUSAND FIVE HUNDRED TWENTY NINE (1,060,529) square meters more or
less, as follows: x x x x

Section 4. Reservations – The development, construction, use and/or operation of any facility that
may be established within the parcel of land herein excluded from the Marikina Watershed
Reservation shall be governed by existing laws, rules and regulations pertaining to environmental
control and management. When no longer needed for sanitary landfill purposes or the related waste
disposal activities, the parcels of land subject of this proclamation shall revert back as part of the
Marikina Watershed Reservation, unless otherwise authorized.

On 06 September 1995, Director Wilfrido S. Pollisco of the Protected Areas and Wildlife Bureau
wrote the DENR Secretary to express the bureau’s stand against the dumpsite at Pintong Bocaue,
and that "it is our view . . . that the mere presence of a garbage dumpsite inside a watershed
reservation is definitely not compatible with the very purpose and objectives for which the
reservation was established."

On 24 November 1995, the petitioners Municipality of San Mateo and the residents of Pintong
Bocaue, represented by former Senator Jovito Salonga, sent a letter to President Ramos requesting
him to reconsider Proclamation No. 635. Receiving no reply, they sent another letter on 02 January
1996 reiterating their previous request.

On 04 March 1996, then chairman of the Metro Manila Development Authority (MMDA [formerly
MMA]) Prospero I. Oreta addressed a letter to Senator Salonga, stating in part that:

….

2. Considering the circumstances under which we are pursuing the project, we are certain you will
agree that, unless we are prepared with a better alternative, the project simply has to be pursued in
the best interest of the greater majority of the population, particularly their health and welfare."

2.1 The San Mateo Sanitary Landfill services, at least, 38% of the waste disposal site requirements
of Metro Manila where an estimated 9 million population reside.

2.2 Metro Manila is presently estimated to be generating, at least, 15,700 cubic meters of household
or municipal waste, a 1.57 hectare of land area will be filled in a month’s time with a pile 31 meters
high of garbage, or in a year, the accumulated volume will require 18.2 hectares.

....

4. The sanitary landfill projects are now on their fifth year of implementation. The amount of effort
and money already invested in the project by the government cannot easily be disregarded, much
more set aside in favor of the few settlers/squatters who chose to ignore the earlier notice given to
them that the area would be used precisely for the development of waste disposal sites, and are now
attempting to arouse opposition to the project.

4.2 There is no place within the jurisdiction of Metro Manila, with an area big enough to
accommodate at least 3 to 5 years of waste disposal requirements. x x x x
4.21 The present site at San Mateo was selected because, at the time consideration was being
made, and up to the present, it is found to have the attributes that positively respond to the criteria
established:

4.21.1 The site was a government property and would not require any outlay for it to be acquired.

4.21.2 It is far from any sizeable community/settlements that could be affected by the development
that would be introduced and yet, was within economic hauling distance from the areas they are
designed to serve.

4.21.21 At the time it was originally decided to locate the landfills at the present site, there were not
more that fifteen (15) settlers in the area and they had hardly established themselves. The
community settlements were located far from the site.

4.21.22 The area was hardly accessible, especially to any public transport. The area was being
served by a public utility jeep that usually made only two (2) trips daily. During the rainy season, it
could only be reached by equipping the vehicle with tire chains to traverse the slippery muddy trail
roads.

4.21.3 There was, at least, seventy-three (73) hectares available at the site.

4.3 While the site was within the Marikina Watershed Reservation under the administration of the
DENR, the site was located at the lower periphery of the buffer zone; was evaluated to be least likely
to affect the underground water supply; and could, in fact, be excluded from the reservation.

4.31 It was determined to be far from the main water containment area for it to pose any immediate
danger of contaminating the underground water, in case of a failure in any of the mitigating
measures that would be installed.

4.32 It was likewise too far from the nearest body of water, the Laguna Lake, and the distance, plus
the increasing accumulation of water from other tributaries toward the lake, would serve to dilute and
mitigate any contamination it may emit, in case one happened.

