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CARPIO-MORALES-DISSENT: 4.

A narrow delimitation of matters to be taken up during oral


argument is a matter of practical necessity since often not all the
relevant issues can be thoroughly discussed without unduly
REASONS FOR DISSENTING:
imposing on the time of the Court
(1) the "agreements involving either technical or financial assistance" 5. Moreover, issue of whether the Mining Act and the WMCP FTAA
contemplated by the fourth paragraph of Section 2, Article XII of the 1987 afford the State a just share in the proceeds of its natural resources
Constitution are distinct and dissimilar from the "service contracts" was in fact raised by the petitioners.
under the 1973 Constitution; and Petitioners claim that the DENR Secretary acted
without or in excess of jurisdiction: signing and
(2) these certain provisions of the Mining Act, its implementing rules, and
promulgating DENR Administrative Order No. 96-40
the WMCP FTAA unconstitutionally convey beneficial ownership
implementing Republic Act No. 7942, the latter being
and control over Philippine mineral and petroleum resources to foreign
unconstitutional in that it allows the inequitable sharing
contractors
of wealth contrary to Sections [sic] 1, paragraph 1, and
Section 2, paragraph 4[,] [Article XII] of the
Constitution
ISSUES:
A. WON the resolution should be confined to the issues taken up
during the oral arguments? NO. B. WON the issues presented are justiciable? YES.

