097 la bugal-blaan tribal assoc vs ramos-1

8/18/2019 097 La Bugal-Blaan Tribal Assoc vs Ramos-1

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LA BUGAL-B’LAAN VS RAMOS

Facts: Former President Aquino issued E.O. No. 279 which authorized the DENRSecretar to acce!t and consider !ro!osa"s #rom #orei$n%owned cor!orations or

#orei$n in&estors #or contracts or a$reements in&o"&in$ either technica" or#inancia" assistance #or "ar$e%sca"e e'!"oration( de&e"o!ment( and uti"ization o#minera"s( which( u!on a!!ro!riate recommendation( the President ma e'ecutewith the #orei$n !ro!onent.

Subsequently, the Philippine Mining Act was approved by FormerPresident Ramos. The said law is to govern the e!ploration,development, utili"ation, and processing o# all mineral resources.$ %talso provides #or &'( the procedure #or the )ling and approval,assignment*trans#er and withdrawal, and terms o# mineral agreements+&( )nancial or technical assistance agreements &FTAA(+ and &-( that

sur#ace owners, occupants, or concessionaires are #orbidden #rompreventing holders o# mining rights #rom entering private lands andconcession areas. e#ore the e/ectivity o# the Philippine Mining Act, anFTAA was entered into by the President and 0M1 Philippines coveringland in South 1otabato, Sultan 2udarat, 3avao del Sur, and 4orth1otabato. A#terwards, 3A5 4o. 6789: was enacted providing #or the%mplementing Rules and Regulations &%RR( o# the Philippine Mining Act.Petitioners demanded in a letter sent to the 3;4R Secretary thecessation o# the implementation o# both the Philippine Mining Act andits %RR. Petitioners later )led a petition alleging that ':: FTAAapplications had already been )led by #ully #oreign8owned corporations

and mining companies. Petitioners alleged that the FTAA between RPand 0M1P is illegal and unconstitutional. Petitioners submit that, inaccordance with the te!t o# Section , Article 0hether the Philippine Mining Act and its %mplementing Rulesenable the government to e!ercise that degree o# control su?cient to

direct and regulate the conduct o# a/airs o# individual enterprises andrestrain undesirable activities.

Ruling> @es, e!cept Sections .B and .6 o# the FTAA which areinvalidated #or being contrary to public policy and #or being grosslydisadvantageous to the government. The Supreme 1ourt held that thephrase agreements involving either technical or )nancial assistance$are service contracts but with proper sa#eguards. These sa#eguards


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are the #ollowing> &'(The service contract shall be cra#ted inaccordance with a general law that will set standard or uni#orm terms,conditions and requirements, presumably to attain a certain uni#ormityin provisions and avoid the possible insertion o# terms disadvantageousto the country. &(The President shall be the signatory #or the

government because, supposedly be#ore an agreement is presented tothe President #or signature, it will have been studied several times overat di/erent levels to ensure that it con#orms to law and can withstandpublic scrutiny. &-(0ithin thirty days o# the e!ecuted agreement, thePresident shall report it to 1ongress to give that branch o# governmentan opportunity to looC over the agreement and interpose timelyobDections, i# any. The Philippine Mining Act provides #or the StateEscontrol and supervision over mining operations.$ Sections B, 6 and 77provide #or the mechanism o# inspection and visitorial rights overmining operations as well as reportorial requirements. %t is readilyapparent that the requirements, regulations, restrictions and

limitations do not relegate the State as a passive regulator o# thecountryEs natural resources. 5n the contrary, the governmentagencies concerned are empowered to approve or disapprove hence,to inGuence, direct and change the various worC programs and thecorresponding minimum e!penditure commitments #or each o# thee!ploration, development and utili"ation phases o# the miningenterprise.$ The Philippine Mining Act and its %mplementing Rules andRegulations grant the government with su?cient control andsupervision on the conduct o# mining operations. The contractor ismandated to maCe its booCs o# account and records available in orderto determine i# the government share has been #ully paid. The State is

also empowered to compel the contractor to provide mine sa#ety, health andenvironmental protection, and the use o# anti8pollution technology and#acilities. Moreover, the contractor is also obligated to assist in thedevelopment o# the mining community and to pay royalties to the indigenouspeoples concerned.$ The FTAA may also be cancelled as penalty #or violationo# its terms and conditions, or noncompliance with statutes or regulations.

The S1 #ound that the FTAA contractor is not #ree to do whatever it pleasesand get away with it+ on the contrary, it will have to #ollow the governmentline i# it wants to stay in the enterprise. %neluctably then, Hthe PhilippineMining ActI and 3A5 6789: vest in the government more than a su?cientdegree o# control and supervision over the conduct o# mining operations.$

There is also no prohibition against #oreign or local corporations or

contractors holding e!ploration permits. The e!ploration permit protects andpreserves the rights o# the grantee &would8be contractor(, whether #oreign orlocal, during the period where the grantee incurs e!penditures on e!plorationworCs, without yet being able to earn revenues to cover its investments ande!penses.


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Re!u)"ic o# the Phi"i!!inesSUPREME COURT

*ani"a

EN +AN,

G.R. No. 127882 December 1, 2!

LA BUGAL-B"LAAN TR#BAL ASSOC#AT#ON, #NC., Re$re%e&'e( b) *'% C+*rm& "LONGM#GUEL M. LUMAONG/ 0#GBERTO E. TAADA/ PONC#ANO BENNAGEN/ A#ME TADEO/RENATO R. CONSTANT#NO R./ "LONG AGUST#N M. DAB#E/ ROBERTO P. AMLO/ RA3#M L.DAB#E/ S#MEON 4. DOLOO/ #MELDA M. GANDON/ LEN B. GUSANAN/ MARCELO L.GUSANAN/ 3U#NTOL A. LABUAAN/ LOM#NGGES D. LA0A/ BEN#TA P. TACUAAN/ M*&or%OL L. BUGO, Re$re%e&'e( b) 4*% '+er UNDERO D. BUGO &( ROGER M. DAD#NG/Re$re%e&'e( b) 4*% '+er ANTON#O L. DAD#NG/ ROM M. LAGARO, Re$re%e&'e( b) 4*%'+er TOT#NG A. LAGARO/ M#5EN ONG B. LUMAONG, Re$re%e&'e( b) 4*% '+erM#GUEL M. LUMAONG/ RENE T. M#GUEL, Re$re%e&'e( b) 4*% Mo'+er ED#T4A T. M#GUEL/

ALDEMAR L. SAL, Re$re%e&'e( b) 4*% '+er DANN M. SAL/ DA#S RECARSE,Re$re%e&'e( b) 4er Mo'+er LD#A S. SANTOS/ ED0ARD M. EMU/ ALAN P. MAMPARA#R/MAR#O L. MANGCAL/ ALDEN S. TUSAN/ AMPARO S. AP/ V#RG#L#O CULAR/ MARV#C M.V..LEONEN/ UL#A REG#NA CULAR, G#AN CARLO CULAR, V#RG#L#O CULAR R., Re$re%e&'e(b) T+e*r '+er V#RG#L#O CULAR/ PAUL ANTON#O P. V#LLAMOR, Re$re%e&'e( b) 4*% Pre&'%OSE V#LLAMOR &( EL#6ABET4 PUA-V#LLAMOR/ ANA G#N#NA R. TALA, Re$re%e&'e( b)4er '+er MAR#O OSE B. TALA/ S4ARMA#NE R. CUNANAN, Re$re%e&'e( b) 4er '+erALREDO M. CUNANAN/ ANTON#O OSE A. V#TUG ###, Re$re%e&'e( b) 4*% Mo'+er ANNAL#6AA. V#TUG, LEAN D. NARVADE6, Re$re%e&'e( b) 4*% '+er MANUEL E. NARVADE6 R./ROSER#O MARALAG L#NGAT#NG, Re$re%e&'e( b) 4er '+er R#O OL#MP#O A. L#NGAT#NG/MAR#O OSE B. TALA/ DAV#D E. DE VERA/ MAR#A M#LAGROS L. SAN OSE/ Sr. SUSAN O.BOLAN#O, OND/ LOL#TA G. DEMONTEVERDE/ BEN#E L. NE3U#NTO/ 1 ROSE L#L#A S.ROMANO/ ROBERTO S. VER6OLA/ EDUARDO AUREL#O C. REES/ LEAN LOUEL A. PER#A,

Re$re%e&'e( b) 4*% '+er ELP#D#O V. PER#A/2 GREEN ORUM P4#L#PP#NES/ GREEN ORUM0ESTERN V#SAAS G-0V/ ENV#RONMENTAL LEGAL ASS#STANCE CENTER ELAC/5A#SA4AN TUNGO SA 5AUNLARAN NG 5ANAUNAN AT REPORMANG PANSA5A4AN5A#SA4AN/9 PARTNERS4#P OR AGRAR#AN REORM &( RURAL DEVELOPMENTSERV#CES, #NC. PARRDS/ P4#L#PP#NE PARTNERS4#P OR T4E DEVELOPMENT O 4UMANRESOURCES #N T4E RURAL AREAS, #NC. P4#LD4RRA/ 0OMEN"S LEGAL BUREAU 0LB/CENTER OR ALTERNAT#VE DEVELOPMENT #N#T#AT#VES, #NC. CAD#/ UPLANDDEVELOPMENT #NST#TUTE UD#/ 5#NA#A4AN OUNDAT#ON, #NC./ SENTRO NGALTERNAT#BONG L#NGAP PANL#GAL SAL#GAN/ &( LEGAL R#G4TS AND NATURALRESOURCES CENTER, #NC. LRC, !etitioners(&s.V#CTOR O. RAMOS, Secre'r), De$r'me&' o: E&;*ro&me&' &( N'


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PANGAN#BAN, J .?

A"" minera" resources are owned ) the State. /heir e'!"oration( de&e"o!ment and uti"ization 1ED

must a"was )e su)3ect to the #u"" contro" and su!er&ision o# the State. *ore s!eci#ica""( $i&en theinadequac o# Fi"i!ino ca!ita" and techno"o$ in large-scale ED acti&ities( the State ma secure thehe"! o# #orei$n com!anies in a"" re"e&ant matters %% es!ecia"" #inancia" and technica" assistance %%!ro&ided that( at a"" times( the State maintains its ri$ht o# #u"" contro". /he #orei$n assistor orcontractor assumes a"" #inancia"( technica" and entre!reneuria" ris4s in the ED acti&ities5 hence( itma )e $i&en reasona)"e mana$ement( o!erationa"( mar4etin$( audit and other !rero$ati&es to!rotect its in&estments and to ena)"e the )usiness to succeed.

Fu"" contro" is not anathematic to da%to%da mana$ement ) the contractor( !ro&ided that the Stateretains the !ower to direct o&era"" strate$5 and to set aside( re&erse or modi# !"ans and actions o#the contractor. /he idea o# #u"" contro" is simi"ar to that which is e'ercised ) the )oard o# directors o#a !ri&ate cor!oration: the !er#ormance o# mana$eria"( o!erationa"( #inancia"( mar4etin$ and other

#unctions ma )e de"e$ated to su)ordinate o##icers or $i&en to contractua" entities( )ut the )oardretains #u"" residua" contro" o# the )usiness.

