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ADMIN LAW | B2015 CASES

Republic v. Pilipinas Shell Petroleum Corp.


2008 Chico-Nazario alycat SUMMARY: The OEA informed Pilipinas Shell that the latters contributions to the OPSF were insufficient. As a consequence, a surcharge was imposed upon Pilipinas Shell. The surcharge was imposed pursuant to a Department of Finance Circular. Pilipinas Shell challenged this and refused to pay the surcharges, claiming the payments it made were based on a valid interpretation of a Department of Finance Order and Department of Energy Circular. However, the DOE only reiterated its demand for Pilipinas Shell to settle the surcharges due. The Office of the President affirmed the DOE. CA reversed, ruling that the Department of Finance Circular was ineffective for failure to comply with the requirement to file with ONAR. SC affirmed CA. DOCTRINE: The requirements of publication and filing were put in place as safeguards against abuses on the part of lawmakers, and as guarantees to the constitutional right to due process and information on matters of public concerns, and therefore, require strict compliance. Strict compliance with the requirements of publication cannot be annulled by a mere allegation that parties were notified of the existence of the implementing rules. NOTE: Values are not exact. Also, the case used Ministry and Department interchangeably in the case. I stuck with Department to avoid confusion. FACTS: Pilipinas Shell corporation engaged in the business of refining oil, marketing petroleum, and other related activities Department of Energy government agency under the direct control and supervision of the Office of the President mandated to prepare, integrate, coordinate, supervise, and control all plans, programs, projects, and activities of the Government relative to energy exploration, development, utilization, distribution, and conservation Oil Price Stabilization Fund (OPSF) created under PD 1596 for the purpose of minimizing frequent price changes of crude oil and petroleum

LOI No. 1431 directed the utilization of the OPSF to reimburse oil companies the additional costs of importation of crude oil and petroleum LOI No. 1441 mandated the Board of Energy to review and reset prices of domestic products every two months to reflect the prevailing prices of crude oil and petroleum EO No. 137 amended PD 1965, expanding the sources and utilization of the OPSF The Office of Energy Affairs (now DOE) informed Pilipinas Shell that the latters contributions to the OPSF were insufficient. The OEA Audit Taskforce noted an underpayment of 14M. As a consequence, a surcharge of 11M was imposed upon Pilipinas Shell. The surcharge was imposed pursuant to a Department of Finance Circular. The Circular is the contested issuance in the case. The OEA wrote another letter to Pilipinas Shell, advising the latter of its additional underpayment of the foreign exchange risk fee in the amount of 10M. Additionally, a surcharge of 2M was imposed. Pilipinas Shell wrote a letter to the OEA, justifying that its calculations for the transactions (for which DOE claimed underpayment) were based on a valid interpretation of a Department of Finance Order and a Department of Energy Circular. Pilipinas Shell paid the OE the full principal amount, but not the surcharges. The OEA wrote a letter to Pilipinas Shell, notifying it that it is required to pay the OPSF a total of P18M for surcharges on the late payment of foreign exchange risk charges. The DOE reiterated its demand for Pilipinas Shell to settle the surcharges due, else, the DOE would proceed against Pilipinas Shells Irrevocable Standby Letter of Credit to recover its unpaid surcharges. Pilipinas Shell filed a Notice of Appeal before the Office of the President. The Office of the President affirmed the conclusion of the of the DOE. While it admitted that the implementation of the Department of Finance Circular was contingent upon its publication and filing with the ONAR, Pilipinas Shell failed to adduce evidence of lack of compliance with such requirements. Pilipinas Shells Motion for Reconsideration was denied. CA reversed and ruled that the Department of Finance Circular was ineffective for failure to comply with the requirement to file with ONAR. Even if the Circular was issued by then Acting Secretary of Finance long before the Administrative Code of 1987, Sec. 3 of Chapter 2, Book 7 thereof specifies that rules already in force on the

ADMIN LAW | B2015 CASES

date of the effectivity of the Administrative Code must be filed within three months from the date of the effectivity of the Code, otherwise, such rules cannot be the basis of any sanction. ISSUE: Did the Department of Finance Circular comply with the requirements for publication and filing? NO RATIO: Taada v. Tuvera All statutes shall be published as a condition for their effectivity. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever delegated by the legislature/ Constitution. Administrative regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. Sec. 3, Chapter 2, Book 7, Administrative Code of 1987 Rules in force on the date of effectivity of this Code which are not filed within three months from the date shall not thereafter be the basis of any sanction against any party or persons. As per the Taada ruling, the Department of Finance Circular is one of those issuances which should have been published before becoming effective since it is intended to enforce PD 1956. The circular should also comply with the requirement under Sec. 3, Chapter 2, Book 7 of the Administrative Code filing with the ONAR in the University of the Philippines Law Center for rules that are already in force at the time the Administrative Code became effective. These requirements of publication and filing were put in place as safeguards against abuses on the part of lawmakers, and as guarantees to the constitutional right to due process and information on matters of public concerns, and therefore, require strict compliance. Here, the Certifications prove that the Department of Finance Circular and its amendatory rule have not been filed before said office. Moreover, the Department of Energy was unable to controvert Pilipinas Shells allegation that neither of the circulars were published in the Official Gazette or in any newspaper of general circulation. Thus, failure to comply with the requirements of publication and filing render the Department of Finance Circular ineffective. National Association of Electricity Consumers for Reforms v. Energy Regulatory Board Both the requirements of publication and filing of administrative issuances intended to enforce existing laws are mandatory for the effectivity of said issuances. The Department of Energy insists that the registration of the Department of Finance Circular with the ONAR is no longer necessary since Pilipinas Shell knew of its existence, despite its non-registration. However,

strict compliance with the requirements of publication cannot be annulled by a mere allegation that parties were notified of the existence of the implementing rules. In National Association of Electricity Consumers for Reforms, the Court ruled that the fact that the parties participated in the public consultation and submitted their respective comments is not compliance with the rule. The Department of Energy avers that the Department of Finance Circular gains its vitality from the subsequent enactment of an Executive Order which reiterates the power of the Secretary of Finance to promulgate the necessary rules and regulations to implement the Executive Order. However, the power of the Secretary of Finance to promulgate rules and regulations is not under dispute. The issue is the ineffectivity of his administrative issuance for non-compliance with the requisite publication and filing. RULING: CA affirmed. The Department of Finance Circular is ineffective.