1. Petitioners argue that the issue of whether the Mining Act and the 1. Respondent WMCP argues that the "exploration, development,
WMCP FTAA are manifestly disadvantageous to the government and utilization of natural resources are matters of policy, in other
could not be passed upon because the same was supposedly not words, political matters or questions," over which this Court has
raised in the original petition. no jurisdiction.
2. BUT, there is no rule of procedure, whether in Rule 52 or 2. The distinction between a truly political question and an ostensible
elsewhere, which restricts the resolution of a case to the issues one lies in the answer to the question of whether there are
taken up in the oral arguments. constitutionally imposed limits on powers or functions conferred
3. Section 1 of Rule 49 provides: upon political bodies.
Section 1. When allowed. At its own instance or upon 3. If there are constitutionally imposed limits, then the issue is
motion of a party, the court may hear the parties in oral justiciable, and a court is duty-bound to examine whether the
argument on the merits of a case, or on any material incident branch or instrumentality of the government properly acted within
in connection therewith. those limits
4. The provisions of paragraph 4, Section 2 of Article XII of the
The oral argument shall be limited to such matters as Constitution, including the phrase "agreements involving either
the court may specify in its order or resolution (Emphasis technical or financial assistance," incorporate limitations on the
supplied) scope of such agreements or FTAAs.
5. Consequently, they constitute limitations on the powers of the b. The phrase "technical or financial" is merely for emphasis,
legislative to determine their terms, as well as the powers of that it is descriptive, not definitive, of the forms of
the Executive to enter into them. assistance that the State needs and which foreign
corporations may provide in the large-scale exploration,
development and utilization of the specified resources.
C. WON the FTAAs contemplated in Section 2, Article XII of the c. should more properly be called "agreements for large-scale
1987 Constitution are identical to, or inclusive of, the "service exploration, development, and utilization of minerals,
contracts" provided for in the 1973 Constitution? NO. petroleum, and other mineral oils."
d. President has broad discretion to enter into any
1. Majority opinion: fourth paragraph of Sec. 2, Article XII agreement, regardless of the scope of assistance, with
contemplates not only financial or technical assistance but, foreign corporations.
just like the service contracts which were allowed under the 1973
Primary Concepts in Article XII of the Constitution
Constitution, management assistance as well
2. Art 12 Sec 2(4): 5. Before passing through the arguments, Carprio-Morales first
a. The President may enter into agreements with foreign- discussed the following concepts:
owned corporations involving either technical or financial a. Beneficial Ownership- right to the gains, rewards and
assistance for large-scale exploration, development, and advantages generated by the property.
utilization of minerals, petroleum, and other mineral oils a. The words "owned" and "State" should both be
according to the general terms and conditions provided by understood on two levels. "Owned" or
law, based on real contributions to the economic growth "ownership" refers to both the legal title to and the
and general welfare of the country. In such agreements, the beneficial ownership of the natural resources
State shall promote the development and use of local b. In the exploration, development and utilization of
scientific and technical resources. the nation's natural resources, the Government is
3. Counterpart provision in 1973 Constitution: in a position analogous to a trustee, holding title
a. The Batasang Pambansa, in the national interest, may to and managing these resources for the benefit of
allow such citizens, corporations or associations to enter the Filipino people, including future generations
into service contracts for financial, technical, management, c. Corollary to this, the Government cannot, without
or other forms of assistance with any person or entity for violating its sacred trust, enter into any agreement
the exploration, development, exploration, or utilization of or arrangement which effectively deprives the
any of the natural resources. Filipino people of their beneficial ownership of
4. OSG argues that these resources
a. intent behind the fourth paragraph is to prevent the d. e.g., when it enters into an agreement whereby the
practice under the 1973 Constitution of allowing foreigners vast majority of the resources, or the profit
to circumvent the capitalization requirement, as well as to generated from the resources, is bargained away in
address the absence of a governing law that led to the abuse favor of a foreign entity.
of service contracts. b. Full Control and Supervision- accomplished by
maintaining a position whereby it can carry out its duty to
protect the beneficial interest of its cestui que trust in these 6. NOW, to the proper interpretation of "agreements involving
resources. either technical or financial assistance" in paragraph 4 of Section
a. The Government may enter into a joint venture 2, Article XII of the Constitution
agreement45 with a third party to explore, develop 7. As used in the fourth paragraph, "may" provides the President with
or utilize certain natural resources through a jointly the option to enter into FTAAs. It is, however, not incumbent
owned corporation, wherein the government has upon the President to do so for, as owner of the natural resources,
the controlling interest the "State [itself] may directly undertake such activities."
b. Whatever form the agreement entered into by the 8. If the President opts to exercise the prerogative to enter into
Government and its third party partner(s) may FTAAs, the agreement must conform to the restrictions laid
take, the same must contain, as an absolute down by Section 2, including the scope of the assistance, which
minimum, provisions that ensure that the must be limited to financial or technical forms.
Government can effectively perform its 9. As Senior Associate Justice Reynato S. Puno pointed out during
fiduciary duty to safeguard the beneficial the oral arguments, the use of the disjunctive "either or"
interest of the Filipino people in their natural denotes restriction.