4.33 To resolve the recurring issue regarding its being located within the Marikina Watershed
Reservation, the site had been recommended by the DENR, and approved by the President, to
already be excluded from the Marikina Watershed reservation and placed under the administration
of MMDA, since the site was deemed to form part of the land resource reserve then commonly
referred to as buffer zone.

5. Contrary to the impression that you had been given, relocating the site at this point and time
would not be easy, if not impracticable, because aside from the investments that had been made in
locating the present site, further investments have been incurred in:

5.1 The conduct of the technical studies for the development being implemented. Through a grant-
in-aid from the World Bank, US$600,000 was initially spent for the conduct of the necessary studies
on the area and the design of the landfill. This was augmented by, at least, another P1.5 million from
the government for the studies to be completed, or a total cost at the time (1990) of approximately
P20 million.

5.2. Additionally, the government has spent approximately P33 million in improving on the roadway
to make the site accessible from the main road/highway.
5.3 To achieve the necessary economies in the development of the site, the utilities had been
planned so that their use could be maximized. These include the access roads, the drainage system,
the leacheate collection system, the gas collection system, and the waste water treatment system.
Their construction are designed so that instead of having to construct independent units for each
area, the use of existing facilities can be maximized through a system of interconnection. On the
average, the government is spending P14.8 million to develop a hectare of sanitary landfill area.

6. Despite the preparations and the investments that are now being made on the project, it is
estimated that the total available area, at an accelerated rate of disposal, assuming that all open
dump sites were to be closed, will only last for 39 months.

6.1 We are still hard pressed to achieve advanced development on the sites to assure against any
possible crisis in garbage from again being experienced in Metro Manila, aside from having to look
for the additional sites that may be used after the capacities shall have been exhausted.

6.2 Faced with the prospects of having the 15,700 cubic meters of garbage generated daily strewn
all over Metro Manila, we are certain you will agree that it would be futile to even as much as
consider a suspension of the waste disposal operations at the sanitary landfills.

On 22 July 1996, the petitioners filed before the Court of Appeals a civil action for certiorari,
prohibition and mandamus with application for a temporary restraining order/writ of preliminary
injunction. The hearing on the prayer for preliminary injunction was held on 14 August 1996.

On 13 June 1997, the court a quo rendered a Decision,15 the dispositive part of which reads:

WHEREFORE, the petition for certiorari, prohibition and mandamus with application for a temporary
restraining order/writ of preliminary injunction for lack of cause of action, is hereby DENIED.16

Hence, this petition for review on certiorari of the above decision on the following grounds:

The Court of Appeals erred and abused its discretion in deliberately ignoring the significant fact that
Presidential Proclamation No. 635 was based on a brazen forgery – it was supposedly issued, as
stated in the proclamation itself and repeatedly asserted by respondents in their comment, on the
basis of the alleged recommendation of the DENR Secretary dated June 26, 1995 but which
assertion was denounced by the then Secretary Angel C. Alcala himself – in a sworn statement
dated September 18, 1996 and again during the special hearing of the case in the Court of Appeals
on November 13, 1996 – as a forgery since his signature on the alleged recommendation had been
falsified, as now admitted by respondents themselves in their comment filed with the Court of
Appeals, through the Office of the Solicitor General.

II

The Court of Appeals erred and abused its discretion in completely ignoring the significant fact that
the respondents are operating the landfill based on a spurious Environmental Compliance
Certificate.

III
The Court of Appeals erred in ruling that the respondents did not violate R.A. 7586 when they issued
and implemented Proclamation No. 635 considering that the withdrawal or disestablishment of a
protected area or the modification of the Marikina Watershed can only be done by an act of
Congress.

IV

The Court of Appeals erred and abused its discretion when it deliberately and willfully brushed aside
the unanimous findings and adverse recommendations of responsible government agencies and
non-partisan officials concerned with environmental protection in favor of the self-serving, gratuitous
assertions found in the unsolicited, partisan letter of former Malabon Mayor, now Chairman Prospero
Oreta of the MMDA who is an interested party in this case.

