James Evan I.

Obnamia
11684917
GG-02
LA BUGAL-BLAAN TRIBAL ASSOCIATION V RAMOS (Jan 27, 2004)
PONENTE: Carpio-Morales, J.
NATURE: This is a petition for mandamus and prohibition assails the constitutionality of RA
7942, otherwise known as the Philippine Mining Act of 1995 along with the Implementing
Rules and Regulations issued pursuant thereto, DENR AO 96-40 and of the Financial and
Technical Assistance Agreement (FTAA) entered into on March 30. 1995 by the RP and Western
Mining Corporation Philippines Inc (WMCP), a corporation organized under Philippine laws.
FACTS: July 25, 1987- Pres. Aquino issued EO 279 authorizing the DENR Sec to: (1) accept,
consider and evaluate, proposals from foreign-owned corporations or investors for contracts or
agreements, involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, which, upon appropriate recommendation of the
Secretary, the President may execute with the foreign proponent. (Large-scale mining 50M
USD)
March 3, 1995- Pres. Ramos approved RA 7942 to govern the exploration, development,
utilization and processing of all mineral resources.
March 30, 1995- Pres. Ramos entered into an FTAA with WMCP covering 99,387 hectares of
land in South Cotobato, Sultan Kudarat, Davao del Sur and North Cotobato.
April 10, 1995- RA 7942 became effective.
August 15, 1995-DENR Sec Victor Ramos issued DENR AO 95-23 s.1995 (IRR of RA 7942)
January 10,1997- Petitioners counsel send a letter to the DENR Sec demanding the DENR to
stop the implementation of RA 7942 and DAO 96-40, however no act was taken by DENR, thus
the case at bar.
WMPC is 100% owned by WMC Resources International Pty, Ltd, a wholly owned subsidiary of
WMC Holdings Limited, a publicly listed major Australian mining and exploration company.
PETITIONERS: FTAA violated the 1987 Constitution as it is a service contract and contrary to
the principle of sovereignty of the State over the natural resources. FTAA allowed foreign control
over the exploitation of the countrys natural resources, to the prejudice of the Filipino nation.

ISSUE: WON the FTAA is violative of the phrase Agreements involving Either Technical or
Financial Assistance contained in paragraph 4, Section 2, Article XII of the Constitution.-YES
as the FTAA entered into is similar to prohibited service contracts.
RATIO: Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions
authorizing the State to grant licenses, concessions, or leases for the exploration, exploitation,
development, or utilization of natural resources. By such omission, the utilization of inalienable
lands of public domain through license, concession or lease is no longer allowed under the 1987
Constitution. However, paragraphs of the same section provide activities where it allows the
participation of foreign-owned corporations.
Under the said Article 2 of the 1987 Constitution, only technical assistance or financial
assistance agreements may be entered into, and only for large-scale activities. These are contract
forms which recognize and assert our sovereignty and ownership over natural resources since the
foreign entity is just a pure contractor and not a beneficial owner of our economic resources. The
proposal recognizes the need for capital and technology to develop our natural resources without
sacrificing our sovereignty and control over such resources by the safeguard of a special law
which requires two-thirds vote of all the members of the Legislature. This will ensure that such
agreements will be debated upon exhaustively and thoroughly in the National Assembly to avert
prejudice to the nation. This is a move against service contracts which perpetrated during the
Martial Law era.
An FTAA is defined as a contract involving financial or technical assistance for large-scale
exploration, development, and utilization of natural resources. Any qualified person with
technical and financial capability to undertake large-scale exploration, development, and
utilization of natural resources in the Philippines may enter into such agreement directly with the
Government through the DENR. For the purpose of granting an FTAA, a legally organized
foreign-owned corporation (any corporation, partnership, association, or cooperative duly
registered in accordance with law in which less than 50% of the capital is owned by Filipino
citizens) is deemed a qualified person.
Finally, the Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service
contracts. Although the statute employs the phrase financial and technical agreements in
accordance with the 1987 Constitution, it actually treats these agreements as service contracts
that grant beneficial ownership to foreign contractors contrary to the fundamental law.
Section 33, which is found under Chapter VI (Financial or Technical Assistance Agreement) of
R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with technical and financial capability to
undertakelarge-scale exploration, development, and utilization of mineral resources in the