resources, as mandated by the Constitution. a. The use of the word "either" clearly limits the President to
c. Real Contributions to the Economy and the General only two possibilities, financial and technical assistance.
Welfare of the Country Other forms of assistance are plainly not allowed, since
a. For benefits from the exploration, development only the words "financial and technical" follow the word
and utilization of these resources to be real, they "either."
must yield profits over and above 1) the capital and 10. To subscribe to the OSG's theory would allow foreign-owned
operating costs incurred, 2) the resulting damage to corporations participation in the country's natural resources equal
the environment, and 3) the social costs to the to, perhaps even greater than, that of Filipino citizens or
people who are immediately and adversely affected corporations.
thereby. a. This proposition must be rejected since it sanctions the
b. The State must ensure that the real benefits from circumvention, if not outright violation, of the fourth
the utilization of these resources are sufficient to paragraph by allowing foreign corporations to render
offset the corresponding loss of these resources to more than technical or financial assistance on the
future generations. pretext that it is an agent of the State.
c. Real benefits are intergenerational benefits b. Quando aliquid prohibitur ex directo, prohibitur et per obliquum.
because the motherland's natural resources are the What is prohibited directly is prohibited indirectly.
birthright not only of the present generation of c. Further, the proposition lends itself to mischievous
Filipinos but of future generations as well. consequences. If followed to its logical conclusion, nothing
would stop the State from engaging the services of a
Construction of paragraph 4, Section 2, Article XII of the
foreign corporation to undertake in its behalf the
Constitution
exploration, development and utilization of all other
natural resources, not just "minerals, petroleum and
mineral oils," even on a small scale, not just "large-scale."
11. Consti deliberations: INTENT is to limit the participation of 13. Professor Pacifico A. Agabin, a member of the working group of
foreign corporations only to areas where they are needed. the U.P. Law Constitution Project and now counsel for intervenor
a. Mr. Quesada: What I refer to is that foreign interest PCM: proposed financial or technical assistance agreements
should be allowed to participate only to the extent that they are contract forms different from the 1973 Constitution
lend us money and give us technical assistance with the service contracts
appropriate government permit. a. Other contract forms which are less derogatory to our
b. Mr. Villegas: Actually, the second provision about the sovereignty and control over natural resources like
President does not permit foreign investors to participate. technical assistance agreements, financial assistance
It is only technical or financial assistance they do not own [agreements], co-production agreements, joint ventures,
anything but on conditions that have to be determined production-sharing [agreements] could still be utilized
by law with the concurrence of Congress. So, it is very and adopted without violating constitutional provisions.
restrictive. The intent is to allow Filipinos to benefit b. In other words, we can adopt contract forms which
from Filipino resources. recognize and assert our sovereignty and ownership over
c. Mr. Davide: Preamble clearly sated there that the Filipino natural resources, and where the entity is just a pure
people are sovereign and that one of the objectives for the contractor instead of the beneficial owner of our economic
creation or establishment of a government is to conserve resources.
and develop the national patrimony. The implication is that 14. Principles of Statutory Construction:
the national patrimony or our natural resources are a. casus omisus pro omisso habendus est: A person,
exclusively reserved for the Filipino people. No alien must object or thing omitted from an enumeration must be held
be allowed to enjoy, exploit and develop our natural to have been omitted intentionally
resources. b. expressio unius est exclusion alterius. The express
The intent loses all significance if foreign-owned mention of one person, thing, act, or consequence
corporations are likewise allowed to participate even in excludes all others
small or medium-scale ventures. c. expressium facit cessare tacitum. What is expressed
12. In the words of the "Draft of the 1986 U.P. Law Constitution puts an end to that which is implied.
Project" (U.P. Law Draft) which was taken into consideration Since the constitutional provision, by its terms, is expressly
during the deliberation of the CONCOM: limited to financial or technical agreements, it may not, by
a. Under the proposed provision, only technical interpretation or construction, be extended to other forms
assistance or financial assistance agreements may be of assistance.
entered into, and only for large-scale activities. 15. Next, the majority opinion asserts that if the framers had meant to
b. The proposal recognizes the need for capital and ban service contracts altogether, they would have provided for the
technology to develop our natural resources without termination or pre-termination of the existing service contracts.
sacrificing our sovereignty and control over such a. BUT, there was no need for a constitutional provision to
resources govern the termination or pre-termination of existing
service contracts since the intention of the framers was
"Agreements" in Section 2, Article XII do not include "service
to apply the rule banning service contracts
contracts."
prospectively.
b. ConComm: This is not applied retroactively. They will be a. Control by the State may be on a macro level,
respected. (Villegaas) through the establishment of policies,
c. A service contract is only a license or privilege, not a guidelines, regulations, industry standards and
contract or property right which merits protection by the similar measures that would enable the
due process clause of the Constitution government to control the conduct of affairs in
d. Even if it is to be assumed that the same are contracts, the various enterprises and restrain activities deemed
instant case does not involve a law or even an executive not desirable or beneficial
issuance declaring the cancellation or modification of gives no effect to the mandated "full" character of the
