G.R. No.

L-28196 November 9, 1967

RAMON A. GONZALES, petitioner,

vs.
COMMISSION ON ELECTIONS, DIRECTOR OF PRINTING and AUDITOR
GENERAL, respondents.

G.R. No. L-28224 November 9, 1967

PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.

No. 28196:
Ramon A. Gonzales for and in his own behalf as petitioner.
Juan T. David as amicus curiae
Office of the Solicitor General for respondents.

No. 28224:
Salvador Araneta for petitioner.
Office of the Solicitor General for respondent.

CONCEPCION, C.J.:

G. R. No. L-28196 is an original action for prohibition, with preliminary injunction.

Petitioner therein prays for judgment:

1) Restraining: (a) the Commission on Elections from enforcing Republic Act No. 4913, or from
performing any act that will result in the holding of the plebiscite for the ratification of the
constitutional amendments proposed in Joint Resolutions Nos. 1 and 3 of the two Houses of
Congress of the Philippines, approved on March 16, 1967; (b) the Director of Printing from
printing ballots, pursuant to said Act and Resolutions; and (c) the Auditor General from passing
in audit any disbursement from the appropriation of funds made in said Republic Act No. 4913;
and

2) declaring said Act unconstitutional and void.

The main facts are not disputed. On March 16, 1967, the Senate and the House of
Representatives passed the following resolutions:

1. R. B. H. (Resolution of Both Houses) No. 1, proposing that Section 5, Article VI, of the
Constitution of the Philippines, be amended so as to increase the membership of the House of
Representatives from a maximum of 120, as provided in the present Constitution, to a maximum
of 180, to be apportioned among the several provinces as nearly as may be according to the
number of their respective inhabitants, although each province shall have, at least, one (1)
member;

2. R. B. H. No. 2, calling a convention to propose amendments to said Constitution, the

convention to be composed of two (2) elective delegates from each representative district, to be
"elected in the general elections to be held on the second Tuesday of November, 1971;" and

3. R. B. H. No. 3, proposing that Section 16, Article VI, of the same Constitution, be amended so
as to authorize Senators and members of the House of Representatives to become delegates to
the aforementioned constitutional convention, without forfeiting their respective seats in
Congress.

Subsequently, Congress passed a bill, which, upon approval by the President, on June 17,
1967, became Republic Act No. 4913, providing that the amendments to the Constitution
proposed in the aforementioned Resolutions No. 1 and 3 be submitted, for approval by the
people, at the general elections which shall be held on November 14, 1967.
The petition in L-28196 was filed on October 21, 1967. At the hearing thereof, on October 28,
1967, the Solicitor General appeared on behalf of respondents. Moreover, Atty. Juan T. David
and counsel for the Philippine Constitution Association — hereinafter referred to as the
PHILCONSA — were allowed to argue as amici curiae. Said counsel for the PHILCONSA, Dr.
Salvador Araneta, likewise prayed that the decision in this case be deferred until after a
substantially identical case brought by said organization before the Commission on
Elections,1 which was expected to decide it any time, and whose decision would, in all
probability, be appealed to this Court — had been submitted thereto for final determination, for a
joint decision on the identical issues raised in both cases. In fact, on October 31, 1967, the
PHILCONSA filed with this Court the petition in G. R. No. L-28224, for review by certiorari of the
resolution of the Commission on Elections2 dismissing the petition therein. The two (2) cases
were deemed submitted for decision on November 8, 1967, upon the filing of the answer of
respondent, the memorandum of the petitioner and the reply memorandum of respondent in L-
28224.

Ramon A. Gonzales, the petitioner in L-28196, is admittedly a Filipino citizen, a taxpayer, and a
voter. He claims to have instituted case L-28196 as a class unit, for and in behalf of all citizens,
taxpayers, and voters similarly situated. Although respondents and the Solicitor General have
filed an answer denying the truth of this allegation, upon the ground that they have no
knowledge or information to form a belief as to the truth thereof, such denial would appear to be
a perfunctory one. In fact, at the hearing of case L-28196, the Solicitor General expressed
himself in favor of a judicial determination of the merits of the issued raised in said case.

The PHILCONSA, petitioner in L-28224, is admittedly a corporation duly organized and existing
under the laws of the Philippines, and a civic, non-profit and non-partisan organization the
objective of which is to uphold the rule of law in the Philippines and to defend its Constitution
against erosions or onslaughts from whatever source. Despite his aforementioned statement in
L-28196, in his answer in L-28224 the Solicitor General maintains that this Court has no
jurisdiction over the subject-matter of L-28224, upon the ground that the same is "merely
political" as held in Mabanag vs. Lopez Vito.3 Senator Arturo M. Tolentino, who appeared before
the Commission on Elections and filed an opposition to the PHILCONSA petition therein, was
allowed to appear before this Court and objected to said petition upon the ground: a) that the
Court has no jurisdiction either to grant the relief sought in the petition, or to pass upon the
legality of the composition of the House of Representatives; b) that the petition, if granted,
would, in effect, render in operational the legislative department; and c) that "the failure of
Congress to enact a valid reapportionment law . . . does not have the legal effect of rendering
illegal the House of Representatives elected thereafter, nor of rendering its acts null and void."

JURISDICTION

As early as Angara vs. Electoral Commission,4 this Court — speaking through one of the
leading members of the Constitutional Convention and a respected professor of Constitutional
Law, Dr. Jose P. Laurel — declared that "the judicial department is the only constitutional organ
which can be called upon to determine the proper allocation of powers between the several
departments and among the integral or constituent units thereof." It is true that in Mabanag vs.
Lopez Vito,5 this Court characterizing the issue submitted thereto as a political one, declined to
pass upon the question whether or not a given number of votes cast in Congress in favor of a
proposed amendment to the Constitution — which was being submitted to the people for
ratification — satisfied the three-fourths vote requirement of the fundamental law. The force of
this precedent has been weakened, however, by Suanes vs. Chief Accountant of the
Senate,6 Avelino vs. Cuenco,7 Tañada vs. Cuenco,8 and Macias vs. Commission on
Elections.9In the first, we held that the officers and employees of the Senate Electoral Tribunal
are under its supervision and control, not of that of the Senate President, as claimed by the
latter; in the second, this Court proceeded to determine the number of Senators necessary for
a quorum in the Senate; in the third, we nullified the election, by Senators belonging to the party
having the largest number of votes in said chamber, purporting to act on behalf of the party
having the second largest number of votes therein, of two (2) Senators belonging to the first
party, as members, for the second party, of the, Senate Electoral Tribunal; and in the fourth, we
declared unconstitutional an act of Congress purporting to apportion the representative districts
for the House of Representatives, upon the ground that the apportionment had not been made
as may be possible according to the number of inhabitants of each province. Thus we rejected
the theory, advanced in these four (4) cases, that the issues therein raised were political
questions the determination of which is beyond judicial review.

Indeed, the power to amend the Constitution or to propose amendments thereto is not included
in the general grant of legislative powers to Congress.10 It is part of the inherent powers of the
people — as the repository of sovereignty in a republican state, such as ours11 — to make, and,
hence, to amend their own Fundamental Law. Congress may propose amendments to the
Constitution merely because the same explicitly grants such power.12 Hence, when exercising
the same, it is said that Senators and Members of the House of Representatives act, not as
members of Congress, but as component elements of a constituent assembly. When acting as
such, the members of Congress derive their authority from the Constitution, unlike the people,
when performing the same function,13 for their authority does not emanate from the Constitution
— they are the very source of all powers of government, including the Constitution itself .

Since, when proposing, as a constituent assembly, amendments to the Constitution, the

members of Congress derive their authority from the Fundamental Law, it follows, necessarily,
that they do not have the final say on whether or not their acts are within or beyond
constitutional limits. Otherwise, they could brush aside and set the same at naught, contrary to
the basic tenet that ours is a government of laws, not of men, and to the rigid nature of our
Constitution. Such rigidity is stressed by the fact that, the Constitution expressly confers upon
the Supreme Court,14 the power to declare a treaty unconstitutional,15 despite the eminently
political character of treaty-making power.

In short, the issue whether or not a Resolution of Congress — acting as a constituent assembly
— violates the Constitution essentially justiciable, not political, and, hence, subject to judicial
review, and, to the extent that this view may be inconsistent with the stand taken in Mabanag
vs. Lopez Vito,16 the latter should be deemed modified accordingly. The Members of the Court
are unanimous on this point.

THE MERITS

Section 1 of Article XV of the Constitution, as amended, reads:

The Congress in joint session assembled by a vote of three-fourths of all the Members of
the Senate and of the House of Representatives voting separately, may propose
amendments to this Constitution or call a convention for that purpose. Such
amendments shall be valid as part of this Constitution when approved by a majority of
the votes cast at an election at which the amendments are submitted to the people for
their ratification.

Pursuant to this provision, amendments to the Constitution may be proposed, either by

Congress, or by a convention called by Congress for that purpose. In either case, the vote of
"three-fourths of all the members of the Senate and of the House of Representatives voting
separately" is necessary. And, "such amendments shall be valid as part of" the "Constitution
when approved by a majority of the votes cast at an election at which the amendments are
submitted to the people for their ratification."

In the cases at bar, it is conceded that the R. B. H. Nos. 1 and 3 have been approved by a vote
of three-fourths of all the members of the Senate and of the House of Representatives voting
separately. This, notwithstanding, it is urged that said resolutions are null and void because:

1. The Members of Congress, which approved the proposed amendments, as well as the
resolution calling a convention to propose amendments, are, at best, de facto Congressmen;

2. Congress may adopt either one of two alternatives propose — amendments or call a
convention therefore but may not avail of both — that is to say, propose amendment and call a
convention — at the same time;

3. The election, in which proposals for amendment to the Constitution shall be submitted for
ratification, must be a special election, not a general election, in which officers of the national
and local governments — such as the elections scheduled to be held on November 14, 1967 —
will be chosen; and

4. The spirit of the Constitution demands that the election, in which proposals for amendment
shall be submitted to the people for ratification, must be held under such conditions — which,
allegedly, do not exist — as to give the people a reasonable opportunity to have a fair grasp of
the nature and implications of said amendments.

Legality of Congress and Legal Status of the Congressmen

The first objection is based upon Section 5, Article VI, of the Constitution, which provides:

The House of Representatives shall be composed of not more than one hundred and
twenty Members who shall be apportioned among the several provinces as nearly as
may be according to the number of their respective inhabitants, but each province shall
have at least one Member. The Congress shall by law make an apportionment within
three years after the return of every enumeration, and not otherwise. Until such
apportionment shall have been made, the House of Representatives shall have the
same number of Members as that fixed by law for the National Assembly, who shall be
elected by the qualified electors from the present Assembly districts. Each
representative district shall comprise, as far as practicable, contiguous and compact
territory.

It is urged that the last enumeration or census took place in 1960; that, no apportionment having
been made within three (3) years thereafter, the Congress of the Philippines and/or the election
of its Members became illegal; that Congress and its Members, likewise, became a de
facto Congress and/or de facto congressmen, respectively; and that, consequently, the disputed
Resolutions, proposing amendments to the Constitution, as well as Republic Act No. 4913, are
null and void.

It is not true, however, that Congress has not made an apportionment within three years after
the enumeration or census made in 1960. It did actually pass a bill, which became Republic Act
No. 3040,17 purporting to make said apportionment. This Act was, however, declared
unconstitutional, upon the ground that the apportionment therein undertaken had not been
made according to the number of inhabitants of the different provinces of the Philippines.18

Moreover, we are unable to agree with the theory that, in view of the failure of Congress to
make a valid apportionment within the period stated in the Constitution, Congress became an
"unconstitutional Congress" and that, in consequence thereof, the Members of its House of
Representatives are de facto officers. The major premise of this process of reasoning is that the
constitutional provision on "apportionment within three years after the return of every
enumeration, and not otherwise," is mandatory. The fact that Congress is under legal obligation
to make said apportionment does not justify, however, the conclusion that failure to comply with
such obligation rendered Congress illegal or unconstitutional, or that its Members have
become de facto officers.

It is conceded that, since the adoption of the Constitution in 1935, Congress has not made a
valid apportionment as required in said fundamental law. The effect of this omission has been
envisioned in the Constitution, pursuant to which:

. . . Until such apportionment shall have been made, the House of Representatives shall
have the same number of Members as that fixed by law for the National Assembly, who
shall be elected by the qualified electors from the present Assembly districts. . . . .

The provision does not support the view that, upon the expiration of the period to make the
apportionment, a Congress which fails to make it is dissolved or becomes illegal. On the
contrary, it implies necessarily that Congress shall continue to function with the representative
districts existing at the time of the expiration of said period.

It is argued that the above-quoted provision refers only to the elections held in 1935. This theory
assumes that an apportionment had to be made necessarily before the first elections to be held
after the inauguration of the Commonwealth of the Philippines, or in 1938.19 The assumption, is,
however, unwarranted, for there had been no enumeration in 1935, and nobody could foretell
when it would be made. Those who drafted and adopted the Constitution in 1935 could be
certain, therefore, that the three-year period, after the earliest possible enumeration, would
expire after the elections in 1938.

What is more, considering that several provisions of the Constitution, particularly those on the
legislative department, were amended in 1940, by establishing a bicameral Congress, those
who drafted and adopted said amendment, incorporating therein the provision of the original
Constitution regarding the apportionment of the districts for representatives, must have known
that the three-year period therefor would expire after the elections scheduled to be held and
actually held in 1941.

Thus, the events contemporaneous with the framing and ratification of the original Constitution
in 1935 and of the amendment thereof in 1940 strongly indicate that the provision concerning
said apportionment and the effect of the failure to make it were expected to be applied to
conditions obtaining after the elections in 1935 and 1938, and even after subsequent elections.

Then again, since the report of the Director of the Census on the last enumeration was
submitted to the President on November 30, 1960, it follows that the three-year period to make
the apportionment did not expire until 1963, or after the Presidential elections in 1961. There
can be no question, therefore, that the Senate and the House of Representatives organized or
constituted on December 30, 1961, were de jure bodies, and that the Members thereof were de
jure officers. Pursuant to the theory of petitioners herein, upon expiration of said period of three
years, or late in 1963, Congress became illegal and its Members, or at least, those of the House
of Representatives, became illegal holder of their respective offices, and were de facto officers.

Petitioners do not allege that the expiration of said three-year period without a reapportionment,
had the effect of abrogating or repealing the legal provision creating Congress, or, at least, the
House of Representatives, and are not aware of any rule or principle of law that would warrant
such conclusion. Neither do they allege that the term of office of the members of said House
automatically expired or that they ipso facto forfeited their seats in Congress, upon the lapse of
said period for reapportionment. In fact, neither our political law, nor our law on public officers, in
particular, supports the view that failure to discharge a mandatory duty, whatever it may be,
would automatically result in the forfeiture of an office, in the absence of a statute to this effect.

Similarly, it would seem obvious that the provision of our Election Law relative to the election of
Members of Congress in 1965 were not repealed in consequence of the failure of said body to
make an apportionment within three (3) years after the census of 1960. Inasmuch as the
general elections in 1965 were presumably held in conformity with said Election Law, and the
legal provisions creating Congress — with a House of Representatives composed of members
elected by qualified voters of representative districts as they existed at the time of said elections
— remained in force, we can not see how said Members of the House of Representatives can
be regarded as de facto officers owing to the failure of their predecessors in office to make a
reapportionment within the period aforementioned.

Upon the other hand, the Constitution authorizes the impeachment of the President, the Vice-
President, the Justices of the Supreme Court and the Auditor General for, inter alia, culpable
violation of the Constitution,20 the enforcement of which is, not only their mandatory duty, but
also, their main function. This provision indicates that, despite the violation of such mandatory
duty, the title to their respective offices remains unimpaired, until dismissal or ouster pursuant to
a judgment of conviction rendered in accordance with Article IX of the Constitution. In short, the
loss of office or the extinction of title thereto is not automatic.

Even if we assumed, however, that the present Members of Congress are merely de
facto officers, it would not follow that the contested resolutions and Republic Act No. 4913 are
null and void. In fact, the main reasons for the existence of the de facto doctrine is that public
interest demands that acts of persons holding, under color of title, an office created by a valid
statute be, likewise, deemed valid insofar as the public — as distinguished from the officer in
question — is concerned.21 Indeed, otherwise, those dealing with officers and employees of the
Government would be entitled to demand from them satisfactory proof of their title to the
positions they hold, before dealing with them, or before recognizing their authority or obeying
their commands, even if they should act within the limits of the authority vested in their
respective offices, positions or employments.22 One can imagine this great inconvenience,
hardships and evils that would result in the absence of the de facto doctrine.

As a consequence, the title of a de facto officer cannot be assailed collaterally.23 It may not be
contested except directly, by quo warranto proceedings. Neither may the validity of his acts be
questioned upon the ground that he is merely a de facto officer.24 And the reasons are obvious:
(1) it would be an indirect inquiry into the title to the office; and (2) the acts of a de facto officer,
if within the competence of his office, are valid, insofar as the public is concerned.

It is argued that the foregoing rules do not apply to the cases at bar because the acts therein
involved have not been completed and petitioners herein are not third parties. This pretense is
untenable. It is inconsistent with Tayko vs. Capistrano.25 In that case, one of the parties to a suit
being heard before Judge Capistrano objected to his continuing to hear the case, for the reason
that, meanwhile, he had reached the age of retirement. This Court held that the objection could
not be entertained, because the Judge was at least, a de facto Judge, whose title can not be
assailed collaterally. It should be noted that Tayko was not a third party insofar as the Judge
was concerned. Tayko was one of the parties in the aforementioned suit. Moreover, Judge
Capistrano had not, as yet, finished hearing the case, much less rendered decision therein. No
rights had vested in favor of the parties, in consequence of the acts of said Judge. Yet, Tayko's
objection was overruled. Needless to say, insofar as Congress is concerned, its acts, as regards
the Resolutions herein contested and Republic Act No. 4913, are complete. Congress has
nothing else to do in connection therewith.

The Court is, also, unanimous in holding that the objection under consideration is untenable.

Available Alternatives to Congress

Atty. Juan T. David, as amicus curiae, maintains that Congress may either propose
amendments to the Constitution or call a convention for that purpose, but it can not do both, at
the same time. This theory is based upon the fact that the two (2) alternatives are connected in
the Constitution by the disjunctive "or." Such basis is, however, a weak one, in the absence of
other circumstances — and none has brought to our attention — supporting the conclusion
drawn by the amicus curiae. In fact, the term "or" has, oftentimes, been held to mean "and," or
vice-versa, when the spirit or context of the law warrants it.26

It is, also, noteworthy that R. B. H. Nos. 1 and 3 propose amendments to the constitutional
provision on Congress, to be submitted to the people for ratification on November 14, 1967,
whereas R. B. H. No. 2 calls for a convention in 1971, to consider proposals for amendment to
the Constitution, in general. In other words, the subject-matter of R. B. H. No. 2 is different from
that of R B. H. Nos. 1 and 3. Moreover, the amendments proposed under R. B. H. Nos. 1 and 3,
will be submitted for ratification several years before those that may be proposed by the
constitutional convention called in R. B. H. No. 2. Again, although the three (3) resolutions were
passed on the same date, they were taken up and put to a vote separately, or one after the
other. In other words, they were not passed at the same time.

In any event, we do not find, either in the Constitution, or in the history thereof anything that
would negate the authority of different Congresses to approve the contested Resolutions, or of
the same Congress to pass the same in, different sessions or different days of the same
congressional session. And, neither has any plausible reason been advanced to justify the
denial of authority to adopt said resolutions on the same day.

Counsel ask: Since Congress has decided to call a constitutional convention to propose
amendments, why not let the whole thing be submitted to said convention, instead of, likewise,
proposing some specific amendments, to be submitted for ratification before said convention is
held? The force of this argument must be conceded. but the same impugns the wisdom of the
action taken by Congress, not its authority to take it. One seeming purpose thereof to permit
Members of Congress to run for election as delegates to the constitutional convention and
participate in the proceedings therein, without forfeiting their seats in Congress. Whether or not
this should be done is a political question, not subject to review by the courts of justice.
On this question there is no disagreement among the members of the Court.

May Constitutional Amendments Be Submitted for Ratification in a General Election?

Article XV of the Constitution provides:

. . . The Congress in joint session assembled, by a vote of three-fourths of all the

Members of the Senate and of the House of Representatives voting separately, may
propose amendments to this Constitution or call a contention for that purpose. Such
amendments shall be valid as part of this Constitution when approved by a majority of
the votes cast at an election at which the amendments are submitted to the people for
their ratification.

There is in this provision nothing to indicate that the "election" therein referred to is a "special,"
not a general, election. The circumstance that three previous amendments to the Constitution
had been submitted to the people for ratification in special elections merely shows that
Congress deemed it best to do so under the circumstances then obtaining. It does not negate its
authority to submit proposed amendments for ratification in general elections.

It would be better, from the viewpoint of a thorough discussion of the proposed amendments,
that the same be submitted to the people's approval independently of the election of public
officials. And there is no denying the fact that an adequate appraisal of the merits and demerits
proposed amendments is likely to be overshadowed by the great attention usually commanded
by the choice of personalities involved in general elections, particularly when provincial and
municipal officials are to be chosen. But, then, these considerations are addressed to the
wisdom of holding a plebiscite simultaneously with the election of public officer. They do not
deny the authority of Congress to choose either alternative, as implied in the term "election"
used, without qualification, in the abovequoted provision of the Constitution. Such authority
becomes even more patent when we consider: (1) that the term "election," normally refers to the
choice or selection of candidates to public office by popular vote; and (2) that the word used in
Article V of the Constitution, concerning the grant of suffrage to women is, not "election," but
"plebiscite."

Petitioners maintain that the term "election," as used in Section 1 of Art. XV of the Constitution,
should be construed as meaning a special election. Some members of the Court even feel that
said term ("election") refers to a "plebiscite," without any "election," general or special, of public
officers. They opine that constitutional amendments are, in general, if not always, of such
important, if not transcendental and vital nature as to demand that the attention of the people be
focused exclusively on the subject-matter thereof, so that their votes thereon may reflect no
more than their intelligent, impartial and considered view on the merits of the proposed
amendments, unimpaired, or, at least, undiluted by extraneous, if not insidious factors, let alone
the partisan political considerations that are likely to affect the selection of elective officials.

This, certainly, is a situation to be hoped for. It is a goal the attainment of which should be
promoted. The ideal conditions are, however, one thing. The question whether the
Constitution forbids the submission of proposals for amendment to the people except under
such conditions, is another thing. Much as the writer and those who concur in this opinion
admire the contrary view, they find themselves unable to subscribe thereto without, in effect,
reading into the Constitution what they believe is not written thereon and can not fairly be
deduced from the letter thereof, since the spirit of the law should not be a matter of sheer
speculation.

The majority view — although the votes in favor thereof are insufficient to declare Republic Act
No. 4913 unconstitutional — as ably set forth in the opinion penned by Mr. Justice Sanchez, is,
however, otherwise.

Would the Submission now of the Contested Amendments to the People Violate the Spirit of the
Constitution?
It should be noted that the contested Resolutions were approved on March 16, 1967, so that, by
November 14, 1967, our citizenry shall have had practically eight (8) months to be informed on
the amendments in question. Then again, Section 2 of Republic Act No. 4913 provides:

(1) that "the amendments shall be published in three consecutive issues of the Official Gazette,
at least twenty days prior to the election;"

(2) that "a printed copy of the proposed amendments shall be posted in a conspicuous place in
every municipality, city and provincial office building and in every polling place not later than
October 14, 1967," and that said copy "shall remain posted therein until after the election;"

(3) that "at least five copies of said amendment shall be kept in each polling place, to be made
available for examination by the qualified electors during election day;"

(4) that "when practicable, copies in the principal native languages, as may be determined by
the Commission on Elections, shall be kept in each polling place;"

(5) that "the Commission on Elections shall make available copies of said amendments in
English, Spanish and, whenever practicable, in the principal native languages, for free
distributing:" and

(6) that the contested Resolutions "shall be printed in full" on the back of the ballots which shall
be used on November 14, 1967.

We are not prepared to say that the foregoing measures are palpably inadequate to comply with
the constitutional requirement that proposals for amendment be "submitted to the people for
their ratification," and that said measures are manifestly insufficient, from a constitutional
viewpoint, to inform the people of the amendment sought to be made.

These were substantially the same means availed of to inform the people of the subject
submitted to them for ratification, from the original Constitution down to the Parity Amendment.
Thus, referring to the original Constitution, Section 1 of Act No. 4200, provides:

Said Constitution, with the Ordinance appended thereto, shall be published in the Official
Gazette, in English and in Spanish, for three consecutive issues at least fifteen days
prior to said election, and a printed copy of said Constitution, with the Ordinance
appended thereto, shall be posted in a conspicuous place in each municipal and
provincial government office building and in each polling place not later than the twenty-
second day of April, nineteen hundred and thirty-five, and shall remain posted therein
continually until after the termination of the election. At least ten copies of the
Constitution with the Ordinance appended thereto, in English and in Spanish, shall be
kept at each polling place available for examination by the qualified electors during
election day. Whenever practicable, copies in the principal local dialects as may be
determined by the Secretary of the Interior shall also be kept in each polling place.

The provision concerning woman's suffrage is Section 1 of Commonwealth Act No. 34, reading:

Said Article V of the Constitution shall be published in the Official Gazette, in English
and in Spanish, for three consecutive issues at least fifteen days prior to said election,
and the said Article V shall be posted in a conspicuous place in each municipal and
provincial office building and in each polling place not later than the twenty-second day
of April, nineteen and thirty-seven, and shall remain posted therein continually until after
the termination of the plebiscite. At least ten copies of said Article V of the Constitution,
in English and in Spanish, shall be kept at each polling place available for examination
by the qualified electors during the plebiscite. Whenever practicable, copies in the
principal native languages, as may be determined by the Secretary of the Interior, shall
also be kept in each polling place.

Similarly, Section 2, Commonwealth Act No. 517, referring to the 1940 amendments, is of the
following tenor:
 The said amendments shall be published in English and Spanish in three consecutive
issues of the Official Gazette at least twenty days prior to the election. A printed copy
thereof shall be posted in a conspicuous place in every municipal, city, and provincial
government office building and in every polling place not later than May eighteen,
nineteen hundred and forty, and shall remain posted therein until after the election. At
least ten copies of said amendments shall be kept in each polling place to be made
available for examination by the qualified electors during election day. When practicable,
copies in the principal native languages, as may be determined by the Secretary of the
Interior, shall also be kept therein.

As regards the Parity Amendment, Section 2 of Republic Act No. 73 is to the effect that:

The said amendment shall be published in English and Spanish in three consecutive
issues of the Official Gazette at least twenty days prior to the election. A printed copy
thereof shall be posted in a conspicuous place in every municipal, city, and provincial
government office building and in every polling place not later than February eleven,
nineteen hundred and forty-seven, and shall remain posted therein until after the
election. At least, ten copies of the said amendment shall be kept in each polling place to
be made available for examination by the qualified electors during election day. When
practicable, copies in the principal native languages, as may be determined by the
Commission on Elections, shall also be kept in each polling place.

The main difference between the present situation and that obtaining in connection with the
former proposals does not arise from the law enacted therefor. The difference springs from the
circumstance that the major political parties had taken sides on previous amendments to the
Constitution — except, perhaps, the woman's suffrage — and, consequently, debated thereon
at some length before the plebiscite took place. Upon the other hand, said political parties have
not seemingly made an issue on the amendments now being contested and have, accordingly,
refrained from discussing the same in the current political campaign. Such debates or polemics
as may have taken place — on a rather limited scale — on the latest proposals for amendment,
have been due principally to the initiative of a few civic organizations and some militant
members of our citizenry who have voiced their opinion thereon. A legislation cannot, however,
be nullified by reason of the failure of certain sectors of the community to discuss it sufficiently.
Its constitutionality or unconstitutionality depends upon no other factors than those existing at
the time of the enactment thereof, unaffected by the acts or omissions of law enforcing
agencies, particularly those that take place subsequently to the passage or approval of the law.