6ho or what or$an o# $o&ernment actua"" e'ercises this !ower o# contro" on )eha"# o# the State/he ,onstitution is crsta" c"ear: the Pre%*(e&'. 0ndeed( the ,hie# E'ecuti&e is the o##icia"constitutiona"" mandated to 8enter into a$reements with #orei$n owned cor!orations.8 On the otherhand( ,on$ress ma re&iew the action o# the President once it is noti#ied o# 8e&er contract enteredinto in accordance with this constitutiona" !ro&ision within thirt das #rom its e'ecution.8 0n contrastto this e'!ress mandate o# the President and ,on$ress in the ED o# natura" resources( Artic"e ;00 o# the ,onstitution is si"ent on the ro"e o# the 3udiciar.


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F/AA e'ecuted )etween the $o&ernment and 6*,P( main" on the #indin$ that F/AAs are %er;*ceco&'rc'% $ro+*b*'e( b) '+e 1@87 Co&%'*'


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Res!ondentsH and inter&enorHs *otions #or Reconsideration shou"d )e $ranted( #or the reasonsdiscussed )e"ow. /he #ore$oin$ three issues identi#ied ) the ,ourt sha"" now )e ta4en u! seriatim.

*r%' #%%


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F/AA. We shall tae up the alleged invalidity of !A "#$% and &A' #(-$) later on in the discussionof the third issue.

*o Transgression of the +onstitutionby the Transfer of the W+ hares

Petitioners c"aim( first, that the a""e$ed in&a"idit o# the transfer of the W+ shares to Sa$ittarius&io"ates the #ourth !ara$ra!h o# Section 2 o# Artic"e ;00 o# the ,onstitution5 second, that it is contrarto the !ro&isions o# the 6*,P F/AA itse"#5 and third, that the sa"e o# the shares is sus!ect andshou"d there#ore )e the su)3ect o# a case in which its &a"idit ma !ro!er" )e "iti$ated.

On the #irst $round( !etitioners assert that !ara$ra!h o# Section 2 o# Artic"e ;00 !ermits the$o&ernment to enter into F/AAs on" with #orei$n%owned cor!orations. Petitioners insist that the #irst!ara$ra!h o# this constitutiona" !ro&ision "imits the !artici!ation o# Fi"i!ino cor!orations in thee'!"oration( de&e"o!ment and uti"ization o# natura" resources to on" three s!ecies o# contracts %%!roduction sharin$( co%!roduction and 3oint &enture %% to the e'c"usion o# a"" other arran$ements or&ariations thereo#( and the 6*,P F/AA ma there#ore not )e &a"id" assumed and im!"emented )Sa$ittarius. In short, petitioners claim that a Filipino corporation is not allo/ed by the +onstitution to

enter into an FTAA /ith the government.


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assumed ) a Fi"i!ino cor!oration "i4e Sa$ittarius( in /hich event the said provision should simply bedisregarded as a superfluity.

*o *eed for a eparate3itigation of the ale of hares

Petitioners c"aim as third $round the 8sus!icious8 sa"e o# shares #rom 6*, to Sa$ittarius5 hence( theneed to "iti$ate it in a se!arate case. Section C o# RA 792 1the *inin$ -aw a""e$ed" requires thePresidentHs !rior a!!ro&a" o# a trans#er.

A re%readin$ o# the said !ro&ision( howe&er( "eads to a di##erent conc"usion. 0ec.$). Assi$nment=/rans#er %% A financial or technical assistance agreement may be assigned ortransferred, in /hole or in part, to a 4ualified person sub2ect to the prior approval of the resident5rovided, That the resident shall notify +ongress of every financial or technical assistanceagreement assigned or converted in accordance /ith this provision /ithin thirty 67)8 days from thedate of the approval thereof.0

ection $) expressly applies to the assignment or transfer of the FTAA, not to the sale and transfer

of shares of stoc in W+ . *oreo&er( when the trans#eree o# an F/AA isanother foreign cor!oration( there is a "o$ica" a!!"ication o# the requirement o# !rior a!!ro&a" ) thePresident o# the Re!u)"ic and noti#ication to ,on$ress in the e&ent o# assi$nment or trans#er o# anF/AA. 0n this situation( such a!!ro&a" and noti#ication are a!!ro!riate sa#e$uards( considerin$ thatthe new contractor is the su)3ect o# a #orei$n $o&ernment.

On the other hand( when the trans#eree o# the F/AA ha!!ens to )e a Filipino cor!oration( the need#or such sa#e$uard is not critica"5 hence( the "ac4 o# !rior a!!ro&a" and noti#ication ma not )edeemed #ata" as to render the trans#er in&a"id. +esides( it is not as i# a!!ro&a" ) the President isentire" a)sent in this instance. As !ointed out ) !ri&ate res!ondent in its *emorandum,@ the issueo# a!!ro&a" is the su)3ect o# one o# the cases )rou$ht ) -e!anto a$ainst Sa$ittarius in GR No.@B2@. /hat case in&o"&ed the re&iew o# the Decision o# the ,ourt o# A!!ea"s dated No&em)er 2@(2CC in ,A%GR SP No. 7@B@( which a##irmed the DENR Order dated Decem)er @( 2CC@ and theDecision o# the O##ice o# the President dated u" 2( 2CC2( )oth approving the assi$nment o# the6*,P F/AA to Sa$ittarius.

Petitioners a"so question the sa"e !rice and the #inancia" ca!acit o# the trans#eree. Accordin$ to theDeed o# A)so"ute Sa"e dated anuar 2( 2CC@( e'ecuted )etween 6*, and Sa$ittarius( the !riceo# the 6*,P shares was #i'ed at SI9(7?(CCC( equi&a"ent to P?? mi""ion at an e'chan$e rate o#?B:@. Sa$ittarius had an authorized ca!ita" stoc4 o# P2?C mi""ion and a !aid u! ca!ita" o# PBC mi""ion./here#ore( at the time o# a!!ro&a" o# the sa"e ) the DENR( the de)t%to%equit ratio o# the trans#ereewas o&er 9:@ %% hard" idea" #or an F/AA contractor( accordin$ to !etitioners.


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/o )o"ster #urther their c"aim that the case is not moot( !etitioners insist that the F/AA is &oid and(hence cannot )e trans#erred5 and that its trans#er does not o!erate to cure the constitutiona" in#irmitthat is inherent in it5 neither wi"" a chan$e in the circumstances o# one o# the !arties ser&e to rati# the&oid contract.

6hi"e the discussion in their Fina" *emorandum was s4im!( !etitioners in their ,omment 1on the

*R did ratiocinate that this ,ourt had dec"ared the F/AA to )e &oid )ecause( at the time it wase'ecuted with 6*,P( the "atter was a #u"" #orei$n%owned cor!oration( in which the #ormer &ested #u""contro" and mana$ement with res!ect to the e'!"oration( de&e"o!ment and uti"ization o# minera"resources( contrar to the !ro&isions o# !ara$ra!h o# Section 2 o# Artic"e ;00 o# the ,onstitution.

And since the F/AA was !er se &oid( no &a"id ri$ht cou"d )e trans#erred5 neither cou"d it )e rati#ied(so !etitioners conc"ude.

Petitioners ha&e assumed as #act that which has et to )e esta)"ished. First and #oremost( theDecision o# this ,ourt dec"arin$ the F/AA &oid has not et )ecome #ina". /hat was !recise" thereason the ,ourt sti"" heard Ora" Ar$ument in this case. econd ( the F/AA does not &est in the#orei$n cor!oration #u"" contro" and su!er&ision o&er the e'!"oration( de&e"o!ment and uti"ization o#minera" resources( to the e'c"usion o# the $o&ernment. /his !oint wi"" )e dea"t with in $reater detai"

)e"ow5 )ut #or now( su##ice it to sa that a !erusa" o# the F/AA !ro&isions wi"" !ro&e that the$o&ernment has e##ecti&e o&era"" direction and contro" o# the minin$ o!erations( inc"udin$ mar4etin$and !roduct !ricin$( and that the contractorHs wor4 !ro$rams and )ud$ets are su)3ect to its re&iewand a!!ro&a" or disa!!ro&a".

As wi"" )e detai"ed "ater on( the $o&ernment does not ha&e to micro%mana$e the minin$ o!erationsand di! its hands into the da%to%da mana$ement o# the enter!rise in order to )e considered asha&in$ o&era"" contro" and direction. +esides( #or !ractica" and !ra$matic reasons( there is a need #or $o&ernment a$encies to de"e$ate certain as!ects o# the mana$ement wor4 to the contractor. /husthe )asis #or dec"arin$ the F/AA &oid sti"" has to )e re&isited( ree'amined and reconsidered.

Petitioners sni## at the citation o# +have1 v. ublic Estates Authority (@ and ;alili v. +A(@? c"aimin$ thatthe doctrines in these cases are who"" ina!!"ica)"e to the instant case.

+have1 c"ear" teaches: 0Thus, the +ourt has ruled consistently that /here a Filipino citi1en sellsland to an alien /ho later sells the land to a Filipino, the invalidity of the first transfer is corrected bythe subse4uent sale to a citi1en. imilarly, /here the alien /ho buys the land subse4uently ac4uireshilippine citi1enship, the sale is validated since the purpose of the constitutional ban to limit lando/nership to Filipinos has been achieved. In short, the la/ disregards the constitutionaldis4ualification of the buyer to hold land if the land is subse4uently transferred to a 4ualified party, or the buyer himself becomes a 4ualified party.0 @B

0n their ,omment( !etitioners contend that in +have1 and ;alili, the o)3ect o# the trans#er 1the "andwas not what was assai"ed #or a""e$ed unconstitutiona"it. Rather( it was the transaction that wasassai"ed5 hence su)sequent com!"iance with constitutiona" !ro&isions wou"d cure its in#irmit. 0n

contrast( in the instant case it is the F/AA itse"#( the o)3ect o# the trans#er( that is )ein$ assai"ed asin&a"id and unconstitutiona". So( !etitioners c"aim that the su)sequent trans#er o# a &oid F/AA to aFi"i!ino cor!oration wou"d not cure the de#ect.

Petitioners are con#usin$ themse"&es. /he !resent Petition has )een #i"ed( !recise" )ecause the$rantee o# the F/AA was a who"" owned su)sidiar o# a #orei$n cor!oration. 0t cannot )e $ainsaidthat anone wou"d ha&e asserted that the same F/AA was &oid i# it had at the outset )een issued toa Fi"i!ino cor!oration. /he F/AA( there#ore( is not !er se de#ecti&e or unconstitutiona". 0t was

http://www.lawphil.net/judjuris/juri2003/may2003/gr_133250_2003.htmlhttp://www.lawphil.net/judjuris/juri2003/may2003/gr_133250_2003.htmlhttp://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt14http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt15http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt15http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt15http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt16http://www.lawphil.net/judjuris/juri2003/may2003/gr_133250_2003.htmlhttp://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt14http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt15http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt16


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questioned on" )ecause it had )een issued to an a""e$ed" non%qua"i#ied( #orei$n%ownedcor!oration.

6e )e"ie&e that this case is c"ear" ana"o$ous to ;alili, in which the "and acquired ) a non%Fi"i!inowas re%con&eed to a qua"i#ied &endee and the ori$ina" transaction was there) cured.Para!hrasin$ ;alili, the same rationa"e a!!"ies to the instant case: assumin$ arguendo the in&a"idit

o# its !rior $rant to a #orei$n cor!oration( the dis!uted F/AA %% )ein$ now he"d ) a Fi"i!inocor!oration %% can no "on$er )e assai"ed5 the o)3ecti&e o# the constitutiona" !ro&ision %% to 4ee! thee'!"oration( de&e"o!ment and uti"ization o# our natura" resources in Fi"i!ino hands %% has )eenser&ed.