Philippines may enter into a financial or technical assistance agreement directly with the
Government through the Department. [Emphasis supplied.]
Exploration, as defined by R.A. No. 7942, means the searching or prospecting for mineral
resources by geological, geochemical or geophysical surveys, remote sensing, test pitting,
trending, drilling, shaft sinking, tunneling or any other means for the purpose of determining the
existence, extent, quantity and quality thereof and the feasibility of mining them for profit.
A legally organized foreign-owned corporation may be granted an exploration permit,which
vests it with the right to conduct exploration for all minerals in specified areas, i.e., to enter,
occupy and explore the same.Eventually, the foreign-owned corporation, as such permittee, may
apply for a financial and technical assistance agreement.
Development is the work undertaken to explore and prepare an ore body or a mineral deposit for
mining, including the construction of necessary infrastructure and related facilities.
Utilization means the extraction or disposition of minerals. A stipulation that the proponent shall
dispose of the minerals and byproducts produced at the highest price and more advantageous
terms and conditions as provided for under the implementing rules and regulations is required to
be incorporated in every FTAA.
A foreign-owned/-controlled corporation may likewise be granted a mineral processing permit.
Mineral processing is the milling, beneficiation or upgrading of ores or minerals and rocks or by
similar means to convert the same into marketable products.
An FTAA contractor makes a warranty that the mining operations shall be conducted in
accordance with the provisions of R.A. No. 7942 and its implementing rules and for work
programs and minimum expenditures and commitments. And it obliges itself to furnish the
Government records of geologic, accounting, and other relevant data for its mining operation
Mining operation, as the law defines it, means mining activities involvingexploration,
feasibility, development, utilization, and processing.
The underlying assumption in all these provisions is that the foreign contractor manages the
mineral resources, just like the foreign contractor in a service contract.
Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary
mining rights that it grants contractors in mineral agreements (MPSA, CA and JV).
Parenthetically, Sections 72 to 75 use the term contractor, without distinguishing between FTAA
and mineral agreement contractors. And so does holders of mining rights in Section 76. A
foreign contractor may even convert its FTAA into a mineral agreement if the economic viability
of the contract area is found to be inadequate to justify large-scale mining operations,provided

that it reduces its equity in the corporation, partnership, association or cooperative to forty
percent (40%).
Finally, under the Act, an FTAA contractor warrants that it has or has access to all the
financing, managerial, and technical expertise. . . . This suggests that an FTAA contractor is
bound to provide some management assistance a form of assistance that has been eliminated
and, therefore, proscribed by the present Charter.
By allowing foreign contractors to manage or operate all the aspects of the mining operation, the
above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the
nations mineral resources to these contractors, leaving the State with nothing but bare title
thereto.
As professor Agabin (one of the UP Law Constitution Project Drafters) discussed during the
drafting: the service contract as we know it here is antithetical to the principle of sovereignty
over our natural resources restated in the same article of the [1973] Constitution containing the
provision for service contracts. If the service contractor happens to be a foreign corporation, the
contract would also run counter to the constitutional provision on nationalization or
Filipinization, of the exploitation of our natural resources. A service contract gives full control
over the contract area to the service contractor, for him to work, manage and dispose of the
proceeds or production.
There can be little doubt that the WMCP FTAA itself is a service contract.
Section 1.3 of the WMCP FTAA grants WMCP the exclusive right to explore, exploit, utilise[,]
process and dispose of all Minerals products and by-products thereof that may be produced from
the Contract Area.[294] The FTAA also imbues WMCP with the following rights:
(b) to extract and carry away any Mineral samples from the Contract area for the purpose of
conducting tests and studies in respect thereof;
(c) to determine the mining and treatment processes to be utilised during the
Development/Operating Period and the project facilities to be constructed during the
Development and Construction Period;
(d) have the right of possession of the Contract Area, with full right of ingress and egress and the
right to occupy the same, subject to the provisions of Presidential Decree No. 512 (if applicable)
and not be prevented from entry into private ands by surface owners and/or occupants thereof
when prospecting, exploring and exploiting for minerals therein;
xxx
(f) to construct roadways, mining, drainage, power generation and transmission facilities and all
other types of works on the Contract Area;