Referring particularly to the contested proposals for amendment, the sufficiency or insufficiency,
from a constitutional angle, of the submission thereof for ratification to the people on November
14, 1967, depends — in the view of those who concur in this opinion, and who, insofar as this
phase of the case, constitute the minority — upon whether the provisions of Republic Act No.
4913 are such as to fairly apprise the people of the gist, the main idea or the substance of said
proposals, which is — under R. B. H. No. 1 — the increase of the maximum number of seats in
the House of Representatives, from 120 to 180, and — under R. B. H. No. 3 — the authority
given to the members of Congress to run for delegates to the Constitutional Convention and, if
elected thereto, to discharge the duties of such delegates, without forfeiting their seats in
Congress. We — who constitute the minority — believe that Republic Act No. 4913 satisfies
such requirement and that said Act is, accordingly, constitutional.

A considerable portion of the people may not know how over 160 of the proposed maximum of
representative districts are actually apportioned by R. B. H. No. 1 among the provinces in the
Philippines. It is not improbable, however, that they are not interested in the details of the
apportionment, or that a careful reading thereof may tend in their simple minds, to impair a clear
vision thereof. Upon the other hand, those who are more sophisticated, may enlighten
themselves sufficiently by reading the copies of the proposed amendments posted in public
places, the copies kept in the polling places and the text of contested resolutions, as printed in
full on the back of the ballots they will use.

It is, likewise, conceivable that as many people, if not more, may fail to realize or envisage the
effect of R. B. H. No. 3 upon the work of the Constitutional Convention or upon the future of our
Republic. But, then, nobody can foretell such effect with certainty. From our viewpoint, the
provisions of Article XV of the Constitution are satisfied so long as the electorate knows that R.
B. H. No. 3 permits Congressmen to retain their seats as legislators, even if they should run for
and assume the functions of delegates to the Convention.

We are impressed by the factors considered by our distinguished and esteemed brethren, who
opine otherwise, but, we feel that such factors affect the wisdom of Republic Act No. 4913 and
that of R. B. H. Nos. 1 and 3, not the authority of Congress to approve the same.

The system of checks and balances underlying the judicial power to strike down acts of the
Executive or of Congress transcending the confines set forth in the fundamental laws is not in
derogation of the principle of separation of powers, pursuant to which each department is
supreme within its own sphere. The determination of the conditions under which the proposed
amendments shall be submitted to the people is concededly a matter which falls within the
legislative sphere. We do not believe it has been satisfactorily shown that Congress has
exceeded the limits thereof in enacting Republic Act No. 4913. Presumably, it could have done
something better to enlighten the people on the subject-matter thereof. But, then, no law is
perfect. No product of human endeavor is beyond improvement. Otherwise, no legislation would
be constitutional and valid. Six (6) Members of this Court believe, however, said Act and R. B.
H. Nos. 1 and 3 violate the spirit of the Constitution.

Inasmuch as there are less than eight (8) votes in favor of declaring Republic Act 4913 and R.
B. H. Nos. 1 and 3 unconstitutional and invalid, the petitions in these two (2) cases must be, as
they are hereby, dismiss and the writs therein prayed for denied, without special pronouncement
as to costs. It is so ordered.

Makalintal and Bengzon, J.P., JJ., concur.

Fernando, J., concurs fully with the above opinion, adding a few words on the question of
jurisdiction.

Separate Opinions

MAKALINTAL, J., concurring:

I concur in the foregoing opinion of the Chief Justice. I would make some additional
observations in connection with my concurrence. Sections 2 and 4 of Republic Act No. 4913
provide:

Sec. 2. The amendments shall be published in three consecutive issues of the Official
Gazette at least twenty days prior to the election. A printed copy thereof shall be posted
in a conspicuous place in every municipality, city and provincial office building and in
every polling place not later than October fourteen, nineteen hundred and sixty-seven,
and shall remain posted therein until after the election. At least five copies of the said
amendments shall be kept in each polling place to be made available for examination by
the qualified electors during election day. When practicable, copies in the principal native
languages, as may be determined by the Commission on Elections, shall be kept in each
polling place. The Commission on Elections shall make available copies of each
amendments in English, Spanish and, whenever practicable, in the principal native
languages, for free distribution.

xxx xxx xxx

Sec. 4. The ballots which shall be used in the election for the approval of said
amendments shall be printed in English and Pilipino and shall be in the size and form
prescribed by the Commission on Elections: Provided, however, That at the back of said
ballot there shall be printed in full Resolutions of both Houses of Congress Numbered
One and Three, both adopted on March sixteen, nineteen hundred and sixty-seven,
proposing the amendments: Provided, further, That the questionnaire appearing on the
face of the ballot shall be as follows:
 Are you in favor of the proposed amendment to Section five of Article VI of our
Constitution printed at the back of this ballot?

Are you in favor of the proposed amendment to section sixteen of Article VI of our
Constitution printed at the back of this ballot?

To vote for the approval of the proposed amendments, the voter shall write the word
"yes" or its equivalent in Pilipino or in the local dialect in the blank space after each
question; to vote for the rejection thereof, he shall write the word "No" or its equivalent in
Pilipino or in the local dialect.

I believe that intrinsically, that is, considered in itself and without reference to extraneous factors
and circumstances, the manner prescribed in the aforesaid provisions is sufficient for the
purpose of having the proposed amendments submitted to the people for their ratification, as
enjoined in Section 1, Article XV of the Constitution. I am at a loss to say what else should have
been required by the Act to make it adhere more closely to the constitutional requirement.
Certainly it would have been out of place to provide, for instance, that government officials and
employees should go out and explain the amendments to the people, or that they should be the
subject of any particular means or form of public discussion.

The objection of some members of the Court to Republic Act No. 4913 seems to me predicated
on the fact that there are so many other issues at stake in the coming general election that the
attention of the electorate, cannot be entirely focused on the proposed amendments, such that
there is a failure to properly submit them for ratification within the intendment of the Constitution.
If that is so, then the defect is not intrinsic in the law but in its implementation. The same
manner of submitting the proposed amendments to the people for ratification may, in a different
setting, be sufficient for the purpose. Yet I cannot conceive that the constitutionality or
unconstitutionality of a law may be made to depend willy-nilly on factors not inherent in its
provisions. For a law to be struck down as unconstitutional it must be so by reason of some
irreconcilable conflict between it and the Constitution. Otherwise a law may be either valid or
invalid, according to circumstances not found in its provisions, such as the zeal with which they
are carried out. To such a thesis I cannot agree. The criterion would be too broad and relative,
and dependent upon individual opinions that at best are subjective. What one may regard as
sufficient compliance with the requirement of submission to the people, within the context of the
same law, may not be so to another. The question is susceptible of as many views as there are
viewers; and I do not think this Court would be justified in saying that its own view on the matter
is the correct one, to the exclusion of the opinions of others.

On the other hand, I reject the argument that the ratification must necessarily be in a special
election or plebiscite called for that purpose alone. While such procedure is highly to be
preferred, the Constitution speaks simply of "an election at which the amendments are
submitted to the people for their ratification," and I do not subscribe to the restrictive
interpretation that the petitioners would place on this provision, namely, that it means only a
special election.

BENGZON, J.P., J., concurring:

It is the glory of our institutions that they are founded upon law, that no one can exercise any
authority over the rights and interests of others except pursuant to and in the manner authorized
by law.1 Based upon this principle, petitioners Ramon A. Gonzales and Philippine Constitution
Association (PHILCONSA) come to this Court in separate petitions.

Petitioner Gonzales, as taxpayer, voter and citizen, and allegedly in representation thru class
suit of all citizens of this country, filed this suit for prohibition with preliminary injunction to
restrain the Commission on Elections, Director of Printing and Auditor General from
implementing and/or complying with Republic Act 4913, assailing said law as unconstitutional.
Petitioner PHILCONSA, as a civic, non-profit and non-partisan corporation, assails the
constitutionality not only of Republic Act 4913 but also of Resolutions of Both Houses Nos. 1
and 3 of March 16, 1967.

Republic Act 4913, effective June 17, 1967, is an Act submitting to the Filipino people for
approval the amendments to the Constitution of the Philippines proposed by the Congress of
the Philippines in Resolutions of Both Houses Numbered 1 and 3, adopted on March 16, 1967.
Said Republic Act fixes the date and manner of the election at which the aforesaid proposed
amendments shall be voted upon by the people, and appropriates funds for said election.
Resolutions of Both Houses Nos. 1 and 3 propose two amendments to the Constitution: the first,
to amend Sec. 5, Art. VI, by increasing the maximum membership of the House of
Representatives from 120 to 180, apportioning 160 of said 180 seats and eliminating the
provision that Congress shall by law make an apportionment within three years after the return
of every enumeration; the second, to amend Sec. 16, Art. VI, by allowing Senators and
Representatives to be delegates to a constitutional convention without forfeiting their seats.

Since both petitions relate to the proposed amendments, they are considered together herein.

Specifically and briefly, petitioner Gonzales' objections are as follows: (1) Republic Act 4913
violates Sec. 1, Art. XV of the Constitution, in submitting the proposed amendments to the
Constitution, to the people for approval, at the general election of 1967 instead of at a special
election solely for that purpose; (2) Republic Act 4913 violates Sec. 1, Art. XV of the
Constitution, since it was not passed with the 3/4 vote in joint session required when Congress
proposes amendments to the Constitution, said Republic Act being a step in or part of the
process of proposing amendments to the Constitution; and (3) Republic Act 4913 violates the
due process clause of the Constitution (Sec. 1, Subsec. 1, Art. III), in not requiring that the
substance of the proposed amendments be stated on the face of the ballot or otherwise
rendering clear the import of the proposed amendments, such as by stating the provisions
before and after said amendments, instead of printing at the back of the ballot only the proposed
amendments.

Since observance of Constitutional provisions on the procedure for amending the Constitution is
concerned, the issue is cognizable by this Court under its powers to review an Act of Congress
to determine its conformity to the fundamental law. For though the Constitution leaves Congress
free to propose whatever Constitutional amendment it deems fit, so that
the substance or content of said proposed amendment is a matter of policy and wisdom and
thus a political question, the Constitution nevertheless imposes requisites as to
the manner or procedure of proposing such amendments, e.g., the three-fourths vote
requirement. Said procedure or manner, therefore, from being left to the discretion of Congress,
as a matter of policy and wisdom, is fixed by the Constitution. And to that extent, all questions
bearing on whether Congress in proposing amendments followed the procedure required by the
Constitution, is perforce justiciable, it not being a matter of policy or wisdom.

Turning then to petitioner Gonzales' first objection, Sec. 1, Art. XV clearly does not bear him on
the point. It nowhere requires that the ratification be thru an election solely for that purpose. It
only requires that it be at "an election at which the amendments are submitted to the people for
their ratification." To join it with an election for candidates to public office, that is, to make it
concurrent with such election, does not render it any less an election at which the proposed
amendments are submitted to the people for their ratification. To prohibition being found in the
plain terms of the Constitution, none should be inferred. Had the framers of requiring
Constitution thought of requiring a special election for the purpose only of the proposed
amendments, they could have said so, by qualifying the phrase with some word such as
"special" or "solely" or "exclusively". They did not.

It is not herein decided that such concurrence of election is wise, or that it would not have been
better to provide for a separate election exclusively for the ratification of the proposed
amendments. The point however is that such separate and exclusive election, even if it may be
better or wiser, which again, is not for this Court to decide, is not included in the procedure
required by the Constitution to amend the same. The function of the Judiciary is "not to pass
upon questions of wisdom, justice or expediency of legislation".2 It is limited to determining
whether the action taken by the Legislative Department has violated the Constitution or not. On
this score, I am of the opinion that it has not.

Petitioner Gonzales' second point is that Republic Act 4913 is deficient for not having been
passed by Congress in joint session by 3/4 vote.

Sec. 1, Art. XV of the Constitution provides:

Sec. 1. The Congress in joint session assembled, by a vote of three-fourths of all the
members of the Senate and of the House of Representatives voting separately, may
propose amendments to this Constitution or call a convention for that purpose. Such
amendments shall be valid as part of this Constitution when approved by a majority of
the votes cast at an election to which the amendments are submitted to the people for
their ratification.

Does Republic Act 4913 propose amendments to the Constitution? If by the term "propose
amendment" is meant to determine WHAT said amendment shall be, then Republic Act 4913
does not; Resolutions of Both Houses 1 and 3 already did that. If, on the other hand, it means,
or also means, to provide for how, when, and by what means the amendments shall
be submitted to the people for approval, then it does.

A careful reading of Sec. 1, Art. XV shows that the first sense. is the one intended. Said Section
has two sentences: in the first, it requires the 3/4 voting in joint session, for Congress to
"propose amendments". And then in the second sentence, it provides that "such amendments . .
. shall be submitted to the people for their ratification". This clearly indicates that by the term
"propose amendments" in the first sentence is meant to frame the substance or the content or
the WHAT-element of the amendments; for it is this and this alone that is submitted to the
people for their ratification. The details of when the election shall be held for approval or
rejection of the proposed amendments, or the manner of holding it, are not submitted for
ratification to form part of the Constitution. Stated differently, the plain language of Section 1,
Art. XV, shows that the act of proposing amendments is distinct from — albeit related to — that
of submitting the amendments to the people for their ratification; and that the 3/4 voting
requirement applies only to the first step, not to the second one.

It follows that the submission of proposed amendments can be done thru an ordinary statute
passed by Congress. The Constitution does not expressly state by whom the submission shall
be undertaken; the rule is that a power not lodged elsewhere under the Constitution is deemed
to reside with the legislative body, under the doctrine of residuary powers. Congress therefore
validly enacted Republic Act 4913 to fix the details of the date and manner of submitting the
proposed amendments to the people for their ratification. Since it does not "propose
amendments" in the sense referred to by Sec. 1, Art. XV of the Constitution, but merely provides
for how and when the amendments, already proposed, are going to be voted upon, the same
does not need the 3/4 vote in joint session required in Sec. 1, Art. XV of the Constitution.
Furthermore, Republic Act 4913 is an appropriation measure. Sec. 6 thereof appropriates
P1,000,000 for carrying out its provisions. Sec. 18, Art. VI of the Constitution states that "All
appropriation . . . bills shall originate exclusively in the House of Representatives". Republic Act
4913, therefore, could not have been validly adopted in a joint session, reinforcing the view that
Sec. 1, Art. XV does not apply to such a measure providing for the holding of the election to
ratify the proposed amendments, which must perforce appropriate funds for its purpose.

Petitioner Gonzales contends, thirdly, that Republic Act 4913 offends against substantive due
process. An examination of the provisions of the law shows no violation of the due process
clause of the Constitution. The publication in the Official Gazette at least 20 days before the
election, the posting of notices in public buildings not later than October 14, 1967, to remain
posted until after the elections, the placing of copies of the proposed amendments in the polling
places, aside from printing the same at the back of the ballot, provide sufficient opportunity to
the voters to cast an intelligent vote on the proposal. Due process refers only to providing fair
opportunity; it does not guarantee that the opportunity given will in fact be availed of; that is the
look-out of the voter and the responsibility of the citizen. As long as fair and reasonable
opportunity to be informed is given, and it is, the due process clause is not infringed.
Non-printing of the provisions to be amended as they now stand, and the printing of the full
proposed amendments at the back of the ballot instead of the substance thereof at the face of
the ballot, do not deprive the voter of fair opportunity to be informed. The present wording of the
Constitution is not being veiled or suppressed from him; he is conclusively presumed to know
them and they are available should he want to check on what he is conclusively presumed to
know. Should the voters choose to remain ignorant of the present Constitution, the fault does
not lie with Congress. For opportunity to familiarize oneself with the Constitution as it stands has
been available thru all these years. Perhaps it would have been more convenient for the voters
if the present wording of the provisions were also to be printed on the ballot. The same however
is a matter of policy. As long as the method adopted provides sufficiently reasonable chance to
intelligently vote on the amendments, and I think it does in this case, it is not constitutionally
defective.

Petitioner Gonzales' other arguments touch on the merits or wisdom of the proposed
amendments. These are for the people in their sovereign capacity to decide, not for this Court.

Two arguments were further advanced: first, that Congress cannot both call a convention and
propose amendments; second, that the present Congress is a de facto one, since no
apportionment law was adopted within three years from the last census of 1960, so that the
Representatives elected in 1961 are de facto officers only. Not being de jure, they cannot
propose amendments, it is argued.

As to the first point, Sec. 1 of Art. XV states that Congress "may propose amendments or call a
convention for that purpose". The term "or", however, is frequently used as having the same
meaning as "and" particularly in permissive, affirmative sentences so that the interpretation of
the word "or" as "and" in the Constitution in such use will not change its meaning (Vicksburg S.
& P. R. Co. v. Goodenough, 32 So. 404, 411, 108 La, 442). And it should be pointed out that the
resolutions proposing amendments (R.B.H. Nos. 1 and 3) are different from that calling for a
convention (R.B.H. No. 2). Surely, if Congress deems it better or wise to amend the Constitution
before a convention called for is elected, it should not be fettered from doing so. For our
purposes in this case, suffice it to note that the Constitution does not prohibit it from doing so.

As to the second argument, it is also true that Sec. 5 of Art. VI of the Constitution provides in
part that "The Congress shall by law make an apportionment within three years after the return
of every enumeration, and not otherwise". It however further states in the next sentence: "Until
such apportionment shall have been made, the House of Representatives shall have the same
number of Members as that fixed by law for the National Assembly, who shall be elected by the
qualified electors from the present assembly districts." The failure of Congress, therefore, to
pass a valid redistricting law since the time the above provision was adopted, does not render
the present districting illegal or unconstitutional. For the Constitution itself provides for its
continuance in such case, rendering legal and de jure the status quo.

For the above reasons, I vote to uphold the constitutionality of Republic Act 4913, and fully
concur with the opinion of the Chief Justice.

FERNANDO, J., concurring:

At the outset, we are faced with a question of jurisdiction. The opinion prepared by the Chief
Justice discusses the matter with a fullness that erases doubts and misgivings and clarifies the
applicable principles. A few words may however be added.

We start from the premise that only where it can be shown that the question is to be solved by
public opinion or where the matter has been left by the Constitution to the sole discretion of any
of the political branches, as was so clearly stated by the then Justice Concepcion in Tañada v.
Cuenco,1 may this Court avoid passing on the issue before it. Whatever may be said about the
present question, it is hard to speak with certitude considering Article XV, that Congress may be
entrusted with the full and uncontrolled discretion on the procedure leading to proposals for an
amendment of the Constitution.
It may be said however that in Mabanag v. Lopez Vito,2 this Court through Justice Tuason
followed Coleman v. Miller,3 in its holding that certain aspects of the amending process may be
considered political. His opinion quoted with approval the view of Justice Black, to which three
other members of the United States Supreme Court agreed, that the process itself is political in
its entirety, "from submission until an amendment becomes part of the Constitution, and is not
subject to judicial guidance, control or interference at any point." In a sense that would solve the
matter neatly. The judiciary would be spared the at times arduous and in every case soul-
searching process of determining whether the procedure for amendments required by the
Constitution has been followed.

At the same time, without impugning the motives of Congress, which cannot be judicially
inquired into at any rate, it is not beyond the realm of possibility that a failure to observe the
requirements of Article XV would occur. In the event that judicial intervention is sought, to rely
automatically on the theory of political question to avoid passing on such a matter of delicacy
might under certain circumstances be considered, and rightly so, as nothing less than judicial
abdication or surrender.

What appears regrettable is that a major opinion of an esteemed jurist, the late Justice Tuason,
would no longer be controlling. There is comfort in the thought that the view that then prevailed
was itself a product of the times. It could very well be that considering the circumstances
existing in 1947 as well as the particular amendment sought to be incorporated in the
Constitution, the parity rights ordinance, the better part of wisdom in view of the grave economic
situation then confronting the country would be to avoid the existence of any obstacle to its
being submitted for ratification. Moreover, the Republic being less than a year old, American
Supreme Court opinions on constitutional questions were-invariably accorded uncritical
acceptance. Thus the approach followed by Justice Tuason is not difficult to understand. It may
be said that there is less propensity now, which is all to the good, for this Court to accord that
much deference to constitutional views coming from the quarter.

Nor is this mode of viewing the opinion of Justice Tuason to do injustice to his memory. For as
he stated in another major opinion in Araneta v. Dinglasan,4 in ascertaining the meaning to be
given the Emergency Powers Act,5 one should not ignore what would ensue if a particular mode
of construction were followed. As he so emphatically stated, "We test a rule by its results."

The consequences of a judicial veto on the then proposed amendment on the economic survival
of the country, an erroneous appraisal it turned out later, constituted an effective argument for
its submission. Why not then consider the question political and let the people decide? That
assumption could have been indulged in. It could very well be the inarticulate major premise.
For many it did bear the stamp of judicial statesmanship.

The opinion of Chief Justice Concepcion renders crystal-clear why as of this date and in the
foreseeable future judicial inquiry to assure the utmost compliance with the constitutional
requirement would be a more appropriate response.

SANCHEZ, J., in separate opinion:

Right at the outset, the writer expresses his deep appreciation to Mr. Justice Calixto O. Zaldivar
and Mr. Justice Fred Ruiz Castro for their invaluable contribution to the substance and form of
the opinion which follows.

Directly under attack in this, a petition for prohibition, is the constitutionality of Republic Act
4913, approved on June 17, 1967. This Act seeks to implement Resolutions 1 and 3 adopted by
the Senate and the House of Representatives on March 16, 1967 with the end in view of
amending vital portions of the Constitution.

Since the problem here presented has its roots in the resolutions aforesaid of both houses of
Congress, it may just as well be that we recite in brief the salient features thereof. Resolution
No. 1 increases the membership of the House of Representatives from 120 to 180 members,
and immediately apportions 160 seats. A companion resolution is Resolution No. 3 which
permits Senators and Congressmen — without forfeiting their seats in Congress — to be
members of the Constitutional Convention1 to be convened, as provided in another resolution —
Resolution No. 2. Parenthetically, two of these proposed amendments to the Constitution
(Resolutions I and 3) are to be submitted to the people for their ratification next November 14,
1967. Resolution No. 2 just adverted to calls for a constitutional convention also to propose
amendments to the Constitution. The delegates thereto are to be elected on the second
Tuesday of November 1970; the convention to sit on June 1, 1971; and the amendments
proposed by the convention to be submitted to the people thereafter for their ratification.

Of importance now are the proposed amendments increasing the number of members of the
House of representatives under Resolution No. 1, and that in Resolution No. 3 which gives
Senators and Congressmen the right to sit as members of the constitutional convention to be
convened on June 1, 1971. Because, these are the two amendments to be submitted to the
people in the general elections soon to be held on November 14, 1967, upon the provisions of
Section 1, Republic Act 4913, which reads:

The amendments to the Constitution of the Philippines proposed by the Congress of the
Philippines in Resolutions of both Houses Numbered One and Three, both adopted on
March sixteen, nineteen hundred and sixty- seven, shall be submitted to the people for
approval at the general election which shall be held on November fourteen, nineteen
hundred and sixty- seven, in accordance with the provisions of this Act.

Republic Act 4913 projects the basic angle of the problem thrust upon us — the manner in
which the amendments proposed by Congress just adverted to be brought to the people's
attention.

First, to the controlling constitutional precept. In order that proposed amendments to the
Constitution may become effective, Section 1, Article XV thereof commands that such
amendments must be "approved by a majority of the votes cast at an election at which
amendments are submitted to the people for their ratification."2 The accent is on two words
complementing each other, namely, "submitted" and "ratification."

1. We are forced to take a long hard look at the core of the problem facing us. And this, because
the amendments submitted are transcendental and encompassing. The ceiling of the number of
Congressmen is sought to be elevated from 120 to 180 members; and Senators and
Congressmen may run in constitutional conventions without forfeiting their seats. These
certainly affect the people as a whole. The increase in the number of Congressmen has its
proportional increase in the people's tax burdens. They may not look at this with favor, what with
the constitutional provision (Section 5, Article VI) that Congress "shall by law make an
apportionment", without the necessity of disturbing the present constitutionally provided number
of Congressmen. People in Quezon City, for instance, may balk at the specific apportionment of
the 160 seats set forth in Resolution No. 1, and ask for a Congressman of their own, on the
theory of equal representation. And then, people may question the propriety of permitting the
increased 180 Congressmen from taking part in the forthcoming constitutional convention and
future conventions for fear that they may dominate its proceedings. They may entertain the
belief that, if at all, increase in the number of Congressmen should be a proper topic for
deliberation in a constitutional convention which, anyway, will soon take place. They probably
would ask: Why the hurry? These ponderables require the people's close scrutiny.

2. With these as backdrop, we perforce go into the philosophy behind the constitutional directive
that constitutional amendments be submitted to the people for their ratification.

A constitutional amendment is not a temporary expedient. Unlike a statute which may suffer
amendments three or more times in the same year, it is intended to stand the test of time. It is
an expression of the people's sovereign will.

And so, our approach to the problem of the mechanics of submission for ratification of
amendments is that reasoning on the basis of the spirit of the Constitution is just as important as
reasoning by a strict adherence to the phraseology thereof. We underscore this, because it is
within the realm of possibility that a Constitution maybe overhauled. Supposing three-fourths of
the Constitution is to be amended. Or, the proposal is to eliminate the all important; Bill of Rights
in its entirety. We believe it to be beyond debate that in some such situations the amendments
ought to call for a constitutional convention rather than a legislative proposal. And yet, nothing
there is in the books or in the Constitution itself. which would require such amendments to be
adopted by a constitutional convention. And then, too, the spirit of the supreme enactment, we
are sure, forbids that proposals therefor be initiated by Congress and thereafter presented to the
people for their ratification.

In the context just adverted to, we take the view that the words "submitted to the people for their
ratification", if construed in the light of the nature of the Constitution — a fundamental charter
that is legislation direct from the people, an — expression of their sovereign will — is that it can
only be amended by the people expressing themselves according to the procedure ordained by
the Constitution. Therefore, amendments must be fairly laid before the people for their blessing
or spurning. The people are not to be mere rubber stamps. They are not to vote blindly. They
must be afforded ample opportunity to mull over the original provisions compare them with the
proposed amendments, and try to reach a conclusion as the dictates of their conscience
suggest, free from the incubus of extraneous or possibly in insidious influences. We believe, the
word "submitted" can only mean that the government, within its maximum capabilities, should
strain every effort to inform very citizen of the provisions to be amended, and the proposed
amendments and the meaning, nature and effects thereof. By this, we are not to be understood
as saying that, if one citizen or 100 citizens or 1,000 citizens cannot be reached, then there is
no submission within the meaning of the word as intended by the framers of the Constitution.
What the Constitution in effect directs is that the government, in submitting an amendment for
ratification, should put every instrumentality or agency within its structural framework to
enlighten the people, educate them with respect to their act of ratification or rejection. For, as
we have earlier stated, one thing is submission and another is ratification. There must be fair
submission, intelligent, consent or rejection. If with all these safeguards the people still approve
the amendment no matter how prejudicial it is to them, then so be it. For, the people decree
their own fate.

Aptly had it been said:

. . . The great men who builded the structure of our state in this respect had the mental
vision of a good Constitution voiced by Judge Cooley, who has said "A good Constitution
should beyond the reach of temporary excitement and popular caprice or passion. It is
needed for stability and steadiness; it must yield to the thought of the people; not to the
whim of the people, or the thought evolved the excitement or hot blood, but the sober
second thought, which alone, if the government is to be safe, can be allowed efficiency. .
. . Changes in government are to be feared unless the benefit is certain. As Montaign
says: "All great mutations shake and disorder a state. Good does not necessarily
succeed evil; another evil may succeed and a worse." Am. Law Rev. 1889, p. 3113

3. Tersely put, the issue before us funnels down to this proposition: If the people are not
sufficiently informed of the amendments to be voted upon, to conscientiously deliberate thereon,
to express their will in a genuine manner can it be said that in accordance with the constitutional
mandate, "the amendments are submitted to the people for their ratification?" Our answer is
"No".

We examine Republic Act 4913, approved on June 17, 1967 — the statute that submits to the
people the constitutional amendments proposed by Congress in Resolutions 1 and 3. Section 2
of the Act provides the manner of propagation of the nature of the amendments throughout the
country. There are five parts in said Section 2, viz:

(1) The amendment shall be published in three consecutive issues of the Official Gazette
at least twenty days prior to the election.