The Court of Appeals erred when it readily swallowed respondents’ assertion that the San Mateo
Dumpsite "is located in the ‘Buffer Zone’ of the reservation" and is therefore outside of its
boundaries, and even declared in its decision that it took "serious note" of this particular argument.

VI

The Court of Appeals erred and abused its discretion when it encroached on the function of
Congress by expressing its unjustified fear of mini-smokey mountains proliferating in Metro Manila
and justifying its decision in favor of "an integrated system of solid waste management like the San
Mateo Landfill.

On 05 January 1998, while the appeal was pending, the petitioners filed a Motion for Temporary
Restraining Order,17pointing out that the effects of the El Niño phenomenon would be aggravated by
the relentless destruction of the Marikina Watershed Reservation. They noted that respondent
MMDA had, in the meantime, continued to expand the area of the dumpsite inside the Marikina
Watershed Reservation, cutting down thousands of mature fruit trees and forest trees, and leveling
hills and mountains to clear the dumping area. Garbage disposal operations were also being
conducted on a 24-hour basis, with hundreds of metric tons of wastes being dumped daily, including
toxic and infectious hospital wastes, intensifying the air, ground and water pollution.18

The petitioners reiterated their prayer that respondent MMDA be temporarily enjoined from further
dumping waste into the site and from encroaching into the area beyond its existing perimeter fence
so as not to render the case moot and academic.

On 28 January 1999, the petitioners filed a Motion for Early Resolution,19 calling attention to the
continued expansion of the dumpsite by the MMDA that caused the people of Antipolo to stage a
rally and barricade the Marcos Highway to stop the dump trucks from reaching the site for five
successive days from 16 January 1999. On the second day of the barricade, all the municipal
mayors of the province of Rizal openly declared their full support for the rally, and notified the MMDA
that they would oppose any further attempt to dump garbage in their province.20

As a result, MMDA officials, headed by then Chairman Jejomar Binay, agreed to abandon the
dumpsite after six months. Thus, the municipal mayors of Rizal, particularly the mayors of Antipolo
and San Mateo, agreed to the use of the dumpsite until that period, which would end on 20 July
1999.21
On 13 July 1999, the petitioners filed an Urgent Second Motion for Early Resolution22 in anticipation
of violence between the conflicting parties as the date of the scheduled closure of the dumpsite
neared.

On 19 July 1999, then President Joseph E. Estrada, taking cognizance of the gravity of the problems
in the affected areas and the likelihood that violence would erupt among the parties involved, issued
a Memorandum ordering the closure of the dumpsite on 31 December 2000.23 Accordingly, on 20 July
1999, the Presidential Committee on Flagship Programs and Projects and the MMDA entered into a
MOA with the Provincial Government of Rizal, the Municipality of San Mateo, and the City of
Antipolo, wherein the latter agreed to further extend the use of the dumpsite until its permanent
closure on 31 December 2000.24

On 11 January 2001, President Estrada directed Department of Interior and Local Government
Secretary Alfredo Lim and MMDA Chairman Binay to reopen the San Mateo dumpsite "in view of the
emergency situation of uncollected garbage in Metro Manila, resulting in a critical and imminent
health and sanitation epidemic."25

Claiming the above events constituted a "clear and present danger of violence erupting in the
affected areas," the petitioners filed an Urgent Petition for Restraining Order26 on 19 January 2001.

On 24 January 2001, this Court issued the Temporary Restraining Order prayed for, "effective
immediately and until further orders."27

Meanwhile, on 26 January 2001, Republic Act No. 9003, otherwise known as "The Ecological Solid
Waste Management Act of 2000," was signed into law by President Estrada.

Thus, the petitioners raised only two issues in their Memorandum28 of 08 February 2005: 1) whether
or not respondent MMDA agreed to the permanent closure of the San Mateo Landfill as of
December 2000, and 2) whether or not the permanent closure of the San Mateo landfill is mandated
by Rep. Act No. 9003.

We hold that the San Mateo Landfill will remain permanently closed.