existing timber licenses. Hence, the non-impairment clause State's control but merely places it at par with any other
cannot as yet be invoked business activity or industry regulated by the
e. In short, the non-impairment clause must yield to the Government.
police power of the state 17. But even under this second and more limited concept of regulatory
control, the provisions of the Mining Act pertaining to FTAAs do
not pass the test of constitutionality.
D. WON the provisions of the Mining Act, insofar as they pertain to a. Conspicuously absent from the Mining Act are effective
FTAA contracts, must be declared unconstitutional and void? means by which the Government can protect the
YES beneficial interest of the Filipino people in the
exploration, development and utilization of their
16. Foreign-owned corporations, however, are not precluded from a resources.
limited participation in the management of the exploration, b. It appears from the provisions of the Mining Act that the
development and utilization of natural resources, so long as it is Government, once it has determined that a foreign
incidental to the financial or technical assistance being corporation is eligible for an FTAA and enters into such
rendered an agreement, has very little say in the corporation's
a. However, to whatever extent the foreign corporation's actual operations.
incidental participation in the management of the mining The enforcement provisions of the Mining Act and its
concern may be, full control and supervision, sufficient Implementing Rules are scarcely effective, and, worse,
to protect the interest of the Filipino people, over all perceptibly less than the analogous provisions of other
aspects of mining operations must be retained by the Government Regulatory Agencies.
Government. In effect, they abdicate control over mining operations
b. Full control is not anathema to day-to-day management by in favor of the foreign FTAA contractor. For this
the contractor, provided that the State retains the power to reason, the provisions of the Mining Act, insofar as they
direct overall strategy; and to set aside, reverse, or pertain to FTAA contracts, must be declared
modify plans and actions of the contractor. The idea of unconstitutional and void.
full control is similar to that which is exercised by the board
of directors of a private corporation Provisions of the Mining Act pertaining to FTAAs
c. However, the majority opinion subsequently substantially void for conveying beneficial ownership of
Philippine mineral resources to foreign contractors
reduces the scope of its definition of "control":
1. MAIN ARGUMENT: Provision of the Mining Act (below) effectively 2. Main Argument: The majority opinion that theres 50-50 sharing
transfer the beneficial ownership over the resources covered by the between government and foreign corp. is misleading and
agreement to a foreigner, in contravention of the letter and spirit of the meaningless
Constitution.
The Mining Act gives the foreign-owned corporation virtually
Pertinent Part of the Law: complete control, not mere "incidental" participation in management,
o SECTION 81. Government Share in Other Mineral over the entire operations. grants beneficial ownership of the
Agreements. x x x natural resources to the foreign contractor and does little to affirm
o The Government share in financial or technical the State's ownership over them
assistance agreement shall consist of, among other
things, the contractor's corporate income tax, excise Majority opinion: Mining Act, as implemented by DENR
tax, special allowance, withholding tax due from the Administrative Order 99-56126 (DAO 99-56), is constitutional b/c it
contractor's foreign stockholders arising from dividend or does not "convey beneficial ownership of any mineral resource or
interest payments to the said foreign stockholder in case of product to any foreign FTAA contractor."
a foreign national and all such other taxes, duties and
fees as provided for under existing laws. total government share, equal to the sum of the "basic government
o The collection of Government share in financial or share" and the "additional government share," will achieve "a fifty-
technical assistance agreement shall commence after fifty sharing between the government and the contractor of net
the financial or technical assistance agreement benefits from mining."
contractor has fully recovered its pre-operating
expenses, exploration, and development
the taxes and fees which make up the government's "basic
expenditures, inclusive. (Emphasis supplied)
share" cannot be considered a return on the resources mined
corresponding to the beneficial ownership of the Filipino
people. Again, they do not correspond to a return on investment
or property.
the law grants the lion's share of the proceeds of the mining the provisions of the Mining Act effectively allow the foreign
operation to the foreign corporation. contractor to circumvent all the provisions of DAO 99-56,
including its intended "50-50 sharing" of the net benefits from
mining, and reduce government's total share to as low as 2%
of the value of the minerals mined
the Government does not receive a share in the proceeds of o Section 39 of the Mining Act allows it to convert its FTAA
the mining operation. All that gov. receives are taxes and fees into a Mineral Production-Sharing Agreement (MPSA) by
from the foreign corporation, just as in the old concession and the simple expedient of reducing its equity in the
service contract regimes. corporation undertaking the FTAA to 40%:
o The collection of taxes and fees cannot be considered a o under Section 80 of the Mining Act, in connection with
return on the resources mined corresponding to beneficial Section 151(a) of the National Internal Revenue
ownership of the Filipino people. Code132 (Tax Code), the TOTAL GOVERNMENT SHARE
o Taxes are not a return on investment or property. in an MPSA is ONLY TWO PERCENT (2%) of the value of
o the Government's share (composed only of taxes and fees) the minerals.
shall not be collected until after the foreign corporation has o Hence a foreign contractor can easily reduce the
"fully recovered its pre-operating expenses, exploration, total government's share (held in trust for the benefit
and development expenditures, inclusive." of the Filipino People) in the minerals mined to a paltry
2% while maintaining a 40% beneficial interest in the foreign investments is merely hypothetical and ultimately
same. illusory.