(2) A printed copy thereof shall be posted in a conspicuous place in every municipality,
city and provincial office building and in every polling place not later than October
fourteen, nineteen hundred and sixty-seven, and shall remain posted therein until after
the election.
 (3) At least five copies of the said amendments shall be kept in each polling place to be
made available for examination by the qualified electors during election day.

(4) When practicable, copies in the principal native languages, as may be determined by
the Commission on Elections, shall be kept in each polling place.

(5) The Commission on Elections shall make available copies of said amendments in
English, Spanish and, whenever practicable, in the principal native languages, for free
distribution.

A question that comes to mind is whether the procedure for dissemination of information
regarding the amendments effectively brings the matter to the people. A dissection of the
mechanics yields disturbing thoughts. First, the Official Gazette is not widely read. It does not
reach the barrios. And even if it reaches the barrios, is it available to all? And if it is, would all
under stand English? Second, it should be conceded that many citizens, especially those in the
outlying barrios, do not go to municipal, city and/or provincial office buildings, except on special
occasions like paying taxes or responding to court summonses. And if they do, will they notice
the printed amendments posted on the bulletin board? And if they do notice, such copy again is
in English (sample submitted to this Court by the Solicitor General) for, anyway, the statute does
not require that it be in any other language or dialect. Third, it would not help any if at least five
copies are kept in the polling place for examination by qualified electors during election day. As
petitioner puts it, voting time is not study time. And then, who can enter the polling place, except
those who are about to vote? Fourth, copies in the principal native languages shall be kept in
each polling place. But this is not, as Section 2 itself implies, in the nature of a command
because such copies shall be kept therein only "when practicable" and "as may be determined
by the Commission on Elections." Even if it be said that these are available before election, a
citizen may not intrude into the school building where the polling places are usually located
without disturbing the school classes being held there. Fifth, it is true that the Comelec is
directed to make available copies of such amendments in English, Spanish or whenever
practicable, in the principal native languages, for free distribution. However, Comelec is not
required to actively distribute them to the people. This is significant as to people in the
provinces, especially those in the far-flung barrios who are completely unmindful of the
discussions that go on now and then in the cities and centers of population on the merits and
demerits of the amendments. Rather, Comelec, in this case, is but a passive agency which may
hold copies available, but which copies may notbe distributed at all. Finally, it is of common
knowledge that Comelec has more than its hands full in these pre-election days. They cannot
possibly make extensive distribution.

Voters will soon go to the polls to say "yes" or "no". But even the official sample ballot submitted
to this Court would show that only the amendments are printed at the back. And this, in
pursuance to Republic Act 4913 itself.

Surely enough, the voters do not have the benefit of proper notice of the proposed amendments
thru dissemination by publication in extenso. People do not have at hand the necessary data on
which to base their stand on the merits and demerits of said amendments.

We, therefore, hold that there is no proper submission of the proposed constitutional
amendments within the meaning and intendment of Section 1, Article XV of the Constitution.

4. Contemporary history is witness to the fact that during the present election campaign the
focus is on the election of candidates. The constitutional amendments are crowded out.
Candidates on the homestretch, and their leaders as well as the voters, gear their undivided
efforts to the election of officials; the constitutional amendments cut no ice with them. The truth
is that even in the ballot itself, the space accorded to the casting of "yes" or "no" vote would give
one the impression that the constitutional amendments are but a bootstrap to the electoral
ballot. Worse still, the fortunes of many elective officials, on the national and local levels, are
inextricably intertwined with the results of the votes on the plebiscite. In a clash between votes
for a candidate and conscience on the merits and demerits of the constitutional amendments,
we are quite certain that it is the latter that will be dented.
5. That proper submission of amendments to the people to enable them to equally ratify them
properly is the meat of the constitutional requirement, is reflected in the sequence of uniform
past practices. The Constitution had been amended thrice — in 1939, 1940 and 1947. In each
case, the amendments were embodied in resolutions adopted by the Legislature, which
thereafter fixed the dates at which the proposed amendments were to be ratified or rejected.
These plebiscites have been referred to either as an "election" or "general election". At no time,
however, was the vote for the amendments of the Constitution held simultaneously with the
election officials, national or local. Even with regard to the 1947 parity amendment; the record
shows that the sole issue was the 1947 parity amendment; and the special elections
simultaneously held in only three provinces, Iloilo, Pangasinan and Bukidnon, were
merely incidental thereto.

In the end we say that the people are the last ramparts that guard against indiscriminate
changes in the Constitution that is theirs. Is it too much to ask that reasonable guarantee be
made that in the matter of the alterations of the law of the land, their true voice be heard? The
answer perhaps is best expressed in the following thoughts: "It must be remembered that the
Constitution is the people's enactment. No proposed change can become effective unless they
will it so through the compelling force of need of it and desire for it."4

For the reasons given, our vote is that Republic Act 4913 must be stricken down as in violation
of the Constitution.

Zaldivar and Castro, JJ., concur.

Reyes, J.B.L., Dizon and Angeles, JJ., concur in the result.

REYES, J.B.L., J., concurring:

I concur in the result with the opinion penned by Mr. Justice Sanchez. To approve a mere
proposal to amend the Constitution requires (Art. XV) a three-fourths (3/4) vote of all the
members of each legislative chamber, the highest majority ever demanded by the fundamental
charter, one higher even than that required in order to declare war (Sec. 24, Article VI), with all
its dire consequences. If such an overwhelming majority, that was evidently exacted in order to
impress upon all and sundry the seriousness of every constitutional amendment, is asked for a
proposal to amend the Constitution, I find it impossible to believe that it was ever intended by its
framers that such amendment should be submitted and ratified by just "a majority of the votes
cast at an election at which the amendments are submitted to the people for their ratification", if
the concentration of the people's attention thereon to be diverted by other extraneous issues,
such as the choice of local and national officials. The framers of the Constitution, aware of the
fundamental character thereof, and of the need of giving it as much stability as is practicable,
could have only meant that any amendments thereto should be debated, considered and voted
upon at an election wherein the people could devote undivided attention to the subject. That this
was the intention and the spirit of the provision is corroborated in the case of all other
constitutional amendments in the past, that were submitted to and approved in special elections
exclusively devoted to the issue whether the legislature's amendatory proposals should be
ratified or not.

Dizon, Angeles, Zaldivar and Castro, JJ., concur.

Footnotes

1
Urging the latter to refrain from implementing Republic Act. No. 4913 and from
submitting to a plebiscite in the general elections to be held on November 14, 1967, the
Constitutional amendments proposed in the aforementioned R.B.H. Nos. 1 and 3.
2
Dated October 30, 1967.
3
78 Phil. 1.

4
63 Phil. 139, 157.
5
Supra.

6
81 Phil. 818.

7
L-2851, March 4 and 14, 1949.
8
L-10520, February 28, 1957.

9
L-18684, September 14, 1961.

10
Section 1, Art. VI, Constitution of the Philippines.

11
Section 1, Art. II, Constitution of the Philippines.

12
Section 1, Art. XV, Constitution of the Philippines.

13
Of amending the Constitution.
14
And, inferentially, to lower courts.

15
Sec. 2(1), Art. VIII of the Constitution.

16
Supra.

17
Approved, June 17, 1961.
18
Macias vs. Commission on Elections, supra.
19
Under the original Constitution providing for a unicameral legislative body, whose
members were chosen for a term of three (3) years (Section 1, Art. VI, of the Original
Constitution).
20
Section 1, Article IX of the Constitution.

21
Lino Luna vs. Rodriguez and De los Angeles, 37 Phil. p. 192; Nacionalista Party vs.
De Vera, 85 Phil., 126; Codilla vs. Martinez, L-14569, November 23, 1960. See, also,
State vs. Carrol, 38 Conn. 499; Wilcox vs. Smith, 5 Wendell [N.Y.] 231; 21 Am. Dec.,
213; Sheenan's Case, 122 Mass., 445; 23 Am. Rep., 323.

22
Torres vs. Ribo, 81 Phil. 50.

23
Nacionalista Party vs. De Vera, supra.

24
People vs. Rogelio Gabitanan, 43 O.G. 3211.
25
53 Phil. 866.

26
50 Am. Jur., Sec. 282, pp. 267-268, citing Heckathorn v. Heckathorn, 284 Mich. 677,
280 NW 79, citing RCL; Robson v. Cantwell, 143 SC 104, 141 SE 180, citing RCL;
Geiger v. Kobilka, 26 Wash 171, 66 P 423, Am. St. Rep. 733 and many others.

BENGZON, J.P., J., concurring:

1
United States v. San Jacinto Tin Co., 125 U. S. 273.
 2
Angara v. Electoral Commission, 63 Phil. 139, 1958, Justice Laurel, ponente.

FERNANDO, J., concurring:

1
103 Phil. 1051 (1957).

2
78 Phil. 1 (1947).

3
307 US 433 (1939).
4
84 Phil. 368 (1940).

5
Commonwealth Act No. 671 (1941).

6
Araneta v. Dinglasan, supra, at p. 376.

SANCHEZ, J., separate opinion:

1
The text of the law reads: "He (Senator or Member of the House of Representatives)
may, however, be a Member of Constitutional Convention."

2
Emphasis supplied.
3
Ellingham vs. Dye, 99 N.E. pp. 4, 15; Emphasis supplied.

4
Elingham vs. Dye, supra, at p. 17; emphasis supplied.

G.R. No. 127325 March 19, 1997

MIRIAM DEFENSOR SANTIAGO, ALEXANDER PADILLA, and MARIA ISABEL

ONGPIN, petitioners,
vs.
COMMISSION ON ELECTIONS, JESUS DELFIN, ALBERTO PEDROSA & CARMEN
PEDROSA, in their capacities as founding members of the People's Initiative for Reforms,
Modernization and Action (PIRMA), respondents.

SENATOR RAUL S. ROCO, DEMOKRASYA-IPAGTANGGOL ANG KONSTITUSYON (DIK),

MOVEMENT OF ATTORNEYS FOR BROTHERHOOD INTEGRITY AND NATIONALISM, INC.
(MABINI), INTEGRATED BAR OF THE PHILIPPINES (IBP), and LABAN NG
DEMOKRATIKONG PILIPINO (LABAN), petitioners-intervenors.

DAVIDE, JR., J.:

The heart of this controversy brought to us by way of a petition for prohibition under Rule 65 of
the Rules of Court is the right of the people to directly propose amendments to the Constitution
through the system of initiative under Section 2 of Article XVII of the 1987 Constitution.
Undoubtedly, this demands special attention, as this system of initiative was unknown to the
people of this country, except perhaps to a few scholars, before the drafting of the 1987
Constitution. The 1986 Constitutional Commission itself, through the original proponent1 and the
main sponsor2 of the proposed Article on Amendments or Revision of the Constitution,
characterized this system as "innovative".3 Indeed it is, for both under the 1935 and 1973
Constitutions, only two methods of proposing amendments to, or revision of, the Constitution
were recognized, viz., (1) by Congress upon a vote of three-fourths of all its members and (2) by
a constitutional convention.4 For this and the other reasons hereafter discussed, we resolved to
give due course to this petition.
On 6 December 1996, private respondent Atty. Jesus S. Delfin filed with public respondent
Commission on Elections (hereafter, COMELEC) a "Petition to Amend the Constitution, to Lift
Term Limits of Elective Officials, by People's Initiative" (hereafter, Delfin Petition)5 wherein
Delfin asked the COMELEC for an order

1. Fixing the time and dates for signature gathering all over the country;

2. Causing the necessary publications of said Order and the attached "Petition
for Initiative on the 1987 Constitution, in newspapers of general and local
circulation;

3. Instructing Municipal Election Registrars in all Regions of the Philippines, to

assist Petitioners and volunteers, in establishing signing stations at the time and
on the dates designated for the purpose.

Delfin alleged in his petition that he is a founding member of the Movement for People's
Initiative,6 a group of citizens desirous to avail of the system intended to institutionalize people
power; that he and the members of the Movement and other volunteers intend to exercise the
power to directly propose amendments to the Constitution granted under Section 2, Article XVII
of the Constitution; that the exercise of that power shall be conducted in proceedings under the
control and supervision of the COMELEC; that, as required in COMELEC Resolution No. 2300,
signature stations shall be established all over the country, with the assistance of municipal
election registrars, who shall verify the signatures affixed by individual signatories; that before
the Movement and other volunteers can gather signatures, it is necessary that the time and
dates to be designated for the purpose be first fixed in an order to be issued by the COMELEC;
and that to adequately inform the people of the electoral process involved, it is likewise
necessary that the said order, as well as the Petition on which the signatures shall be affixed, be
published in newspapers of general and local circulation, under the control and supervision of
the COMELEC.

The Delfin Petition further alleged that the provisions sought to be amended are Sections 4 and
7 of Article VI,7Section 4 of Article VII,8 and Section 8 of Article X9 of the Constitution. Attached
to the petition is a copy of a "Petition for Initiative on the 1987 Constitution" 10 embodying the
proposed amendments which consist in the deletion from the aforecited sections of the
provisions concerning term limits, and with the following proposition:

DO YOU APPROVE OF LIFTING THE TERM LIMITS OF ALL ELECTIVE

GOVERNMENT OFFICIALS, AMENDING FOR THE PURPOSE SECTIONS 4
AND 7 OF ARTICLE VI, SECTION 4 OF ARTICLE VII, AND SECTION 8 OF
ARTICLE X OF THE 1987 PHILIPPINE CONSTITUTION?

According to Delfin, the said Petition for Initiative will first be submitted to the people, and after it
is signed by at least twelve per cent of the total number of registered voters in the country it will
be formally filed with the COMELEC.

Upon the filing of the Delfin Petition, which was forthwith given the number UND 96-037
(INITIATIVE), the COMELEC, through its Chairman, issued an Order 11 (a) directing Delfin "to
cause the publication of the petition, together with the attached Petition for Initiative on the 1987
Constitution (including the proposal, proposed constitutional amendment, and the signature
form), and the notice of hearing in three (3) daily newspapers of general circulation at his own
expense" not later than 9 December 1996; and (b) setting the case for hearing on 12 December
1996 at 10:00 a.m.

At the hearing of the Delfin Petition on 12 December 1996, the following appeared: Delfin and
Atty. Pete Q. Quadra; representatives of the People's Initiative for Reforms, Modernization and
Action (PIRMA); intervenor-oppositor Senator Raul S. Roco, together with his two other lawyers,
and representatives of, or counsel for, the Integrated Bar of the Philippines (IBP), Demokrasya-
Ipagtanggol ang Konstitusyon (DIK), Public Interest Law Center, and Laban ng Demokratikong
Pilipino (LABAN). 12 Senator Roco, on that same day, filed a Motion to Dismiss the Delfin
Petition on the ground that it is not the initiatory petition properly cognizable by the COMELEC.
After hearing their arguments, the COMELEC directed Delfin and the oppositors to file their
"memoranda and/or oppositions/memoranda" within five days. 13

On 18 December 1996, the petitioners herein — Senator Miriam Defensor Santiago, Alexander
Padilla, and Maria Isabel Ongpin — filed this special civil action for prohibition raising the
following arguments:

(1) The constitutional provision on people's initiative to amend the Constitution

can only be implemented by law to be passed by Congress. No such law has
been passed; in fact, Senate Bill No. 1290 entitled An Act Prescribing and
Regulating Constitution Amendments by People's Initiative, which petitioner
Senator Santiago filed on 24 November 1995, is still pending before the Senate
Committee on Constitutional Amendments.

(2) It is true that R.A. No. 6735 provides for three systems of initiative, namely,
initiative on the Constitution, on statutes, and on local legislation. However, it
failed to provide any subtitle on initiative on the Constitution, unlike in the other
modes of initiative, which are specifically provided for in Subtitle II and Subtitle III.
This deliberate omission indicates that the matter of people's initiative to amend
the Constitution was left to some future law. Former Senator Arturo Tolentino
stressed this deficiency in the law in his privilege speech delivered before the
Senate in 1994: "There is not a single word in that law which can be considered
as implementing [the provision on constitutional initiative]. Such implementing
provisions have been obviously left to a separate law.

(3) Republic Act No. 6735 provides for the effectivity of the law after publication
in print media. This indicates that the Act covers only laws and not constitutional
amendments because the latter take effect only upon ratification and not after
publication.

(4) COMELEC Resolution No. 2300, adopted on 16 January 1991 to govern "the
conduct of initiative on the Constitution and initiative and referendum on national
and local laws, is ultra vires insofar as initiative on amendments to the
Constitution is concerned, since the COMELEC has no power to provide rules
and regulations for the exercise of the right of initiative to amend the Constitution.
Only Congress is authorized by the Constitution to pass the implementing law.

(5) The people's initiative is limited to amendments to the Constitution, not

to revision thereof. Extending or lifting of term limits constitutes a revision and is,
therefore, outside the power of the people's initiative.

(6) Finally, Congress has not yet appropriated funds for people's initiative; neither
the COMELEC nor any other government department, agency, or office has
realigned funds for the purpose.

To justify their recourse to us via the special civil action for prohibition, the petitioners allege that
in the event the COMELEC grants the Delfin Petition, the people's initiative spearheaded by
PIRMA would entail expenses to the national treasury for general re-registration of voters
amounting to at least P180 million, not to mention the millions of additional pesos in expenses
which would be incurred in the conduct of the initiative itself. Hence, the transcendental
importance to the public and the nation of the issues raised demands that this petition for
prohibition be settled promptly and definitely, brushing aside technicalities of procedure and
calling for the admission of a taxpayer's and legislator's suit. 14 Besides, there is no other plain,
speedy, and adequate remedy in the ordinary course of law.

On 19 December 1996, this Court (a) required the respondents to comment on the petition
within a non-extendible period of ten days from notice; and (b) issued a temporary restraining
order, effective immediately and continuing until further orders, enjoining public respondent
COMELEC from proceeding with the Delfin Petition, and private respondents Alberto and
Carmen Pedrosa from conducting a signature drive for people's initiative to amend the
Constitution.
 15
On 2 January 1997, private respondents, through Atty Quadra, filed their Comment on the
petition. They argue therein that:

1. IT IS NOT TRUE THAT "IT WOULD ENTAIL EXPENSES TO THE NATIONAL

TREASURY FOR GENERAL REGISTRATION OF VOTERS AMOUNTING TO
AT LEAST PESOS: ONE HUNDRED EIGHTY MILLION (P180,000,000.00)" IF
THE "COMELEC GRANTS THE PETITION FILED BY RESPONDENT DELFIN
BEFORE THE COMELEC.

2. NOT A SINGLE CENTAVO WOULD BE SPENT BY THE NATIONAL

GOVERNMENT IF THE COMELEC GRANTS THE PETITION OF
RESPONDENT DELFIN. ALL EXPENSES IN THE SIGNATURE GATHERING
ARE ALL FOR THE ACCOUNT OF RESPONDENT DELFIN AND HIS
VOLUNTEERS PER THEIR PROGRAM OF ACTIVITIES AND EXPENDITURES
SUBMITTED TO THE COMELEC. THE ESTIMATED COST OF THE DAILY PER
DIEM OF THE SUPERVISING SCHOOL TEACHERS IN THE SIGNATURE
GATHERING TO BE DEPOSITED and TO BE PAID BY DELFIN AND HIS
VOLUNTEERS IS P2,571,200.00;

3. THE PENDING PETITION BEFORE THE COMELEC IS ONLY ON THE

SIGNATURE GATHERING WHICH BY LAW COMELEC IS DUTY BOUND "TO
SUPERVISE CLOSELY" PURSUANT TO ITS "INITIATORY JURISDICTION"
UPHELD BY THE HONORABLE COURT IN ITS RECENT SEPTEMBER 26,
1996 DECISION IN THE CASE OF SUBIC BAY METROPOLITAN AUTHORITY
VS. COMELEC, ET AL. G.R. NO. 125416;

4. REP. ACT NO. 6735 APPROVED ON AUGUST 4, 1989 IS THE ENABLING

LAW IMPLEMENTING THE POWER OF PEOPLE INITIATIVE TO PROPOSE
AMENDMENTS TO THE CONSTITUTION. SENATOR DEFENSOR-
SANTIAGO'S SENATE BILL NO. 1290 IS A DUPLICATION OF WHAT ARE
ALREADY PROVIDED FOR IN REP. ACT NO. 6735;

5. COMELEC RESOLUTION NO. 2300 PROMULGATED ON JANUARY 16,

1991 PURSUANT TO REP. ACT 6735 WAS UPHELD BY THE HONORABLE
COURT IN THE RECENT SEPTEMBER 26, 1996 DECISION IN THE CASE
OF SUBIC BAY METROPOLITAN AUTHORITY VS. COMELEC, ET AL. G.R.
NO. 125416 WHERE THE HONORABLE COURT SAID: "THE COMMISSION
ON ELECTIONS CAN DO NO LESS BY SEASONABLY AND JUDICIOUSLY
PROMULGATING GUIDELINES AND RULES FOR BOTH NATIONAL AND
LOCAL USE, IN IMPLEMENTING OF THESE LAWS."

6. EVEN SENATOR DEFENSOR-SANTIAGO'S SENATE BILL NO. 1290

CONTAINS A PROVISION DELEGATING TO THE COMELEC THE POWER TO
"PROMULGATE SUCH RULES AND REGULATIONS AS MAY BE
NECESSARY TO CARRY OUT THE PURPOSES OF THIS ACT." (SEC. 12,
S.B. NO. 1290, ENCLOSED AS ANNEX E, PETITION);

7. THE LIFTING OF THE LIMITATION ON THE TERM OF OFFICE OF

ELECTIVE OFFICIALS PROVIDED UNDER THE 1987 CONSTITUTION IS NOT
A "REVISION" OF THE CONSTITUTION. IT IS ONLY AN AMENDMENT.
"AMENDMENT ENVISAGES AN ALTERATION OF ONE OR A FEW SPECIFIC
PROVISIONS OF THE CONSTITUTION. REVISION CONTEMPLATES A RE-
EXAMINATION OF THE ENTIRE DOCUMENT TO DETERMINE HOW AND TO
WHAT EXTENT IT SHOULD BE ALTERED." (PP. 412-413, 2ND. ED. 1992,
1097 PHIL. CONSTITUTION, BY JOAQUIN G. BERNAS, S.J.).

Also on 2 January 1997, private respondent Delfin filed in his own behalf a Comment 16 which
starts off with an assertion that the instant petition is a "knee-jerk reaction to a draft 'Petition for
Initiative on the 1987 Constitution'. . . which is not formally filed yet." What he filed on 6
December 1996 was an "Initiatory Pleading" or "Initiatory Petition," which was legally necessary
to start the signature campaign to amend the Constitution or to put the movement to gather
signatures under COMELEC power and function. On the substantive allegations of the
petitioners, Delfin maintains as follows:

(1) Contrary to the claim of the petitioners, there is a law, R.A. No. 6735, which
governs the conduct of initiative to amend the Constitution. The absence therein
of a subtitle for such initiative is not fatal, since subtitles are not requirements for
the validity or sufficiency of laws.

(2) Section 9(b) of R.A. No. 6735 specifically provides that the proposition in
an initiative to amend the Constitution approved by the majority of the votes cast
in the plebiscite shall become effective as of the day of the plebiscite.

(3) The claim that COMELEC Resolution No. 2300 is ultra vires is contradicted
by (a) Section 2, Article IX-C of the Constitution, which grants the COMELEC the
power to enforce and administer all laws and regulations relative to the conduct
of an election, plebiscite, initiative, referendum, and recall; and (b) Section 20 of
R.A. 6735, which empowers the COMELEC to promulgate such rules and
regulations as may be necessary to carry out the purposes of the Act.

(4) The proposed initiative does not involve a revision of, but
mere amendment to, the Constitution because it seeks to alter only a few specific
provisions of the Constitution, or more specifically, only those which lay term
limits. It does not seek to reexamine or overhaul the entire document.

As to the public expenditures for registration of voters, Delfin considers petitioners' estimate of
P180 million as unreliable, for only the COMELEC can give the exact figure. Besides, if there
will be a plebiscite it will be simultaneous with the 1997 Barangay Elections. In any event, fund
requirements for initiative will be a priority government expense because it will be for the
exercise of the sovereign power of the people.

In the Comment 17 for the public respondent COMELEC, filed also on 2 January 1997, the Office
of the Solicitor General contends that:

(1) R.A. No. 6735 deals with, inter alia, people's initiative to amend the
Constitution. Its Section 2 on Statement of Policy explicitly affirms, recognizes,
and guarantees that power; and its Section 3, which enumerates the three
systems of initiative, includes initiative on the Constitution and defines the same
as the power to propose amendments to the Constitution. Likewise, its Section 5
repeatedly mentions initiative on the Constitution.

(2) A separate subtitle on initiative on the Constitution is not necessary in R.A.

No. 6735 because, being national in scope, that system of initiative is deemed
included in the subtitle on National Initiative and Referendum; and Senator
Tolentino simply overlooked pertinent provisions of the law when he claimed that
nothing therein was provided for initiative on the Constitution.

(3) Senate Bill No. 1290 is neither a competent nor a material proof that R.A. No.
6735 does not deal with initiative on the Constitution.

(4) Extension of term limits of elected officials constitutes a mere amendment to

the Constitution, not a revision thereof.

(5) COMELEC Resolution No. 2300 was validly issued under Section 20 of R.A.
No. 6735 and under the Omnibus Election Code. The rule-making power of the
COMELEC to implement the provisions of R.A. No. 6735 was in fact upheld by
this Court in Subic Bay Metropolitan Authority vs. COMELEC.

On 14 January 1997, this Court (a) confirmed nunc pro tunc the temporary restraining order; (b)
noted the aforementioned Comments and the Motion to Lift Temporary Restraining Order filed
by private respondents through Atty. Quadra, as well as the latter's Manifestation stating that he
is the counsel for private respondents Alberto and Carmen Pedrosa only and the Comment he
filed was for the Pedrosas; and (c) granted the Motion for Intervention filed on 6 January 1997
by Senator Raul Roco and allowed him to file his Petition in Intervention not later than 20
January 1997; and (d) set the case for hearing on 23 January 1997 at 9:30 a.m.

On 17 January 1997, the Demokrasya-Ipagtanggol ang Konstitusyon (DIK) and the Movement
of Attorneys for Brotherhood Integrity and Nationalism, Inc. (MABINI), filed a Motion for
Intervention. Attached to the motion was their Petition in Intervention, which was later replaced
by an Amended Petition in Intervention wherein they contend that:

(1) The Delfin proposal does not involve a mere amendment to, but a revision of,
the Constitution because, in the words of Fr. Joaquin Bernas, S.J., 18 it would
involve a change from a political philosophy that rejects unlimited tenure to one
that accepts unlimited tenure; and although the change might appear to be an
isolated one, it can affect other provisions, such as, on synchronization of
elections and on the State policy of guaranteeing equal access to opportunities
for public service and prohibiting political dynasties. 19 A revision cannot be done
by initiative which, by express provision of Section 2 of Article XVII of the
Constitution, is limited to amendments.

(2) The prohibition against reelection of the President and the limits provided for
all other national and local elective officials are based on the philosophy of
governance, "to open up the political arena to as many as there are Filipinos
qualified to handle the demands of leadership, to break the concentration of
political and economic powers in the hands of a few, and to promote effective
proper empowerment for participation in policy and decision-making for the
common good"; hence, to remove the term limits is to negate and nullify the
noble vision of the 1987 Constitution.

(3) The Delfin proposal runs counter to the purpose of initiative, particularly in a
conflict-of-interest situation. Initiative is intended as a fallback position that may
be availed of by the people only if they are dissatisfied with the performance of
their elective officials, but not as a premium for good performance. 20

(4) R.A. No. 6735 is deficient and inadequate in itself to be called the enabling
law that implements the people's initiative on amendments to the Constitution. It
fails to state (a) the proper parties who may file the petition, (b) the appropriate
agency before whom the petition is to be filed, (c) the contents of the petition, (d)
the publication of the same, (e) the ways and means of gathering the signatures
of the voters nationwide and 3% per legislative district, (f) the proper parties who
may oppose or question the veracity of the signatures, (g) the role of the
COMELEC in the verification of the signatures and the sufficiency of the petition,
(h) the appeal from any decision of the COMELEC, (I) the holding of a plebiscite,
and (g) the appropriation of funds for such people's initiative. Accordingly, there
being no enabling law, the COMELEC has no jurisdiction to hear Delfin's petition.