Although the petitioners may be deemed to have waived or abandoned the issues raised in their
previous pleadings but not included in the memorandum,29 certain events we shall relate below have
inclined us to address some of the more pertinent issues raised in the petition for the guidance of the
herein respondents, and pursuant to our symbolic function to educate the bench and bar.30

The law and the facts indicate that a mere MOA does not guarantee the dumpsite’s permanent
closure.

The rally and barricade staged by the people of Antipolo on 28 January 1999, with the full support of
all the mayors of Rizal Province caused the MMDA to agree that it would abandon the dumpsite after
six months. In return, the municipal mayors allowed the use of the dumpsite until 20 July 1999.

On 20 July 1999, with much fanfare and rhetoric, the Presidential Committee on Flagship Programs
and Projects and the MMDA entered into a MOA with the Provincial Government of Rizal, the
Municipality of San Mateo, and the City of Antipolo, whereby the latter agreed to an extension for the
use of the dumpsite until 31 December 2000, at which time it would be permanently closed.
Despite this agreement, President Estrada directed Department of Interior and Local Government
Secretary Alfredo Lim and MMDA Chairman Binay to reopen the San Mateo dumpsite on 11 January
2001, "in view of the emergency situation of uncollected garbage in Metro Manila, resulting in a
critical and imminent health and sanitation epidemic;" our issuance of a TRO on 24 January 2001
prevented the dumpsite’s reopening.

Were it not for the TRO, then President Estrada’s instructions would have been lawfully carried out,
for as we observed in Oposa v. Factoran, the freedom of contract is not absolute. Thus:

….. In Abe vs. Foster Wheeler Corp., this Court stated: "The freedom of contract, under our
system of government, is not meant to be absolute. The same is understood to be subject to
reasonable legislative regulation aimed at the promotion of public health, moral, safety and welfare.
In other words, the constitutional guaranty of non-impairment of obligations of contract is limited by
the exercise of the police power of the State, in the interest of public health, safety, moral and
general welfare." The reason for this is emphatically set forth in Nebia vs. New York, quoted in
Philippine American Life Insurance Co. vs. Auditor General, to wit: "'Under our form of government
the use of property and the making of contracts are normally matters of private and not of public
concern. The general rule is that both shall be free of governmental interference. But neither
property rights nor contract rights are absolute; for government cannot exist if the citizen may at will
use his property to the detriment of his fellows, or exercise his freedom of contract to work them
harm. Equally fundamental with the private right is that of the public to regulate it in the common
interest.'" In short, the non-impairment clause must yield to the police power of the state. (Citations
omitted, emphasis supplied)

We thus feel there is also the added need to reassure the residents of the Province of Rizal that this
is indeed a final resolution of this controversy, for a brief review of the records of this case indicates
two self-evident facts. First, the San Mateo site has adversely affected its environs,
and second, sources of water should always be protected.

As to the first point, the adverse effects of the site were reported as early as 19 June 1989, when the
Investigation Report of the Community Environment and Natural Resources Officer of DENR-IV-1
stated that the sources of domestic water supply of over one thousand families would be adversely
affected by the dumping operations.31 The succeeding report included the observation that the use of
the areas as dumping site greatly affected the ecological balance and environmental factors of the
community.32 Respondent LLDA in fact informed the MMA that the heavy pollution and risk of disease
generated by dumpsites rendered the location of a dumpsite within the Marikina Watershed
Reservation incompatible with its program of upgrading the water quality of the Laguna Lake. 33

The DENR suspended the site’s ECC after investigations revealed ground slumping and erosion had
resulted from improper development of the site.34 Another Investigation Report35 submitted by the
Regional Technical Director to the DENR reported respiratory illnesses among pupils of a primary
school located approximately 100 meters from the site, as well as the constant presence of large
flies and windblown debris all over the school’s playground. It further reiterated reports that the
leachate treatment plant had been eroded twice already, contaminating the nearby creeks that were
sources of potable water for the residents. The contaminated water was also found to flow to the
Wawa Dam and Boso-boso River, which in turn empties into Laguna de Bay.

