LA BUGAL BLAAN VS.

RAMOS
The constitutional provision allowing the President to enter into FTAA is a exception to the rule that
participation in the nations natural resources is reserved exclusively to Filipinos. Provision must be
construed strictly against their enjoyment by non-Filipinos.
FACTS: RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942, or on
March 30, 1995, the President signed a Financial and Technical Assistance Agreement (FTAA) with WMCP, a
corporation organized under Philippine laws, covering close to 100,000 hectares of land in South Cotabato, Sultan
Kudarat, Davao del Sur and North Cotabato. On August 15, 1995, the Environment Secretary Victor Ramos issued
DENR Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-40, adopted on
December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and WMCP be
declared unconstitutional on ground that they allow fully foreign owned corporations like WMCP to exploit, explore
and develop Philippine mineral resources in contravention of Article XII Section 2 paragraphs 2 and 4 of the
Charter.
In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its whole stake in WMCP
to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is owned by Indophil Resources, an
Australian company. DENR approved the transfer and registration of the FTAA in Sagittarius name but Lepanto
Consolidated assailed the same. The latter case is still pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept, consider and
evaluate proposals from foreign owned corporations or foreign investors for contracts or agreements involving
wither technical or financial assistance for large scale exploration, development and utilization of minerals which
upon appropriate recommendation of the (DENR) Secretary, the President may execute with the foreign proponent.
WMCP likewise contended that the annulment of the FTAA would violate a treaty between the Philippines and
Australia which provides for the protection of Australian investments.
ISSUES:
1.
Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned corporations to
exploit the Philippine mineral resources.
2.
Whether or not the FTAA between the government and WMCP is a service contract that permits fully
foreign owned companies to exploit the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional
RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned corporations to
exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that All lands of the
public domain, waters, minerals, coal, petroleum, and other minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the State. The same section also states that, the exploration and development and utilization of
natural resources shall be under the full control and supervision of the State.

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing the State to grant
licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural resources. By
such omission, the utilization of inalienable lands of the public domain through license, concession or lease is no
longer allowed under the 1987 Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a
particular natural resource within a given area. The concession amounts to complete control by the concessionaire
over the countrys natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the
point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or other forms of assistance in the 1973
Charter. The present Constitution now allows only technical and financial assistance. The management and the
operation of the mining activities by foreign contractors, the primary feature of the service contracts was precisely
the evil the drafters of the 1987 Constitution sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that participation in
the nations natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed
strictly against their enjoyment by non-Filipinos. Therefore, RA 7942 is invalid insofar as the said act authorizes
service contracts. Although the statute employs the phrase financial and technical agreements in accordance
with the 1987 Constitution, its pertinent provisions actually treat these agreements as service contracts that grant
beneficial ownership to foreign contractors contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages the mineral resources
just like the foreign contractor in a service contract. By allowing foreign contractors to manage or operate all the
aspects of the mining operation, RA 7942 has, in effect, conveyed beneficial ownership over the nations mineral
resources to these contractors, leaving the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained 6040% capitalization requirement for corporations or associations engaged in the exploitation, development and
utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as conditions, considerations, inducements or
compensations for each other as to warrant a belief that the legislature intended them as a whole, then if some parts
are unconstitutional, all provisions that are thus dependent, conditional or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to merely technical or
financial assistance to the State for large scale exploration, development and utilization of minerals, petroleum and
other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional since the agreement itself
is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to explore, exploit,
utilize and dispose of all minerals and by-products that may be produced from the contract area. Section 1.2 of the
same agreement provides that EMCP shall provide all financing, technology, management, and personnel
necessary for the Mining Operations.

These contractual stipulations and related provisions in the FTAA taken together, grant WMCP beneficial ownership
over natural resources that properly belong to the State and are intended for the benefit of its citizens. These
stipulations are abhorrent to the 1987 Constitution. They are precisely the vices that the fundamental law seeks to
avoid, the evils that it aims to suppress. Consequently, the contract from which they spring must be struck down.