*ore accurate" s!ea4in$( the !resent situation is one de$ree )etter than that o)tainin$ in ;alili, inwhich the ori$ina" sa"e to a non%Fi"i!ino was c"ear" and indis!uta)" &io"ati&e o# the constitutiona"!rohi)ition and thus &oidab initio. 0n the !resent case( the issuance=$rant o# the su)3ect F/AA to thethen #orei$n%owned 6*,P was not i""e$a"( &oid or unconstitutiona" at the time. /he matter had to )e)rou$ht to court( !recise" #or ad3udication as to whether the F/AA and the *inin$ -aw had indeed&io"ated the ,onstitution. Since( u! to this !oint( the decision o# this ,ourt dec"arin$ the F/AA &oidhas et to )ecome #ina"( to a"" intents and !ur!oses( the F/AA must )e deemed &a"id and

constitutiona".

@7

At )ottom( we #ind com!"ete" out"andish !etitionersH contention that an F/AA cou"d )e entered into) the $o&ernment on" with a #orei$n cor!oration( never /ith a Filipino enterprise. 0ndeed( thenationa"istic !ro&isions o# the ,onstitution are a"" anchored on the !rotection o# Fi"i!ino interests.


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o&er -uzon( the >isaas and *indanao@9 %% a!!"ied #or. 0t ma )e a )it #ar%#etched to assert( as!etitioners do( that each and e&er F/AA that was entered into under the !ro&isions o# the *inin$

Act 8in&ites !otentia" "iti$ation8 #or as "on$ as the constitutiona" issues are not reso"&ed with #ina"it.Ne&erthe"ess( /e must concede that there exists the distinct possibility that one or more of the futureFTAAs /ill be the sub2ect of yet another suit grounded on constitutional issues.

+ut o# equa" i# not $reater si$ni#icance is the c"oud o# uncertaint han$in$ o&er the minin$ industr(which is e&en now scarin$ awa #orei$n in&estments. Attestin$ to this c"imate o# an'iet is the #actthat the ,ham)er o# *ines o# the Phi"i!!ines saw the ur$ent need to inter&ene in the case and to!resent its !osition durin$ the Ora" Ar$ument5 and that Secretar Genera" Romu"o Neri o# theNationa" Economic De&e"o!ment Authorit 1NEDA requested this ,ourt to a""ow him to s!ea4(durin$ that Ora" Ar$ument( on the economic consequences o# the Decision o# anuar 27( 2CC.2C

6e are con&inced. We no/ agree that the +ourt must recogni1e the exceptional character of thesituation and the paramount public interest involved, as /ell as the necessity for a ruling to put anend to the uncertainties plaguing the mining industry and the affected communities as a result ofdoubts cast upon the constitutionality and validity of the ining Act, the sub2ect FTAA and futureFTAAs, and the need to avert a multiplicity of suits. Para!hrasin$


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8As this ,ourt has re!eated" and #irm" em!hasized in man cases( it wi"" not shir4( di$ress#rom or a)andon its sacred dut and authorit to u!ho"d the ,onstitution in matters thatin&o"&e $ra&e a)use o# discretion )rou$ht )e#ore it in a!!ro!riate cases( committed ) ano##icer( a$enc( instrumenta"it or de!artment o# the $o&ernment.8C

Additiona""( the entr o# ,*P into this case has a"so e##ecti&e" #oresta""ed an !ossi)"e o)3ections

arisin$ #rom the standin$ or "e$a" interest o# the ori$ina" !arties.

For a"" the #ore$oin$ reasons( we )e"ie&e that the ,ourt shou"d !roceed to a reso"ution o# theconstitutiona" issues in this case.

T+*r( #%%


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*o !estriction of eaning by a >er)a -e$is Interpretation

/o inter!ret the #ore$oin$ !ro&ision( !etitioners adamant" assert that the "an$ua$e o# the,onstitution shou"d !re&ai"5 that the !rimar method o# inter!retin$ it is to see4 the ordinar meanin$o# the words used in its !ro&isions. /he re" on ru"in$s o# this ,ourt( such as the #o""owin$:

0The fundamental principle in constitutional construction ho/ever is that the primary sourcefrom /hich to ascertain constitutional intent or purpose is the language of the provision itself.The presumption is that the /ords in /hich the constitutional provisions are couchedexpress the ob2ective sought to be attained. In other /ords, &er)a "e$is prevails. 'nly /henthe meaning of the /ords used is unclear and e4uivocal should resort be made toextraneous aids of construction and interpretation, such as the proceedings of the+onstitutional +ommission or +onvention to shed light on and ascertain the true intent or

purpose of the provision being construed.0 2

>er recent"( in Francisco v. The ;ouse of !epresentatives, this ,ourt indeed had the occasion toreiterate the we""%sett"ed !rinci!"es o# constitutiona" construction:

0First, &er)a "e$is, that is, /herever possible, the /ords used in the +onstitution must begiven their ordinary meaning except /here technical terms are employed. x x x.

x x x x x x x x x

0econd, /here there is ambiguity, ratio "e$is est anima. The /ords of the +onstitutionshould be interpretedin accordance /ith the intent of its framers. x x x.

x x x x x x x x x

0Finally, ut ma$is &a"eat quam !ereat. The +onstitution is to be interpreted as a /hole.0

For ease o# re#erence and in consonance with verba legis( we reconstruct and strati# thea#orequoted Section 2 as #o""ows:

@. A"" natura" resources are owned ) the State. E'ce!t #or a$ricu"tura" "ands( natura"resources cannot )e a"ienated ) the State.

2. /he e'!"oration( de&e"o!ment and uti"ization 1ED o# natura" resources sha"" )e under the#u"" contro" and su!er&ision o# the State.

. /he State ma underta4e these ED acti&ities throu$h either o# the #o""owin$:

1a + itse"# direct" and so"e"

1) + 1i co%!roduction5 1ii 3oint &enture5 or 1iii !roduction sharin$ a$reements withFi"i!ino citizens or cor!orations( at "east BC !ercent o# the ca!ita" o# which is owned) such citizens

. mall-scale uti"ization o# natura" resources ma )e a""owed ) "aw in #a&or o# Fi"i!inocitizens.

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?. For large-scale ED o# minera"s( !etro"eum and other minera" oi"s( the President maenter into 8a$reements with #orei$n%owned cor!orations in&o"&in$ either technica" or #inancia"assistance accordin$ to the $enera" terms and conditions !ro&ided ) "aw ' ' '.8

Note that in a"" the three #ore$oin$ minin$ acti&ities %% exploration, development and utili1ation %% theState ma underta4e such ED acti&ities ) itse"# or in tandem with Fi"i!inos or Fi"i!ino cor!orations(

e'ce!t in two instances:first ( in sma""%sca"e uti"ization o# natura" resources( which Fi"i!inos ma )ea""owed ) "aw to underta4e5 andsecond ( in "ar$e%sca"e ED o# minera"s( !etro"eum and minera" oi"s(which ma )e underta4en ) the State &ia 8agreements /ith foreign-o/ned corporations involvingeither technical or financial assistance8 as !ro&ided ) "aw.

Petitioners c"aim that the !hrase 0agreements x x x involving either technical or financialassistance0 sim!" meanstechnica" assistance or #inancia" assistance a$reements( nothin$ more andnothin$ e"se. /he insist that there is no am)i$uit in the !hrase( and that a !"ain readin$ o#!ara$ra!h quoted a)o&e "eads to the inesca!a)"e conc"usion that what a #orei$n%ownedcor!oration ma enter into with the $o&ernment is mere" an a$reement#or either #inancia" or technica" assistance only ( #or the "ar$e%sca"e e'!"oration( de&e"o!ment anduti"ization o# minera"s( !etro"eum and other minera" oi"s5 such a "imitation( the ar$ue( e'c"udes

#orei$n mana$ement and o!eration o# a minin$ enter!rise.

?

/his restricti&e inter!retation( !etitioners )e"ie&e( is in "ine with the $enera" !o"ic enunciated ) the,onstitution reser&in$ to Fi"i!ino citizens and cor!orations the use and en3oment o# the countrHsnatura" resources. /he maintain that this ,ourtHs DecisionB o# anuar 27( 2CC correct" dec"aredthe 6*,P F/AA( a"on$ with !ertinent !ro&isions o# RA 792( &oid #or a""owin$ a #orei$n contractor toha&e direct and e'c"usi&e mana$ement o# a minin$ enter!rise. A""owin$ such a !ri&i"e$e not on"runs counter to the 8#u"" contro" and su!er&ision8 that the State is constitutiona"" mandated toe'ercise o&er the e'!"oration( de&e"o!ment and uti"ization o# the countrHs natura" resources5 doin$so a"so &ests in the #orei$n com!an 8)ene#icia" ownershi!8 o# our minera" resources. 0t wi"" )ereca""ed that the Decision o# anuar 27( 2CC zeroed in on 8mana$ement or other #orms o#assistance8 or other acti&ities associated with the 8ser&ice contracts8 o# the martia" "aw re$ime(since 0the management or operation of mining activities by foreign contractors, /hich is the primary

feature of service contracts, /as precisely the evil that the drafters of the >#?" +onstitution soughtto eradicate.0

On the other hand( the inter&enor 7 and !u)"ic res!ondents ar$ue that the F/AA a""owed )!ara$ra!h is not mere" an a$reement #or su!!"in$ "imited and s!eci#ic #inancia" or technica"ser&ices to the State. Rather( such F/AA is a com!rehensi&e a$reement #or the #orei$n%ownedcor!orationHs integrated e'!"oration( de&e"o!ment and uti"ization o# minera"( !etro"eum or otherminera" oi"s on a "ar$e%sca"e )asis. /he a$reement( there#ore( authorizes the #orei$n contractorHsrendition o# a who"e ran$e o# inte$rated and com!rehensi&e ser&ices( ran$in$ #rom the disco&er tothe de&e"o!ment( uti"ization and !roduction o# minera"s or !etro"eum !roducts.

6e do not see how a!!"in$ a strict" "itera" or verba legis inter!retation o# !ara$ra!h cou"d

ine'ora)" "ead to the conc"usions arri&ed at in the ponencia. First ( the dra#tersH choice o# words %%their use o# the !hraseagreements x x x in"ol"ing either technical or financial assistance %% does notindicate the intent to exclude other modes o# assistance. /he dra#ters o!ted to use involving whenthe cou"d ha&e sim!" said agreements for financial or technical assistance, i# that was theirintention to )e$in with. 0n this case( the "imitation wou"d )e &er c"ear and no #urther de)ate wou"densue.

0n contrast( the use o# the word 8in&o"&in$8 si$ni#ies the $o%%*b*=*') o: '+e *&c=


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technica" assistance. /he word 8in&o"&in$8 as used in this conte't has three connotations that can )edi##erentiated thus:one, the sense o# 8concernin$(8 8ha&in$ to do with(8 or 8a##ectin$85 t/o( 8entai"in$(88requirin$(8 8im!"in$8 or 8necessitatin$85 and three( 8inc"udin$(8 8containin$8 or 8com!risin$.8

P"ain"( none o# the three connotations con&e a sense o# e'c"usi&it. *oreo&er( the word 8in&o"&in$(8when understood in the sense o# 8inc"udin$(8 as in including technical or financial

assistance, necessari" im!"ies that there are activities other than those that are )ein$ inc"uded. 0nother words( i# an a$reement includes technica" or #inancia" assistance( there is a!art #rom suchassistance %% somethin$ e"se a"read in( and co&ered or ma )e co&ered )( the said a$reement.