(g) to erect, install or place any type of improvements, supplies, machinery and other equipment
relating to the Mining Operations and to use, sell or otherwise dispose of, modify, remove or
diminish any and all parts thereof;
(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third Parties, easement
rights and the use of timber, sand, clay, stone, water and other natural resources in the Contract
Area without cost for the purposes of the Mining Operations;
xxx
(l) have the right to mortgage, charge or encumber all or part of its interest and obligations under
this Agreement, the plant, equipment and infrastructure and the Minerals produced from the
Mining Operations;
RESOLUTION: Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service
contracts. Although the statute employs the phrase financial and technical agreements in
accordance with the 1987 Constitution, it actually treats these agreements as service contracts
that grant beneficial ownership to foreign contractors contrary to the fundamental law

LA BUGAL-BLAAN TRIBAL ASSOCIATION V RAMOS (Dec 1, 2004)

PONENTE: Panganiban, J.
NATURE: Motion for Reconsideration for the January 27, 2004 decision.
FACTS: Same as the January case.
ISSUE: What is the proper interpretation of the phrase Agreements Involving Either Technical or
Financial Assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution?
RATIO: The Court held that application of a strictly literal or verba legis interpretation of
paragraph 4 could NOT inexorably lead to the conclusions arrived at in the ponencia. First, the
drafters choice of words -- their use of the phrase agreements x x x involving either technical or
financial assistance -- does not indicate the intent to exclude other modes of assistance. The
drafters opted to use involving when they could have simply said agreements forfinancial or
technical assistance, if that was their intention to begin with. In this case, the limitation would be
very clear and no further debate would ensue.
In contrast, the use of the word involving signifies the possibility of the inclusion of other forms
of assistance or activities having to do with, otherwise related to or compatible with financial or
technical assistance. The word involving as used in this context has three connotations that can
be differentiated thus: one, the sense of concerning, having to do with, or affecting; two,
entailing, requiring, implying or necessitating; and three, including, containing or comprising.
Moreover, the word involving, when understood in the sense of including, as in including
technical or financial assistance, necessarily implies that there are activities other than those that
are being included. In other words, if an agreement includes technical or financial assistance,
there is apart from such assistance -- something else already in, and covered or may be covered
by, the said agreement.
The Court concluded that the use of the word involving implies that these agreements with
foreign corporations are not limited to mere financial or technical assistance. The difference in
sense becomes very apparent when we juxtapose agreements for technical or financial assistance
against agreements including technical or financial assistance. This much is unalterably clear in
a verba legis approach. If the real intention of the drafters was to confine foreign corporations to
financial or technical assistance and nothing more, their language would have certainly been

so unmistakably restrictive and stringent as to leave no doubt in anyones mind about their true
intent. Thus, there was a conscious and deliberate decision to avoid the use of restrictive
wording that bespeaks an intent not to use the expression agreements x x x involving either
technical or financial assistance in an exclusionary and limiting manner.
Under principle of ut magis valeat quam pereat -- every part of the Constitution is to be given
effect, and the Constitution is to be read and understood as a harmonious whole. Thus, full
control and supervision by the State must be understood as one that does not preclude the
legitimate exercise of management prerogatives by the foreign contractor. However, it must be
stressed that the primacy and supremacy of the principle of sovereignty and State control and
supervision over all aspects of exploration, development and utilization of the countrys natural
resources, as mandated in the first paragraph of Section 2 of Article XII.
Full control and supervision cannot be taken literally to mean that the State controls and
supervises everything involved, down to the minutest details, and makes all decisions required in
the mining operations. This strained concept of control and supervision over the mining
enterprise would render impossible the legitimate exercise by the contractors of a reasonable
degree of management prerogative and authority necessary and indispensable to their proper
functioning.
For one thing, such an interpretation would discourage foreign entry into large-scale exploration,
development and utilization activities; and result in the unmitigated stagnation of this sector, to
the detriment of our nations development. This scenario renders paragraph 4 inoperative and
useless. And as respondents have correctly pointed out, the government does not have to micromanage the mining operations and dip its hands into the day-to-day affairs of the enterprise in
order for it to be considered as having full control and supervision.
The concept of control adopted in Section 2 of Article XII must be taken to mean less than
dictatorial, all-encompassing control; but nevertheless sufficient to give the State the power to
direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the State
may be on a macro level, through the establishment of policies, guidelines, regulations, industry
standards and similar measures that would enable the government to control the conduct of
affairs in various enterprises and restrain activities deemed not desirable or beneficial.
The end in view is ensuring that these enterprises contribute to the economic development and
general welfare of the country, conserve the environment, and uplift the well-being of the
affected local communities. Such a concept of control would be compatible with permitting the
foreign contractor sufficient and reasonable management authority over the enterprise it invested
in, in order to ensure that it is operating efficiently and profitably, to protect its investments and
to enable it to succeed.