This brings us to the second self-evident point. Water is life, and must be saved at all costs.
In Collado v. Court of Appeals,36 we had occasion to reaffirm our previous discussion in Sta. Rosa
Realty Development Corporation v. Court of Appeals,37 on the primordial importance of watershed
areas, thus: "The most important product of a watershed is water, which is one of the most important
human necessities. The protection of watersheds ensures an adequate supply of water for future
generations and the control of flashfloods that not only damage property but also cause loss of lives.
Protection of watersheds is an "intergenerational" responsibility that needs to be answered now.38

Three short months before Proclamation No. 635 was passed to avert the garbage crisis, Congress
had enacted the National Water Crisis Act39 to "adopt urgent and effective measures to address the
nationwide water crisis which adversely affects the health and well-being of the population, food
production, and industrialization process. One of the issues the law sought to address was the
"protection and conservation of watersheds."40

In other words, while respondents were blandly declaring that "the reason for the creation of the
Marikina Watershed Reservation, i.e., to protect Marikina River as the source of water supply of the
City of Manila, no longer exists," the rest of the country was gripped by a shortage of potable water
so serious, it necessitated its own legislation.

Respondents’ actions in the face of such grave environmental consequences defy all logic. The
petitioners rightly noted that instead of providing solutions, they have, with unmitigated callousness,
worsened the problem. It is this readiness to wreak irrevocable damage on our natural heritage in
pursuit of what is expedient that has compelled us to rule at length on this issue. We ignore the
unrelenting depletion of our natural heritage at our peril.

I.

The Reorganization Act of the DENR Defines and

Limits Its Powers over the Country’s Natural Resources

The respondents next point out that the Marikina Watershed Reservation, and thus the San Mateo
Site, is located in the public domain. They allege that as such, neither the Province of Rizal nor the
municipality of San Mateo has the power to control or regulate its use since properties of this nature
belong to the national, and not to the local governments.

It is ironic that the respondents should pursue this line of reasoning.

In Cruz v. Secretary of Environment and Natural Resources,41 we had occasion to observe that "(o)ne
of the fixed and dominating objectives of the 1935 Constitutional Convention was the nationalization
and conservation of the natural resources of the country. 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."42

The Regalian doctrine was embodied in the 1935 Constitution, in Section 1 of Article XIII on
"Conservation and Utilization of Natural Resources." This was reiterated in the 1973 Constitution
under Article XIV on the "National Economy and the Patrimony of the Nation," and reaffirmed in the
1987 Constitution in Section 2 of Article XII on "National Economy and Patrimony," to wit:

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.43

Clearly, the state is, and always has been, zealous in preserving as much of our natural and national
heritage as it can, enshrining as it did the obligation to preserve and protect the same within the text
of our fundamental law.

It was with this objective in mind that the respondent DENR was mandated by then President
Corazon C. Aquino, under Section 4 of Executive Order No. 192, 44 otherwise known as "The
Reorganization Act of the Department of Environment and Natural Resources," to be "the primary
government agency responsible for the conservation, management, development and proper
use of the country’s environment and natural resources, specifically forest and grazing lands,
mineral resources, including those in reservation and watershed areas, and lands of the public
domain. It is also responsible for the licensing and regulation of all natural resources as may be
provided for by law in order to ensure equitable sharing of the benefits derived therefrom for
the welfare of the present and future generations of Filipinos."

We expounded on this matter in the landmark case of Oposa v. Factoran,45 where we held that the
right to a balanced and healthful ecology is a fundamental legal right that carries with it the
correlative duty to refrain from impairing the environment. This right implies, among other things, the
judicious management and conservation of the country’s resources, which duty is reposed in the
DENR under the aforequoted Section 4 of Executive Order No. 192. Moreover:

Section 3 (of E. O. No. 192) makes the following statement of policy:

SEC. 3. Declaration of Policy. - It is hereby declared the policy of the State to ensure
the sustainable use, development, management, renewal, and conservation of the country's
forest, mineral, land, off-shore areas and other natural resources, including the protection and
enhancement of the quality of the environment, and equitable access of the different segments of
the population to the development and use of the country's natural resources, not only for the
present generation but for future generations as well. It is also the policy of the state to
recognize and apply a true value system including social and environmental cost implications
relative to their utilization; development and conservation of our natural resources. (Emphasis ours)