Grant of Exploration Permits to Foreign


Corporations is Unconstitutional
Hence, these sections of Mining Act are virtually identical to that
embodied in Section 7.9 of the WMCP FTAA which the majority
opinion itself found to be "without a doubt grossly disadvantageous
to the government, detrimental to the interests of the Filipino people, and 1. Main Argument: Section 3 (aq), in so far as it allows the granting of
violative of public policy:" exploration permits to foreign corporations, is patently
unconstitutional, hence, null and void.
o Section 7.9 deprives the government of part or all of the said
60 percent. Under the latter provision, should WMCP's foreign Majority Opinion: Section 3(aq) of the Mining Act, defining foreign
shareholders who originally owned 100 percent of the equity corporations as a qualified entity for the purposes of granting
sell 60 percent or more of its outstanding capital stock to a Filipino exploration permits, is "not unconstitutional."
citizen or corporation, the State loses its right to receive its 60
percent share in net mining revenues under Section 7.7. SECTION 3. Definition of Terms. As used in and for
o Section 7.9 has the effect of depriving the State of its 60 percent purposes of this Act, the following terms, whether in
share in the net mining revenues of WMCP without any offset or singular or plural, shall mean:
compensation whatsoever
xxx

(aq) "Qualified person" means any citizen of the Philippines


3. Main Argument: Section 39 that allows FTAA holder to covert its with capacity to contract, or a corporation, partnership,
agreement to an MPSA "at any time during the term of the agreement" association, or cooperative organized or authorized for the
is not advantageous. purpose of engaging in mining, with technical and financial
capability to undertake mineral resources development
As any reasonable person with a modicum of business experience and duly registered in accordance with law at least sixty
can readily determine, the optimal time for the foreign contractor per centum (60%) of the capital of which is owned by
to convert its FTAA into an MPSA is after the completion of the citizens of the Philippines: Provided, That a legally
exploration phase and just before undertaking the development, organized foreign-owned corporation shall be deemed
construction and utilization phase. a qualified person for purposes of granting an
exploration permit, financial or technical assistance
agreement or mineral processing permit. (Emphasis
This is because under Section 56 (a) of DAO 40-96, the supplied)
requirement for a minimum investment of Fifty Million U.S. Dollars
(US$ 50,000,000.00)135 is only applicable during the development, Arguments of the majority opinion:
construction and utilization phase and NOT during the exploration
phase where the foreign contractor need only comply with the (1) "there is no prohibition at all against foreign or local
stipulated minimum ground expenditures corporations or contractors holding exploration permits;" and
Clearly, under the terms and provisions of the Mining Act,
even the promised influx of tens of millions of dollars in direct (2) an "exploration permit serves a practical and legitimate purpose
in that it protects the interests and preserves the rights of the
exploration permit grantee x x x during the period of time that it is (2) the exclusive right to an MPSA or other mineral
spending heavily on exploration works, without yet being able to agreements or FTAAs upon the filing of a Declaration of
earn revenues x x x." Mining Project Feasibility under Sections 23 and 24; but
requires none of the obligations of an FTAA not even the
"[t]he State risks nothing and loses nothing by granting these obligation under Section 56 of DAO 40-96 to pay the
permits" to foreign firms. minimum ground expenditures during the exploration and
feasibility period.139
These contentions fail for two obvious reasons.
Should it discover minerals in commercial quantities, it can
FIRST. the only constitutionally sanctioned method by which a circumvent the Fiscal Regime in DAO 99-56 by divesting 60% of
foreign entity may participate in the natural resources of the its equity in favor of a Philippine corporation and opting to
Philippines is (1) by virtue of paragraph 4 of Section 2, Article XII enter into an MPSA. By doing so it automatically reduces the
of the Constitution; Government's TOTAL SHARE to merely 2% of value of the
o said provision requires that an agreement be entered into minerals mined by operation of Section 81.
(3) between the President and the foreign corporation (4)
for the large-scaleexploration, development, and utilization And if the Philippine corporation to which it divested its 60% foreign