0n short( it a""ows #or the !ossi)i"it that matters( other than those e'!"icit" mentioned( cou"d )emade !art o# the a$reement. /hus( we are now "ed to the conc"usion that the use o# the word8in&o"&in$8 im!"ies that these a$reements with #orei$n cor!orations are not "imited to mere #inancia"or technica" assistance. /he di##erence in sense )ecomes &er a!!arent when we 3u'ta!ose8a$reements for technica" or #inancia" assistance8 a$ainst 8a$reements including technica" or#inancia" assistance.8 /his much is una"tera)" c"ear in a verba legis a!!roach.

econd ( i# the rea" intention o# the dra#ters was to con#ine #orei$n cor!orations to #inancia" or

technica" assistance and nothin$ more( their "an$ua$e wou"d ha&e certain" )een so #?" +onstitution sought toeradicate.0 Nowhere in the a)o&e%quoted Section can )e discerned the o)3ecti&e to 4ee! out o##orei$n hands the mana$ement or o!eration o# minin$ acti&ities or the !"an to eradicate ser&icecontracts as these were understood in the @97 ,onstitution. Sti""( !etitioners maintain that thede"etion or omission #rom the @97 ,onstitution o# the term 8ser&ice contracts8 #ound in the @97,onstitution su##icient" !ro&es the dra#tersH intent to e'c"ude #orei$ners #rom the mana$ement o# thea##ected enter!rises.

/o our mind( howe&er( such intent cannot )e de#initi&e" and conc"usi&e" esta)"ished #rom the mere#ai"ure to carr the same e'!ression or term o&er to the new ,onstitution( a)sent a more s!eci#ic(

e'!"icit and unequi&oca" statement to that e##ect. 6hat !etitioners see4 1a com!"ete )an on #orei$n!artici!ation in the mana$ement o# minin$ o!erations( as !re&ious" a""owed ) the ear"ier,onstitutions is nothin$ short o# )rin$in$ a)out a momentous sea chan$e in the economic andde&e"o!menta" !o"icies5 and the #undamenta"" ca!ita"ist( #ree%enter!rise !hi"oso!h o# our$o&ernment. 6e cannot ima$ine such a radical shift )ein$ underta4en ) our $o&ernment( to the$reat !re3udice o# the minin$ sector in !articu"ar and our econom in $enera"( mere" on the )asis o#the omission o# the terms service contract #rom or the #ai"ure to carr them o&er to the new,onstitution. /here has to )e a much more de#inite and e&en unar$ua)"e )asis #or such a drasticre&ersa" o# !o"icies.

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Fourth, a "itera" and restricti&e inter!retation o# !ara$ra!h ( such as that !ro!osed ) !etitioners(su##ers #rom certain interna" "o$ica" inconsistencies that $enerate am)i$uities in the understandin$ o#the !ro&ision. As the inter&enor !ointed out( there has ne&er )een an constitutiona" or statutor!ro&ision that reser&ed to Fi"i!ino citizens or cor!orations( at "east BC !ercent o# which is Fi"i!ino%owned( the rendition o# #inancia" or technica" assistance to com!anies en$a$ed in minin$ or thede&e"o!ment o# an other natura" resource. /he ta4in$ out o# #orei$n%currenc or !eso%denominated

"oans or an other 4ind o# #inancia" assistance( as we"" as the rendition o# technica" assistance %%whether to the State or to an other entit in the Phi"i!!ines %% has ne&er )een restricted in #a&or o#Fi"i!ino citizens or cor!orations ha&in$ a certain minimum !ercenta$e o# Fi"i!ino equit. Such arestriction wou"d certain" )e !re!osterous and unnecessar. As a matter o# #act( #inancia"( and e&entechnica" assistance(re$ard"ess o# the nationa"it o# its source( wou"d )e we"comed in the minin$industr antime with o!en arms( on account o# the dearth o# "oca" ca!ita" and the need to continua""u!date techno"o$ica" 4now%how and im!ro&e technica" s4i""s.

/here was there#ore no need #or a constitutiona" !ro&ision s!eci#ica"" a""owin$ #orei$n%ownedcor!orations to render #inancia" or technica" assistance( whether in res!ect o# minin$ or some otherresource de&e"o!ment or commercia" acti&it in the Phi"i!!ines. T+e =%' $o*&' &ee(% 'o beem$+%*e(? *: mere=) :*&&c*= or 'ec+&*c= %%*%'&ce reeme&'% re ==oe(, '+ere o


17/81

8/he State(8 then it necessari" im!"ies that the State itse"# is the one directly and solely underta4in$the "ar$e%sca"e e'!"oration( de&e"o!ment and uti"ization o# a minera" resource( so it #o""ows that theState must itse"# )ear the "ia)i"it and cost o# re!ain$ the #inancin$ sourced #rom the #orei$n "enderand=or o# !ain$ com!ensation to the #orei$n entit renderin$ technica" assistance.


18/81

su!!" wou"d not $o to waste. "timate"( the wou"d a"so want to !rotect their )usiness re!utationand )ottom "ines.2

0n short( the dra#ters wi"" ha&e to )e credited with enou$h !ra$matism and sa&& to 4now that these#orei$n entities wi"" not enter into such 8a$reements in&o"&in$ assistance8 without requirin$arran$ements #or the !rotection o# their in&estments( $ains and )ene#its.

/hus( ) s!eci#in$ such 8a$reements in&o"&in$ assistance(8 the dra#ters necessari" $a&e im!"iedassent to e&erthin$ that these a$reements necessari" entai"ed5 or that cou"d reasona)" )edeemed necessar to ma4e them tena)"e and e##ecti&e( inc"udin$ mana$ement authorit withres!ect to the da%to%da o!erations o# the enter!rise and measures #or the !rotection o# theinterests o# the #orei$n cor!oration( PRO>0DED /


19/81

for not more than eighteen months after the ratification of this +onstitution. ;o/ever, in thenational interest, as certified by the resident, the +ongress may extend such period.

A se4uestration or free1e order shall be issued only upon sho/ing of a prima facie case. Theorder and the list of the se4uestered or fro1en properties shall forth/ith be registered /iththe proper court. For orders issued before the ratification of this +onstitution, the

corresponding 2udicial action or proceeding shall be filed /ithin six months from itsratification. For those issued after such ratification, the 2udicial action or proceeding shall becommenced /ithin six months from the issuance thereof.

The se4uestration or free1e order is deemed automatically lifted if no 2udicial action or proceeding is commenced as herein provided.0

0t is inconcei&a)"e that the dra#ters o# the ,onstitution wou"d "ea&e such an im!ortant matter %% ane'!ression o# so&erei$nt as it were %% inde#inite" han$in$ in the air in a #orm"ess and ine##ecti&estate. 0ndeed( the com!"ete a)sence o# e&en a $enera" #ramewor4 on" ser&es to #urther de#"ate!etitionersH theor( "i4e a chi"dHs )a""oon "osin$ its air.

nder the circumstances( the "o$ica" inconsistencies resu"tin$ #rom !etitionersH "itera" and!ure" verba legisa!!roach to !ara$ra!h o# Section 2 o# Artic"e ;00 com!e" a resort to other aids tointer!retation.

etitioners9 osture Also *egatedby Ratio -e$is Et Anima

/hus, in order to resolve the inconsistencies, incongruities and ambiguities encountered and tosupply the deficiencies of the plain-language approach, there is a need for recourse to the

proceedings of the >#?( +onstitutional +ommission. /here is a need #or ratio legis et anima.

ervice +ontracts *ot

0&econstitutionali1ed0

Pertinent !ortions o# the de"i)erations o# the mem)ers o# the ,onstitutiona" ,ommission 1,on,omconc"usi&e" show that the discussed agreements involving either technical or financialassistance in the same )readth asservice contracts and used the terms interchan$ea)". /he#o""owin$ e'chan$e )etween ,ommissioner amir 1s!onsor o# the !ro&ision and ,ommissionerSuarez irre#uta)" !ro&es that the 8a$reements in&o"&in$ technica" or #inancia" assistance8 were noneother than ser&ice contracts.

/0NG E0/0--EGAS. /he ,ommittee acce!ts the amendment. ,ommissioner Suarez wi"" $i&e the)ac4$round.

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*R. A*0R. /han4 ou.

/


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*R. GAS,ON. As it is !ro!osed now( such %er;*ce co&'rc'% wi"" )e entered into ) thePresident with the $uide"ines o# a $enera" "aw on %er;*ce co&'rc' to )e enacted ),on$ress. 0s that correct

*R. >0--EGAS. /he ,ommissioner is ri$ht( *adam President.

*R. GAS,ON. Accordin$ to the ori$ina" !ro!osa"( i# the President were to enter into a!articu"ar a$reement( he wou"d need the concurrence o# ,on$ress. Now that it has )eenchan$ed ) the !ro!osa" o# ,ommissioner amir in that ,on$ress wi"" set the $enera" "aw towhich the President sha"" com!"( the President wi""( there#ore( not need the concurrence o#,on$ress e&er time he enters into %er;*ce co&'rc'%. 0s that correct

*R. >0--EGAS. /hat is ri$ht.

*R. GAS,ON. /he !ro!osed amendment o# ,ommissioner amir is in indirect contrast tom !ro!osed amendment( so 0 wou"d "i4e to o)3ect and !resent m !ro!osed amendment tothe )od.

' ' ' ' ' ' ' ' '

*R. GAS,ON. Kes( it wi"" )e u! to the )od.

0 #ee" that the $enera" "aw to )e set ) ,on$ress as re$ard %er;*ce co&'rc'reeme&'% which the President wi"" enter into mi$ht )e too $enera" or since we do not 4nowthe content et o# such a "aw( it mi$ht )e that certain a$reements wi"" )e detrimenta" to theinterest o# the Fi"i!inos. /his is in direct contrast to m !ro!osa" which !ro&ides that there )ee##ecti&e constraints in the im!"ementation o# %er;*ce co&'rc'%.

So instead o# a $enera" "aw to )e !assed ) ,on$ress to ser&e as a $uide"ine to thePresident when enterin$ into %er;*ce co&'rc' reeme&'%( 0 !ro!ose that e&er %er;*ce

co&'rc' entered into ) the President wou"d need the concurrence o# ,on$ress( so as toassure the Fi"i!inos o# their interests with re$ard to the issue in Section on a"" "ands o# the!u)"ic domain. * a"ternati&e amendment( which we wi"" discuss "ater( reads: /


22/81

ha&e to )e uni#orm. /he President has no choice )ut to #o""ow a"" the $uide"ines that wi"" )e!ro&ided ) "aw.

*R. GAS,ON. +ut m )asic !ro)"em is that we do not 4now as o# et the contents o# such a$enera" "aw as to how much constraints there wi"" )e in it. And to m mind( a"thou$h the,ommitteeHs contention that the re$u"ar concurrence #rom ,on$ress wou"d su)3ect ,on$ress

to e'tensi&e "o))in$( 0 thin4 that is a ris4 we wi"" ha&e to ta4e since ,on$ress is a )od o#re!resentati&es o# the !eo!"e whose mem)ershi! wi"" )e chan$in$ re$u"ar" as there wi"" )echan$in$ circumstances e&er time certain a$reements are made. 0t wou"d )e )est then to4ee! in ta) and attuned to the interest o# the Fi"i!ino !eo!"e( whene&er the President entersinto an a$reement with re$ard to such an im!ortant matter as 'ec+&*c= or :*&&c*=%%*%'&ce :or =re-%c=e e>$=or'*o&, (e;e=o$me&' &( 0--EGAS. Kes( the ,ommittee acce!ts the amendment.