This policy declaration is substantially re-stated in Title XIV, Book IV of the Administrative Code of
1987, specifically in Section 1 thereof which reads:

SEC. 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 country's forest, mineral, land, waters, fisheries, wildlife, off-shore
areas and other natural resources, consistent with the necessity of maintaining a sound
ecological balance and protecting and enhancing the quality of the environment and the
objective of making the exploration, development and utilization of such natural resources equitably
accessible to the different segments of the present as well as future generations.

(2) The State shall likewise recognize and apply a true value system that takes into account social
and environmental cost implications relative to the utilization, development and conservation of our
natural resources.
The above provision stresses "the necessity of maintaining a sound ecological balance and
protecting and enhancing the quality of the environment."46 (Emphasis ours.)

In sum, the Administrative Code of 1987 and Executive Order No. 192 entrust the DENR with
the guardianship and safekeeping of the Marikina Watershed Reservation and our other natural
treasures. However, although the DENR, an agency of the government, owns the Marikina Reserve
and has jurisdiction over the same, this power is not absolute, but is defined by the declared policies
of the state, and is subject to the law and higher authority. Section 2, Title XIV, Book IV of the
Administrative Code of 1987, while specifically referring to the mandate of the DENR, makes
particular reference to the agency’s being subject to law and higher authority, thus:

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 State's
constitutional mandate to control and supervise the exploration, development, utilization, and
conservation of the country's natural resources.

With great power comes great responsibility. It is the height of irony that the public respondents have
vigorously arrogated to themselves the power to control the San Mateo site, but have deftly ignored
their corresponding responsibility as guardians and protectors of this tormented piece of land.

II.

The Local Government Code Gives to Local Government Units All the Necessary Powers to
Promote the General Welfare of Their Inhabitants

The circumstances under which Proclamation No. 635 was passed also violates Rep. Act No. 7160,
or the Local Government Code.

Contrary to the averment of the respondents, Proclamation No. 635, which was passed on 28
August 1995, is subject to the provisions of the Local Government Code, which was approved four
years earlier, on 10 October 1991.

Section 2(c) of the said law declares that it is the policy of the state " to require all national agencies
and offices to conduct periodic consultations with appropriate local government units, non-
governmental and people's organizations, and other concerned sectors of the community before any
project or program is implemented in their respective jurisdictions." Likewise, Section 27 requires
prior consultations before a program shall be implemented by government authorities and the prior
approval of the sanggunian is obtained.

During the oral arguments at the hearing for the temporary restraining order, Director Uranza of the
MMDA Solid Waste Management Task Force declared before the Court of Appeals that they had
conducted the required consultations. However, he added that "(t)his is the problem, sir, the officials
we may have been talking with at the time this was established may no longer be incumbent and this
is our difficulty now. That is what we are trying to do now, a continuing dialogue." 47

The ambivalent reply of Director Uranza was brought to the fore when, at the height of the protest
rally and barricade along Marcos Highway to stop dump trucks from reaching the site, all the
municipal mayors of the province of Rizal openly declared their full support for the rally and notified
the MMDA that they would oppose any further attempt to dump garbage in their province. 48
The municipal mayors acted within the scope of their powers, and were in fact fulfilling their
mandate, when they did this. Section 16 allows every local government unit to "exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or
incidental for its efficient and effective governance, and those which are essential to the promotion of
the general welfare," which involve, among other things, "promot(ing) health and safety,
enhance(ing) the right of the people to a balanced ecology, and preserv(ing) the comfort and
convenience of their inhabitants. "

In Lina , Jr. v. Paño,49 we held that Section 2 (c), requiring consultations with the appropriate local
government units, should apply to national government projects affecting the environmental or
ecological balance of the particular community implementing the project. Rejecting the petitioners’
contention that Sections 2(c) and 27 of the Local Government Code applied mandatorily in the
setting up of lotto outlets around the country, we held that:

From a careful reading of said provisions, we find that these apply only to national programs and/or
projects which are to be implemented in a particular local community. Lotto is neither a program nor
a project of the national government, but of a charitable institution, the PCSO. Though sanctioned by
the national government, it is far fetched to say that lotto falls within the contemplation of Sections 2
(c) and 27 of the Local Government Code.