The question to be answered, then, is whether RA 7942 and its Implementing Rules enable the
government to exercise that degree of control sufficient to direct and regulate the conduct of
affairs of individual enterprises and restrain undesirable activities.
RA 7942 provides for the States control and supervision over mining operations. The following
provisions thereof establish the mechanism of inspection and visitorial rights over mining
operations and institute reportorial requirements in this manner:
1. Sec. 8 which provides for the DENRs power of over-all supervision and periodic review for the
conservation, management, development and proper use of the States mineral resources;
2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the DENR to exercise direct
charge in the administration and disposition of mineral resources, and empowers the MGB to
monitor the compliance by the contractor of the terms and conditions of the mineral agreements,
confiscate surety and performance bonds, and deputize whenever necessary any member or unit of
the Phil. National Police, barangay, duly registered non-governmental organization (NGO) or any
qualified person to police mining activities;
3. Sec. 66 which vests in the Regional Director exclusive jurisdiction over safety inspections of all
installations, whether surface or underground, utilized in mining operations.
4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and warranties:
(g) Mining operations shall be conducted in accordance with the provisions of the Act and
its IRR.
(h) Work programs and minimum expenditures commitments.
xxxxxxxxx
(k) Requiring proponent to effectively use appropriate anti-pollution technology and
facilities to protect the environment and restore or rehabilitate mined-out areas.
(l) The contractors shall furnish the Government records of geologic, accounting and other
relevant data for its mining operation, and that books of accounts and records shall
be open for inspection by the government. x x x.
(m) Requiring the proponent to dispose of the minerals at the highest price and more
advantageous terms and conditions.
(n) x x x x x x x x x
(o) Such other terms and conditions consistent with the Constitution and with this Act as
the Secretary may deem to be for the best interest of the State and the welfare of
the Filipino people.

The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in
Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40.
Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the
governments control over mining enterprises:
The contractor is to relinquish to the government those portions of the contract area not needed for
mining operations and not covered by any declaration of mining feasibility (Section 35-e, RA 7942;
Section 60, DAO 96-40).
The contractor must comply with the provisions pertaining to mine safety, health and environmental
protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 96-40).
For violation of any of its terms and conditions, government may cancel an FTAA. (Chapter XVII,
RA 7942; Chapter XXIV, DAO 96-40).
An FTAA contractor is obliged to open its books of accounts and records for inspection by the
government (Section 56-m, DAO 96-40).
An FTAA contractor has to dispose of the minerals and by-products at the highest market price and
register with the MGB a copy of the sales agreement (Section 56-n, DAO 96-40).
MGB is mandated to monitor the contractors compliance with the terms and conditions of the FTAA;
and to deputize, when necessary, any member or unit of the Philippine National Police, the barangay
or a DENR-accredited nongovernmental organization to police mining activities (Section 7-d and -f,
DAO 96-40).
An FTAA cannot be transferred or assigned without prior approval by the President (Section 40, RA
7942; Section 66, DAO 96-40).
A mining project under an FTAA cannot proceed to the construction/development/utilization stage,
unless its Declaration of Mining Project Feasibility has been approved by government (Section 24,
RA 7942).
The Declaration of Mining Project Feasibility filed by the contractor cannot be approved without
submission of the following documents:
1. Approved mining project feasibility study (Section 53-d, DAO 96-40)
2. Approved three-year work program (Section 53-a-4, DAO 96-40)
3. Environmental compliance certificate (Section 70, RA 7942)
4. Approved environmental protection and enhancement program (Section 69, RA
7942)