(5) The deficiency of R.A. No. 6735 cannot be rectified or remedied by

COMELEC Resolution No. 2300, since the COMELEC is without authority to
legislate the procedure for a people's initiative under Section 2 of Article XVII of
the Constitution. That function exclusively pertains to Congress. Section 20 of
R.A. No. 6735 does not constitute a legal basis for the Resolution, as the former
does not set a sufficient standard for a valid delegation of power.

On 20 January 1997, Senator Raul Roco filed his Petition in

Intervention. 21 He avers that R.A. No. 6735 is the enabling law that implements the people's
right to initiate constitutional amendments. This law is a consolidation of Senate Bill No. 17 and
House Bill No. 21505; he co-authored the House Bill and even delivered a sponsorship speech
thereon. He likewise submits that the COMELEC was empowered under Section 20 of that law
to promulgate COMELEC Resolution No. 2300. Nevertheless, he contends that the respondent
Commission is without jurisdiction to take cognizance of the Delfin Petition and to order its
publication because the said petition is not the initiatory pleading contemplated under the
Constitution, Republic Act No. 6735, and COMELEC Resolution No. 2300. What vests
jurisdiction upon the COMELEC in an initiative on the Constitution is the filing of a petition for
initiative which is signed by the required number of registered voters. He also submits that the
proponents of a constitutional amendment cannot avail of the authority and resources of the
COMELEC to assist them is securing the required number of signatures, as the COMELEC's
role in an initiative on the Constitution is limited to the determination of the sufficiency of the
initiative petition and the call and supervision of a plebiscite, if warranted.

On 20 January 1997, LABAN filed a Motion for Leave to Intervene.

The following day, the IBP filed a Motion for Intervention to which it attached a Petition in
Intervention raising the following arguments:

(1) Congress has failed to enact an enabling law mandated under Section 2,
Article XVII of the 1987 Constitution.

(2) COMELEC Resolution No. 2300 cannot substitute for the required
implementing law on the initiative to amend the Constitution.

(3) The Petition for Initiative suffers from a fatal defect in that it does not have the
required number of signatures.

(4) The petition seeks, in effect a revision of the Constitution, which can be
proposed only by Congress or a constitutional convention. 22

On 21 January 1997, we promulgated a Resolution (a) granting the Motions for Intervention filed
by the DIK and MABINI and by the IBP, as well as the Motion for Leave to Intervene filed by
LABAN; (b) admitting the Amended Petition in Intervention of DIK and MABINI, and the Petitions
in Intervention of Senator Roco and of the IBP; (c) requiring the respondents to file within a
nonextendible period of five days their Consolidated Comments on the aforesaid Petitions in
Intervention; and (d) requiring LABAN to file its Petition in Intervention within a nonextendible
period of three days from notice, and the respondents to comment thereon within a
nonextendible period of five days from receipt of the said Petition in Intervention.

At the hearing of the case on 23 January 1997, the parties argued on the following pivotal
issues, which the Court formulated in light of the allegations and arguments raised in the
pleadings so far filed:

1. Whether R.A. No. 6735, entitled An Act Providing for a System of Initiative and
Referendum and Appropriating Funds Therefor, was intended to include or
cover initiative on amendments to the Constitution; and if so, whether the Act, as
worded, adequately covers such initiative.

2. Whether that portion of COMELEC Resolution No. 2300 (In re: Rules and
Regulations Governing the Conduct of Initiative on the Constitution, and Initiative
and Referendum on National and Local Laws) regarding the conduct of initiative
on amendments to the Constitution is valid, considering the absence in the law of
specific provisions on the conduct of such initiative.

3. Whether the lifting of term limits of elective national and local officials, as
proposed in the draft "Petition for Initiative on the 1987 Constitution," would
constitute a revision of, or an amendment to, the Constitution.

4. Whether the COMELEC can take cognizance of, or has jurisdiction over, a
petition solely intended to obtain an order (a) fixing the time and dates for
signature gathering; (b) instructing municipal election officers to assist Delfin's
movement and volunteers in establishing signature stations; and (c) directing or
causing the publication of, inter alia, the unsigned proposed Petition for Initiative
on the 1987 Constitution.

5. Whether it is proper for the Supreme Court to take cognizance of the petition
when there is a pending case before the COMELEC.
After hearing them on the issues, we required the parties to submit simultaneously their
respective memoranda within twenty days and requested intervenor Senator Roco to submit
copies of the deliberations on House Bill No. 21505.

On 27 January 1997, LABAN filed its Petition in Intervention wherein it adopts the allegations
and arguments in the main Petition. It further submits that the COMELEC should have
dismissed the Delfin Petition for failure to state a sufficient cause of action and that the
Commission's failure or refusal to do so constituted grave abuse of discretion amounting to lack
of jurisdiction.

On 28 January 1997, Senator Roco submitted copies of portions of both the Journal and the
Record of the House of Representatives relating to the deliberations of House Bill No. 21505, as
well as the transcripts of stenographic notes on the proceedings of the Bicameral Conference
Committee, Committee on Suffrage and Electoral Reforms, of 6 June 1989 on House Bill No.
21505 and Senate Bill No. 17.

Private respondents Alberto and Carmen Pedrosa filed their Consolidated Comments on the
Petitions in Intervention of Senator Roco, DIK and MABINI, and IBP. 23 The parties thereafter
filed, in due time, their separate memoranda. 24

As we stated in the beginning, we resolved to give due course to this special civil action.

For a more logical discussion of the formulated issues, we shall first take up the fifth issue which
appears to pose a prejudicial procedural question.

THE INSTANT PETITION IS VIABLE DESPITE THE PENDENCY IN THE COMELEC

OF THE DELFIN PETITION.

Except for the petitioners and intervenor Roco, the parties paid no serious attention to the fifth
issue, i.e., whether it is proper for this Court to take cognizance of this special civil action when
there is a pending case before the COMELEC. The petitioners provide an affirmative answer.
Thus:

28. The Comelec has no jurisdiction to take cognizance of the petition filed by
private respondent Delfin. This being so, it becomes imperative to stop the
Comelec from proceeding any further, and under the Rules of Court, Rule 65,
Section 2, a petition for prohibition is the proper remedy.

29. The writ of prohibition is an extraordinary judicial writ issuing out of a court of
superior jurisdiction and directed to an inferior court, for the purpose of
preventing the inferior tribunal from usurping a jurisdiction with which it is not
legally vested. (People v. Vera, supra., p. 84). In this case the writ is an urgent
necessity, in view of the highly divisive and adverse environmental
consequences on the body politic of the questioned Comelec order. The
consequent climate of legal confusion and political instability begs for judicial
statesmanship.

30. In the final analysis, when the system of constitutional law is threatened by
the political ambitions of man, only the Supreme Court
can save a nation in peril and uphold the paramount majesty of the
Constitution. 25

It must be recalled that intervenor Roco filed with the COMELEC a motion to dismiss the Delfin
Petition on the ground that the COMELEC has no jurisdiction or authority to entertain the
petition. 26 The COMELEC made no ruling thereon evidently because after having heard the
arguments of Delfin and the oppositors at the hearing on 12 December 1996, it required them to
submit within five days their memoranda or oppositions/memoranda. 27 Earlier, or specifically on
6 December 1996, it practically gave due course to the Delfin Petition by ordering Delfin to
cause the publication of the petition, together with the attached Petition for Initiative, the
signature form, and the notice of hearing; and by setting the case for hearing. The COMELEC's
failure to act on Roco's motion to dismiss and its insistence to hold on to the petition rendered
ripe and viable the instant petition under Section 2 of Rule 65 of the Rules of Court, which
provides:

Sec. 2. Petition for prohibition. — Where the proceedings of any tribunal,

corporation, board, or person, whether exercising functions judicial or ministerial,
are without or in excess of its or his jurisdiction, or with grave abuse of discretion,
and there is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in
the proper court alleging the facts with certainty and praying that judgment be
rendered commanding the defendant to desist from further proceedings in the
action or matter specified therein.

It must also be noted that intervenor Roco claims that the COMELEC has no jurisdiction over
the Delfin Petition because the said petition is not supported by the required minimum number
of signatures of registered voters. LABAN also asserts that the COMELEC gravely abused its
discretion in refusing to dismiss the Delfin Petition, which does not contain the required number
of signatures. In light of these claims, the instant case may likewise be treated as a special civil
action for certiorari under Section I of Rule 65 of the Rules of Court.

In any event, as correctly pointed out by intervenor Roco in his Memorandum, this Court may
brush aside technicalities of procedure in
cases of transcendental importance. As we stated in Kilosbayan, Inc. v. Guingona, Jr. 28

A party's standing before this Court is a procedural technicality which it may, in

the exercise of its discretion, set aside in view of the importance of issues raised.
In the landmark Emergency Powers Cases, this Court brushed aside this
technicality because the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure.

II

R.A. NO. 6735 INTENDED TO INCLUDE THE SYSTEM OF INITIATIVE ON

AMENDMENTS TO THE CONSTITUTION, BUT IS, UNFORTUNATELY, INADEQUATE
TO COVER THAT SYSTEM.

Section 2 of Article XVII of the Constitution provides:

Sec. 2. Amendments to this Constitution may likewise be directly proposed by

the people through initiative upon a petition of at least twelve per centum of the
total number of registered voters, of which every legislative district must be
represented by at least three per centum of the registered voters therein. No
amendment under this section shall be authorized within five years following the
ratification of this Constitution nor oftener than once every five years thereafter.

The Congress shall provide for the implementation of the exercise of this right.

This provision is not self-executory. In his book, 29 Joaquin Bernas, a member of the 1986
Constitutional Commission, stated:

Without implementing legislation Section 2 cannot operate. Thus, although this

mode of amending the Constitution is a mode of amendment which bypasses
congressional action, in the last analysis it still is dependent on congressional
action.

Bluntly stated, the right of the people to directly propose amendments to the Constitution
through the system of initiative would remain entombed in the cold niche of the
Constitution until Congress provides for its implementation. Stated otherwise, while the
 Constitution has recognized or granted that right, the people cannot exercise it if
Congress, for whatever reason, does not provide for its implementation.

This system of initiative was originally included in Section 1 of the draft Article on Amendment or
Revision proposed by the Committee on Amendments and Transitory Provisions of the 1986
Constitutional Commission in its Committee Report No. 7 (Proposed Resolution No.
332). 30 That section reads as follows:

Sec. 1. Any amendment to, or revision of, this Constitution may be proposed:

(a) by the National Assembly upon a vote of three-fourths of all its members; or

(b) by a constitutional convention; or

(c) directly by the people themselves thru initiative as provided for in Article___
Section ___of the Constitution. 31

After several interpellations, but before the period of amendments, the Committee
submitted a new formulation of the concept of initiative which it denominated as Section
2; thus:

MR. SUAREZ. Thank you, Madam President. May we respectfully

call attention of the Members of the Commission that pursuant to
the mandate given to us last night, we submitted this afternoon a
complete Committee Report No. 7 which embodies the proposed
provision governing the matter of initiative. This is now covered by
Section 2 of the complete committee report. With the permission
of the Members, may I quote Section 2:

The people may, after five years from the date of the last plebiscite held, directly
propose amendments to this Constitution thru initiative upon petition of at least
ten percent of the registered voters.

This completes the blanks appearing in the original Committee Report No. 7. 32

The interpellations on Section 2 showed that the details for carrying out Section 2 are left to the
legislature. Thus:

FR. BERNAS. Madam President, just two simple, clarificatory

questions.

First, on Section 1 on the matter of initiative upon petition of at

least 10 percent, there are no details in the provision on how to
carry this out. Do we understand, therefore, that we are leaving
this matter to the legislature?

MR. SUAREZ. That is right, Madam President.

FR. BERNAS. And do we also understand, therefore, that for as

long as the legislature does not pass the necessary implementing
law on this, this will not operate?

MR. SUAREZ. That matter was also taken up during the

committee hearing, especially with respect to the budget
appropriations which would have to be legislated so that the
plebiscite could be called. We deemed it best that this matter be
left to the legislature. The Gentleman is right. In any event, as
envisioned, no amendment through the power of initiative can be
called until after five years from the date of the ratification of this
Constitution. Therefore, the first amendment that could be
proposed through the exercise of this initiative power would be
after five years. It is reasonably expected that within that five-year
period, the National Assembly can come up with the appropriate
rules governing the exercise of this power.

FR. BERNAS. Since the matter is left to the legislature — the

details on how this is to be carried out — is it possible that, in
effect, what will be presented to the people for ratification is the
work of the legislature rather than of the people? Does this
provision exclude that possibility?

MR. SUAREZ. No, it does not exclude that possibility because

even the legislature itself as a body could propose that
amendment, maybe individually or collectively, if it fails to muster
the three-fourths vote in order to constitute itself as a constituent
assembly and submit that proposal to the people for ratification
through the process of an initiative.

xxx xxx xxx

MS. AQUINO. Do I understand from the sponsor that the intention

in the proposal is to vest constituent power in the people to amend
the Constitution?

MR. SUAREZ. That is absolutely correct, Madam President.

MS. AQUINO. I fully concur with the underlying precept of the

proposal in terms of institutionalizing popular participation in the
drafting of the Constitution or in the amendment thereof, but I
would have a lot of difficulties in terms of accepting the draft of
Section 2, as written. Would the sponsor agree with me that in the
hierarchy of legal mandate, constituent power has primacy over all
other legal mandates?

MR. SUAREZ. The Commissioner is right, Madam President.

MS. AQUINO. And would the sponsor agree with me that in the
hierarchy of legal values, the Constitution is source of all legal
mandates and that therefore we require a great deal of
circumspection in the drafting and in the amendments of the
Constitution?

MR. SUAREZ. That proposition is nondebatable.

MS. AQUINO. Such that in order to underscore the primacy of

constituent power we have a separate article in the constitution
that would specifically cover the process and the modes of
amending the Constitution?

MR. SUAREZ. That is right, Madam President.

MS. AQUINO. Therefore, is the sponsor inclined, as the provisions

are drafted now, to again concede to the legislature the process or
the requirement of determining the mechanics of amending the
Constitution by people's initiative?

MR. SUAREZ. The matter of implementing this could very well be

placed in the hands of the National Assembly, not unless we can
incorporate into this provision the mechanics that would
adequately cover all the conceivable situations. 33
It was made clear during the interpellations that the aforementioned Section 2 is limited to
proposals to AMEND — not to REVISE — the Constitution; thus:

MR. SUAREZ. . . . This proposal was suggested on the theory that

this matter of initiative, which came about because of the
extraordinary developments this year, has to be separated from
the traditional modes of amending the Constitution as embodied in
Section 1. The committee members felt that this system of
initiative should not extend to the revision of the entire
Constitution, so we removed it from the operation of Section 1 of
the proposed Article on Amendment or Revision. 34

xxx xxx xxx

MS. AQUINO. In which case, I am seriously bothered by providing

this process of initiative as a separate section in the Article on
Amendment. Would the sponsor be amenable to accepting an
amendment in terms of realigning Section 2 as another
subparagraph (c) of Section 1, instead of setting it up as another
separate section as if it were a self-executing provision?

MR. SUAREZ. We would be amenable except that, as we clarified

a while ago, this process of initiative is limited to the matter of
amendment and should not expand into a revision which
contemplates a total overhaul of the Constitution. That was the
sense that was conveyed by the Committee.

MS. AQUINO. In other words, the Committee was attempting to

distinguish the coverage of modes (a) and (b) in Section 1 to
include the process of revision; whereas the process of initiation to
amend, which is given to the public, would only apply to
amendments?

MR. SUAREZ. That is right. Those were the terms envisioned in

the Committee. 35

Amendments to the proposed Section 2 were thereafter introduced by then Commissioner

Hilario G. Davide, Jr., which the Committee accepted. Thus:

MR. DAVIDE. Thank you Madam President. I propose to

substitute the entire Section 2 with the following:

MR. DAVIDE. Madam President, I have modified the proposed

amendment after taking into account the modifications submitted
by the sponsor himself and the honorable Commissioners
Guingona, Monsod, Rama, Ople, de los Reyes and Romulo. The
modified amendment in substitution of the proposed Section 2 will
now read as follows: "SECTION 2. — AMENDMENTS TO THIS
CONSTITUTION MAY LIKEWISE BE DIRECTLY PROPOSED BY
THE PEOPLE THROUGH INITIATIVE UPON A PETITION OF AT
LEAST TWELVE PERCENT OF THE TOTAL NUMBER Of
REGISTERED VOTERS, OF WHICH EVERY LEGISLATIVE
DISTRICT MUST BE REPRESENTED BY AT LEAST THREE
PERCENT OF THE REGISTERED VOTERS THEREOF. NO
AMENDMENT UNDER THIS SECTION SHALL BE AUTHORIZED
WITHIN FIVE YEARS FOLLOWING THE RATIFICATION OF
THIS CONSTITUTION NOR OFTENER THAN ONCE EVERY
FIVE YEARS THEREAFTER.

THE NATIONAL ASSEMBLY SHALL BY LAW PROVIDE FOR

THE IMPLEMENTATION OF THE EXERCISE OF THIS RIGHT.
 MR. SUAREZ. Madam President, considering that the proposed
amendment is reflective of the sense contained in Section 2 of our
completed Committee Report No. 7, we accept the proposed
amendment. 36

The interpellations which ensued on the proposed modified amendment to Section 2 clearly
showed that it was a legislative act which must implement the exercise of the right. Thus:

MR. ROMULO. Under Commissioner Davide's amendment, is it

possible for the legislature to set forth certain procedures to carry
out the initiative. . .?

MR. DAVIDE. It can.

xxx xxx xxx

MR. ROMULO. But the Commissioner's amendment does not

prevent the legislature from asking another body to set the
proposition in proper form.

MR. DAVIDE. The Commissioner is correct. In other words, the

implementation of this particular right would be subject to
legislation, provided the legislature cannot determine anymore the
percentage of the requirement.

MR. ROMULO. But the procedures, including the determination of

the proper form for submission to the people, may be subject to
legislation.

MR. DAVIDE. As long as it will not destroy the substantive right to

initiate. In other words, none of the procedures to be proposed by
the legislative body must diminish or impair the right conceded
here.

MR. ROMULO. In that provision of the Constitution can the

procedures which I have discussed be legislated?

MR. DAVIDE. Yes. 37

Commissioner Davide also reaffirmed that his modified amendment strictly confines initiative to
AMENDMENTS to — NOT REVISION of — the Constitution. Thus:

MR. DAVIDE. With pleasure, Madam President.

MR. MAAMBONG. My first question: Commissioner Davide's

proposed amendment on line 1 refers to "amendment." Does it not
cover the word "revision" as defined by Commissioner Padilla
when he made the distinction between the words "amendments"
and "revision"?

MR. DAVIDE. No, it does not, because "amendments" and

"revision" should be covered by Section 1. So insofar as initiative
is concerned, it can only relate to "amendments" not "revision." 38

Commissioner Davide further emphasized that the process of proposing amendments

through initiative must be more rigorous and difficult than the initiative on legislation. Thus:

MR. DAVIDE. A distinction has to be made that under this

proposal, what is involved is an amendment to the Constitution. To
amend a Constitution would ordinarily require a proposal by the
 National Assembly by a vote of three-fourths; and to call a
constitutional convention would require a higher number.
Moreover, just to submit the issue of calling a constitutional
convention, a majority of the National Assembly is required, the
import being that the process of amendment must be made more
rigorous and difficult than probably initiating an ordinary legislation
or putting an end to a law proposed by the National Assembly by
way of a referendum. I cannot agree to reducing the requirement
approved by the Committee on the Legislative because it would
require another voting by the Committee, and the voting as
precisely based on a requirement of 10 percent. Perhaps, I might
present such a proposal, by way of an amendment, when the
Commission shall take up the Article on the Legislative or on the
National Assembly on plenary sessions. 39

The Davide modified amendments to Section 2 were subjected to amendments, and the final
version, which the Commission approved by a vote of 31 in favor and 3 against, reads as
follows:

MR. DAVIDE. Thank you Madam President. Section 2, as

amended, reads as follows: "AMENDMENT TO THIS
CONSTITUTION MAY LIKEWISE BE DIRECTLY PROPOSED BY
THE PEOPLE THROUGH INITIATIVE UPON A PETITION OF AT
LEAST TWELVE PERCENT OF THE TOTAL NUMBER OF
REGISTERED VOTERS, OF WHICH EVERY LEGISLATIVE
DISTRICT MUST BE REPRESENTED BY AT LEAST THREE
PERCENT OF THE REGISTERED VOTERS THEREOF. NO
AMENDMENT UNDER THIS SECTION SHALL BE AUTHORIZED
WITHIN FIVE YEARS FOLLOWING THE RATIFICATION OF
THIS CONSTITUTION NOR OFTENER THAN ONCE EVERY
FIVE YEARS THEREAFTER.

THE NATIONAL ASSEMBLY SHALL BY LAW PROVIDE

FOR THE IMPLEMENTATION OF THE EXERCISE OF THIS
RIGHT. 40

The entire proposed Article on Amendments or Revisions was approved on second

reading on 9 July 1986. 41Thereafter, upon his motion for reconsideration, Commissioner
Gascon was allowed to introduce an amendment to Section 2 which, nevertheless, was
withdrawn. In view thereof, the Article was again approved on Second and Third
Readings on 1 August 1986. 42

However, the Committee on Style recommended that the approved Section 2 be amended by
changing "percent" to "per centum" and "thereof" to "therein" and deleting the phrase "by law" in
the second paragraph so that said paragraph reads: The Congress 43 shall provide for the
implementation of the exercise of this right. 44 This amendment was approved and is the text of
the present second paragraph of Section 2.

The conclusion then is inevitable that, indeed, the system of initiative on the Constitution under
Section 2 of Article XVII of the Constitution is not self-executory.

Has Congress "provided" for the implementation of the exercise of this right? Those who answer
the question in the affirmative, like the private respondents and intervenor Senator Roco, point
to us R.A. No. 6735.

There is, of course, no other better way for Congress to implement the exercise of the right than
through the passage of a statute or legislative act. This is the essence or rationale of the last
minute amendment by the Constitutional Commission to substitute the last paragraph of Section
2 of Article XVII then reading:
 The Congress 45 shall by law provide for the implementation of the exercise of
this right.

with

The Congress shall provide for the implementation of the exercise of this right.

This substitute amendment was an investiture on Congress of a power to provide for the
rules implementing the exercise of the right. The "rules" means "the details on how [the
right] is to be carried out." 46

We agree that R.A. No. 6735 was, as its history reveals, intended to cover initiative to propose
amendments to the Constitution. The Act is a consolidation of House Bill No. 21505 and Senate
Bill No. 17. The former was prepared by the Committee on Suffrage and Electoral Reforms of
the House of Representatives on the basis of two House Bills referred to it, viz., (a) House Bill
No. 497, 47 which dealt with the initiative and referendum mentioned
in Sections 1 and 32 of Article VI of the Constitution; and (b) House Bill No. 988, 48 which dealt
with the subject matter of House Bill No. 497, as well as with initiative and referendum under
Section 3 of Article X (Local Government) and initiative provided for in Section 2 of Article XVII
of the Constitution. Senate Bill No. 17 49 solely dealt with initiative and referendum concerning
ordinances or resolutions of local government units. The Bicameral Conference Committee
consolidated Senate Bill No. 17 and House Bill No. 21505 into a draft bill, which was
subsequently approved on 8 June 1989 by the Senate 50 and by the House of
Representatives. 51 This approved bill is now R.A. No. 6735.

But is R.A. No. 6735 a full compliance with the power and duty of Congress to "provide for the
implementation of the exercise of the right?"

A careful scrutiny of the Act yields a negative answer.

First. Contrary to the assertion of public respondent COMELEC, Section 2 of the Act does not
suggest an initiative on amendments to the Constitution. The said section reads:

Sec. 2. Statement and Policy. — The power of the people under a system of
initiative and referendum to directly propose, enact, approve or reject, in whole or
in part, the Constitution, laws, ordinances, or resolutions passed by any
legislative body upon compliance with the requirements of this Act is hereby
affirmed, recognized and guaranteed. (Emphasis supplied).

The inclusion of the word "Constitution" therein was a delayed afterthought. That word is
neither germane nor relevant to said section, which exclusively relates to initiative and
referendum on national laws and local laws, ordinances, and resolutions. That section is
silent as to amendments on the Constitution. As pointed out earlier, initiative on the
Constitution is confined only to proposals to AMEND. The people are not accorded the
power to "directly propose, enact, approve, or reject, in whole or in part, the Constitution"
through the system of initiative. They can only do so with respect to "laws, ordinances, or
resolutions."

The foregoing conclusion is further buttressed by the fact that this section was lifted from
Section 1 of Senate Bill No. 17, which solely referred to a statement of policy on local initiative
and referendum and appropriately used the phrases "propose and enact," "approve or reject"
and "in whole or in part." 52

Second. It is true that Section 3 (Definition of Terms) of the Act defines initiative on
amendments to the Constitution and mentions it as one of the three systems of initiative, and
that Section 5 (Requirements) restates the constitutional requirements as to the percentage of
the registered voters who must submit the proposal. But unlike in the case of the other systems
of initiative, the Act does not provide for the contents of a petition for initiative on the
Constitution. Section 5, paragraph (c) requires, among other things, statement of the proposed
law sought to be enacted, approved or rejected, amended or repealed, as the case may be. It
does not include, as among the contents of the petition, the provisions of the Constitution
sought to be amended, in the case of initiative on the Constitution. Said paragraph (c) reads in
full as follows:

(c) The petition shall state the following:

c.1 contents or text of the proposed law sought to be enacted, approved or

rejected, amended or repealed, as the case may be;

c.2 the proposition;

c.3 the reason or reasons therefor;

c.4 that it is not one of the exceptions provided therein;

c.5 signatures of the petitioners or registered voters; and

c.6 an abstract or summary proposition is not more than one hundred (100)
words which shall be legibly written or printed at the top of every page of the
petition. (Emphasis supplied).

The use of the clause "proposed laws sought to be enacted, approved or rejected,
amended or repealed" only strengthens the conclusion that Section 2, quoted earlier,
excludes initiative on amendments to the Constitution.

Third. While the Act provides subtitles for National Initiative and Referendum (Subtitle II) and for
Local Initiative and Referendum (Subtitle III), no subtitle is provided for initiative on the
Constitution. This conspicuous silence as to the latter simply means that the main thrust of the
Act is initiative and referendum on national and local laws. If Congress intended R.A. No. 6735
to fully provide for the implementation of the initiative on amendments to the Constitution, it
could have provided for a subtitle therefor, considering that in the order of things, the primacy of
interest, or hierarchy of values, the right of the people to directly propose amendments to the
Constitution is far more important than the initiative on national and local laws.

We cannot accept the argument that the initiative on amendments to the Constitution is
subsumed under the subtitle on National Initiative and Referendum because it is national in
scope. Our reading of Subtitle II (National Initiative and Referendum) and Subtitle III (Local
Initiative and Referendum) leaves no room for doubt that the classification is not based on
the scope of the initiative involved, but on its nature and character. It is "national initiative," if
what is proposed to be adopted or enacted is a national law, or a law which only Congress can
pass. It is "local initiative" if what is proposed to be adopted or enacted is a law, ordinance, or
resolution which only the legislative bodies of the governments of the autonomous regions,
provinces, cities, municipalities, and barangays can pass. This classification of initiative
into national and local is actually based on Section 3 of the Act, which we quote for emphasis
and clearer understanding:

Sec. 3. Definition of terms —

xxx xxx xxx

There are three (3) systems of initiative, namely:

a.1 Initiative on the Constitution which refers to a petition proposing amendments

to the Constitution;

a.2 Initiative on Statutes which refers to a petition proposing to enact a national

legislation; and

a.3 Initiative on local legislation which refers to a petition proposing to enact a

regional, provincial, city, municipal, or barangay law, resolution or ordinance.
(Emphasis supplied).
Hence, to complete the classification under subtitles there should have been a subtitle on
initiative on amendments to the Constitution. 53

A further examination of the Act even reveals that the subtitling is not accurate. Provisions not
germane to the subtitle on National Initiative and Referendum are placed therein, like (1)
paragraphs (b) and (c) of Section 9, which reads:

(b) The proposition in an initiative on the Constitution approved by the majority of

the votes cast in the plebiscite shall become effective as to the day of the
plebiscite.