of minerals, petroleum, and other mineral oils (5) according equity is itself a 60-40 Philippine Corporation, then the beneficial
to the general terms and conditions provided by law, (6) interest of foreigners in the minerals mined would be a minimum of
based on real contributions to the economic growth and 64%.
general welfare of the country; (7) such agreements
will promote the development and use of local scientific Invalidity of the WMCP FTAA Sale of foreign
and technical resources; and (8) the President shall notify interest in WMCP to a Filipino corporation
the Congress of every contract entered into in accordance did not render the case moot and academic.
with this provision, within thirty days from its execution.
1. Main Argument: the transfer of the shares in WMCP from WMC
Resources International Pty. Ltd. (WMC), a foreign-owned
corporation, to a Filipino-owned one, whether Sagittarius or Lepanto,
o Not falling within the exception embodied in paragraph 4 of now presently engaged in a dispute over said shares,154 did not
Section 2, Article XII of the Constitution, the grant of such "cure" the FTAA nor moot the petition at bar.
a permit to a foreign corporation is prohibited and the
proviso providing for such grant in Section 3 (aq) of the On the contrary, it is the Decision in this case that rendered those
Mining Act is void for being unconstitutional. pending cases moot for the invalidation of the FTAA leaves
Sagittarius and Lepanto with nothing to dispute.

SECOND. to allow the grant of exploration permits to foreign


corporations is to allow the whole-sale circumvention of the entire Argument of Respondent WMCP( now renamed Tampakan
system of FTAAs mandated by the Constitution. Mineral Resources Corporation): case has been rendered moot
since "[e]xcept for the nominal shares of directors, 100% of
Together with grant of exploration permit are the ff: TMRC's share are now owned by Sagittarius Mines, which is a
Filipino-owned corporation. More than 60% of the equity of
(1) the right to enter, occupy and explore the permit Sagittarius is owned by Filipinos or Filipino-owned
area under Section 23,
corporations."141 This Court initially reserved judgment on this Republic of the Philippines in a manner contrary to the terms
issue.142 of the Philippine Constitution. If held unconstitutional, the
WMCP FTAA is void ab initio for being contrary to the fundamental
Petitioner invokes by analogy the rule that where land is invalidly law and no rights may arise from it, either in favor of WMC or its
transferred to an alien who subsequently becomes a Filipino citizen Filipino transferee.
or transfers it to one, the infirmity in the original transaction is
considered cured and the title of the transferee is rendered valid Terms of the WMCP FTAA are
contrary to the Constitution and
Respondent WMCP's analogy is fallacious. Whether the legal render said FTAA null and void.
title to the corporate vehicle holding the FTAA has been
transferred from a foreigner to a Filipino is irrelevant. 1. Main Argument: On the part of WMCP, a foreign-owned
corporation, the cause was to extend NOT ONLY technical or
What is relevant is whether a foreigner has improperly and financial assistance but management assistance as well. The
illegally obtained an FTAA and has therefore benefited from MANAGEMENT PREROGATIVES contemplated by the FTAA are not
the exploration, development or utilization of Philippine natural merely incidental to the two other forms of assistance, but
resources in a manner contrary to the provisions of the VIRTUALLY grant WMCP FULL CONTROL over its mining operations.
Constitution.
Section 1.2 of the FTAA, WMCP shall provide "[all] financing,
Divestment by a foreigner of an illegally acquired right to mine technology, management and personnel necessary for the Mining
Philippine resources does not alter the illegal character of the Operations." The mining company binds itself to "perform all Mining
right being divested or sold. Operations . . . providing all necessary services, technology and
financing in connection therewith," and to "furnish all materials, labour,
To rule otherwise would be to condone, even to invite, foreign equipment and other installations that may be required for carrying on
entities to obtain Philippine mining interests in violation of the all Mining Operations." WMCP may make expansions,
Constitution with the assurance that they can escape liability and improvements and replacements of the mining facilities and may
at the same time make a tidy sum by later selling these interests to add such new facilities as it considers necessary for the mining
Filipinos. operations.