' ' ' ' ' ' ' ' '

SR. /AN. *adam President( ma 0 as4 a question

/0--EGAS. /hat is ri$ht.

SR. /AN. So those are the sa#e$uards.

*R. >0--EGAS. Kes. /here was no "aw at a"" $o&ernin$ %er;*ce co&'rc'% )e#ore.


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SR. /AN. /han4 ou( *adam President.?

ore Than ere Financial and Technical AssistanceEntailed by the Agreements

/he c"ear words o# ,ommissioner ose N. No""edo quoted )e"ow e'!"icit" and e"oquent"demonstrate that the dra#ters 4new that the a$reements with #orei$n cor!orations were $oin$ toentai" not mere technica" or #inancia" assistance )ut( rather( foreign investment in and managementof an enterprise involved in large-scale exploration(development and utili1ation of minerals,

petroleum, and other mineral oils.

/


24/81

Another e'cer!t( #eaturin$ then ,ommissioner 1now ,hie# ustice 0DE. /hat is !recise" the reason we ha&e to enumerate what these resources are

into which%er;*ce co&'rc'% ma enter. So( )eond the reach o# an %er;*ce co&'rc' wi"")e "ands o# the !u)"ic domain( tim)er"ands( #orests( marine resources( #auna and #"ora(wi"d"i#e and nationa" !ar4s.7

A#ter the amir amendment was &oted u!on and a!!ro&ed ) a &ote o# 2@ to @C with 2 a)stentions(,ommissioner Da&ide made the #o""owin$ statement( which is &er re"e&ant to our quest:

/0DE. 0 am &er $"ad that ,ommissioner Padi""a em!hasized minera"s( !etro"eumand minera" oi"s. /he ,ommission has 3ust a!!ro&ed the !ossi)"e #orei$n entr into thede&e"o!ment( e'!"oration and uti"ization o# these minera"s( !etro"eum and other minera" oi"s

) &irtue o# the amir amendment. 0 &oted in #a&or o# the amir amendment )ecause it wi""e&entua"" $i&e wa to &estin$ in e'c"usi&e" Fi"i!ino citizens and cor!orations who"" owned) Fi"i!ino citizens the ri$ht to uti"ize the other natura" resources. /his means that as a matter o# !o"ic( natura" resources shou"d )e uti"ized and e'!"oited on" ) Fi"i!ino citizens orcor!orations who"" owned ) such citizens. +ut ) &irtue o# the amir amendment( since we#ee" that Fi"i!ino ca!ita" ma not )e enou$h #or the de&e"o!ment and uti"ization o# minera"s(!etro"eum and other minera" oi"s( the President can enter into %er;*ce co&'rc'% with #orei$ncor!orations !recise" #or the de&e"o!ment and uti"ization o# such resources. And so( there is

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nothin$ to #ear that we wi"" sta$nate in the de&e"o!ment o# minera"s( !etro"eum and minera"oi"s bec


26/81

/his !ro&ision was !rom!ted ) the !ercei&ed insu##icienc o# Fi"i!ino ca!ita" and the #e"tneed #or #orei$n in&estments in the ED o# minera"s and !etro"eum resources.

/he #ramers #or the most !art de)ated a)out the sort o# sa#e$uards that wou"d )econsidered adequate and reasona)"e. +ut some o# them( ha&in$ more 8radica"8 "eanin$s(wanted to )an ser&ice contracts a"to$ether5 #or them( the !ro&ision wou"d !ermit a"iens to

e'!"oit and )ene#it #rom the nationHs natura" resources( which the #e"t shou"d )e reser&edon" #or Fi"i!inos.

0n the e'!"anation o# their &otes( the indi&idua" commissioners were heard ) the entire)od. /he sounded o## their indi&idua" o!inions( o!en" enunciated their !hi"oso!hies( andsu!!orted or attac4ed the !ro&isions with #er&or. E&eroneHs &iew!oint was heard.

0n the #ina" &otin$( the Artic"e on the Nationa" Econom and Patrimon %% inc"udin$!ara$ra!h a""owin$ ser&ice contracts with #orei$n cor!orations as an e'ce!tion to the$enera" norm in !ara$ra!h @ o# Section 2 o# the same artic"e %% was resoundin$" a!!ro&ed) a &ote o# 2 to 7( with 2 a)stentions.

Agreements Involving Technical

or Financial Assistance Are

ervice +ontracts With afeguards

From the #ore$oin$( we are im!e""ed to conc"ude that the !hrase agreements involving eithertechnical or financial assistance, re#erred to in !ara$ra!h ( are in #act service contracts. +ut un"i4ethose o# the @97 &ariet( the new ones are )etween #orei$n cor!orations actin$ as contractors onthe one hand5 and on the other( the $o&ernment as !rinci!a" or 8owner8 o# the wor4s. 0n the newser&ice contracts( the #orei$n contractors !ro&ide ca!ita"( techno"o$ and technica" 4now%how( andmana$eria" e'!ertise in the creation and o!eration o# "ar$e%sca"e minin$=e'tracti&e enter!rises5 and

the $o&ernment( throu$h its a$encies 1DENR( *G+( acti&e" e'ercises contro" and su!er&ision o&erthe entire o!eration.

Such ser&ice contracts ma )e entered into only /ith respect to minerals, petroleum and othermineral oils. /he $rant thereo# is su)3ect to se&era" sa#e$uards( amon$ which are theserequirements:

1@ /he ser&ice contract sha"" )e cra#ted in accordance with a $enera" "aw that wi"" setstandard or uni#orm terms( conditions and requirements( !resuma)" to attain a certainuni#ormit in !ro&isions and a&oid the !ossi)"e insertion o# terms disad&anta$eous to thecountr.

12 /he President sha"" )e the si$nator #or the $o&ernment )ecause( su!!osed" )e#ore ana$reement is !resented to the President #or si$nature( it wi"" ha&e )een &etted se&era" timeso&er at di##erent "e&e"s to ensure that it con#orms to "aw and can withstand !u)"ic scrutin.

1 6ithin thirt das o# the e'ecuted a$reement( the President sha"" re!ort it to ,on$ress to$i&e that )ranch o# $o&ernment an o!!ortunit to "oo4 o&er the a$reement and inter!osetime" o)3ections( i# an.

Dse of the !ecord of the


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+on+om to Ascertain Intent

At this 3uncture( we sha"" address( rather than $"oss o&er( the use o# the 8#ramersH intent8 a!!roach(and the criticism hur"ed ) !etitioners who quote a ru"in$ o# this ,ourt:

0While it is permissible in this 2urisdiction to consult the debates and proceedings of the

constitutional convention in order to arrive at the reason and purpose of the resulting+onstitution, resort thereto may be had only /hen other guides fail as said proceedings are

po/erless to vary the terms of the +onstitution /hen the meaning is clear. &ebates in theconstitutional convention 9 are o# &a"ue as showin$ the &iews o# the indi&idua" mem)ers( andas indicatin$ the reason #or their &otes( )ut the $i&e us no "i$ht as to the &iews o# the "ar$ema3orit who did not ta"4( much "ess the mass o# our #e""ow citizens whose &otes at the !o""s$a&e that instrument the #orce o# #undamenta" "aw. 6e thin4 it sa#er to construe theconstitution #rom what a!!ears u!on its #ace.H The proper interpretation therefore dependsmore on ho/ it /as understood by the people adopting it than in the framers9 understandingthereof.0 ?2

/he notion that the de"i)erations re#"ect on" the &iews o# those mem)ers who s!o4e out and not the

&iews o# the ma3orit who remained si"ent shou"d )e c"ari#ied. 6e must ne&er #or$et that those whos!o4e out were heard ) those who remained si"ent and did not react. 0# the "atter were si"ent)ecause the ha!!ened not to )e !resent at the time( the are !resumed to ha&e read the minutesand 4e!t a)reast o# the de"i)erations. + remainin$ si"ent( the are deemed to ha&e si$ni#ied theirassent to and=or con#ormit with at "east some o# the &iews !ro!ounded or their "ac4 o# o)3ectionsthereto. 0t was incum)ent u!on them( as re!resentati&es o# the entire Fi"i!ino !eo!"e( to #o""ow thede"i)erations c"ose" and to s!ea4 their minds on the matter i# the did not see ee to ee with the!ro!onents o# the dra#t !ro&isions.

0n an e&ent( each and e&er one o# the commissioners had the o!!ortunit to s!ea4 out and to &oteon the matter. *oreo&er( the indi&idua" e'!"anations o# &otes are on record( and the show whereeach de"e$ate stood on the issues. #& %


28/81

itHs $ood enou$h #or them( itHs $ood enou$h #or me58 or( in man instances( 80# itHs $ood enou$h #orPresident ,or Aquino( itHs $ood enou$h #or me.8

And e&en #or those who &oted )ased on their own indi&idua" assessment o# the !ro!osed ,harter(there is no e&idence a&ai"a)"e to indicate that their assessment or understandin$ o# its !ro&isionswas in #act di##erent #rom that o# the dra#ters. /his unwritten assum!tion seems to )e !etitionersH as

we"". For a"" we 4now( this se$ment o# &oters must ha&e read and understood the !ro&isions o# the,onstitution in the same wa the #ramers had( an assum!tion that wou"d account #or the #a&ora)"e&otes.

Fundamenta"" s!ea4in$( in the !rocess o# rewritin$ the ,harter( the mem)ers o# the ,on,om as a$rou! were su!!osed to re!resent the entire Fi"i!ino !eo!"e. /hus( we cannot )ut re$ard their &iewsas )ein$ &er much indicati&e o# the thin4in$ o# the !eo!"e with res!ect to the matters de"i)eratedu!on and to the ,harter as a who"e.

#' *% '+ere:ore re%o&b=e &( a"eatuam Pereat


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nder the third !rinci!"e o# constitutiona" construction "aid down in Francisco %% ut magis valeat 4uam pereat --e&er !art o# the ,onstitution is to )e $i&en e##ect( and the ,onstitution is to )e read andunderstood as a harmonious who"e. /hus( 0full control and supervision0 by the tate must beunderstood as one that does not preclude the legitimate exercise of management prerogatives bythe foreign contractor. +e#ore an #urther discussion( we must stress the !rimac and su!remac o#the !rinci!"e o# so&erei$nt and State contro" and su!er&ision o&er a"" as!ects o# e'!"oration(

de&e"o!ment and uti"ization o# the countrHs natura" resources( as mandated in the #irst !ara$ra!h o#Section 2 o# Artic"e ;00.

+ut in the ne't )readth we ha&e to !oint out that 8#u"" contro" and su!er&ision8 cannot )e ta4en"itera"" to mean that the State contro"s and su!er&ises everything involved, do/n to the minutestdetails( and ma4es all decisionsrequired in the minin$ o!erations. /his strained conce!t o# contro"and su!er&ision o&er the minin$ enter!rise wou"d render im!ossi)"e the "e$itimate e'ercise ) thecontractors o# a reasona)"e de$ree o# mana$ement !rero$ati&e and authorit necessar andindis!ensa)"e to their !ro!er #unctionin$.

For one thin$( such an inter!retation wou"d discoura$e #orei$n entr into "ar$e%sca"e e'!"oration(de&e"o!ment and uti"ization acti&ities5 and resu"t in the unmiti$ated sta$nation o# this sector( to the

detriment o# our nationHs de&e"o!ment. /his scenario renders !ara$ra!h ino!erati&e and use"ess. And as res!ondents ha&e correct" !ointed out( the $o&ernment does not ha&e to micro%mana$e theminin$ o!erations and di! its hands into the da%to%da a##airs o# the enter!rise in order #or it to )econsidered as ha&in$ #u"" contro" and su!er&ision.