(c) A national or local initiative proposition approved by majority of the votes cast
in an election called for the purpose shall become effective fifteen (15) days after
certification and proclamation of the Commission. (Emphasis supplied).

(2) that portion of Section 11 (Indirect Initiative) referring to indirect initiative with the legislative
bodies of local governments; thus:

Sec. 11. Indirect Initiative. — Any duly accredited people's organization, as

defined by law, may file a petition for indirect initiative with the House of
Representatives, and other legislative bodies. . . .

and (3) Section 12 on Appeal, since it applies to decisions of the COMELEC on the
findings of sufficiency or insufficiency of the petition for initiative or referendum, which
could be petitions for both national and local initiative and referendum.

Upon the other hand, Section 18 on "Authority of Courts" under subtitle III on Local Initiative and
Referendum is misplaced, 54 since the provision therein applies to both national and local
initiative and referendum. It reads:

Sec. 18. Authority of Courts. — Nothing in this Act shall prevent or preclude the
proper courts from declaring null and void any proposition approved pursuant to
this Act for violation of the Constitution or want of capacity of the local legislative
body to enact the said measure.

Curiously, too, while R.A. No. 6735 exerted utmost diligence and care in providing for the details
in the implementation of initiative and referendum on national and local legislation thereby giving
them special attention, it failed, rather intentionally, to do so on the system of initiative on
amendments to the Constitution. Anent the initiative on national legislation, the Act provides for
the following:

(a) The required percentage of registered voters to sign the petition and the contents of the
petition;

(b) The conduct and date of the initiative;

(c) The submission to the electorate of the proposition and the required number of votes for its
approval;

(d) The certification by the COMELEC of the approval of the proposition;

(e) The publication of the approved proposition in the Official Gazette or in a newspaper of
general circulation in the Philippines; and

(f) The effects of the approval or rejection of the proposition. 55

As regards local initiative, the Act provides for the following:

(a) The preliminary requirement as to the number of signatures of registered voters for the
petition;
(b) The submission of the petition to the local legislative body concerned;

(c) The effect of the legislative body's failure to favorably act thereon, and the invocation of the
power of initiative as a consequence thereof;

(d) The formulation of the proposition;

(e) The period within which to gather the signatures;

(f) The persons before whom the petition shall be signed;

(g) The issuance of a certification by the COMELEC through its official in the local government
unit concerned as to whether the required number of signatures have been obtained;

(h) The setting of a date by the COMELEC for the submission of the proposition to the
registered voters for their approval, which must be within the period specified therein;

(i) The issuance of a certification of the result;

(j) The date of effectivity of the approved proposition;

(k) The limitations on local initiative; and

(l) The limitations upon local legislative bodies. 56

Upon the other hand, as to initiative on amendments to the Constitution, R.A. No. 6735, in all of
its twenty-three sections, merely (a) mentions, the word "Constitution" in Section 2; (b) defines
"initiative on the Constitution" and includes it in the enumeration of the three systems of initiative
in Section 3; (c) speaks of "plebiscite" as the process by which the proposition in an initiative on
the Constitution may be approved or rejected by the people; (d) reiterates the constitutional
requirements as to the number of voters who should sign the petition; and (e) provides for the
date of effectivity of the approved proposition.

There was, therefore, an obvious downgrading of the more important or the paramount system
of initiative. RA. No. 6735 thus delivered a humiliating blow to the system of initiative on
amendments to the Constitution by merely paying it a reluctant lip service. 57

The foregoing brings us to the conclusion that R.A. No. 6735 is incomplete, inadequate, or
wanting in essential terms and conditions insofar as initiative on amendments to the Constitution
is concerned. Its lacunae on this substantive matter are fatal and cannot be cured by
"empowering" the COMELEC "to promulgate such rules and regulations as may be necessary
to carry out the purposes of [the] Act. 58

The rule is that what has been delegated, cannot be delegated or as expressed in a Latin
maxim: potestas delegata non delegari potest. 59 The recognized exceptions to the rule are as
follows:

(1) Delegation of tariff powers to the President under Section 28(2) of Article VI of the
Constitution;

(2) Delegation of emergency powers to the President under Section 23(2) of Article VI of the
Constitution;

(3) Delegation to the people at large;

(4) Delegation to local governments; and

(5) Delegation to administrative bodies. 60

Empowering the COMELEC, an administrative body exercising quasi-judicial functions, to
promulgate rules and regulations is a form of delegation of legislative authority under no. 5
above. However, in every case of permissible delegation, there must be a showing that the
delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the
policy to be executed, carried out, or implemented by the delegate; and (b) fixes a standard —
the limits of which are sufficiently determinate and determinable — to which the delegate must
conform in the performance of his functions. 61 A sufficient standard is one which defines
legislative policy, marks its limits, maps out its boundaries and specifies the public agency to
apply it. It indicates the circumstances under which the legislative command is to be effected. 62

Insofar as initiative to propose amendments to the Constitution is concerned, R.A. No. 6735
miserably failed to satisfy both requirements in subordinate legislation. The delegation of the
power to the COMELEC is then invalid.

III

COMELEC RESOLUTION NO. 2300, INSOFAR AS IT PRESCRIBES RULES AND

REGULATIONS ON THE CONDUCT OF INITIATIVE ON AMENDMENTS TO THE
CONSTITUTION, IS VOID.

It logically follows that the COMELEC cannot validly promulgate rules and regulations to
implement the exercise of the right of the people to directly propose amendments to the
Constitution through the system of initiative. It does not have that power under R.A. No. 6735.
Reliance on the COMELEC's power under Section 2(1) of Article IX-C of the Constitution is
misplaced, for the laws and regulations referred to therein are those promulgated by the
COMELEC under (a) Section 3 of Article IX-C of the Constitution, or (b) a law where
subordinate legislation is authorized and which satisfies the "completeness" and the "sufficient
standard" tests.

IV

COMELEC ACTED WITHOUT JURISDICTION OR WITH GRAVE ABUSE OF

DISCRETION IN ENTERTAINING THE DELFIN PETITION.

Even if it be conceded ex gratia that R.A. No. 6735 is a full compliance with the power of
Congress to implement the right to initiate constitutional amendments, or that it has validly
vested upon the COMELEC the power of subordinate legislation and that COMELEC Resolution
No. 2300 is valid, the COMELEC acted without jurisdiction or with grave abuse of discretion in
entertaining the Delfin Petition.

Under Section 2 of Article XVII of the Constitution and Section 5(b) of R.A. No. 6735, a petition
for initiative on the Constitution must be signed by at least 12% of the total number of registered
voters of which every legislative district is represented by at least 3% of the registered voters
therein. The Delfin Petition does not contain signatures of the required number of voters. Delfin
himself admits that he has not yet gathered signatures and that the purpose of his petition is
primarily to obtain assistance in his drive to gather signatures. Without the required signatures,
the petition cannot be deemed validly initiated.

The COMELEC acquires jurisdiction over a petition for initiative only after its filing. The petition
then is the initiatory pleading. Nothing before its filing is cognizable by the COMELEC, sitting en
banc. The only participation of the COMELEC or its personnel before the filing of such petition
are (1) to prescribe the form of the petition; 63 (2) to issue through its Election Records and
Statistics Office a certificate on the total number of registered voters in each legislative
district; 64 (3) to assist, through its election registrars, in the establishment of signature
stations; 65 and (4) to verify, through its election registrars, the signatures on the basis of the
registry list of voters, voters' affidavits, and voters' identification cards used in the immediately
preceding election. 66

Since the Delfin Petition is not the initiatory petition under R.A. No. 6735 and COMELEC
Resolution No. 2300, it cannot be entertained or given cognizance of by the COMELEC. The
respondent Commission must have known that the petition does not fall under any of the
actions or proceedings under the COMELEC Rules of Procedure or under Resolution No. 2300,
for which reason it did not assign to the petition a docket number. Hence, the said petition was
merely entered as UND, meaning, undocketed. That petition was nothing more than a mere
scrap of paper, which should not have been dignified by the Order of 6 December 1996, the
hearing on 12 December 1996, and the order directing Delfin and the oppositors to file their
memoranda or oppositions. In so dignifying it, the COMELEC acted without jurisdiction or with
grave abuse of discretion and merely wasted its time, energy, and resources.

The foregoing considered, further discussion on the issue of whether the proposal to lift the term
limits of elective national and local officials is an amendment to, and not a revision of, the
Constitution is rendered unnecessary, if not academic.

CONCLUSION

This petition must then be granted, and the COMELEC should be permanently enjoined from
entertaining or taking cognizance of any petition for initiative on amendments to the Constitution
until a sufficient law shall have been validly enacted to provide for the implementation of the
system.

We feel, however, that the system of initiative to propose amendments to the Constitution
should no longer be kept in the cold; it should be given flesh and blood, energy and strength.
Congress should not tarry any longer in complying with the constitutional mandate to provide for
the implementation of the right of the people under that system.

WHEREFORE, judgment is hereby rendered

a) GRANTING the instant petition;

b) DECLARING R.A. No. 6735 inadequate to cover the system of initiative on amendments to
the Constitution, and to have failed to provide sufficient standard for subordinate legislation;

c) DECLARING void those parts of Resolution No. 2300 of the Commission on Elections
prescribing rules and regulations on the conduct of initiative or amendments to the Constitution;
and

d) ORDERING the Commission on Elections to forthwith DISMISS the DELFIN petition (UND-
96-037).

The Temporary Restraining Order issued on 18 December 1996 is made permanent as against
the Commission on Elections, but is LIFTED as against private respondents.

Resolution on the matter of contempt is hereby reserved.

SO ORDERED.

Narvasa, C.J., Regalado, Romero, Bellosillo, Kapunan, Hermosisima, Jr. and Torres, Jr., JJ.,
concur.

Padilla, J., took no part.

Separate Opinions

PUNO, J., concurring and dissenting:

I join the ground-breaking ponencia of our esteemed colleague, Mr. Justice Davide insofar as it
orders the COMELEC to dismiss the Delfin petition. I regret, however, I cannot share the view
that R.A. No. 5735 and COMELEC Resolution No. 2300 are legally defective and cannot
implement the people's initiative to amend the Constitution. I likewise submit that the petition
with respect to the Pedrosas has no leg to stand on and should be dismissed. With due respect:

First, I submit that R.A. No. 6735 sufficiently implements the right of the people to initiate
amendments to the Constitution thru initiative. Our effort to discover the meaning of R.A. No.
6735 should start with the search of the intent of our lawmakers. A knowledge of this intent is
critical for the intent of the legislature is the law and the controlling factor in its
interpretation.1 Stated otherwise, intent is the essence of the law, the spirit which gives life to its
enactment.2

Significantly, the majority decision concedes that ". . . R.A. No. 6735 was intended to cover
initiative to propose amendments to the Constitution." It ought to be so for this intent is crystal
clear from the history of the law which was a consolidation of House Bill No. 215053 and Senate
Bill No. 17.4 Senate Bill No. 17 was entitled "An Act Providing for a System of Initiative and
Referendum and the Exception Therefrom, Whereby People in Local Government Units Can
Directly Propose and Enact Resolutions and Ordinances or Approve or Reject any Ordinance or
Resolution Passed by the Local Legislative Body." Beyond doubt, Senate Bill No. 17 did not
include people's initiative to propose amendments to the Constitution. In checkered contrast,
House Bill No. 21505 5expressly included people's initiative to amend the Constitution.
Congressman (now Senator) Raul Roco emphasized in his sponsorship remarks:6

xxx xxx xxx

SPONSORSHIP REMARKS OF MR. ROCO

At the outset, Mr. Roco provided the following backgrounder on the constitutional
basis of the proposed measure.

1. As cited in Vera vs. Avelino (1946), the presidential system which was
introduced by the 1935 Constitution saw the application of the principle of
separation of powers.

2. While under the parliamentary system of the 1973 Constitution the principle
remained applicable, the 1981 amendments to the Constitution of 1973 ensured
presidential dominance over the Batasang Pambansa.

Constitutional history then saw the shifting and sharing of legislative powers
between the Legislature and the Executive departments. Transcending changes
in the exercise of legislative power is the declaration in the Philippine Constitution
that the Philippines is a republican state where sovereignty resides in the people
and all sovereignty emanates from them.

3. Under the 1987 Constitution, the lawmaking power is still preserved in

Congress; however, to institutionalize direct action of the people as exemplified
in the 1986 Revolution, the Constitution recognizes the power of the people,
through the system of initiative and referendum.

As cited in Section 1, Article VI of the 1987 Constitution, Congress does not have
plenary powers since reserve powers are given to the people expressly. Section
32 of the same Article mandates Congress to pass at the soonest possible time,
a bill on referendum and initiative, and to share its legislative powers with the
people.

Section 2, Article XVII of the 1987 Constitution, on the other hand, vests in the
people the power to directly propose amendments to the Constitution through
initiative, upon petition of at least 12 percent of the total number of registered
voters.

Stating that House Bill No. 21505 is the Committee's response to the duty
imposed on Congress to implement the exercise by the people of the right to
initiative and referendum, Mr. Roco recalled the beginnings of the system of
initiative and referendum under Philippine Law. He cited Section 99 of the Local
Government Code which vests in the barangay assembly the power to initiate
legislative processes, decide the holding of plebiscite and hear reports of the
Sangguniang Barangay, all of which are variations of the power of initiative and
referendum. He added that the holding of barangay plebiscites and referendum
are likewise provided in Sections 100 and 101 of the same Code.

Thereupon, for the sake of brevity, Mr. Roco moved that pertinent quotation on
the subject which he will later submit to the Secretary of the House be
incorporated as part of his sponsorship speech.

He then cited examples of initiative and referendum similar to those contained in

the instant Bill among which are the constitutions of states in the United States
which recognize the right of registered voters to initiate the enactment of any
statute or to project any existing law or parts thereof in a referendum. These
states, he said, are Alaska, Alabama, Montana, Massachusets, Dakota,
Oklahoma, Oregon, and practically all other states.

Mr. Roco explained that in certain American states, the kind of laws to which
initiative and referendum apply is also without limitation, except for emergency
measures, which are likewise incorporated in House Bill No. 21505. He added
that the procedure provided by the Bill from the filing of the petition, the
requirements of a certain percentage of supporters to present a proposition, to
the submission to electors are substantially similar to the provisions in American
laws. Although an infant in Philippine political structure, the system of initiative
and referendum, he said, is a tried and tested system in other jurisdictions, and
the Bill is patterned after American experience.

He further explained that the bill has only 12 sections, and recalled that the
Constitutional Commissioners saw the system of the initiative and referendum as
an instrument which can be used should the legislature show itself to be
indifferent to the needs of the people. This is the reason, he claimed, why now is
an opportune time to pass the Bill even as he noted the felt necessity of the times
to pass laws which are necessary to safeguard individual rights and liberties.

At this juncture Mr. Roco explained the process of initiative and referendum as
advocated in House Bill No. 21505. He stated that:

1. Initiative means that the people, on their own political judgment, submit a Bill
for the consideration of the general electorate.

2. The instant Bill provides three kinds of initiative, namely; the initiative to amend
the Constitution once every five years; the initiative to amend statutes approved
by Congress; and the initiative to amend local ordinances.

3. The instant Bill gives a definite procedure and allows the Commission on
Elections (COMELEC) to define rules and regulations on the power of initiative.

4. Referendum means that the legislators seek the consent of the people on
measures that they have approved.

5. Under Section 4 of the Bill the people can initiate a referendum which is a
mode of plebiscite by presenting a petition therefor, but under certain limitations,
such as the signing of said petition by at least 10 percent of the total of registered
voters at which every legislative district is represented by at least three percent of
 the registered voters thereof. Within 30 days after receipt of the petition, the
COMELEC shall determine the sufficiency of the petition, publish the same, and
set the date of the referendum within 45 to 90-day period.

6. When the matter under referendum or initiative is approved by the required

number of votes, it shall become effective 15 days following the completion of its
publication in the Official Gazette.

In concluding his sponsorship remarks, Mr. Roco stressed that the Members
cannot ignore the people's call for initiative and referendum and urged the Body
to approve House Bill No. 21505.

At this juncture, Mr. Roco also requested that the prepared text of his speech
together with the footnotes be reproduced as part of the Congressional Records.

The same sentiment as to the bill's intent to implement people's initiative to amend the
Constitution was stressed by then Congressman (now Secretary of Agriculture) Salvador
Escudero III in his sponsorship remarks, viz:7

xxx xxx xxx

SPONSORSHIP REMARKS OF MR. ESCUDERO

Mr. Escudero first pointed out that the people have been clamoring for a truly
popular democracy ever since, especially in the so-called parliament of the
streets. A substantial segment of the population feels, he said, that the form of
democracy is there, but not the reality or substance of it because of the
increasingly elitist approach of their representatives to the country's problem.

Whereupon, Mr. Escudero pointed out that the Constitution has provided a
means whereby the people can exercise the reserved power of initiative to
propose amendments to the Constitution, and requested that Sections 1 and 32,
Article VI; Section 3, Article X; and Section 2, Article XVII of the Constitution be
made part of his sponsorship remarks.

Mr. Escudero also stressed that an implementing law is needed for the aforecited
Constitutional provisions. While the enactment of the Bill will give way to strong
competition among cause-oriented and sectoral groups, he continued, it will
hasten the politization of the citizenry, aid the government in forming an
enlightened public opinion, and produce more responsive legislation. The
passage of the Bill will also give street parliamentarians the opportunity to
articulate their ideas in a democratic forum, he added.

Mr. Escudero stated that he and Mr. Roco hoped for the early approval of the Bill
so that it can be initially used for the Agrarian Reform Law. He said that the
passage of House Bill No. 21505 will show that the Members can set aside their
personal and political consideration for the greater good of the people.

The disagreeing provisions in Senate Bill No. 17 and House Bill No. 21505 were
threshed out in a Bicameral Conference Committee.8 In the meeting of the Committee on
June 6, 1989,9 the members agreed that the two (2) bills should be consolidated and that
the consolidated version should include people's initiative to amend the Constitution as
contemplated by House Bill No. 21505. The transcript of the meeting states:

xxx xxx xxx

CHAIRMAN GONZALES. But at any rate, as I have said, because

this is new in our political system, the Senate decided on a more
cautious approach and limiting it only to the local government units
because even with that stage where . . . at least this has been
quite popular, ano? It has been attempted on a national basis.
 Alright. There has not been a single attempt. Now, so, kami
limitado doon. And, second, we consider also that it is only fair
that the local legislative body should be given a chance to adopt
the legislation bill proposed, right? Iyong sinasabing indirect
system of initiative. If after all, the local legislative assembly or
body is willing to adopt it in full or in toto, there ought to be any
reason for initiative, ano for initiative. And, number 3, we feel that
there should be some limitation on the frequency with which it
should be applied. Number 4, na the people, thru initiative, cannot
enact any ordinance that is beyond the scope of authority of the
local legislative body, otherwise, my God, mag-aassume sila ng
power that is broader and greater than the grant of legislative
power to the Sanggunians. And Number 5, because of that, then a
proposition which has been the result of a successful initiative can
only carry the force and effect of an ordinance and therefore that
should not deprive the court of its jurisdiction to declare it null and
void for want of authority. Ha, di ba? I mean it is beyond powers of
local government units to enact. Iyon ang main essence namin, so
we concentrated on that. And that is why . . . so ang sa inyo
naman includes iyon sa Constitution, amendment to the
Constitution eh . . . national laws. Sa amin, if you insist on that,
alright, although we feel na it will in effect become a dead statute.
Alright, and we can agree, we can agree. So ang mangyayari dito,
and magiging basic nito, let us not discuss anymore kung alin and
magiging basic bill, ano, whether it is the Senate Bill or whether it
is the House bill. Logically it should be ours sapagkat una iyong sa
amin eh. It is one of the first bills approved by the Senate kaya
ang number niyan, makikita mo, 17, eh. Huwag na nating
pagusapan. Now, if you insist, really iyong features ng national at
saka constitutional, okay. ____ gagawin na natin na consolidation
of both bills.

HON. ROCO. Yes, we shall consolidate.

CHAIRMAN GONZALES. Consolidation of the Senate and House

Bill No. so and so. 10

When the consolidated bill was presented to the House for approval, then Congressman
Roco upon interpellation by Congressman Rodolfo Albano, again confirmed that it
covered people's initiative to amend the Constitution. The record of the House
Representative states: 11

xxx xxx xxx

THE SPEAKER PRO TEMPORE. The Gentleman from

Camarines Sur is recognized.

MR. ROCO. On the Conference Committee Report on the

disagreeing provisions between Senate Bill No. 21505 which
refers to the system providing for the initiative and referendum,
fundamentally, Mr. Speaker, we consolidated the Senate and the
House versions, so both versions are totally intact in the bill. The
Senators ironically provided for local initiative and referendum and
the House Representatives correctly provided for initiative and
referendum on the Constitution and on national legislation.

I move that we approve the consolidated bill.

MR. ALBANO. Mr. Speaker.

THE SPEAKER PRO TEMPORE. What is the pleasure of the
Minority Floor Leader?

MR. ALBANO. Will the distinguished sponsor answer just a few

questions?

THE SPEAKER PRO TEMPORE. The Gentlemen will please

proceed.

MR. ALBANO. I heard the sponsor say that the only difference in
the two bills was that in the Senate version there was a provision
for local initiative and referendum, whereas the House version has
none.

MR. ROCO. In fact, the Senate version provide purely for local
initiative and referendum, whereas in the House version, we
provided purely for national and constitutional legislation.

MR. ALBANO. Is it our understanding therefore, that the two

provisions were incorporated?

MR. ROCO. Yes, Mr. Speaker.

MR. ALBANO. So that we will now have a complete initiative and

referendum both in the constitutional amendment and national
legislation.

MR. ROCO. That is correct.

MR. ALBANO. And provincial as well as municipal resolutions?

MR. ROCO. Down to barangay, Mr. Speaker.

MR. ALBANO. And this initiative and referendum is in consonance

with the provision of the Constitution whereby it mandates this
Congress to enact the enabling law, so that we shall have a
system which can be done every five years. Is it five years in the
provision of the Constitution?

MR. ROCO. That is correct, Mr. Speaker. For constitutional

amendments in the 1987 Constitution, it is every five years.

MR. ALBANO. For every five years, Mr. Speaker?

MR. ROCO. Within five years, we cannot have multiple initiatives

and referenda.

MR. ALBANO. Therefore, basically, there was no substantial

difference between the two versions?

MR. ROCO. The gaps in our bill were filled by the Senate which,
as I said earlier, ironically was about local, provincial and
municipal legislation.

MR. ALBANO. And the two bills were consolidated?

MR. ROCO. Yes, Mr. Speaker.

MR. ALBANO. Thank you, Mr. Speaker.

 APPROVAL OF C.C.R.
ON S.B. NO. 17 AND H.B. NO. 21505
(The Initiative and Referendum Act)

THE SPEAKER PRO TEMPORE. There was a motion to approve this

consolidated bill on Senate Bill No. 17 and House Bill No. 21505.

Is there any objection? (Silence. The Chair hears none; the motion is approved.

Since it is crystalline that the intent of R.A. No. 6735 is to implement the people's
initiative to amend the Constitution, it is our bounden duty to interpret the law as it was
intended by the legislature. We have ruled that once intent is ascertained, it must be
enforced even if it may not be consistent with the strict letter of the law and this ruling is
as old as the mountain. We have also held that where a law is susceptible of more than
one interpretation, that interpretation which will most tend to effectuate the manifest
intent of the legislature will be adopted. 12

The text of R.A. No. 6735 should therefore be reasonably construed to effectuate its intent to
implement the people's initiative to amend the Constitution. To be sure, we need not torture the
text of said law to reach the conclusion that it implements people's initiative to amend the
Constitution. R.A. No. 6735 is replete with references to this prerogative of the people.

First, the policy statement declares:

Sec. 2. Statement of Policy. — The power of the people under a system of

initiative and referendum to directly propose, enact, approve or reject, in whole or
in part, the Constitution, laws, ordinances, or resolutions passed by any
legislative body upon compliance with the requirements of this Act is hereby
affirmed, recognized and guaranteed. (emphasis supplied)

Second, the law defines "initiative" as "the power of the people to propose amendments to the
constitution or to propose and enact legislations through an election called for the purpose," and
"plebiscite" as "the electoral process by which an initiative on the Constitution is approved or
rejected by the people.

Third, the law provides the requirements for a petition for initiative to amend the Constitution.
Section 5(b) states that "(a) petition for an initiative on the 1987 Constitution must have at least
twelve per centum (12%) of the total number of registered voters as signatories, of which every
legislative district must be represented by at least threeper centum (3%) of the registered voters
therein." It also states that "(i)nitiative on the Constitution may be exercised only after five (5)
years from the ratification of the 1987 Constitution and only once every five (5) years thereafter.

Finally, R.A. No. 6735 fixes the effectivity date of the amendment. Section 9(b) states that "(t)he
proposition in an initiative on the Constitution approved by a majority of the votes cast in the
plebiscite shall become effective as to the day of the plebiscite.

It is unfortunate that the majority decision resorts to a strained interpretation of R.A. No. 6735 to
defeat its intent which it itself concedes is to implement people's initiative to propose
amendments to the Constitution. Thus, it laments that the word "Constitution" is neither
germane nor relevant to the policy thrust of section 2 and that the statute's subtitling is not
accurate. These lapses are to be expected for laws are not always written in impeccable
English. Rightly, the Constitution does not require our legislators to be word-smiths with the
ability to write bills with poetic commas like Jose Garcia Villa or in lyrical prose like Winston
Churchill. But it has always been our good policy not to refuse to effectuate the intent of a law
on the ground that it is badly written. As the distinguished Vicente Francisco 13 reminds us:
"Many laws contain words which have not been used accurately. But the use of inapt or
inaccurate language or words, will not vitiate the statute if the legislative intention can be
ascertained. The same is equally true with reference to awkward, slovenly, or ungrammatical
expressions, that is, such expressions and words will be construed as carrying the meaning the
legislature intended that they bear, although such a construction necessitates a departure from
the literal meaning of the words used.
In the same vein, the argument that R.A. No. 7535 does not include people's initiative to amend
the Constitution simply because it lacks a sub-title on the subject should be given the weight of
helium. Again, the hoary rule in statutory construction is that headings prefixed to titles, chapters
and sections of a statute may be consulted in aid of interpretation, but inferences drawn
therefrom are entitled to very little weight, and they can never control the plain terms of the
enacting clauses. 14

All said, it is difficult to agree with the majority decision that refuses to enforce the manifest
intent or spirit of R.A. No. 6735 to implement the people's initiative to amend the Constitution. It
blatantly disregards the rule cast in concrete that the letter of the law must yield to its spirit for
the letter of the law is its body but its spirit is its soul. 15

II

COMELEC Resolution No. 2300, 16 promulgated under the stewardship of Commissioner

Haydee Yorac, then its Acting Chairman, spelled out the procedure on how to exercise the
people's initiative to amend the Constitution. This is in accord with the delegated power granted
by section 20 of R.A. No. 6735 to the COMELEC which expressly states: "The Commission is
hereby empowered to promulgate such rules and regulations as may be necessary to carry out
the purposes of this Act." By no means can this delegation of power be assailed as infirmed. In
the benchmark case of Pelaez v. Auditor General, 17 this Court, thru former Chief Justice
Roberto Concepcion laid down the test to determine whether there is undue delegation of
legislative power, viz:

xxx xxx xxx

Although Congress may delegate to another branch of the Government the

power to fill details in the execution, enforcement or administration of a law, it is
essential, to forestall a violation of the principle of separation of powers, that said
law: (a) be complete in itself — it must set forth therein the policy to be executed,
carried out or implemented by the delegate — and (b) to fix standard — the limits
of which are sufficiently determinate or determinable — to which the delegate
must conform in the performance of his functions. Indeed, without a statutory
declaration of policy, which is the essence of every law, and, without the
aforementioned standard, there would be no means to determine, with
reasonable certainty, whether the delegate has acted within or beyond the scope
of his authority. Hence, he could thereby arrogate upon himself the power, not
only to make the law, but, also — and this is worse — to unmake it, by adopting
measures inconsistent with the end sought to be attained by the Act of Congress,
thus nullifying the principle of separation of powers and the system of checks and
balances, and, consequently, undermining the very foundation of our republican
system.