5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section 70, RA

7942; Section 27, RA 7160)
6. Free and prior informed consent by the indigenous peoples concerned, including
payment of royalties through a Memorandum of Agreement (Section 16, RA
7942; Section 59, RA 8371)
The FTAA contractor is obliged to assist in the development of its mining community, promotion of
the general welfare of its inhabitants, and development of science and mining technology (Section 57,
RA 7942).
The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or annual basis as the
case may be; per Section 270, DAO 96-40), pertaining to the following:
1. Exploration
2. Drilling
3. Mineral resources and reserves
4. Energy consumption
5. Production
6. Sales and marketing
7. Employment
8. Payment of taxes, royalties, fees and other Government Shares
9. Mine safety, health and environment
10. Land use
11. Social development
12. Explosives consumption
An FTAA pertaining to areas within government reservations cannot be granted without a written
clearance from the government agencies concerned (Section 19, RA 7942; Section 54, DAO 96-40).
An FTAA contractor is required to post a financial guarantee bond in favor of the government in an
amount equivalent to its expenditures obligations for any particular year. This requirement is apart
from the representations and warranties of the contractor that it has access to all the financing,
managerial and technical expertise and technology necessary to carry out the objectives of the FTAA
(Section 35-b, -e, and -f, RA 7942).

Other reports to be submitted by the contractor, as required under DAO 96-40, are as follows: an
environmental report on the rehabilitation of the mined-out area and/or mine waste/tailing covered
area, and anti-pollution measures undertaken (Section 35-a-2); annual reports of the mining
operations and records of geologic accounting (Section 56-m); annual progress reports and final
report of exploration activities (Section 56-2).
Other programs required to be submitted by the contractor, pursuant to DAO 96-40, are the
following: a safety and health program (Section 144); an environmental work program (Section
168); an annual environmental protection and enhancement program (Section 171).

The foregoing gamut of requirements, regulations, restrictions and limitations imposed upon the
FTAA contractor by the statute and regulations easily overturns petitioners contention. The setup
under RA 7942 and DAO 96-40 hardly relegates the State to the role of a passive regulator
dependent on submitted plans and reports. On the contrary, the government agencies concerned
are empowered to approve or disapprove -- hence, to influence, direct and change -- the various
work programs and the corresponding minimum expenditure commitments for each of the
exploration, development and utilization phases of the mining enterprise.
In other words, the FTAA contractor is not free to do whatever it pleases and get away with it; on
the contrary, it will have to follow the government line if it wants to stay in the enterprise.
Ineluctably then, RA 7942 and DAO 96-40 vest in the government more than a sufficient degree
of control and supervision over the conduct of mining operations.
RESOLUTION: WHEREFORE, the Court RESOLVES to GRANT the respondents and the
intervenors Motions for Reconsideration; to REVERSE and SET ASIDE this Courts January 27,
2004 Decision; to DISMISS the Petition; and to issue this new judgment
declaringCONSTITUTIONAL (1) Republic Act No. 7942 (the Philippine Mining Law), (2) its
Implementing Rules and Regulations contained in DENR Administrative Order (DAO) No. 9640
-- insofar as they relate to financial and technical assistance agreements referred to in paragraph
4 of Section 2 of Article XII of the Constitution; and (3) the Financial and Technical Assistance
Agreement (FTAA) dated March 30, 1995 executed by the government and Western Mining
Corporation Philippines Inc. (WMCP), except Sections 7.8 and 7.9 of the subject FTAA which
are hereby INVALIDATED for being contrary to public policy and for being grossly
disadvantageous to the government.