Section 27 of the Code should be read in conjunction with Section 26 thereof. Section 26 reads:

SECTION 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. It
shall be the duty of every national agency or government-owned or controlled corporation
authorizing or involved in the planning and implementation of any project or program that may cause
pollution, climatic change, depletion of non-renewable resources, loss of crop land, range-land, or
forest cover, and extinction of animal or plant species, to consult with the local government units,
nongovernmental organizations, and other sectors concerned and explain the goals and objectives
of the project or program, its impact upon the people and the community in terms of environmental
or ecological balance, and the measures that will be undertaken to prevent or minimize the adverse
effects thereof.

Thus, the projects and programs mentioned in Section 27 should be interpreted to mean
projects and programs whose effects are among those enumerated in Section 26 and 27, to
wit, those that: (1) may cause pollution; (2) may bring about climatic change; (3) may cause
the depletion of non-renewable resources; (4) may result in loss of crop land, range-land, or
forest cover; (5) may eradicate certain animal or plant species from the face of the planet; and
(6) other projects or programs that may call for the eviction of a particular group of people
residing in the locality where these will be implemented. Obviously, none of these effects will be
produced by the introduction of lotto in the province of Laguna. (emphasis supplied)

We reiterated this doctrine in the recent case of Bangus Fry Fisherfolk v. Lanzanas,50 where we held
that there was no statutory requirement for the sangguniang bayan of Puerto Galera to approve the
construction of a mooring facility, as Sections 26 and 27 are inapplicable to projects which are not
environmentally critical.

Moreover, Section 447, which enumerates the powers, duties and functions of the municipality,
grants the sangguniang bayan the power to, among other things, "enact ordinances, approve
resolutions and appropriate funds for the general welfare of the municipality and its inhabitants
pursuant to Section 16 of th(e) Code." These include:
(1) Approving ordinances and passing resolutions to protect the environment and impose
appropriate penalties for acts which endanger the environment, such as dynamite fishing and
other forms of destructive fishing, illegal logging and smuggling of logs, smuggling of natural
resources products and of endangered species of flora and fauna, slash and burn farming, and
such other activities which result in pollution, acceleration of eutrophication of rivers and
lakes, or of ecological imbalance; [Section 447 (1)(vi)]

(2) Prescribing reasonable limits and restraints on the use of property within the jurisdiction
of the municipality, adopting a comprehensive land use plan for the municipality, reclassifying land
within the jurisdiction of the city, subject to the pertinent provisions of this Code, enacting
integrated zoning ordinances in consonance with the approved comprehensive land use plan,
subject to existing laws, rules and regulations; establishing fire limits or zones, particularly in
populous centers; and regulating the construction, repair or modification of buildings within said fire
limits or zones in accordance with the provisions of this Code; [Section 447 (2)(vi-ix)]

(3) Approving ordinances which shall ensure the efficient and effective delivery of the basic services
and facilities as provided for under Section 17 of this Code, and in addition to said services and
facilities, …providing for the establishment, maintenance, protection, and conservation of
communal forests and watersheds, tree parks, greenbelts, mangroves, and other similar
forest development projects ….and, subject to existing laws, establishing and providing for the
maintenance, repair and operation of an efficient waterworks system to supply water for the
inhabitants and purifying the source of the water supply; regulating the construction,
maintenance, repair and use of hydrants, pumps, cisterns and reservoirs; protecting the purity and
quantity of the water supply of the municipality and, for this purpose, extending the coverage
of appropriate ordinances over all territory within the drainage area of said water supply and
within one hundred (100) meters of the reservoir, conduit, canal, aqueduct, pumping station,
or watershed used in connection with the water service; and regulating the consumption, use or
wastage of water." [Section 447 (5)(i) & (vii)]

Under the Local Government Code, therefore, two requisites must be met before a national project
that affects the environmental and ecological balance of local communities can be implemented:
prior consultation with the affected local communities, and prior approval of the project by the
appropriate sanggunian. Absent either of these mandatory requirements, the project’s
implementation is illegal.