Section 68 of the Revised Administrative Code does not meet these well-settled
requirements for a valid delegation of the power to fix the details in the
enforcement of a law. It does not enunciate any policy to be carried out or
implemented by the President. Neither does it give a standard sufficiently precise
to avoid the evil effects above referred to.

R.A. No. 6735 sufficiently states the policy and the standards to guide the COMELEC in
promulgating the law's implementing rules and regulations of the law. As aforestated, section 2
spells out the policy of the law; viz: "The power of the people under a system of initiative and
referendum to directly propose, enact, approve or reject, in whole or in part, the Constitution,
laws, ordinances, or resolutions passed by any legislative body upon compliance with the
requirements of this Act is hereby affirmed, recognized and guaranteed." Spread out all over
R.A. No. 6735 are the standards to canalize the delegated power to the COMELEC to
promulgate rules and regulations from overflowing. Thus, the law states the number of
signatures necessary to start a people's initiative, 18 directs how initiative proceeding is
commenced, 19 what the COMELEC should do upon filing of the petition for initiative, 20 how a
proposition is approved, 21 when a plebiscite may be held, 22 when the amendment takes
effect 23 and what matters may not be the subject of any initiative. 24
By any measure, these
standards are adequate.

Former Justice Isagani A. Cruz, similarly elucidated that "a sufficient standard is intended to
map out the boundaries of the delegates' authority by defining the legislative policy and
indicating the circumstances under which it is to be pursued and effected. The purpose of the
sufficient standard is to prevent a total transference of legislative power from the lawmaking
body to the delegate." 25 In enacting R.A. No. 6735, it cannot be said that Congress totally
transferred its power to enact the law implementing people's initiative to COMELEC. A close
look at COMELEC Resolution No. 2300 will show that it merely provided the procedure to
effectuate the policy of R.A. No. 6735 giving life to the people's initiative to amend the
Constitution. The debates 26 in the Constitutional Commission make it clear that the rules of
procedure to enforce the people's initiative can be delegated, thus:

MR. ROMULO. Under Commissioner Davide's amendment, it is

possible for the legislature to set forth certain procedures to carry
out the initiative. . . ?

MR. DAVIDE. It can.

xxx xxx xxx

MR. ROMULO. But the Commissioner's amendment does not

prevent the legislature from asking another body to set the
proposition in proper form.

MR. DAVIDE. The Commissioner is correct. In other words, the

implementation of this particular right would be subject to
legislation, provided the legislature cannot determine anymore the
percentage of the requirement.

MR. DAVIDE. As long as it will not destroy the substantive right to

initiate. In other words, none of the procedures to be proposed by
the legislative body must diminish or impair the right conceded
here.

MR. ROMULO. In that provision of the Constitution can the

procedures which I have discussed be legislated?

MR. DAVIDE. Yes.

In his book, The Intent of the 1986 Constitution Writers, 27 Father Bernas likewise
affirmed: "In response to questions of Commissioner Romulo, Davide explained the
extent of the power of the legislature over the process: it could for instance, prescribe
the 'proper form before (the amendment) is submitted to the people,' it could authorize
another body to check the proper form. It could also authorize the COMELEC, for
instance, to check the authenticity of the signatures of petitioners. Davide concluded: 'As
long as it will not destroy the substantive right to initiate. In other words, none of the
procedures to be proposed by the legislative body must diminish or impair the right
conceded here.'" Quite clearly, the prohibition against the legislature is to impair the
substantive right of the people to initiate amendments to the Constitution. It is not,
however, prohibited from legislating the procedure to enforce the people's right of
initiative or to delegate it to another body like the COMELEC with proper standard.

A survey of our case law will show that this Court has prudentially refrained from invalidating
administrative rules on the ground of lack of adequate legislative standard to guide their
promulgation. As aptly perceived by former Justice Cruz, "even if the law itself does not
expressly pinpoint the standard, the courts will bend backward to locate the same elsewhere in
order to spare the statute, if it can, from constitutional infirmity." 28 He cited the ruling
in Hirabayashi v. United States, 29 viz:
 xxx xxx xxx

It is true that the Act does not in terms establish a particular standard to which
orders of the military commander are to conform, or require findings to be made
as a prerequisite to any order. But the Executive Order, the Proclamations and
the statute are not to be read in isolation from each other. They were parts of a
single program and must be judged as such. The Act of March 21, 1942, was an
adoption by Congress of the Executive Order and of the Proclamations. The
Proclamations themselves followed a standard authorized by the Executive
Order — the necessity of protecting military resources in the designated areas
against espionage and sabotage.

In the case at bar, the policy and the standards are bright-lined in R.A. No. 6735. A 20-
20 look at the law cannot miss them. They were not written by our legislators in invisible
ink. The policy and standards can also be found in no less than section 2, Article XVII of
the Constitution on Amendments or Revisions. There is thus no reason to hold that the
standards provided for in R.A. No. 6735 are insufficient for in other cases we have
upheld as adequate more general standards such as "simplicity and dignity," 30 "public
interest," 31 "public welfare," 32 "interest of law and order," 33 "justice and
equity,"34 "adequate and efficient instruction," 35 "public safety," 36 "public
policy", 37 "greater national interest", 38 "protect the local consumer by stabilizing and
subsidizing domestic pump rates", 39 and "promote simplicity, economy and efficiency in
government." 40 A due regard and respect to the legislature, a co-equal and coordinate
branch of government, should counsel this Court to refrain from refusing to effectuate
laws unless they are clearly unconstitutional.

III

It is also respectfully submitted that the petition should he dismissed with respect to the
Pedrosas. The inclusion of the Pedrosas in the petition is utterly baseless. The records show
that the case at bar started when respondent Delfin alone and by himself filed with the
COMELEC a Petition to Amend the Constitution to Lift Term Limits of Elective Officials by
People's Initiative. The Pedrosas did not join the petition. It was Senator Roco who moved to
intervene and was allowed to do so by the COMELEC. The petition was heard and before the
COMELEC could resolve the Delfin petition, the case at bar was filed by the petitioners with this
Court. Petitioners sued the COMELEC. Jesus Delfin, Alberto Pedrosa and Carmen Pedrosa in
their capacities as founding members of the People's Initiative for Reform, Modernization and
Action (PIRMA). The suit is an original action for prohibition with prayer for temporary restraining
order and/or writ of preliminary injunction.

The petition on its face states no cause of action against the Pedrosas. The only allegation
against the Pedrosas is that they are founding members of the PIRMA which proposes to
undertake the signature drive for people's initiative to amend the Constitution. Strangely, the
PIRMA itself as an organization was not impleaded as a respondent. Petitioners then prayed
that we order the Pedrosas ". . . to desist from conducting a signature drive for a people's
initiative to amend the Constitution." On December 19, 1996, we temporarily enjoined the
Pedrosas ". . . from conducting a signature drive for people's initiative to amend the
Constitution." It is not enough for the majority to lift the temporary restraining order against the
Pedrosas. It should dismiss the petition and all motions for contempt against them without
equivocation.

One need not draw a picture to impart the proposition that in soliciting signatures to start a
people's initiative to amend the Constitution the Pedrosas are not engaged in any criminal act.
Their solicitation of signatures is a right guaranteed in black and white by section 2 of Article
XVII of the Constitution which provides that ". . . amendments to this Constitution may likewise
be directly proposed by the people through initiative. . ." This right springs from the principle
proclaimed in section 1, Article II of the Constitution that in a democratic and republican state
"sovereignty resides in the people and all government authority emanates from them." The
Pedrosas are part of the people and their voice is part of the voice of the people. They may
constitute but a particle of our sovereignty but no power can trivialize them for sovereignty is
indivisible.
But this is not all. Section 16 of Article XIII of the Constitution provides: "The right of the people
and their organizations to effective and reasonable participation at all levels of social, political
and economic decision-making shall not be abridged. The State shall by law, facilitate the
establishment of adequate consultation mechanisms." This is another novel provision of the
1987 Constitution strengthening the sinews of the sovereignty of our people. In soliciting
signatures to amend the Constitution, the Pedrosas are participating in the political decision-
making process of our people. The Constitution says their right cannot be abridged without any
ifs and buts. We cannot put a question mark on their right.

Over and above these new provisions, the Pedrosas' campaign to amend the Constitution is an
exercise of their freedom of speech and expression and their right to petition the government for
redress of grievances. We have memorialized this universal right in all our fundamental laws
from the Malolos Constitution to the 1987 Constitution. We have iterated and reiterated in our
rulings that freedom of speech is a preferred right, the matrix of other important rights of our
people. Undeniably, freedom of speech enervates the essence of the democratic creed of think
and let think. For this reason, the Constitution encourages speech even if it protects the
speechless.

It is thus evident that the right of the Pedrosas to solicit signatures to start a people's initiative to
amend the Constitution does not depend on any law, much less on R.A. 6735 or COMELEC
Resolution No. 2300. No law, no Constitution can chain the people to an undesirable status quo.
To be sure, there are no irrepealable laws just as there are no irrepealable Constitutions.
Change is the predicate of progress and we should not fear change. Mankind has long
recognized the truism that the only constant in life is change and so should the majority.

IV

In a stream of cases, this Court has rhapsodized people power as expanded in the 1987
Constitution. On October 5, 1993, we observed that people's might is no longer a myth but an
article of faith in our Constitution. 41 On September 30, 1994, we postulated that people power
can be trusted to check excesses of government and that any effort to trivialize the
effectiveness of people's initiatives ought to be rejected. 42 On September 26, 1996, we pledged
that ". . . this Court as a matter of policy and doctrine will exert every effort to nurture, protect
and promote their legitimate exercise." 43 Just a few days ago, or on March 11, 1997, by a
unanimous decision, 44 we allowed a recall election in Caloocan City involving the mayor and
ordered that he submits his right to continue in office to the judgment of the tribunal of the
people. Thus far, we have succeeded in transforming people power from an opaque abstraction
to a robust reality. The Constitution calls us to encourage people empowerment to blossom in
full. The Court cannot halt any and all signature campaigns to amend the Constitution without
setting back the flowering of people empowerment. More important, the Court cannot seal the
lips of people who are pro-change but not those who are anti-change without concerting the
debate on charter change into a sterile talkaton. Democracy is enlivened by a dialogue and not
by a monologue for in a democracy nobody can claim any infallibility.

Melo and Mendoza, JJ., concur.

VITUG, J., concurring and dissenting:

The COMELEC should have dismissed, outrightly, the Delfin Petition.

It does seem to me that there is no real exigency on the part of the Court to engross, let alone to
commit, itself on all the issues raised and debated upon by the parties. What is essential at this
time would only be to resolve whether or not the petition filed with the COMELEC, signed by
Atty. Jesus S. Delfin in his capacity as a "founding member of the Movement for People's
Initiative" and seeking through a people initiative certain modifications on the 1987 Constitution,
can properly be regarded and given its due course. The Constitution, relative to any proposed
amendment under this method, is explicit. Section 2, Article XVII, thereof provides:
 Sec. 2. Amendments to this Constitution may likewise be directly proposed by
the people through initiative upon a petition of at least twelve per centum of the
total number of registered voters, of which every legislative district must be
represented by at least three per centum of the registered voters therein. No
amendment under this section shall be authorized within five years following the
ratification of this Constitution nor oftener than once every five years thereafter.

The Congress shall provide for the implementation of the exercise of this right.

The Delfin petition is thus utterly deficient. Instead of complying with the constitutional
imperatives, the petition would rather have much of its burden passed on, in effect, to the
COMELEC. The petition would require COMELEC to schedule "signature gathering all over the
country," to cause the necessary publication of the petition "in newspapers of general and local
circulation," and to instruct "Municipal Election Registrars in all Regions of the Philippines to
assist petitioners and volunteers in establishing signing stations at the time and on the dates
designated for the purpose.

I submit, even then, that the TRO earlier issued by the Court which, consequentially, is made
permanent under theponencia should be held to cover only the Delfin petition and must not be
so understood as having intended or contemplated to embrace the signature drive of the
Pedrosas. The grant of such a right is clearly implicit in the constitutional mandate on people
initiative.

The distinct greatness of a democratic society is that those who reign are the governed
themselves. The postulate is no longer lightly taken as just a perceived myth but a veritable
reality. The past has taught us that the vitality of government lies not so much in the strength of
those who lead as in the consent of those who are led. The role of free speech is pivotal but it
can only have its true meaning if it comes with the correlative end of being heard.

Pending a petition for a people's initiative that is sufficient in form and substance, it behooves
the Court, I most respectfully submit, to yet refrain from resolving the question of whether or not
Republic Act No. 6735 has effectively and sufficiently implemented the Constitutional provision
on right of the people to directly propose constitutional amendments. Any opinion or view
formulated by the Court at this point would at best be only a non-binding, albeitpossibly
persuasive, obiter dictum.

I vote for granting the instant petition before the Court and for clarifying that the TRO earlier
issued by the Court did not prescribe the exercise by the Pedrosas of their right to campaign for
constitutional amendments.

FRANCISCO, J., dissenting and concurring:

There is no question that my esteemed colleague Mr. Justice Davide has prepared a scholarly
and well-written ponencia. Nonetheless, I cannot fully subscribe to his view that R. A. No. 6735
is inadequate to cover the system of initiative on amendments to the Constitution.

To begin with, sovereignty under the constitution, resides in the people and all government
authority emanates from them.1 Unlike our previous constitutions, the present 1987 Constitution
has given more significance to this declaration of principle for the people are now vested with
power not only to propose, enact or reject any act or law passed by Congress or by the local
legislative body, but to propose amendments to the constitution as well.2 To implement these
constitutional edicts, Congress in 1989 enacted Republic Act No. 6735, otherwise known as
"The initiative and Referendum Act". This law, to my mind, amply covers an initiative on the
constitution. The contrary view maintained by petitioners is based principally on the alleged lack
of sub-title in the law on initiative to amend the constitution and on their allegation that:

Republic Act No. 6735 provides for the effectivity of the law after publication in
print media. [And] [t]his indicates that Republic Act No. 6735 covers only laws
 and not constitutional amendments, because constitutional amendments take
effect upon ratification not after publication.3

which allegation manifests petitioners' selective interpretation of the law, for under
Section 9 of Republic Act No. 6735 on the Effectivity of Initiative or Referendum
Proposition paragraph (b) thereof is clear in providing that:

The proposition in an initiative on the constitution approved by a majority of the votes cast in the
plebiscite shall become effective as to the day of the plebiscite.

It is a rule that every part of the statute must be interpreted with reference the context, i.e., that
every part of the statute must be construed together with the other parts and kept subservient to
the general intent of the whole enactment. 4 Thus, the provisions of Republic Act No. 6735 may
not be interpreted in isolation. The legislative intent behind every law is to be extracted from the
statute as a whole.5

In its definition of terms, Republic Act No. 6735 defines initiative as "the power of the people to
propose amendments to the constitution or to propose and enact legislations through an
election called for the purpose".6The same section, in enumerating the three systems of
initiative, included an "initiative on the constitution which refers to a petition proposing
amendments to the constitution"7 Paragraph (e) again of Section 3 defines "plebiscite" as
"the electoral process by which an initiative on the constitution is approved or rejected by the
people" And as to the material requirements for an initiative on the Constitution, Section 5(b)
distinctly enumerates the following:

A petition for an initiative on the 1987 Constitution must have at least twelve per
centum (12%) of the total number of the registered voters as signatories, of
which every legislative district must be represented by at least three per
centum (3%) of the registered voters therein. Initiative on the constitution may be
exercised only after five (5) years from the ratification of the 1987 Constitution
and only once every five years thereafter.

These provisions were inserted, on purpose, by Congress the intent being to provide for
the implementation of the right to propose an amendment to the Constitution by way of
initiative. "A legal provision", the Court has previously said, "must not be construed as to
be a useless surplusage, and accordingly, meaningless, in the sense of adding nothing
to the law or having no effect whatsoever thereon". 8 That this is the legislative intent is
further shown by the deliberations in Congress, thus:

. . . More significantly, in the course of the consideration of the Conference

Committee Report on the disagreeing provisions of Senate Bill No. 17 and House
Bill No. 21505, it was noted:

MR. ROCO. On the Conference Committee Report on the

disagreeing provisions between Senate Bill No. 17 and the
consolidated House Bill No. 21505 which refers to the system
providing for the initiative and referendum, fundamentally, Mr.
Speaker, we consolidated the Senate and the House versions, so
both versions are totally intact in the bill. The Senators ironically
provided for local initiative and referendum and the House of
Representatives correctly provided for initiative and referendum an
the Constitution and on national legislation.

I move that we approve the consolidated bill.

MR. ALBANO, Mr. Speaker.

THE SPEAKER PRO TEMPORE. What is the pleasure of the

Minority Floor Leader?
 MR. ALBANO. Will the distinguished sponsor answer just a few
questions?

THE SPEAKER PRO TEMPORE. What does the sponsor say?

MR. ROCO. Willingly, Mr. Speaker.

THE SPEAKER PRO TEMPORE. The Gentleman will please

proceed.

MR. ALBANO. I heard the sponsor say that the only difference in
the two bills was that in the Senate version there was a provision
for local initiative and referendum, whereas the House version has
none.

MR. ROCO. In fact, the Senate version provided purely for local
initiative and referendum, whereas in the House version, we
provided purely for national and constitutional legislation.

MR. ALBANO. Is it our understanding, therefore, that the two

provisions were incorporated?

MR. ROCO. Yes, Mr. Speaker.

MR. ALBANO. So that we will now have a complete initiative and

referendum both in the constitutional amendment and national
legislation.

MR. ROCO. That is correct.

MR. ALBANO. And provincial as well as municipal resolutions?

MR. ROCO. Down to barangay, Mr. Speaker.

MR. ALBANO. And this initiative and referendum is in consonance

with the provision of the Constitution to enact the enabling law, so
that we shall have a system which can be done every five years.
Is it five years in the provision of the Constitution?

MR. ROCO. That is correct, Mr. Speaker. For constitutional

amendments to the 1987 Constitution, it is every five years." (Id.
[Journal and Record of the House of Representatives], Vol. VIII, 8
June 1989, p. 960; quoted in Garcia v. Comelec, 237 SCRA 279,
292-293 [1994]; emphasis supplied)

. . . The Senate version of the Bill may not have comprehended initiatives on the
Constitution. When consolidated, though, with the House version of the Bill and
as approved and enacted into law, the proposal included initiative on both the
Constitution and ordinary laws.9

Clearly then, Republic Act No. 6735 covers an initiative on the constitution. Any other
construction as what petitioners foist upon the Court constitute a betrayal of the intent
and spirit behind the enactment.

At any rate, I agree with the ponencia that the Commission on Elections, at present, cannot take
any action (such as those contained in the Commission's orders dated December 6, 9, and 12,
1996 [Annexes B, C and B-1]) indicative of its having already assumed jurisdiction over private
respondents' petition. This is so because from the tenor of Section 5 (b) of R.A. No. 6735 it
would appear that proof of procurement of the required percentage of registered voters at the
time the petition for initiative is filed, is a jurisdictional requirement.
Thus:

A petition for an initiative on the 1987 Constitution must have at least twelve per
centum (12%) of the total number of registered voters as signatories, of which
every legislative district must be represented by at least three per centum (3%) of
the registered voters therein. Initiative on the Constitution may be exercised only
after five (5) years from the ratification of the 1987 Constitution and only once
every five (5) years thereafter.

Here private respondents' petition is unaccompanied by the required signatures. This

defect notwithstanding, it is without prejudice to the refiling of their petition once
compliance with the required percentage is satisfactorily shown by private respondents.
In the absence, therefore, of an appropriate petition before the Commission on
Elections, any determination of whether private respondents' proposal constitutes an
amendment or revision is premature.

ACCORDINGLY, I take exception to the conclusion reached in the ponencia that R.A. No. 6735
is an "inadequate" legislation to cover a people's initiative to propose amendments to the
Constitution. I, however, register my concurrence with the dismissal, in the meantime, of private
respondents' petition for initiative before public respondent Commission on Elections until the
same be supported by proof of strict compliance with Section 5 (b) of R.A. No. 6735.

Melo and Mendoza, JJ., concur.

PANGANIBAN, J., concurring and dissenting:

Our distinguished colleague, Mr. Justice Hilario G. Davide Jr., writing for the majority, holds that:

(1) The Comelec acted without jurisdiction or with grave abuse of discretion in entertaining the
"initiatory" Delfin Petition.

(2) While the Constitution allows amendments to "be directly proposed by the people through
initiative," there is no implementing law for the purpose. RA 6735 is "incomplete, inadequate, or
wanting in essential terms and conditions insofar as initiative on amendments to the Constitution
is concerned."

(3) Comelec Resolution No. 2330, "insofar as it prescribes rules and regulations on the conduct
of initiative on amendments to the Constitution, is void."

I concur with the first item above. Until and unless an initiatory petition can show the required
number of signatures — in this case, 12% of all the registered voters in the Philippines with at
least 3% in every legislative district — no public funds may be spent and no government
resources may be used in an initiative to amend the Constitution. Verily, the Comelec cannot
even entertain any petition absent such signatures. However, I dissent most respectfully from
the majority's two other rulings. Let me explain.

Under the above restrictive holdings espoused by the Court's majority, the Constitution cannot
be amended at all through a people's initiative. Not by Delfin, not by Pirma, not by anyone, not
even by all the voters of the country acting together. This decision will effectively but
unnecessarily curtail, nullify, abrogate and render inutile the people's right to change the basic
law. At the very least, the majority holds the right hostage to congressional discretion on
whether to pass a new law to implement it, when there is already one existing at present. This
right to amend through initiative, it bears stressing, is guaranteed by Section 2, Article XVII of
the Constitution, as follows:

Sec. 2. Amendments to this Constitution may likewise be directly proposed by

the people through initiative upon a petition of at least twelve per centum of the
total number of registered voters, of which every legislative district must be
represented by at least three per centum of the registered voters therein. No
 amendment under this section shall be authorized within five years following the
ratification of this Constitution nor oftener than once every five years thereafter.

With all due respect, I find the majority's position all too sweeping and all too extremist. It is
equivalent to burning the whole house to exterminate the rats, and to killing the patient to relieve
him of pain. What Citizen Delfin wants the Comelec to do we should reject. But we should not
thereby preempt any future effort to exercise the right of initiative correctly and judiciously. The
fact that the Delfin Petition proposes a misuse of initiative does not justify a ban against its
proper use. Indeed, there is a right way to do the right thing at the right time and for the right
reason.

Taken Together and Interpreted Properly, the Constitution, RA 6735 and Comelec
Resolution 2300 Are Sufficient to Implement Constitutional Initiatives

While RA 6735 may not be a perfect law, it was — as the majority openly concedes — intended
by the legislature to cover and, I respectfully submit, it contains enough provisions to effectuate
an initiative on the Constitution.1 I completely agree with the inspired and inspiring opinions of
Mr. Justice Reynato S. Puno and Mr. Justice Ricardo J. Francisco that RA 6735, the Roco law
on initiative, sufficiently implements the right of the people to initiate amendments to the
Constitution. Such views, which I shall no longer repeat nor elaborate on, are thoroughly
consistent with this Court's unanimous en banc rulings in Subic Bay Metropolitan Authority
vs. Commission on Elections, 2 that "provisions for initiative . . . are (to be) liberally construed to
effectuate their purposes, to facilitate and not hamper the exercise by the voters of the rights
granted thereby"; and in Garcia vs. Comelec, 3 that any "effort to trivialize the effectiveness of
people's initiatives ought to be rejected."

No law can completely and absolutely cover all administrative details. In recognition of this, RA
6735 wisely empowered 4 the Commission on Election "to promulgate such rules and
regulations as may be necessary to carry out the purposes of this Act." And pursuant thereto,
the Comelec issued its Resolution 2300 on 16 January 1991. Such Resolution, by its very
words, was promulgated "to govern the conduct of initiative on the Constitution and initiative and
referendum on national and local laws," not by the incumbent Commission on Elections but by
one then composed of Acting Chairperson Haydee B. Yorac, Comms. Alfredo E. Abueg Jr.,
Leopoldo L. Africa, Andres R. Flores, Dario C. Rama and Magdara B. Dimaampao. All of these
Commissioners who signed Resolution 2300 have retired from the Commission, and thus we
cannot ascribe any vile motive unto them, other than an honest, sincere and exemplary effort to
give life to a cherished right of our people.

The majority argues that while Resolution 2300 is valid in regard to national laws and local
legislations, it is void in reference to constitutional amendments. There is no basis for such
differentiation. The source of and authority for the Resolution is the same law, RA 6735.

I respectfully submit that taken together and interpreted properly and liberally, the Constitution
(particularly Art. XVII, Sec. 2), R4 6735 and Comelec Resolution 2300 provide more than
sufficient authority to implement, effectuate and realize our people's power to amend the
Constitution.

Petitioner Delfin and the Pedrosa

Spouses Should Not Be Muzzled

I am glad the majority decided to heed our plea to lift the temporary restraining order issued by
this Court on 18 December 1996 insofar as it prohibited Petitioner Delfin and the Spouses
Pedrosa from exercising their right of initiative. In fact, I believe that such restraining order as
against private respondents should not have been issued, in the first place. While I agree that
the Comelec should be stopped from using public funds and government resources to help
them gather signatures, I firmly believe that this Court has no power to restrain them from
exercising their right of initiative. The right to propose amendments to the Constitution is really a
species of the right of free speech and free assembly. And certainly, it would be tyrannical and
despotic to stop anyone from speaking freely and persuading others to conform to his/her
beliefs. As the eminent Voltaire once said, "I may disagree with what you say, but I will defend
to the death your right to say it." After all, freedom is not really for the thought we agree with, but
as Justice Holmes wrote, "freedom for the thought that we hate."5

Epilogue

By way of epilogue, let me stress the guiding tenet of my Separate Opinion. Initiative, like
referendum and recall, is a new and treasured feature of the Filipino constitutional system. All
three are institutionalized legacies of the world-admired EDSA people power. Like elections and
plebiscites, they are hallowed expressions of popular sovereignty. They are sacred democratic
rights of our people to be used as their final weapons against political excesses, opportunism,
inaction, oppression and misgovernance; as well as their reserved instruments to exact
transparency, accountability and faithfulness from their chosen leaders. While on the one hand,
their misuse and abuse must be resolutely struck down, on the other, their legitimate exercise
should be carefully nurtured and zealously protected.

WHEREFORE, I vote to GRANT the petition of Sen. Miriam D. Santiago et al. and to DIRECT
Respondent Commission on Elections to DISMISS the Delfin Petition on the ground of
prematurity, but not on the other grounds relied upon by the majority. I also vote to LIFT the
temporary restraining order issued on 18 December 1996 insofar as it prohibits Jesus Delfin,
Alberto Pedrosa and Carmen Pedrosa from exercising their right to free speech in proposing
amendments to the Constitution.

Melo and Mendoza, JJ., concur.