/he conce!t o# control ? ado!ted in Section 2 o# Artic"e ;00 must )e ta4en to mean "ess thandictatoria"( a""%encom!assin$ contro"5 )ut ne&erthe"ess su##icient to $i&e the State the !ower to direct(restrain( re$u"ate and $o&ern the a##airs o# the e'tracti&e enter!rises. ,ontro" ) the State ma )e ona macro "e&e"( throu$h the esta)"ishment o# !o"icies( $uide"ines( re$u"ations( industr standards andsimi"ar measures that wou"d ena)"e the $o&ernment to contro" the conduct o# a##airs in &ariousenter!rises and restrain acti&ities deemed not desira)"e or )ene#icia".

/he end in &iew is ensurin$ that these enter!rises contri)ute to the economic de&e"o!ment and

$enera" we"#are o# the countr( conser&e the en&ironment( and u!"i#t the we""%)ein$ o# the a##ected"oca" communities. Such a conce!t o# contro" wou"d )e com!ati)"e with !ermittin$ the #orei$ncontractor su##icient and reasona)"e mana$ement authorit o&er the enter!rise it in&ested in( in order to ensure that it is o!eratin$ e##icient" and !ro#ita)"( to !rotect its in&estments and to ena)"e it tosucceed.

T+e


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that the "aw( the im!"ementin$ re$u"ations( and the 6*,P F/AA cede 8)ene#icia" ownershi!8 o# theminera" resources to the #orei$n contractor.

A care#u" scrutin o# the !ro&isions o# RA 792 and its 0m!"ementin$ Ru"es )e"ies !etitionersH c"aims.Para!hrasin$ the ,onstitution( Section o# the statute c"ear" a##irms the StateHs contro" thus:

0ec. $. '/nership of ineral !esources. ineral resources are o/ned by the tate andthe exploration, development, utili1ation and processing thereof shall be under its full controland supervision. The tate may directly undertae such activities or it may enter into mineral agreements /ith contractors.

0The tate shall recogni1e and protect the rights of the indigenous cultural communities totheir ancestral lands as provided for by the +onstitution.8

/he a#orequoted !ro&ision is su)stanti&e" reiterated in Section 2 o# DAO 9B%C as #o""ows:

0ec. %. &eclaration of olicy. All mineral resources in public and private lands /ithin theterritory and exclusive economic 1one of the !epublic of the hilippines are o/ned by the

tate. It shall be the responsibility of the tate to promote their rational exploration,development, utili1ation and conservation through the combined efforts of the


31/81

81h 6or4 !ro$rams and minimum e'!enditures commitments.

' ' ' ' ' ' ' ' '

814 Requirin$ !ro!onent to e##ecti&e" use a!!ro!riate anti%!o""ution techno"o$ and#aci"ities to !rotect the en&ironment and restore or reha)i"itate mined%out areas.

81" /he contractors sha"" #urnish the Go&ernment records o# $eo"o$ic( accountin$ andother re"e&ant data #or its minin$ o!eration( and that )oo4s o# accounts and recordssha"" )e o!en #or ins!ection ) the $o&ernment. ' ' '.

81m Requirin$ the !ro!onent to dis!ose o# the minera"s at the hi$hest !rice andmore ad&anta$eous terms and conditions.

81n ' ' ' ' ' ' ' ' '

81o Such other terms and conditions consistent with the ,onstitution and with this Act as the Secretar ma deem to )e #or the )est interest o# the State and the

we"#are o# the Fi"i!ino !eo!"e.8

/he #ore$oin$ !ro&isions o# Section ? o# RA 792 are a"so re#"ected andim!"emented in Section ?B 1$( 1h( 1"( 1m and 1n o# the 0m!"ementin$ Ru"es( DAO9B%C.

*oreo&er( RA 792 and DAO 9B%C a"so !ro&ide &arious sti!u"ations con#irmin$ the $o&ernmentHscontro" o&er minin$ enter!rises:

/he contractor is to re"inquish to the $o&ernment those !ortions o# the contract area notneeded #or minin$ o!erations and not co&ered ) an dec"aration o# minin$ #easi)i"it1Section ?%e( RA 7925 Section BC( DAO 9B%C.

/he contractor must com!" with the !ro&isions !ertainin$ to mine sa#et( hea"th anden&ironmenta" !rotection 1,ha!ter ;0( RA 7925 ,ha!ters ;> and ;>0( DAO 9B%C.

For &io"ation o# an o# its terms and conditions( $o&ernment ma cance" an F/AA. 1,ha!ter;>00( RA 7925 ,ha!ter ;;0>( DAO 9B%C.

An F/AA contractor is o)"i$ed to o!en its )oo4s o# accounts and records #or ins!ection )the $o&ernment 1Section ?B%m( DAO 9B%C.

An F/AA contractor has to dis!ose o# the minera"s and )%!roducts at the hi$hest mar4et!rice and re$ister with the *G+ a co! o# the sa"es a$reement 1Section ?B%n( DAO 9B%C.

*G+ is mandated to monitor the contractorHs com!"iance with the terms and conditions o#the F/AA5 and to de!utize( when necessar( an mem)er or unit o# the Phi"i!!ine Nationa"Po"ice( the )aran$a or a DENR%accredited non$o&ernmenta" or$anization to !o"ice minin$acti&ities 1Section 7%d and %#( DAO 9B%C.

An F/AA cannot )e trans#erred or assi$ned without !rior a!!ro&a" ) the President 1SectionC( RA 7925 Section BB( DAO 9B%C.


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A minin$ !ro3ect under an F/AA cannot !roceed to the construction=de&e"o!ment=uti"izationsta$e( un"ess its Dec"aration o# *inin$ Pro3ect Feasi)i"it has )een a!!ro&ed ) $o&ernment1Section 2( RA 792.

/he Dec"aration o# *inin$ Pro3ect Feasi)i"it #i"ed ) the contractor cannot )e a!!ro&edwithout su)mission o# the #o""owin$ documents:

@. A!!ro&ed minin$ !ro3ect #easi)i"it stud 1Section ?%d( DAO 9B%C

2. A!!ro&ed three%ear wor4 !ro$ram 1Section ?%a%( DAO 9B%C

. En&ironmenta" com!"iance certi#icate 1Section 7C( RA 792

. A!!ro&ed en&ironmenta" !rotection and enhancement !ro$ram 1Section B9( RA792

?. A!!ro&a" ) the San$$unian$ Pan"a"awi$an=+aan=+aran$a 1Section 7C( RA7925 Section 27( RA 7@BC

B. Free and !rior in#ormed consent ) the indi$enous !eo!"es concerned( inc"udin$!ament o# roa"ties throu$h a *emorandum o# A$reement 1Section @B( RA 7925Section ?9( RA 7@

/he F/AA contractor is o)"i$ed to assist in the de&e"o!ment o# its minin$ communit(!romotion o# the $enera" we"#are o# its inha)itants( and de&e"o!ment o# science and minin$techno"o$ 1Section ?7( RA 792.

/he F/AA contractor is o)"i$ed to su)mit re!orts 1on quarter"( semi%annua" or annua" )asisas the case ma )e5 !er Section 27C( DAO 9B%C( !ertainin$ to the #o""owin$:

@. E'!"oration

2. Dri""in$

. *inera" resources and reser&es

. Ener$ consum!tion

?. Production

B. Sa"es and mar4etin$

7. Em!"oment

. Pament o# ta'es( roa"ties( #ees and other Go&ernment Shares

9. *ine sa#et( hea"th and en&ironment

@C. -and use


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@@. Socia" de&e"o!ment

@2. E'!"osi&es consum!tion

An F/AA !ertainin$ to areas within $o&ernment reser&ations cannot )e $ranted without awritten c"earance #rom the $o&ernment a$encies concerned 1Section @9( RA 7925 Section

?( DAO 9B%C.

An F/AA contractor is required to !ost a #inancia" $uarantee )ond in #a&or o# the$o&ernment in an amount equi&a"ent to its e'!enditures o)"i$ations #or an !articu"ar ear./his requirement is a!art #rom the re!resentations and warranties o# the contractor that ithas access to a"" the #inancin$( mana$eria" and technica" e'!ertise and techno"o$necessar to carr out the o)3ecti&es o# the F/AA 1Section ?%)( %e( and %#( RA 792.

Other re!orts to )e su)mitted ) the contractor( as required under DAO 9B%C( are as#o""ows: an en&ironmenta" re!ort on the reha)i"itation o# the mined%out area and=or minewaste=tai"in$ co&ered area( and anti%!o""ution measures underta4en 1Section ?%a%25 annua"re!orts o# the minin$ o!erations and records o# $eo"o$ic accountin$ 1Section ?B%m5 annua"

!ro$ress re!orts and #ina" re!ort o# e'!"oration acti&ities 1Section ?B%2.

Other !ro$rams required to )e su)mitted ) the contractor( !ursuant to DAO 9B%C( are the#o""owin$: a sa#et and hea"th !ro$ram 1Section @5 an en&ironmenta" wor4 !ro$ram1Section @B5 an annua" en&ironmenta" !rotection and enhancement !ro$ram 1Section @7@.

/he #ore$oin$ $amut o# requirements( re$u"ations( restrictions and "imitations im!osed u!on theF/AA contractor ) the statute and re$u"ations easi" o&erturns !etitionersH contention. /he setu!under RA 792 and DAO 9B%C hard" re"e$ates the State to the ro"e o# a 8!assi&e re$u"ator8de!endent on su)mitted !"ans and re!orts. On the contrar( the $o&ernment a$encies concernedare em!owered to a!!ro&e or disa!!ro&e %% hence( to in#"uence( direct and chan$e %% the &ariouswor4 !ro$rams and the corres!ondin$ minimum e'!enditure commitments #or each o# the

e'!"oration( de&e"o!ment and uti"ization !hases o# the minin$ enter!rise.

Once these !"ans and re!orts are a!!ro&ed( the contractor is )ound to com!" with its commitmentstherein. Fi$ures #or minera" !roduction and sa"es are re$u"ar" monitored and su)3ected to$o&ernment re&iew( in order to ensure that the !roducts and )%!roducts are dis!osed o# at the )est!rices !ossi)"e5 e&en co!ies o# sa"es a$reements ha&e to )e su)mitted to and re$istered with *G+.

And the contractor is mandated to o!en its )oo4s o# accounts and records #or scrutin( so as toena)"e the State to determine i# the $o&ernment share has )een #u"" !aid.

/he State ma "i4ewise com!e" the contractorHs com!"iance with mandator requirements on minesa#et( hea"th and en&ironmenta" !rotection( and the use o# anti%!o""ution techno"o$ and #aci"ities.*oreo&er( the contractor is a"so o)"i$ated to assist in the de&e"o!ment o# the minin$ communit andto !a roa"ties to the indi$enous !eo!"es concerned.

,ance""ation o# the F/AA ma )e the !ena"t #or &io"ation o# an o# its terms and conditions and=ornoncom!"iance with statutes or re$u"ations. /his $enera"( a""%around( mu"ti!ur!ose sanction is notri#"in$ matter( es!ecia"" to a contractor who ma ha&e et to reco&er the tens or hundreds o#mi""ions o# do""ars sun4 into a minin$ !ro3ect.