III.

Waste Disposal Is Regulated by the Ecological

Solid Waste Management Act of 2000

The respondents would have us overlook all the abovecited laws because the San Mateo site is a
very expensive - and necessary - fait accompli. The respondents cite the millions of pesos and
hundreds of thousands of dollars the government has already expended in its development and
construction, and the lack of any viable alternative sites.

The Court of Appeals agreed, thus:

During the hearing on the injunction, questions were also asked. "What will happen if the San Mateo
Sanitary Landfill is closed? Where will the daily collections of garbage be disposed of and dumped?"
Atty. Mendoza, one of the lawyers of the petitioners, answered that each city/municipality ‘must take
care of its own.’ Reflecting on that answer, we are troubled: will not the proliferation of separate open
dumpsites be a more serious health hazard (which ha(s) to be addressed) to the residents of the
community? What with the galloping population growth and the constricting available land area in
Metro Manila? There could be a ‘mini-Smokey Mountain’ in each of the ten cities…comprising Metro
Manila, placing in danger the health and safety of more people. Damage to the environment could
be aggravated by the increase in number of open dumpsites. An integrated system of solid waste
management, like the San Mateo Sanitary Landfill, appears advisable to a populous metropolis like
the Greater Metro Manila Area absent access to better technology.51

We acknowledge that these are valid concerns. Nevertheless, the lower court should have been
mindful of the legal truism that it is the legislature, by its very nature, which is the primary judge of
the necessity, adequacy, wisdom, reasonableness and expediency of any law.52

Moreover, these concerns are addressed by Rep. Act No. 9003. Approved on 26 January 2001,
"The Ecological Solid Waste Management Act of 2000" was enacted pursuant to the declared policy
of the state "to adopt a systematic, comprehensive and ecological solid waste management system
which shall ensure the protection of public health and environment, and utilize environmentally
sound methods that maximize the utilization of valuable resources and encourage resource
conservation and recovery."53 It requires the adherence to a Local Government Solid Waste
Management Plan with regard to the collection and transfer, processing, source reduction, recycling,
composting and final disposal of solid wastes, the handling and disposal of special wastes,
education and public information, and the funding of solid waste management projects.

The said law mandates the formulation of a National Solid Waste Management Framework, which
should include, among other things, the method and procedure for the phaseout and the eventual
closure within eighteen months from effectivity of the Act in case of existing open dumps
and/or sanitary landfills located within an aquifer, groundwater reservoir or watershed
area.54 Any landfills subsequently developed must comply with the minimum requirements laid down
in Section 40, specifically that the site selected must be consistent with the overall land use plan
of the local government unit, and that the site must be located in an area where the landfill’s
operation will not detrimentally affect environmentally sensitive resources such as aquifers,
groundwater reservoirs or watershed areas.55

This writes finis to any remaining aspirations respondents may have of reopening the San Mateo
Site. Having declared Proclamation No. 635 illegal, we see no compelling need to tackle the
remaining issues raised in the petition and the parties’ respective memoranda.

A final word. Laws pertaining to the protection of the environment were not drafted in a vacuum.
Congress passed these laws fully aware of the perilous state of both our economic and natural
wealth. It was precisely to minimize the adverse impact humanity’s actions on all aspects of the
natural world, at the same time maintaining and ensuring an environment under which man and
nature can thrive in productive and enjoyable harmony with each other, that these legal safeguards
were put in place. They should thus not be so lightly cast aside in the face of what is easy and
expedient.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No.
41330, dated 13 June 1997, is REVERSED and SET ASIDE. The temporary restraining order issued
by the Court on 24 January 2001 is hereby made permanent.

SO ORDERED