Separate Opinions

PUNO, J., concurring and dissenting:

I join the ground-breaking ponencia of our esteemed colleague, Mr. Justice Davide insofar as it
orders the COMELEC to dismiss the Delfin petition. I regret, however, I cannot share the view
that R.A. No. 5735 and COMELEC Resolution No. 2300 are legally defective and cannot
implement the people's initiative to amend the Constitution. I likewise submit that the petition
with respect to the Pedrosas has no leg to stand on and should be dismissed. With due respect:

First, I submit that R.A. No. 6735 sufficiently implements the right of the people to initiate
amendments to the Constitution thru initiative. Our effort to discover the meaning of R.A. No.
6735 should start with the search of the intent of our lawmakers. A knowledge of this intent is
critical for the intent of the legislature is the law and the controlling factor in its
interpretation.1 Stated otherwise, intent is the essence of the law, the spirit which gives life to its
enactment.2

Significantly, the majority decision concedes that ". . . R.A. No. 6735 was intended to cover
initiative to propose amendments to the Constitution." It ought to be so for this intent is crystal
clear from the history of the law which was a consolidation of House Bill No. 215053 and Senate
Bill No. 17.4 Senate Bill No. 17 was entitled "An Act Providing for a System of Initiative and
Referendum and the Exception Therefrom, Whereby People in Local Government Units Can
Directly Propose and Enact Resolutions and Ordinances or Approve or Reject any Ordinance or
Resolution Passed by the Local Legislative Body." Beyond doubt, Senate Bill No. 17 did not
include people's initiative to propose amendments to the Constitution. In checkered contrast,
House Bill No. 21505 5expressly included people's initiative to amend the Constitution.
Congressman (now Senator) Raul Roco emphasized in his sponsorship remarks:6

xxx xxx xxx

SPONSORSHIP REMARKS OF MR. ROCO

At the outset, Mr. Roco provided the following backgrounder on the constitutional
basis of the proposed measure.

1. As cited in Vera vs. Avelino (1946), the presidential system which was
introduced by the 1935 Constitution saw the application of the principle of
separation of powers.

2. While under the parliamentary system of the 1973 Constitution the principle
remained applicable, the 1981 amendments to the Constitution of 1973 ensured
presidential dominance over the Batasang Pambansa.

Constitutional history then saw the shifting and sharing of legislative powers
between the Legislature and the Executive departments. Transcending changes
in the exercise of legislative power is the declaration in the Philippine Constitution
that the Philippines is a republican state where sovereignty resides in the people
and all sovereignty emanates from them.

3. Under the 1987 Constitution, the lawmaking power is still preserved in

Congress; however, to institutionalize direct action of the people as exemplified
in the 1986 Revolution, the Constitution recognizes the power of the people,
through the system of initiative and referendum.

As cited in Section 1, Article VI of the 1987 Constitution, Congress does not have
plenary powers since reserve powers are given to the people expressly. Section
32 of the same Article mandates Congress to pass at the soonest possible time,
a bill on referendum and initiative, and to share its legislative powers with the
people.

Section 2, Article XVII of the 1987 Constitution, on the other hand, vests in the
people the power to directly propose amendments to the Constitution through
initiative, upon petition of at least 12 percent of the total number of registered
voters.

Stating that House Bill No. 21505 is the Committee's response to the duty
imposed on Congress to implement the exercise by the people of the right to
initiative and referendum, Mr. Roco recalled the beginnings of the system of
initiative and referendum under Philippine Law. He cited Section 99 of the Local
Government Code which vests in the barangay assembly the power to initiate
legislative processes, decide the holding of plebiscite and hear reports of the
Sangguniang Barangay, all of which are variations of the power of initiative and
referendum. He added that the holding of barangay plebiscites and referendum
are likewise provided in Sections 100 and 101 of the same Code.

Thereupon, for the sake of brevity, Mr. Roco moved that pertinent quotation on
the subject which he will later submit to the Secretary of the House be
incorporated as part of his sponsorship speech.

He then cited examples of initiative and referendum similar to those contained in

the instant Bill among which are the constitutions of states in the United States
which recognize the right of registered voters to initiate the enactment of any
statute or to project any existing law or parts thereof in a referendum. These
states, he said, are Alaska, Alabama, Montana, Massachusets, Dakota,
Oklahoma, Oregon, and practically all other states.

Mr. Roco explained that in certain American states, the kind of laws to which
initiative and referendum apply is also without limitation, except for emergency
measures, which are likewise incorporated in House Bill No. 21505. He added
that the procedure provided by the Bill from the filing of the petition, the
requirements of a certain percentage of supporters to present a proposition, to
the submission to electors are substantially similar to the provisions in American
laws. Although an infant in Philippine political structure, the system of initiative
 and referendum, he said, is a tried and tested system in other jurisdictions, and
the Bill is patterned after American experience.

He further explained that the bill has only 12 sections, and recalled that the
Constitutional Commissioners saw the system of the initiative and referendum as
an instrument which can be used should the legislature show itself to be
indifferent to the needs of the people. This is the reason, he claimed, why now is
an opportune time to pass the Bill even as he noted the felt necessity of the times
to pass laws which are necessary to safeguard individual rights and liberties.

At this juncture Mr. Roco explained the process of initiative and referendum as
advocated in House Bill No. 21505. He stated that:

1. Initiative means that the people, on their own political judgment, submit a Bill
for the consideration of the general electorate.

2. The instant Bill provides three kinds of initiative, namely; the initiative to amend
the Constitution once every five years; the initiative to amend statutes approved
by Congress; and the initiative to amend local ordinances.

3. The instant Bill gives a definite procedure and allows the Commission on
Elections (COMELEC) to define rules and regulations on the power of initiative.

4. Referendum means that the legislators seek the consent of the people on
measures that they have approved.

5. Under Section 4 of the Bill the people can initiate a referendum which is a
mode of plebiscite by presenting a petition therefor, but under certain limitations,
such as the signing of said petition by at least 10 percent of the total of registered
voters at which every legislative district is represented by at least three percent of
the registered voters thereof. Within 30 days after receipt of the petition, the
COMELEC shall determine the sufficiency of the petition, publish the same, and
set the date of the referendum within 45 to 90-day period.

6. When the matter under referendum or initiative is approved by the required

number of votes, it shall become effective 15 days following the completion of its
publication in the Official Gazette.

In concluding his sponsorship remarks, Mr. Roco stressed that the Members
cannot ignore the people's call for initiative and referendum and urged the Body
to approve House Bill No. 21505.

At this juncture, Mr. Roco also requested that the prepared text of his speech
together with the footnotes be reproduced as part of the Congressional Records.

The same sentiment as to the bill's intent to implement people's initiative to amend the
Constitution was stressed by then Congressman (now Secretary of Agriculture) Salvador
Escudero III in his sponsorship remarks, viz:7

xxx xxx xxx

SPONSORSHIP REMARKS OF MR. ESCUDERO

Mr. Escudero first pointed out that the people have been clamoring for a truly
popular democracy ever since, especially in the so-called parliament of the
streets. A substantial segment of the population feels, he said, that the form of
democracy is there, but not the reality or substance of it because of the
increasingly elitist approach of their representatives to the country's problem.

Whereupon, Mr. Escudero pointed out that the Constitution has provided a
means whereby the people can exercise the reserved power of initiative to
 propose amendments to the Constitution, and requested that Sections 1 and 32,
Article VI; Section 3, Article X; and Section 2, Article XVII of the Constitution be
made part of his sponsorship remarks.

Mr. Escudero also stressed that an implementing law is needed for the aforecited
Constitutional provisions. While the enactment of the Bill will give way to strong
competition among cause-oriented and sectoral groups, he continued, it will
hasten the politization of the citizenry, aid the government in forming an
enlightened public opinion, and produce more responsive legislation. The
passage of the Bill will also give street parliamentarians the opportunity to
articulate their ideas in a democratic forum, he added.

Mr. Escudero stated that he and Mr. Roco hoped for the early approval of the Bill
so that it can be initially used for the Agrarian Reform Law. He said that the
passage of House Bill No. 21505 will show that the Members can set aside their
personal and political consideration for the greater good of the people.

The disagreeing provisions in Senate Bill No. 17 and House Bill No. 21505 were
threshed out in a Bicameral Conference Committee.8 In the meeting of the Committee on
June 6, 1989,9 the members agreed that the two (2) bills should be consolidated and that
the consolidated version should include people's initiative to amend the Constitution as
contemplated by House Bill No. 21505. The transcript of the meeting states:

xxx xxx xxx

CHAIRMAN GONZALES. But at any rate, as I have said, because

this is new in our political system, the Senate decided on a more
cautious approach and limiting it only to the local government units
because even with that stage where . . . at least this has been
quite popular, ano? It has been attempted on a national basis.
Alright. There has not been a single attempt. Now, so, kami
limitado doon. And, second, we consider also that it is only fair
that the local legislative body should be given a chance to adopt
the legislation bill proposed, right? Iyong sinasabing indirect
system of initiative. If after all, the local legislative assembly or
body is willing to adopt it in full or in toto, there ought to be any
reason for initiative, ano for initiative. And, number 3, we feel that
there should be some limitation on the frequency with which it
should be applied. Number 4, na the people, thru initiative, cannot
enact any ordinance that is beyond the scope of authority of the
local legislative body, otherwise, my God, mag-aassume sila ng
power that is broader and greater than the grant of legislative
power to the Sanggunians. And Number 5, because of that, then a
proposition which has been the result of a successful initiative can
only carry the force and effect of an ordinance and therefore that
should not deprive the court of its jurisdiction to declare it null and
void for want of authority. Ha, di ba? I mean it is beyond powers of
local government units to enact. Iyon ang main essence namin, so
we concentrated on that. And that is why . . . so ang sa inyo
naman includes iyon sa Constitution, amendment to the
Constitution eh . . . national laws. Sa amin, if you insist on that,
alright, although we feel na it will in effect become a dead statute.
Alright, and we can agree, we can agree. So ang mangyayari dito,
and magiging basic nito, let us not discuss anymore kung alin and
magiging basic bill, ano, whether it is the Senate Bill or whether it
is the House bill. Logically it should be ours sapagkat una iyong sa
amin eh. It is one of the first bills approved by the Senate kaya
ang number niyan, makikita mo, 17, eh. Huwag na nating
pagusapan. Now, if you insist, really iyong features ng national at
saka constitutional, okay. ____ gagawin na natin na consolidation
of both bills.
 HON. ROCO. Yes, we shall consolidate.

CHAIRMAN GONZALES. Consolidation of the Senate and House

Bill No. so and so. 10

When the consolidated bill was presented to the House for approval, then Congressman
Roco upon interpellation by Congressman Rodolfo Albano, again confirmed that it
covered people's initiative to amend the Constitution. The record of the House
Representative states: 11

xxx xxx xxx

THE SPEAKER PRO TEMPORE. The Gentleman from

Camarines Sur is recognized.

MR. ROCO. On the Conference Committee Report on the

disagreeing provisions between Senate Bill No. 21505 which
refers to the system providing for the initiative and referendum,
fundamentally, Mr. Speaker, we consolidated the Senate and the
House versions, so both versions are totally intact in the bill. The
Senators ironically provided for local initiative and referendum and
the House Representatives correctly provided for initiative and
referendum on the Constitution and on national legislation.

I move that we approve the consolidated bill.

MR. ALBANO. Mr. Speaker.

THE SPEAKER PRO TEMPORE. What is the pleasure of the

Minority Floor Leader?

MR. ALBANO. Will the distinguished sponsor answer just a few

questions?

THE SPEAKER PRO TEMPORE. The Gentlemen will please

proceed.

MR. ALBANO. I heard the sponsor say that the only difference in
the two bills was that in the Senate version there was a provision
for local initiative and referendum, whereas the House version has
none.

MR. ROCO. In fact, the Senate version provide purely for local
initiative and referendum, whereas in the House version, we
provided purely for national and constitutional legislation.

MR. ALBANO. Is it our understanding therefore, that the two

provisions were incorporated?

MR. ROCO. Yes, Mr. Speaker.

MR. ALBANO. So that we will now have a complete initiative and

referendum both in the constitutional amendment and national
legislation.

MR. ROCO. That is correct.

MR. ALBANO. And provincial as well as municipal resolutions?

MR. ROCO. Down to barangay, Mr. Speaker.

 MR. ALBANO. And this initiative and referendum is in consonance
with the provision of the Constitution whereby it mandates this
Congress to enact the enabling law, so that we shall have a
system which can be done every five years. Is it five years in the
provision of the Constitution?

MR. ROCO. That is correct, Mr. Speaker. For constitutional

amendments in the 1987 Constitution, it is every five years.

MR. ALBANO. For every five years, Mr. Speaker?

MR. ROCO. Within five years, we cannot have multiple initiatives

and referenda.

MR. ALBANO. Therefore, basically, there was no substantial

difference between the two versions?

MR. ROCO. The gaps in our bill were filled by the Senate which,
as I said earlier, ironically was about local, provincial and
municipal legislation.

MR. ALBANO. And the two bills were consolidated?

MR. ROCO. Yes, Mr. Speaker.

MR. ALBANO. Thank you, Mr. Speaker.

APPROVAL OF C.C.R.
ON S.B. NO. 17 AND H.B. NO. 21505
(The Initiative and Referendum Act)

THE SPEAKER PRO TEMPORE. There was a motion to approve this

consolidated bill on Senate Bill No. 17 and House Bill No. 21505.

Is there any objection? (Silence. The Chair hears none; the motion is approved.

Since it is crystalline that the intent of R.A. No. 6735 is to implement the people's
initiative to amend the Constitution, it is our bounden duty to interpret the law as it was
intended by the legislature. We have ruled that once intent is ascertained, it must be
enforced even if it may not be consistent with the strict letter of the law and this ruling is
as old as the mountain. We have also held that where a law is susceptible of more than
one interpretation, that interpretation which will most tend to effectuate the manifest
intent of the legislature will be adopted. 12

The text of R.A. No. 6735 should therefore be reasonably construed to effectuate its intent to
implement the people's initiative to amend the Constitution. To be sure, we need not torture the
text of said law to reach the conclusion that it implements people's initiative to amend the
Constitution. R.A. No. 6735 is replete with references to this prerogative of the people.

First, the policy statement declares:

Sec. 2. Statement of Policy. — The power of the people under a system of

initiative and referendum to directly propose, enact, approve or reject, in whole or
in part, the Constitution, laws, ordinances, or resolutions passed by any
legislative body upon compliance with the requirements of this Act is hereby
affirmed, recognized and guaranteed. (emphasis supplied)

Second, the law defines "initiative" as "the power of the people to propose amendments to the
constitution or to propose and enact legislations through an election called for the purpose," and
"plebiscite" as "the electoral process by which an initiative on the Constitution is approved or
rejected by the people.

Third, the law provides the requirements for a petition for initiative to amend the Constitution.
Section 5(b) states that "(a) petition for an initiative on the 1987 Constitution must have at least
twelve per centum (12%) of the total number of registered voters as signatories, of which every
legislative district must be represented by at least threeper centum (3%) of the registered voters
therein." It also states that "(i)nitiative on the Constitution may be exercised only after five (5)
years from the ratification of the 1987 Constitution and only once every five (5) years thereafter.

Finally, R.A. No. 6735 fixes the effectivity date of the amendment. Section 9(b) states that "(t)he
proposition in an initiative on the Constitution approved by a majority of the votes cast in the
plebiscite shall become effective as to the day of the plebiscite.

It is unfortunate that the majority decision resorts to a strained interpretation of R.A. No. 6735 to
defeat its intent which it itself concedes is to implement people's initiative to propose
amendments to the Constitution. Thus, it laments that the word "Constitution" is neither
germane nor relevant to the policy thrust of section 2 and that the statute's subtitling is not
accurate. These lapses are to be expected for laws are not always written in impeccable
English. Rightly, the Constitution does not require our legislators to be word-smiths with the
ability to write bills with poetic commas like Jose Garcia Villa or in lyrical prose like Winston
Churchill. But it has always been our good policy not to refuse to effectuate the intent of a law
on the ground that it is badly written. As the distinguished Vicente Francisco 13 reminds us:
"Many laws contain words which have not been used accurately. But the use of inapt or
inaccurate language or words, will not vitiate the statute if the legislative intention can be
ascertained. The same is equally true with reference to awkward, slovenly, or ungrammatical
expressions, that is, such expressions and words will be construed as carrying the meaning the
legislature intended that they bear, although such a construction necessitates a departure from
the literal meaning of the words used.

In the same vein, the argument that R.A. No. 7535 does not include people's initiative to amend
the Constitution simply because it lacks a sub-title on the subject should be given the weight of
helium. Again, the hoary rule in statutory construction is that headings prefixed to titles, chapters
and sections of a statute may be consulted in aid of interpretation, but inferences drawn
therefrom are entitled to very little weight, and they can never control the plain terms of the
enacting clauses. 14

All said, it is difficult to agree with the majority decision that refuses to enforce the manifest
intent or spirit of R.A. No. 6735 to implement the people's initiative to amend the Constitution. It
blatantly disregards the rule cast in concrete that the letter of the law must yield to its spirit for
the letter of the law is its body but its spirit is its soul. 15

II

COMELEC Resolution No. 2300, 16 promulgated under the stewardship of Commissioner

Haydee Yorac, then its Acting Chairman, spelled out the procedure on how to exercise the
people's initiative to amend the Constitution. This is in accord with the delegated power granted
by section 20 of R.A. No. 6735 to the COMELEC which expressly states: "The Commission is
hereby empowered to promulgate such rules and regulations as may be necessary to carry out
the purposes of this Act." By no means can this delegation of power be assailed as infirmed. In
the benchmark case of Pelaez v. Auditor General, 17 this Court, thru former Chief Justice
Roberto Concepcion laid down the test to determine whether there is undue delegation of
legislative power, viz:

xxx xxx xxx

Although Congress may delegate to another branch of the Government the

power to fill details in the execution, enforcement or administration of a law, it is
essential, to forestall a violation of the principle of separation of powers, that said
law: (a) be complete in itself — it must set forth therein the policy to be executed,
carried out or implemented by the delegate — and (b) to fix standard — the limits
 of which are sufficiently determinate or determinable — to which the delegate
must conform in the performance of his functions. Indeed, without a statutory
declaration of policy, which is the essence of every law, and, without the
aforementioned standard, there would be no means to determine, with
reasonable certainty, whether the delegate has acted within or beyond the scope
of his authority. Hence, he could thereby arrogate upon himself the power, not
only to make the law, but, also — and this is worse — to unmake it, by adopting
measures inconsistent with the end sought to be attained by the Act of Congress,
thus nullifying the principle of separation of powers and the system of checks and
balances, and, consequently, undermining the very foundation of our republican
system.

Section 68 of the Revised Administrative Code does not meet these well-settled
requirements for a valid delegation of the power to fix the details in the
enforcement of a law. It does not enunciate any policy to be carried out or
implemented by the President. Neither does it give a standard sufficiently precise
to avoid the evil effects above referred to.

R.A. No. 6735 sufficiently states the policy and the standards to guide the COMELEC in
promulgating the law's implementing rules and regulations of the law. As aforestated, section 2
spells out the policy of the law; viz: "The power of the people under a system of initiative and
referendum to directly propose, enact, approve or reject, in whole or in part, the Constitution,
laws, ordinances, or resolutions passed by any legislative body upon compliance with the
requirements of this Act is hereby affirmed, recognized and guaranteed." Spread out all over
R.A. No. 6735 are the standards to canalize the delegated power to the COMELEC to
promulgate rules and regulations from overflowing. Thus, the law states the number of
signatures necessary to start a people's initiative, 18 directs how initiative proceeding is
commenced, 19 what the COMELEC should do upon filing of the petition for initiative, 20 how a
proposition is approved, 21 when a plebiscite may be held, 22 when the amendment takes
effect 23 and what matters may not be the subject of any initiative. 24 By any measure, these
standards are adequate.

Former Justice Isagani A. Cruz, similarly elucidated that "a sufficient standard is intended to
map out the boundaries of the delegates' authority by defining the legislative policy and
indicating the circumstances under which it is to be pursued and effected. The purpose of the
sufficient standard is to prevent a total transference of legislative power from the lawmaking
body to the delegate." 25 In enacting R.A. No. 6735, it cannot be said that Congress totally
transferred its power to enact the law implementing people's initiative to COMELEC. A close
look at COMELEC Resolution No. 2300 will show that it merely provided the procedure to
effectuate the policy of R.A. No. 6735 giving life to the people's initiative to amend the
Constitution. The debates 26 in the Constitutional Commission make it clear that the rules of
procedure to enforce the people's initiative can be delegated, thus:

MR. ROMULO. Under Commissioner Davide's amendment, it is

possible for the legislature to set forth certain procedures to carry
out the initiative. . . ?

MR. DAVIDE. It can.

xxx xxx xxx

MR. ROMULO. But the Commissioner's amendment does not

prevent the legislature from asking another body to set the
proposition in proper form.

MR. DAVIDE. The Commissioner is correct. In other words, the

implementation of this particular right would be subject to
legislation, provided the legislature cannot determine anymore the
percentage of the requirement.
 MR. DAVIDE. As long as it will not destroy the substantive right to
initiate. In other words, none of the procedures to be proposed by
the legislative body must diminish or impair the right conceded
here.

MR. ROMULO. In that provision of the Constitution can the

procedures which I have discussed be legislated?

MR. DAVIDE. Yes.

In his book, The Intent of the 1986 Constitution Writers, 27 Father Bernas likewise
affirmed: "In response to questions of Commissioner Romulo, Davide explained the
extent of the power of the legislature over the process: it could for instance, prescribe
the 'proper form before (the amendment) is submitted to the people,' it could authorize
another body to check the proper form. It could also authorize the COMELEC, for
instance, to check the authenticity of the signatures of petitioners. Davide concluded: 'As
long as it will not destroy the substantive right to initiate. In other words, none of the
procedures to be proposed by the legislative body must diminish or impair the right
conceded here.'" Quite clearly, the prohibition against the legislature is to impair the
substantive right of the people to initiate amendments to the Constitution. It is not,
however, prohibited from legislating the procedure to enforce the people's right of
initiative or to delegate it to another body like the COMELEC with proper standard.

A survey of our case law will show that this Court has prudentially refrained from invalidating
administrative rules on the ground of lack of adequate legislative standard to guide their
promulgation. As aptly perceived by former Justice Cruz, "even if the law itself does not
expressly pinpoint the standard, the courts will bend backward to locate the same elsewhere in
order to spare the statute, if it can, from constitutional infirmity." 28 He cited the ruling
in Hirabayashi v. United States, 29 viz:

xxx xxx xxx

It is true that the Act does not in terms establish a particular standard to which
orders of the military commander are to conform, or require findings to be made
as a prerequisite to any order. But the Executive Order, the Proclamations and
the statute are not to be read in isolation from each other. They were parts of a
single program and must be judged as such. The Act of March 21, 1942, was an
adoption by Congress of the Executive Order and of the Proclamations. The
Proclamations themselves followed a standard authorized by the Executive
Order — the necessity of protecting military resources in the designated areas
against espionage and sabotage.

In the case at bar, the policy and the standards are bright-lined in R.A. No. 6735. A 20-
20 look at the law cannot miss them. They were not written by our legislators in invisible
ink. The policy and standards can also be found in no less than section 2, Article XVII of
the Constitution on Amendments or Revisions. There is thus no reason to hold that the
standards provided for in R.A. No. 6735 are insufficient for in other cases we have
upheld as adequate more general standards such as "simplicity and dignity," 30 "public
interest," 31 "public welfare," 32 "interest of law and order," 33 "justice and
equity,"34 "adequate and efficient instruction," 35 "public safety," 36 "public
policy", 37 "greater national interest", 38 "protect the local consumer by stabilizing and
subsidizing domestic pump rates", 39 and "promote simplicity, economy and efficiency in
government." 40 A due regard and respect to the legislature, a co-equal and coordinate
branch of government, should counsel this Court to refrain from refusing to effectuate
laws unless they are clearly unconstitutional.

III

It is also respectfully submitted that the petition should he dismissed with respect to the
Pedrosas. The inclusion of the Pedrosas in the petition is utterly baseless. The records show
that the case at bar started when respondent Delfin alone and by himself filed with the
COMELEC a Petition to Amend the Constitution to Lift Term Limits of Elective Officials by
People's Initiative. The Pedrosas did not join the petition. It was Senator Roco who moved to
intervene and was allowed to do so by the COMELEC. The petition was heard and before the
COMELEC could resolve the Delfin petition, the case at bar was filed by the petitioners with this
Court. Petitioners sued the COMELEC. Jesus Delfin, Alberto Pedrosa and Carmen Pedrosa in
their capacities as founding members of the People's Initiative for Reform, Modernization and
Action (PIRMA). The suit is an original action for prohibition with prayer for temporary restraining
order and/or writ of preliminary injunction.

The petition on its face states no cause of action against the Pedrosas. The only allegation
against the Pedrosas is that they are founding members of the PIRMA which proposes to
undertake the signature drive for people's initiative to amend the Constitution. Strangely, the
PIRMA itself as an organization was not impleaded as a respondent. Petitioners then prayed
that we order the Pedrosas ". . . to desist from conducting a signature drive for a people's
initiative to amend the Constitution." On December 19, 1996, we temporarily enjoined the
Pedrosas ". . . from conducting a signature drive for people's initiative to amend the
Constitution." It is not enough for the majority to lift the temporary restraining order against the
Pedrosas. It should dismiss the petition and all motions for contempt against them without
equivocation.

One need not draw a picture to impart the proposition that in soliciting signatures to start a
people's initiative to amend the Constitution the Pedrosas are not engaged in any criminal act.
Their solicitation of signatures is a right guaranteed in black and white by section 2 of Article
XVII of the Constitution which provides that ". . . amendments to this Constitution may likewise
be directly proposed by the people through initiative. . ." This right springs from the principle
proclaimed in section 1, Article II of the Constitution that in a democratic and republican state
"sovereignty resides in the people and all government authority emanates from them." The
Pedrosas are part of the people and their voice is part of the voice of the people. They may
constitute but a particle of our sovereignty but no power can trivialize them for sovereignty is
indivisible.

But this is not all. Section 16 of Article XIII of the Constitution provides: "The right of the people
and their organizations to effective and reasonable participation at all levels of social, political
and economic decision-making shall not be abridged. The State shall by law, facilitate the
establishment of adequate consultation mechanisms." This is another novel provision of the
1987 Constitution strengthening the sinews of the sovereignty of our people. In soliciting
signatures to amend the Constitution, the Pedrosas are participating in the political decision-
making process of our people. The Constitution says their right cannot be abridged without any
ifs and buts. We cannot put a question mark on their right.

Over and above these new provisions, the Pedrosas' campaign to amend the Constitution is an
exercise of their freedom of speech and expression and their right to petition the government for
redress of grievances. We have memorialized this universal right in all our fundamental laws
from the Malolos Constitution to the 1987 Constitution. We have iterated and reiterated in our
rulings that freedom of speech is a preferred right, the matrix of other important rights of our
people. Undeniably, freedom of speech enervates the essence of the democratic creed of think
and let think. For this reason, the Constitution encourages speech even if it protects the
speechless.

It is thus evident that the right of the Pedrosas to solicit signatures to start a people's initiative to
amend the Constitution does not depend on any law, much less on R.A. 6735 or COMELEC
Resolution No. 2300. No law, no Constitution can chain the people to an undesirable status quo.
To be sure, there are no irrepealable laws just as there are no irrepealable Constitutions.
Change is the predicate of progress and we should not fear change. Mankind has long
recognized the truism that the only constant in life is change and so should the majority.

IV

In a stream of cases, this Court has rhapsodized people power as expanded in the 1987
Constitution. On October 5, 1993, we observed that people's might is no longer a myth but an
article of faith in our Constitution. 41 On September 30, 1994, we postulated that people power
can be trusted to check excesses of government and that any effort to trivialize the
effectiveness of people's initiatives ought to be rejected. 42 On September 26, 1996, we pledged
that ". . . this Court as a matter of policy and doctrine will exert every effort to nurture, protect
and promote their legitimate exercise." 43 Just a few days ago, or on March 11, 1997, by a
unanimous decision, 44 we allowed a recall election in Caloocan City involving the mayor and
ordered that he submits his right to continue in office to the judgment of the tribunal of the
people. Thus far, we have succeeded in transforming people power from an opaque abstraction
to a robust reality. The Constitution calls us to encourage people empowerment to blossom in
full. The Court cannot halt any and all signature campaigns to amend the Constitution without
setting back the flowering of people empowerment. More important, the Court cannot seal the
lips of people who are pro-change but not those who are anti-change without concerting the
debate on charter change into a sterile talkaton. Democracy is enlivened by a dialogue and not
by a monologue for in a democracy nobody can claim any infallibility.