O&era""( considerin$ the !ro&isions o# the statute and the re$u"ations 3ust discussed( we )e"ie&e thatthe State de#inite" !ossesses the means ) which it can ha&e the u"timate word in the o!eration o#


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the enter!rise( set directions and o)3ecti&es( and detect de&iations and noncom!"iance ) thecontractor5 "i4ewise( it has the ca!a)i"it to en#orce com!"iance and to im!ose sanctions( shou"d theoccasion there#or arise.

#& o'+er or(%, '+e TAA co&'rc'or *% &o' :ree 'o (o +'e;er *' $=e%e% &( e' ) *'+ *'/o& '+e co&'rr), *' *== +;e 'o :o==o '+e o;er&me&' =*&e *: *' &'% 'o %') *& '+e e&'er$r*%e.

#&e=


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the State( and the $rantee wou"d de#inite" need to ha&e some document or instrument as e&idenceo# its ri$ht to conduct e'!"oration wor4s within the s!eci#ied area. /his need is met ) the e'!"oration!ermit issued !ursuant to Sections 1aq( 2C and 2 o# RA 792.

#& br*e:, '+e e>$=or'*o& $erm*' %er;e% $rc'*c= &( =e*'*m'e $$=or'*o& or%,*'+o


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@2. /he contractor is to su)mit within si' months a#ter e'!iration o# e'!"oration !eriod a #ina"re!ort on a"" its #indin$s in the contract area 1,"ause ?.%).

@. /he contractor( a#ter conductin$ #easi)i"it studies( sha"" su)mit a dec"aration o# minin$#easi)i"it( a"on$ with a descri!tion o# the area to )e de&e"o!ed and mined( a descri!tion o#the !ro!osed minin$ o!erations and the techno"o$ to )e em!"oed( and a !ro!osed wor4

!ro$ram #or the de&e"o!ment !hase( #or a!!ro&a" ) the DENR secretar 1,"ause ?..

@. /he contractor is o)"i$ed to com!"ete the de&e"o!ment o# the mine( inc"udin$ constructiono# the !roduction #aci"ities( within the !eriod stated in the a!!ro&ed wor4 !ro$ram 1,"auseB.@.

@?. /he contractor is o)"i$ated to su)mit #or a!!ro&a" o# the DENR secretar a wor4 !ro$ramco&erin$ each !eriod o# three #isca" ears 1,"ause B.2.

@B. /he contractor is to su)mit re!orts to the DENR secretar on the !roduction( orereser&es( wor4 accom!"ished and wor4 in !ro$ress( !ro#i"e o# its wor4 #orce and mana$ementsta##( and other technica" in#ormation 1,"ause B..

@7. An e'!ansions( modi#ications( im!ro&ements and re!"acements o# minin$ #aci"ities sha"")e su)3ect to the a!!ro&a" o# the secretar 1,"ause B..

@. /he State has contro" with res!ect to the amount o# #unds that the contractor ma )orrowwithin the Phi"i!!ines 1,"ause 7.2.

@9. /he State has su!er&isor !ower with res!ect to technica"( #inancia" and mar4etin$issues 1,"ause @C.@%a.

2C. /he contractor is required to ensure BC !ercent Fi"i!ino equit in the contractor( within tenears o# reco&erin$ s!eci#ied e'!enditures( un"ess not so required ) su)sequent "e$is"ation

1,"ause @C.@.

2@. /he State has the ri$ht to terminate the F/AA #or the contractorHs unremedied su)stantia")reach thereo# 1,"ause @.25

22. /he StateHs a!!ro&a" is needed #or an assi$nment o# the F/AA ) the contractor to anentit other than an a##i"iate 1,"ause @.@.

6e shou"d e"a)orate a "itt"e on the wor4 !ro$rams and )ud$ets( and what the mean with res!ect tothe StateHs a)i"it to e'ercise #u"" contro" and e##ecti&e su!er&ision o&er the enter!rise. For instance(throu$hout the initia" #i&e%ear exploration and feasibility phase o# the !ro3ect( the contractor ismandated ) ,"ause ?.@ o# the 6*,P F/AA to su)mit a series o# wor4 !ro$rams 1co! #urnished

the director o# *G+ to the DENR secretar #or approval. /he !ro$rams wi"" detai" the contractorHs!ro!osed exploration activities and budget co&erin$ each su)sequent !eriod o# two #isca" ears.

0n other words( the concerned $o&ernment o##icia"s wi"" )e in#ormed )e#orehand o# the !ro!osede'!"oration acti&ities and e'!enditures o# the contractor #or each succeedin$ two%ear !eriod( withthe ri$ht to a!!ro&e=disa!!ro&e them or require chan$es or ad3ustments therein i# deemednecessar.


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-i4ewise( under ,"ause ?.21a( the amount that the contractor was su!!osed to s!end #or e'!"orationacti&ities durin$ the #irst contract ear o# the e'!"oration !eriod was #i'ed at not "ess than P2 mi""ion5and then #or the succeedin$ ears( the amount sha"" )e as a$reed )etween the DENR secretar andthe contractor !rior to the commencement o# each su)sequent #isca" ear. 0# no such a$reement isarri&ed u!on( the !re&ious earHs e'!enditure commitment sha"" a!!".

/his !ro&ision a"one $rants the $o&ernment throu$h the DENR secretar a &er )i$ sa in thee'!"oration !hase o# the !ro3ect. /his #act is not somethin$ to )e ta4en "i$ht"( considerin$ thatthe government has absolutely no contribution to the exploration expenditures or /or activities andyet is given veto po/er over such a critical aspect of the pro2ect . 6e cannot )ut construe as &ersi$ni#icant such a de$ree o# contro" o&er the !ro3ect and( resu"tant"( o&er the minin$ enter!rise itse"#.

Fo""owin$ its e'!"oration acti&ities or #easi)i"it studies( i# the contractor )e"ie&es that an !art o# thecontract area is "i4e" to contain an economic minera" resource( it sha"" su)mit to the DENR secretara dec"aration o# minin$ #easi)i"it 1!er ,"ause ?. o# the F/AA( to$ether with a technica" descri!tiono# the area de"ineated #or de&e"o!ment and !roduction( a description of the proposed miningoperations including the technology to be used, a /or program for development, an environmentalimpact statement, and a description of the contributions to the economic and general /elfare o# the

countr to )e $enerated ) the minin$ o!erations 1!ursuant to ,"ause ?.?.

/he wor program for development is su)3ect to the approval of the &E*! secretary. !on itsa!!ro&a"( the contractor must com!" with it and com!"ete the de&e"o!ment o# the mine( inc"udin$the construction o# !roduction #aci"ities and insta""ation o# machiner and equi!ment( within the!eriod !ro&ided in the a!!ro&ed wor4 !ro$ram #or de&e"o!ment 1!er ,"ause B.@.

/hus( nota)"( the de&e"o!ment !hase o# the !ro3ect is "i4ewise su)3ect to the contro" and su!er&isiono# the $o&ernment. 0t cannot )e em!hasized enou$h that the !ro!er and time" construction andde!"oment o# the !roduction #aci"ities and the de&e"o!ment o# the mine are o# !i&ota" si$ni#icance tothe success o# the minin$ &enture. An misste!s here wi"" !otentia"" )e &er cost" to remed.


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4uestion, be%'o


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/hese tem!orar or sto!%$a! so"utions are not necessari" e&i" or wron$. Neither does it #o""ow thatthe $o&ernment wi"" ine'ora)" )e a$$rie&ed i# and when these tem!orar remedies come into!"a. First ( a&oidance o# "on$ de"as in these situations wi"" undou)ted" redound to the )ene#it o# theState as we"" as the contractor.econd ( who is to sa that the wor4 !ro$ram or )ud$et !ro!osed )the contractor and deemed a!!ro&ed under ,"ause . wou"d not )e the )etter or more reasona)"eor more e##ecti&e a"ternati&e /he contractor( )ein$ the 8insider(8 as it were( ma )e said to )e in a

)etter !osition than the State %% an outsider "oo4in$ in %% to determine what wor4 !ro$ram or )ud$etwou"d )e a!!ro!riate( more e##ecti&e( or more suita)"e under the circumstances.

A"" thin$s considered( we ta4e e'ce!tion to the characterization o# the DENR secretar as asu)ser&ient nonentit whom the contractor can o&erru"e at wi""( on account o# ,"ause .. Andneither is it true that under the same c"ause( the DENR secretar has no authorit whatsoe&er todisa!!ro&e the wor4 !ro$ram. As Res!ondent 6*,P reasoned in its Re!"%*emorandum( the State%% des!ite ,"ause . %% sti"" has contro" o&er the contract area and it ma( as so&erei$n authorit(!rohi)it wor4 thereon unti" the dis!ute is reso"&ed. And u"timate"( the State ma terminate thea$reement( !ursuant to ,"ause @.2 o# the same F/AA( citin$ su)stantia" )reach thereo#.


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#ees on the non%minera" !arts o# its contract area. Neither wi"" it want to re"inquish !romisin$ sites(which other contractors ma su)sequent" !ic4 u!.


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$o&ernment( then( wi"" not act as a su)contractor o# the contractor5 rather, it /ill facilitate thetransaction and enable the parties to avoid a technical violation of the Anti-&ummy 3a/.

Absence of rovision!e4uiring ale at osted rices *ot roblematic

/he su!!osed a)sence o# an !ro&ision in the 6*,P F/AA direct" and e'!"icit" requirin$ thecontractor to sell the mineral products at posted or maret prices is not a !ro)"em. A!art #rom ,"ause@. o# the F/AA o)"i$atin$ the contractor to account #or the tota" &a"ue o# minera" !roduction and thesa"e o# minera"s( we can a"so "oo4 to Section ? o# RA 792( which incor!orates into a"" F/AAscertain terms( conditions and warranties( inc"udin$ the #o""owin$:

06l8 The contractors shall furnish the


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!roceeds there#rom. -i4ewise( under the 6*,P F/AA( the $o&ernment remains entit"ed to its si't!ercent share in the net minin$ re&enues o# the contractor. /he "atterHs ri$ht to mort$a$e theminera"s does not ne$ate the StateHs ri$ht to recei&e its share o# net minin$ re&enues.

hareholders Free to ell Their tocs

Petitioners "i4ewise criticize ,"ause @C.214( which $i&es the contractor authorit 8to chan$e its equitstructure at an time.8 /his !ro&ision ma seem somewhat unusua"( )ut considerin$ that 6*,P thenwas @CC !ercent #orei$n%owned( an chan$e wou"d mean that such !ercenta$e wou"d either stauna"tered or )e decreased in #a&or o# Fi"i!ino ownershi!. *oreo&er( the #orei$n%he"d shares machan$e hands #ree". Such e&entua"it is as it shou"d )e.

6e )e"ie&e it is not necessar #or $o&ernment to attem!t to "imit or restrict the #reedom o# theshareho"ders in the contractor to #ree" trans#er( dis!ose o# or encum)er their shareho"din$s(consonant with the un#ettered e'ercise o# their )usiness 3ud$ment and discretion. Rather( /hat iscritical is that, regardless of the identity, nationality and percentage o/nership of the variousshareholders of the contractor -- and regardless of /hether these shareholders decide to tae thecompany public, float bonds and other fixed-income instruments, or allo/ the creditor-bans to tae

an e4uity position in the company -- the foreign-o/ned contractor is al/ays in a position to renderthe services re4uired under the FTAA, under the direction and control of the government.

+ontractor9s !ight to As For Amendment *ot Absolute

6ith res!ect to ,"auses @C.1e and 1i( !etitioners com!"ain that these !ro&isions )ind $o&ernmentto a""ow amendments to the F/AA i# required ) )an4s and other #inancia" institutions as !art o# theconditions #or new "endin$s.