To allow a foreigner to profit from illegally obtained mining rights or


FTAAs subverts and circumvents the letter and intent of Article XII
of the Constitution. It facilitates rather than prevents the rape and Also, in Section 8.3 of the FTAA, in case of a dispute between the
plunder of the nation's natural resources by unscrupulous neo- DENR and WMCP, it is WMCP's decision which will prevail.
colonial entities. It thwarts, rather than achieves, the purpose of the
fundamental law.

If the FTAA is held to be valid under the Constitution, then the sale These contractual stipulations, taken together, grant WMCP
is valid and, more importantly, WMC's US$10,000,000.00 interest beneficial ownership over natural resources that properly belong
in Philippine mineral deposit, arising as it did from the sale and its to the State and are intended for the benefit of its citizens.
prior 100% ownership of WMCP, is likewise valid.

However, if the FTAA is held to be invalid, then neither WMC's


interest nor the sale which gave rise to said interest is valid for no Contracts whose cause is contrary to law or public policy are inexistent
foreigner may profit from the natural resources of the and void from the beginning. They produce no effect
whatsoever.160 They cannot be ratified,161 and so cannot the WMCP mortgage is: that the pledgor or mortgagor be
FTAA. the absolute owner of the thing pledged or
mortgaged;
The terms of the WMCP FTAA effectively give away
the Beneficial Ownership of Philippine minerals and under Section 2, Article XII of the Constitution
the absolute owner ofthe minerals is none other t
1. Main Argument: viewed in its entirety, the WMCP FTAA cannot han the State. While the foreign FTAA contractor may
withstand a rigid constitutional scrutiny since, by its provisions, it have an interest in the proceeds of the minerals, it
conveys both the beneficial ownership of Philippine minerals and does not acquire ownership over the minerals
control over their exploration, development and utilization to a themselves.
foreign corporation. Being contrary to both the letter and intent of
Section 2, Article XII of the Constitution, the WMCP FTAA must be The act of mortgaging the minerals is an act of ownership, which,
declared void and of no effect whatsoever. under the Constitution, is reserved solely to the State. In purporting to grant
such power to a foreign FTAA contractor, Section 10.2 (l) of the WMCP
Majority opinion: Although Section 7.9 and 7.8 (e) of the WMCP FTAA clearly runs afoul of the Constitution.
FTAA are "grossly disadvantageous to the government,
detrimental to the interests of the Filipino people, and violative of
public policy" since it "effectively gives away the State's share of
net mining revenues (provided for in Section 7.7) without anything 3. Another unconstitutional provision: Under Section 10.2 (e) of the
in exchange, WMCP FTAA doesnt have to be invalidated because WMCP FTAA, the foreign FTAA Contractor has the power to require
they are separable from the rest of the agreement, which may the Government to acquire surface rights in its behalf at such price
supposedly be given effect without the offending provisions. and terms acceptable to it:

It reads:

However, As previously discussed, the SAME deleterious results 10.2 Rights of Contractor
are easily achieved by the foreign contractor's conversion of its
FTAA into an MPSA under the OTHER provisions of the Mining The Government agrees that the Contractor shall:-
Act. Hence, merely striking out Sections 7.9 and 7.8(e) of the
WMCP FTAA will not suffice; the provisions pertaining to xxx
FTAAs in the Mining Act must be stricken out for being
unconstitutional as well.
(e) have the right to require the Government at the
Contractor's own cost, to purchase or acquire surface
2. Moreover, Section 7.8 (e) and 7.9 are not the only provisions of the areas for and on behalf of the Contractor at such price
WMCP FTAA which convey beneficial ownership of mineral and terms as may be acceptable to the Contractor. At
resources to a foreign corporation. For example, Sec. 10.2 (l) the termination of this Agreement such areas shall be sold
by public auction or tender and the Contractor shall be
Section 10.2 (l) of the WMCP FTAA, the foreign FTAA entitled to reimbursement of the costs of acquisition
contractor shall have the right to mortgage and encumber, not and maintenance, adjusted for inflation, from the
only its rights and interests in the FTAA, but the very minerals proceeds of sale; (Emphasis supplied)
themselves:
o THIS IS INVALID. Because, first, according to Art the provision in question clearly contemplates a situation
2085 of Civil Code: a requisite for contract of where the surface area is not already owned by the
Government i.e. when the land over which the minerals are
located is owned by some private person.
under the terms of the WMCP FTAA, the contractor is given the
power to hold inalienable mineral land of up to 5,000 hectares,
with the assistance of the State's power of eminent domain for
Second, the logical solution in that situation is not, as asserted a period of up to 50 years in contravention of Section 3, Article
by respondent WMCP, to have the Government purchase or XII of the Constitution.
acquire the land, but for the foreign FTAA contractor to
negotiate a lease over the property with the private owner.

Even measured against the majority opinion's standards of control


i.e. either (1) the power to set aside, reverse, or modify plans and
Third, it is plain that the foreign FTAA contractor would only actions of the contractor; or (2) regulatory control the foregoing
avail of Section 10.2 (e) if, for some reason or another, it is provisions cannot pass muster. This is because, by virtue of the
unable to lease the land in question at the price it is willing to foregoing provisions, the foreign FTAA contractor has
pay. In that situation, it would have the power under unfettered discretion to countermand the orders of its
Section 10.2 (e) to compel the State, as the only entity which putative regulator, the DENR.
can legally compel the landowner to involuntarily part with his o The determination of the FTAA contractor permanently
property, to acquire the land at a price dictated by the foreign reverses the "Rejection Notice" of the DENRsince, by the
FTAA contractor. majority opinion's own admission, there is no available
remedy for the DENR under the agreement except to seek
the cancellation of the same.
Clearly, the State's power of eminent domain is very much related to the
practical workings of Section 10.2 (e) of the WMCP FTAA. It is the very
instrument by which the contractor assures itself that it can obtain
the "surface right" to the property at a price of its own choosing.
Moreover, under Section 60 of DAO 40-96, the contractor may, after final To any reasonable mind, the absence of an effective means to
relinquishment, hold up to 5,000 hectares of land in this manner. enforce even administrative determinations over an FTAA
contractor, except to terminate the contract itself, falls far too
short of the concept of "full control and supervision" as to
cause the offending FTAA to fall outside the ambit of Section 2,
4. Conclusion: Taken together, the foregoing provisions of the WMCP Article XII of the Constitution.
FTAA amount to a conveyance to a foreign corporation of the
beneficial ownership of both the minerals and the surface rights to
the same in contravention of the clear provisions of the Constitution.

under Section 60 of DAO 40-96, which is among the enactments


under review, the contractor may, after final relinquishment, hold
up to 5,000 hectares of land. And, under Section 3.3. of the
WMCP FTAA, it may do so for a term of 25 years automatically
renewable for another 25 years, at the option of the contractor.