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disa!!ro&e such requested amendments to the F/AA. In short, approval thereof is not mandatory onthe part of the government.

#& :*&e, '+e :oreo*& e;=


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"oca"( the F/AA contractor( and the a##ected communities. /he !ur!ose is to ensure sustaina)"eminera" resources de&e"o!ment5 and a #air( equita)"e( com!etiti&e and sta)"e in&estment re$ime #orthe "ar$e%sca"e e'!"oration( de&e"o!ment and commercia" uti"ization o# minera"s. The generalframe/or or concept follo/ed in crafting the fiscal regime of the FTAA is based on the principle that the government expects real contributions to the economic gro/th and general /elfare of thecountry, /hile the contractor expects a reasonable return on its investments in the pro2ect.B

S!eci#ica""( under the #isca" re$ime( the $o&ernmentHs e'!ectation is( inter alia, the recei!t o# itsshare #rom the ta'es and #ees norma"" !aid ) a minin$ enter!rise. On the other hand( the F/AAcontractor is $ranted ) the $o&ernment certain #isca" and non%#isca" incenti&esB to he"! su!!ort the#ormerHs cash #"ow durin$ the most critica" !hase 1cost reco&er and to ma4e the Phi"i!!inescom!etiti&e with other minera"%!roducin$ countries. A#ter the contractor has reco&ered its initia"in&estment( it wi"" !a a"" the norma" ta'es and #ees com!risin$ the )asic share o# the $o&ernment(!"us an additiona" share #or the $o&ernment )ased on the o!tions and #ormu"ae set #orth in DAO 99%?B.

/he said DAO s!e""s out the #inancia" )ene#its the $o&ernment wi"" recei&e #rom an F/AA( re#erred toas 8the Go&ernment Share(8 com!osed o# a basic go"ern$ent share &( & additional

go"ern$ent share.

/he b%*c o;er&me&' %+re is com!rised o# a"" direct ta'es( #ees and roa"ties( as we"" as other!aments made ) the contractor durin$ the term o# the F/AA. /hese are amounts !aid direct" to 1ithe nationa" $o&ernment 1throu$h the +ureau o# 0nterna" Re&enue( +ureau o# ,ustoms( *ines QGeosciences +ureau and other nationa" $o&ernment a$encies im!osin$ ta'es or #ees( 1ii the "oca"$o&ernment units where the minin$ acti&it is conducted( and 1iii !ersons and communities direct"a##ected ) the minin$ !ro3ect. /he ma3or ta'es and other !aments constitutin$ the )asic$o&ernment share are enumerated )e"ow:B?

Paments to the Nationa" Go&ernment:

E'cise ta' on minera"s % 2 !ercent o# the $ross out!ut o# minin$ o!erations

,ontractorH income ta' % ma'imum o# 2 !ercent o# ta'a)"e income #or cor!orations

,ustoms duties and #ees on im!orted ca!ita" equi!ment %the rate is set ) the /ari##and ,ustoms ,ode 1%7 !ercent #or chemica"s5 %@C !ercent #or e'!"osi&es5 %@?!ercent #or mechanica" and e"ectrica" equi!ment5 and %@C !ercent #or &ehic"es(aircra#t and &esse"s

>A/ on im!orted equi!ment( $oods and ser&ices M @C !ercent o# &a"ue

Roa"ties due the $o&ernment on minera"s e'tracted #rom minera" reser&ations( i#a!!"ica)"e M ? !ercent o# the actua" mar4et &a"ue o# the minera"s !roduced

Documentar stam! ta' % the rate de!ends on the t!e o# transaction

,a!ita" $ains ta' on traded stoc4s % ? to @C !ercent o# the &a"ue o# the shares

6ithho"din$ ta' on interest !aments on #orei$n "oans %@? !ercent o# the amount o#interest

http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt63http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt64http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt65http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt63http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt64http://www.lawphil.net/judjuris/juri2004/dec2004/gr_127882_2004.html#fnt65


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6ithho"din$ ta' on di&idend !aments to #orei$n stoc4ho"ders M @? !ercent o# thedi&idend

6har#a$e and !ort #ees

-icensin$ #ees 1#or e'am!"e( radio !ermit( #irearms !ermit( !ro#essiona" #ees

Other nationa" ta'es and #ees.

Paments to -oca" Go&ernments:

-oca" )usiness ta' % a ma'imum o# 2 !ercent o# $ross sa"es or recei!ts 1the rate&aries amon$ "oca" $o&ernment units

Rea" !ro!ert ta' % 2 !ercent o# the #air mar4et &a"ue o# the !ro!ert( )ased on anassessment "e&e" set ) the "oca" $o&ernment

S!ecia" education "e& % @ !ercent o# the )asis used #or the rea" !ro!ert ta'

Occu!ation #ees % PhP?C !er hectare !er ear5 PhP@CC !er hectare !er ear i#"ocated in a minera" reser&ation

,ommunit ta' % ma'imum o# PhP@C(?CC !er ear

A"" other "oca" $o&ernment ta'es( #ees and im!osts as o# the e##ecti&e date o# theF/AA % the rate and the t!e de!end on the "oca" $o&ernment

Other Paments:

Roa"t to indi$enous cu"tura" communities( i# an M @ !ercent o# $ross out!ut #romminin$ o!erations

S!ecia" a""owance % !ament to c"aim owners and sur#ace ri$hts ho"ders

A!art #rom the )asic share( an ((*'*o&= o;er&me&' %+re is a"so co""ected #rom the F/AAcontractor in accordance with the second !ara$ra!h o# Section @ o# RA 792( which !ro&ides thatthe $o&ernment share sha"" )e com!rised o#( among other things, certain ta'es( duties and #ees. /hesu)3ect !ro&iso reads:

0The


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/he ((*'*o&= o;er&me&' %+re is com!uted ) usin$ one o# three o!tions or schemes!resented in DAO 99%?B: 1@ a #i#t%#i#t sharin$ in the cumu"ati&e !resent &a"ue o# cash #"ows5 12 theshare )ased on e'cess !ro#its5 and 1 the sharin$ )ased on the cumu"ati&e net minin$ re&enue. /he!articu"ar #ormu"a to )e a!!"ied wi"" )e se"ected ) the contractor( with a written notice to the$o&ernment !rior to the commencement o# the de&e"o!ment and construction !hase o# the minin$!ro3ect.BB

Proceeds #rom the $o&ernment shares arisin$ #rom an F/AA contract are distri)uted to and recei&ed) the di##erent "e&e"s o# $o&ernment in the #o""owin$ !ro!ortions:

Nationa" Go&ernment ?C !ercent

Pro&incia"Go&ernment

@C !ercent

*unici!a"Go&ernment

2C !ercent

A##ected +aran$as 2C !ercent

/he !ortion o# re&enues remainin$ a#ter the deduction o# the )asic and additiona" $o&ernment shares

is what $oes to the contractor.


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%% that wou"d su$$est that such !hrase shou"d )e inter!reted as re#errin$ on" to ta'es( duties( #eesand the "i4e.

Precise" #or that reason( to #u"#i"" the "e$is"ati&e intent )ehind the inc"usion o# the !hrase amongother things in the second !ara$ra!h o# Section @(B7 the DENR structured and #ormu"ated in DAO99%?B the said ((*'*o&= o;er&me&' %+re. Such a share was to consist not o# ta'es( )ut o#

%+re *& '+e er&*&% or c%+ :=o% o: '+e m*&*& e&'er$r*%e. /he additiona" $o&ernment sharewas to )e !aid ) the contractor on to! o# the )asic share( so as to achie&e a fifty-fifty sharing-- )etween the $o&ernment and the contractor %% of net benefits from mining . In the !amos-&e:era

paper, the explanation of the '+ree o$'*o&% or :orm


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Furthermore( it shou"d )e noted that the three o!tions or #ormu"ae do not yet tae into account theindirect taxes7Cand other financial contributions7@ of mining pro2ects. /hese indirect ta'es and othercontri)utions are rea" and actua" )ene#its en3oed ) the Fi"i!ino !eo!"e and=or $o&ernment. Now( i#some o# the quanti#ia)"e items are ta4en into account in the com!utations( the #inancia" mode"in$wou"d show that the tota" $o&ernment share increases to BC !ercent or higher %% in one instance( asmuch as 77 !ercent and e&en 9 !ercent %% o# the net !resent &a"ue o# tota" )ene#its #rom the !ro3ect.

As noted in the Ramos%De>era !a!er( these resu"ts are not at a"" sha))( considerin$ that thecontractor !uts in a"" the ca!ita" requirements and assumes a"" the ris4s( without the $o&ernmentha&in$ to contri)ute or ris4 anthin$.

Des!ite the #ore$oin$ e'!"anation( ustice ,ar!io sti"" insisted durin$ the ,ourtHs de"i)erations thatthe !hraseamong other things re#ers on" to ta'es( duties and #ees. 6e are )ewi"dered ) his!osition. On the one hand( he condemns the *inin$ -aw #or a""e$ed" "imitin$ the $o&ernmentHs)ene#its on" to ta'es( duties and #ees5 and on the other( he re#uses to a""ow the State to )ene#it #romthe correct and !ro!er inter!retation o# the DENR=*G+. /o remo&e a"" dou)ts then( we ho"d that theStateHs share is not "imited to ta'es( duties and #ees on" and that the DENR=*G+ inter!retation o#the !hrase among other things is correct. De#inite"( this DENR=*G+ inter!retation is not on" "e$a""sound( )ut a"so $reat" ad&anta$eous to the $o&ernment.

One "ast !oint on the su)3ect. /he "e$is"ature acted 3udicious" in not de#inin$ the terms among other things and( instead( "ea&in$ it to the a$encies concerned to de&ise and de&e"o! the &arious modes o# arri&in$ at a reasona)"e and #air amount #or the ((*'*o&= o;er&me&' %+re. As can )e seen #romDAO 99%?B( the a$encies concerned did an admira)"e 3o) o# concei&in$ and de&e"o!in$ not 3ust one#ormu"a( )ut three di##erent #ormu"ae #or arri&in$ at the additiona" $o&ernment share. Each o# theseo!tions is quite #air and reasona)"e5 and( as *essrs. Ramos and De >era stated( other a"ternati&esor schemes #or a !ossi)"e im!ro&ement o# the #isca" re$ime #or F/AAs are a"so )ein$ studied ) the$o&ernment.

+esides( not "oc4in$ into a #i'ed de#inition o# the term among other things wi"" u"timate" )e more)ene#icia" to the $o&ernment( as it wi"" ha&e that innate #"e'i)i"it to ad3ust to and co!e with ra!id"chan$in$ circumstances( !articu"ar" those in the internationa" mar4ets. Such #"e'i)i"it is es!ecia""

si$ni#icant #or the $o&ernment in terms o# he"!in$ our minin$ enter!rises remain com!etiti&e in wor"dmar4ets des!ite cha""en$in$ and shi#tin$ economic scenarios.

#& co&c=


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we cannot discount the !ossi)i"it o# shorter reco&er !eriods. At an rate( the concerned a$enciesha&e not )een remiss in this area. /he @99? and @99B 0m!"ementin$ Ru"es and Re$u"ations o# RA792 s!eci# that the !eriod o# reco&er( rec4oned #rom the date o# commercia" o!eration( sha"" )e#or a period not exceeding five years, or until the date of actual recovery, /hichever comes earlier .

Approval of re

097 la bugal-blaan tribal assoc vs ramos-1

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