Melo and Mendoza, JJ., concur.

VITUG, J., concurring and dissenting:

The COMELEC should have dismissed, outrightly, the Delfin Petition.

It does seem to me that there is no real exigency on the part of the Court to engross, let alone to
commit, itself on all the issues raised and debated upon by the parties. What is essential at this
time would only be to resolve whether or not the petition filed with the COMELEC, signed by
Atty. Jesus S. Delfin in his capacity as a "founding member of the Movement for People's
Initiative" and seeking through a people initiative certain modifications on the 1987 Constitution,
can properly be regarded and given its due course. The Constitution, relative to any proposed
amendment under this method, is explicit. Section 2, Article XVII, thereof provides:

Sec. 2. Amendments to this Constitution may likewise be directly proposed by

the people through initiative upon a petition of at least twelve per centum of the
total number of registered voters, of which every legislative district must be
represented by at least three per centum of the registered voters therein. No
amendment under this section shall be authorized within five years following the
ratification of this Constitution nor oftener than once every five years thereafter.

The Congress shall provide for the implementation of the exercise of this right.

The Delfin petition is thus utterly deficient. Instead of complying with the constitutional
imperatives, the petition would rather have much of its burden passed on, in effect, to the
COMELEC. The petition would require COMELEC to schedule "signature gathering all over the
country," to cause the necessary publication of the petition "in newspapers of general and local
circulation," and to instruct "Municipal Election Registrars in all Regions of the Philippines to
assist petitioners and volunteers in establishing signing stations at the time and on the dates
designated for the purpose.

I submit, even then, that the TRO earlier issued by the Court which, consequentially, is made
permanent under theponencia should be held to cover only the Delfin petition and must not be
so understood as having intended or contemplated to embrace the signature drive of the
Pedrosas. The grant of such a right is clearly implicit in the constitutional mandate on people
initiative.

The distinct greatness of a democratic society is that those who reign are the governed
themselves. The postulate is no longer lightly taken as just a perceived myth but a veritable
reality. The past has taught us that the vitality of government lies not so much in the strength of
those who lead as in the consent of those who are led. The role of free speech is pivotal but it
can only have its true meaning if it comes with the correlative end of being heard.

Pending a petition for a people's initiative that is sufficient in form and substance, it behooves
the Court, I most respectfully submit, to yet refrain from resolving the question of whether or not
Republic Act No. 6735 has effectively and sufficiently implemented the Constitutional provision
on right of the people to directly propose constitutional amendments. Any opinion or view
formulated by the Court at this point would at best be only a non-binding, albeitpossibly
persuasive, obiter dictum.

I vote for granting the instant petition before the Court and for clarifying that the TRO earlier
issued by the Court did not prescribe the exercise by the Pedrosas of their right to campaign for
constitutional amendments.

FRANCISCO, J., dissenting and concurring:

There is no question that my esteemed colleague Mr. Justice Davide has prepared a scholarly
and well-written ponencia. Nonetheless, I cannot fully subscribe to his view that R. A. No. 6735
is inadequate to cover the system of initiative on amendments to the Constitution.

To begin with, sovereignty under the constitution, resides in the people and all government
authority emanates from them.1 Unlike our previous constitutions, the present 1987 Constitution
has given more significance to this declaration of principle for the people are now vested with
power not only to propose, enact or reject any act or law passed by Congress or by the local
legislative body, but to propose amendments to the constitution as well.2 To implement these
constitutional edicts, Congress in 1989 enacted Republic Act No. 6735, otherwise known as
"The initiative and Referendum Act". This law, to my mind, amply covers an initiative on the
constitution. The contrary view maintained by petitioners is based principally on the alleged lack
of sub-title in the law on initiative to amend the constitution and on their allegation that:

Republic Act No. 6735 provides for the effectivity of the law after publication in
print media. [And] [t]his indicates that Republic Act No. 6735 covers only laws
and not constitutional amendments, because constitutional amendments take
effect upon ratification not after publication.3

which allegation manifests petitioners' selective interpretation of the law, for under
Section 9 of Republic Act No. 6735 on the Effectivity of Initiative or Referendum
Proposition paragraph (b) thereof is clear in providing that:

The proposition in an initiative on the constitution approved by a majority of the votes cast in the
plebiscite shall become effective as to the day of the plebiscite.

It is a rule that every part of the statute must be interpreted with reference the context, i.e., that
every part of the statute must be construed together with the other parts and kept subservient to
the general intent of the whole enactment. 4 Thus, the provisions of Republic Act No. 6735 may
not be interpreted in isolation. The legislative intent behind every law is to be extracted from the
statute as a whole.5

In its definition of terms, Republic Act No. 6735 defines initiative as "the power of the people to
propose amendments to the constitution or to propose and enact legislations through an
election called for the purpose".6The same section, in enumerating the three systems of
initiative, included an "initiative on the constitution which refers to a petition proposing
amendments to the constitution"7 Paragraph (e) again of Section 3 defines "plebiscite" as
"the electoral process by which an initiative on the constitution is approved or rejected by the
people" And as to the material requirements for an initiative on the Constitution, Section 5(b)
distinctly enumerates the following:

A petition for an initiative on the 1987 Constitution must have at least twelve per
centum (12%) of the total number of the registered voters as signatories, of
which every legislative district must be represented by at least three per
centum (3%) of the registered voters therein. Initiative on the constitution may be
exercised only after five (5) years from the ratification of the 1987 Constitution
and only once every five years thereafter.
These provisions were inserted, on purpose, by Congress the intent being to provide for
the implementation of the right to propose an amendment to the Constitution by way of
initiative. "A legal provision", the Court has previously said, "must not be construed as to
be a useless surplusage, and accordingly, meaningless, in the sense of adding nothing
to the law or having no effect whatsoever thereon". 8 That this is the legislative intent is
further shown by the deliberations in Congress, thus:

. . . More significantly, in the course of the consideration of the Conference

Committee Report on the disagreeing provisions of Senate Bill No. 17 and House
Bill No. 21505, it was noted:

MR. ROCO. On the Conference Committee Report on the

disagreeing provisions between Senate Bill No. 17 and the
consolidated House Bill No. 21505 which refers to the system
providing for the initiative and referendum, fundamentally, Mr.
Speaker, we consolidated the Senate and the House versions, so
both versions are totally intact in the bill. The Senators ironically
provided for local initiative and referendum and the House of
Representatives correctly provided for initiative and referendum an
the Constitution and on national legislation.

I move that we approve the consolidated bill.

MR. ALBANO, Mr. Speaker.

THE SPEAKER PRO TEMPORE. What is the pleasure of the

Minority Floor Leader?

MR. ALBANO. Will the distinguished sponsor answer just a few

questions?

THE SPEAKER PRO TEMPORE. What does the sponsor say?

MR. ROCO. Willingly, Mr. Speaker.

THE SPEAKER PRO TEMPORE. The Gentleman will please

proceed.

MR. ALBANO. I heard the sponsor say that the only difference in
the two bills was that in the Senate version there was a provision
for local initiative and referendum, whereas the House version has
none.

MR. ROCO. In fact, the Senate version provided purely for local
initiative and referendum, whereas in the House version, we
provided purely for national and constitutional legislation.

MR. ALBANO. Is it our understanding, therefore, that the two

provisions were incorporated?

MR. ROCO. Yes, Mr. Speaker.

MR. ALBANO. So that we will now have a complete initiative and

referendum both in the constitutional amendment and national
legislation.

MR. ROCO. That is correct.

MR. ALBANO. And provincial as well as municipal resolutions?

 MR. ROCO. Down to barangay, Mr. Speaker.

MR. ALBANO. And this initiative and referendum is in consonance

with the provision of the Constitution to enact the enabling law, so
that we shall have a system which can be done every five years.
Is it five years in the provision of the Constitution?

MR. ROCO. That is correct, Mr. Speaker. For constitutional

amendments to the 1987 Constitution, it is every five years." (Id.
[Journal and Record of the House of Representatives], Vol. VIII, 8
June 1989, p. 960; quoted in Garcia v. Comelec, 237 SCRA 279,
292-293 [1994]; emphasis supplied)

. . . The Senate version of the Bill may not have comprehended initiatives on the
Constitution. When consolidated, though, with the House version of the Bill and
as approved and enacted into law, the proposal included initiative on both the
Constitution and ordinary laws.9

Clearly then, Republic Act No. 6735 covers an initiative on the constitution. Any other
construction as what petitioners foist upon the Court constitute a betrayal of the intent
and spirit behind the enactment.

At any rate, I agree with the ponencia that the Commission on Elections, at present, cannot take
any action (such as those contained in the Commission's orders dated December 6, 9, and 12,
1996 [Annexes B, C and B-1]) indicative of its having already assumed jurisdiction over private
respondents' petition. This is so because from the tenor of Section 5 (b) of R.A. No. 6735 it
would appear that proof of procurement of the required percentage of registered voters at the
time the petition for initiative is filed, is a jurisdictional requirement.

Thus:

A petition for an initiative on the 1987 Constitution must have at least twelve per
centum (12%) of the total number of registered voters as signatories, of which
every legislative district must be represented by at least three per centum (3%) of
the registered voters therein. Initiative on the Constitution may be exercised only
after five (5) years from the ratification of the 1987 Constitution and only once
every five (5) years thereafter.

Here private respondents' petition is unaccompanied by the required signatures. This

defect notwithstanding, it is without prejudice to the refiling of their petition once
compliance with the required percentage is satisfactorily shown by private respondents.
In the absence, therefore, of an appropriate petition before the Commission on
Elections, any determination of whether private respondents' proposal constitutes an
amendment or revision is premature.

ACCORDINGLY, I take exception to the conclusion reached in the ponencia that R.A. No. 6735
is an "inadequate" legislation to cover a people's initiative to propose amendments to the
Constitution. I, however, register my concurrence with the dismissal, in the meantime, of private
respondents' petition for initiative before public respondent Commission on Elections until the
same be supported by proof of strict compliance with Section 5 (b) of R.A. No. 6735.

Melo and Mendoza, JJ., concur.

PANGANIBAN, J., concurring and dissenting:

Our distinguished colleague, Mr. Justice Hilario G. Davide Jr., writing for the majority, holds that:

(1) The Comelec acted without jurisdiction or with grave abuse of discretion in entertaining the
"initiatory" Delfin Petition.
(2) While the Constitution allows amendments to "be directly proposed by the people through
initiative," there is no implementing law for the purpose. RA 6735 is "incomplete, inadequate, or
wanting in essential terms and conditions insofar as initiative on amendments to the Constitution
is concerned."

(3) Comelec Resolution No. 2330, "insofar as it prescribes rules and regulations on the conduct
of initiative on amendments to the Constitution, is void."

I concur with the first item above. Until and unless an initiatory petition can show the required
number of signatures — in this case, 12% of all the registered voters in the Philippines with at
least 3% in every legislative district — no public funds may be spent and no government
resources may be used in an initiative to amend the Constitution. Verily, the Comelec cannot
even entertain any petition absent such signatures. However, I dissent most respectfully from
the majority's two other rulings. Let me explain.

Under the above restrictive holdings espoused by the Court's majority, the Constitution cannot
be amended at all through a people's initiative. Not by Delfin, not by Pirma, not by anyone, not
even by all the voters of the country acting together. This decision will effectively but
unnecessarily curtail, nullify, abrogate and render inutile the people's right to change the basic
law. At the very least, the majority holds the right hostage to congressional discretion on
whether to pass a new law to implement it, when there is already one existing at present. This
right to amend through initiative, it bears stressing, is guaranteed by Section 2, Article XVII of
the Constitution, as follows:

Sec. 2. Amendments to this Constitution may likewise be directly proposed by

the people through initiative upon a petition of at least twelve per centum of the
total number of registered voters, of which every legislative district must be
represented by at least three per centum of the registered voters therein. No
amendment under this section shall be authorized within five years following the
ratification of this Constitution nor oftener than once every five years thereafter.

With all due respect, I find the majority's position all too sweeping and all too extremist. It is
equivalent to burning the whole house to exterminate the rats, and to killing the patient to relieve
him of pain. What Citizen Delfin wants the Comelec to do we should reject. But we should not
thereby preempt any future effort to exercise the right of initiative correctly and judiciously. The
fact that the Delfin Petition proposes a misuse of initiative does not justify a ban against its
proper use. Indeed, there is a right way to do the right thing at the right time and for the right
reason.

Taken Together and Interpreted Properly, the Constitution, RA 6735 and Comelec
Resolution 2300 Are Sufficient to Implement Constitutional Initiatives

While RA 6735 may not be a perfect law, it was — as the majority openly concedes — intended
by the legislature to cover and, I respectfully submit, it contains enough provisions to effectuate
an initiative on the Constitution.1 I completely agree with the inspired and inspiring opinions of
Mr. Justice Reynato S. Puno and Mr. Justice Ricardo J. Francisco that RA 6735, the Roco law
on initiative, sufficiently implements the right of the people to initiate amendments to the
Constitution. Such views, which I shall no longer repeat nor elaborate on, are thoroughly
consistent with this Court's unanimous en banc rulings in Subic Bay Metropolitan Authority
vs. Commission on Elections, 2 that "provisions for initiative . . . are (to be) liberally construed to
effectuate their purposes, to facilitate and not hamper the exercise by the voters of the rights
granted thereby"; and in Garcia vs. Comelec, 3 that any "effort to trivialize the effectiveness of
people's initiatives ought to be rejected."

No law can completely and absolutely cover all administrative details. In recognition of this, RA
6735 wisely empowered 4 the Commission on Election "to promulgate such rules and
regulations as may be necessary to carry out the purposes of this Act." And pursuant thereto,
the Comelec issued its Resolution 2300 on 16 January 1991. Such Resolution, by its very
words, was promulgated "to govern the conduct of initiative on the Constitution and initiative and
referendum on national and local laws," not by the incumbent Commission on Elections but by
one then composed of Acting Chairperson Haydee B. Yorac, Comms. Alfredo E. Abueg Jr.,
Leopoldo L. Africa, Andres R. Flores, Dario C. Rama and Magdara B. Dimaampao. All of these
Commissioners who signed Resolution 2300 have retired from the Commission, and thus we
cannot ascribe any vile motive unto them, other than an honest, sincere and exemplary effort to
give life to a cherished right of our people.

The majority argues that while Resolution 2300 is valid in regard to national laws and local
legislations, it is void in reference to constitutional amendments. There is no basis for such
differentiation. The source of and authority for the Resolution is the same law, RA 6735.

I respectfully submit that taken together and interpreted properly and liberally, the Constitution
(particularly Art. XVII, Sec. 2), R4 6735 and Comelec Resolution 2300 provide more than
sufficient authority to implement, effectuate and realize our people's power to amend the
Constitution.

Petitioner Delfin and the Pedrosa

Spouses Should Not Be Muzzled

I am glad the majority decided to heed our plea to lift the temporary restraining order issued by
this Court on 18 December 1996 insofar as it prohibited Petitioner Delfin and the Spouses
Pedrosa from exercising their right of initiative. In fact, I believe that such restraining order as
against private respondents should not have been issued, in the first place. While I agree that
the Comelec should be stopped from using public funds and government resources to help
them gather signatures, I firmly believe that this Court has no power to restrain them from
exercising their right of initiative. The right to propose amendments to the Constitution is really a
species of the right of free speech and free assembly. And certainly, it would be tyrannical and
despotic to stop anyone from speaking freely and persuading others to conform to his/her
beliefs. As the eminent Voltaire once said, "I may disagree with what you say, but I will defend
to the death your right to say it." After all, freedom is not really for the thought we agree with, but
as Justice Holmes wrote, "freedom for the thought that we hate."5

Epilogue

By way of epilogue, let me stress the guiding tenet of my Separate Opinion. Initiative, like
referendum and recall, is a new and treasured feature of the Filipino constitutional system. All
three are institutionalized legacies of the world-admired EDSA people power. Like elections and
plebiscites, they are hallowed expressions of popular sovereignty. They are sacred democratic
rights of our people to be used as their final weapons against political excesses, opportunism,
inaction, oppression and misgovernance; as well as their reserved instruments to exact
transparency, accountability and faithfulness from their chosen leaders. While on the one hand,
their misuse and abuse must be resolutely struck down, on the other, their legitimate exercise
should be carefully nurtured and zealously protected.

WHEREFORE, I vote to GRANT the petition of Sen. Miriam D. Santiago et al. and to DIRECT
Respondent Commission on Elections to DISMISS the Delfin Petition on the ground of
prematurity, but not on the other grounds relied upon by the majority. I also vote to LIFT the
temporary restraining order issued on 18 December 1996 insofar as it prohibits Jesus Delfin,
Alberto Pedrosa and Carmen Pedrosa from exercising their right to free speech in proposing
amendments to the Constitution.

Melo and Mendoza, JJ., concur.

Footnotes

1 Commissioner Blas Ople.

2 Commissioner Jose Suarez.

3 I Record of the Constitutional Commission, 371, 378.

4 Section 1, Article XV of the 1935 Constitution and Section 1(1), Article XVI of
the 1973 Constitution.
5 Annex "A" of Petition, Rollo, 15.

6 Later identified as the People's Initiative for Reforms, Modernization and

Action, or PIRMA for brevity.

7 These sections read:

Sec. 4. The term of office of the Senators shall be six years and shall commence,
unless otherwise provided by law, at noon on the thirtieth day of June next
following their election.

No Senator shall serve for more than two consecutive terms. Voluntary
renunciation of the office for any length of time shall not be considered as an
interruption in the continuity of his service for the full term for which he was
elected.

xxx xxx xxx

Sec. 7. The Members of the House of Representatives shall be elected for a term
of three years which shall begin, unless otherwise provided by law, at noon on
the thirtieth day of June next following their election.

No Member of the House of Representatives shall serve for more than three
consecutive terms. Voluntary renunciation of the office for any length of time shall
not be considered as an interruption in the continuity of his service for the full
term for which he was elected.

8 The section reads:

Sec. 4. The President and the Vice-President shall be elected by direct vote of
the people for a term of six years which shall begin at noon on the thirtieth day of
June next following the day of the election and shall end at noon of the same
date six years thereafter. The President shall not be eligible for any reelection.
No person who has succeeded as President and has served as such for more
than four years shall be qualified for election to the same office at any time.

No Vice-President shall serve for more than two successive terms. Voluntary
renunciation of the office for any length or time shall not be considered as an
interruption in the continuity of the service for the full term for which he was
elected.

9 The section reads:

Sec. 8. The term of office of elective local officials, except barangay officials,
which shall be determined by law, shall be three years and no such official shall
serve for more than three consecutive terms. Voluntary renunciation of the office
for any length of time shall not be considered as an interruption in the continuity
of his service for the full term for which he was elected.

10 Rollo, 19.

11 Annex "B" of Petition, Rollo, 25.

12 Order of 12 December 1996, Annex "B-1" of Petition, Rollo, 27.

13 Id.

14 Citing Araneta v. Dinglasan, 84 Phil. 368 [1949]; Sanidad v. COMELEC, 73

SCRA 333 [1976].
15 Rollo, 68.

16 Rollo, 100.

17 Rollo, 130.

18 A Member of the 1986 Constitutional Commission.

19 Section 26, Article II, Constitution.

20 Citing Commissioner Ople of the Constitutional Commission, I Record of the

Constitutional Commission, 405.

21 Rollo, 239.

22 Rollo, 304.

23 Rollo, 568.

24 These were submitted on the following dates:

(a) Private respondent Delfin — 31 January 1997 (Rollo, 429);

(b) Private respondents Alberto and Carmen Pedrosa — 10

February 1997 (Id., 446);

(c) Petitioners — 12 February 1997 (Id., 585);

(d) IBP — 12 February 1997 (Id., 476);

(e) Senator Roco — 12 February 1997 (Id., 606);

(f) DIK and MABINI — 12 February 1997 (Id., 465);

(g) COMELEC — 12 February 1997 (Id., 489);

(h) LABAN — 13 February 1997 (Id., 553).

25 Rollo, 594.

26 Annex "D" of Roco's Motion for Intervention in this case, Rollo, 184.

27 Rollo, 28.

28 232 SCRA 110, 134 [1994].

29 II The Constitution of the Republic of the Philippines, A Commentary 571

[1988].

30 I Record of the Constitutional Commission 370-371.

31 Id., 371.

32 Id., 386.

33 Id., 391-392. (Emphasis supplied).

34 Id., 386.
35 Id., 392.

36 Id., 398-399.

37 Id., 399. Emphasis supplied.

38 Id., 402-403.

39 Id., 401-402.

40 Id., 410.

41 Id., 412.

42 II Record of the Constitutional Commission 559-560.

43 The Congress originally appeared as The National Assembly. The change

came about as a logical consequence of the amended Committee Report No. 22
of the Committee on Legislative which changed The National Assembly to "The
Congress of the Philippines" in view of the approval of the amendment to adopt
the bicameral system (II Record of the Constitutional Commission 102-105). The
proposed new Article on the Legislative Department was, after various
amendments approved on Second and Third Readings on 9 October 1986 (Id.,
702-703)

44 V Record of the Constitutional Commission 806.

45 See footnote No. 42.

46 As Stated by Commissioner Bernas in his interpellation of Commissioner

Suarez, footnote 28.

47 Entitled "Initiative and Referendum Act of 1987," introduced by then

Congressmen Raul Roco, Raul del Mar and Narciso Monfort.

48 Entitled "An Act Implementing the Constitutional Provisions on Initiative and

Referendum and for Other Purposes," introduced by Congressmen Salvador
Escudero.

49 Entitled "An Act Providing for a System of Initiative and Referendum, and the
Exceptions Therefrom, Whereby People in Local Government Units Can Directly
Propose and Enact Resolutions and Ordinances or Approve or Reject Any
Ordinance or Resolution Passed By the Local Legislative Body," introduced by
Senators Gonzales, Romulo, Pimentel, Jr., and Lina, Jr.

50 IV Record of the Senate, No. 143, pp. 1509-1510.

51 VIII Journal and Record of the House of Representatives, 957-961.

52 That section reads:

Sec. 1. Statement of Policy. The power of the people under a system of initiative
and referendum to directly propose and enact resolutions and ordinances or
approve or reject, in whole or in part, any ordinance or resolution passed by any
local legislative body upon compliance with the requirements of this Act is hereby
affirmed, recognized and guaranteed.

53 It must be pointed out that Senate Bill No. 17 and House Bill No. 21505, as
approved on Third Reading, did not contain any subtitles.
54 If some confusion attended the preparation of the subtitles resulting in the
leaving out of the more important and paramount system of initiative on
amendments to the Constitution, it was because there was in the Bicameral
Conference Committee an initial agreement for the Senate panel to draft that
portion on local initiative and for the House of Representatives panel to draft that
portion covering national initiative and initiative on the Constitution; eventually,
however, the Members thereof agreed to leave the drafting of the consolidated
bill to their staff. Thus:

CHAIRMAN GONZALES.

. . . All right, and we can agree, we can agree. So ang mangyayari dito, ang
magiging basic nito, let us not discuss anymore kung alin ang magiging basic bill,
ano, whether it is the Senate Bill or whether it is the House Bill. Logically it should
be ours sapagkat una iyong sa amin, eh. It is one of the first bills approved by the
Senate kaya ang number niyan, makikita mo, 17, eh. Huwag na nating pag-
usapan. Now, if you insist, really iyong features ng national at saka constitutional,
okay. Pero gagawin na nating consolidation of both bills. (TSN, proceedings of
the Bicameral Conference Committee on 6 June 1989 submitted by Nora, R, pp.
1-4 — 1-5).

xxx xxx xxx

HON. ROCO. So how do we proceed from this? The staff will consolidate.

HON. GONZALES. Gumawa lang ng isang draft. Submit it to the Chairman, kami
na ang bahalang magconsult sa aming mga members na kung okay,

HON. ROCO. Within today?

HON. GONZALES. Within today and early tomorrow. Hanggang Huwebes lang
tayo, eh.

HON. AQUINO. Kinakailangang palusutin natin ito. Kung mabigyan tayo ng

kopya bukas and you are not objecting naman kayo naman ganoon din.

HON. ROCO. Editing na lang because on a physical consolidation nga ito, eh.
Yung mga provisions naman namin wala sa inyo. (TSN, proceedings of
Bicameral Conference Committee of 6 June 1989, submitted by E.S. Bongon, pp.
III-4 — III-5).

55 Sec. 5(a & c), Sec. 8, Section 9(a).

56 Sections 13, 14, 15 and 16.

57 It would thus appear that the Senate's "cautious approach" in the

implementation of the system of initiative as a mode of proposing amendments to
the Constitution, as expressed by Senator Gonzales in the course of his
sponsorship of Senate Bill No. 17 in the Bicameral Conference Committee
meeting and in his sponsorship of the Committee's Report, might have insidiously
haunted the preparation of the consolidated version of Senate Bill No. 17 and
House Bill No. 21505. In the first he said:

Senate Bill No. 17 recognizes the initiatives and referendum are recent
innovations in our political system. And recognizing that, it has adopted a
cautious approach by: first, allowing them only when the local legislative
body had refused to act; second, not more frequently than once a year;
and, third, limiting them to the national level. (I Record of the Senate, No.
33, p. 871).

xxx xxx xxx

 First, as I have said Mr. President, and I am saying for the nth time, that
we are introducing a novel and new system in politics. We have to adopt
first a cautious approach. We feel it is prudent and wise at this point in
time, to limit those powers that may be the subject of initiatives and
referendum to those exercisable or within the authority of the local
government units. (Id., p. 880).

In the second he stated:

But at any rate, as I have said, because this is new in our political system,
the Senate decided on a more cautious approach and limiting it only to
the local general units. (TSN of the proceedings of the Bicameral
Conference Committee on 6 June 1989, submitted by stenographer Nora
R, pp. 1-2 to 1-3).

In the last he declared:

The initiatives and referendum are new tools of democracy; therefore, we have
decided to be cautious in our approach. Hence, 1) we limited initiative and
referendum to the local government units; 2) that initiative can only be exercised
if the local legislative cannot be exercised more frequently that once every year.
(IV Records of the Senate, No. 143, pp. 15-9-1510).

58 Section 20, RA. No. 6735.

59 People v. Rosenthal, 68 Phil. 328 [1939]; ISAGANI A. CRUZ, Philippine

Political Law 86 [1996] (hereafter CRUZ).

60 People v. Vera, 65 Phil. 56 [1937]; CRUZ, supra, 87.

61 Pelaez v. Auditor General, 122 Phil. 965, 974 [1965].

62 Edu v. Ericta, 35 SCRA 481,497 [1970].

63 Sec. 7, COMELEC Resolution No. 2300.

64 Sec. 28, id.

65 Sec. 29, id.

66 Sec. 30, id.

PUNO, J., concurring and dissenting::

1 Agpalo, Statutory Construction, 1986 ed., p. 38, citing, inter alia, US v.

Tamparong 31 Phil. 321; Hernani v. Export Control Committee, 100 Phil. 973;
People v. Purisima, 86 SCRA 542.

2 Ibid, citing Torres v. Limjap, 56 Phil. 141.

3 Prepared and sponsored by the House Committee on Suffrage and Electoral

Reforms on the basis of H.B. No. 497 introduced by Congressmen Raul Roco,
Raul del Mar and Narciso Monfort and H.B. No. 988 introduced by Congressman
Salvador Escudero.

4 Introduced by Senators Neptali Gonzales, Alberto Romulo, Aquilino Pimentel,

Jr., and Jose Lina, Jr.

5 It was entitled "An Act Providing a System of Initiative and Referendum and
Appropriating Funds therefor.
6 Journal No. 85, February 14, 1989, p. 121.

7 Ibid.

8 The Senate Committee was chaired by Senator Neptali Gonzales with

Senators Agapito Aquino and John Osmena as members. The House Committee
was chaired by Congressman Magdaleno M. Palacol with Congressmen Raul
Roco, Salvador H. Escudero III and Joaquin Chipeco, Jr., as members.

9 Held at Constancia Room, Ciudad Fernandina, Greenhills, San Juan, Metro

Manila.

10 See Compliance submitted by intervenor Roco dated January 28, 1997.

11 Record No. 137, June 8, 1989, pp. 960-961.

12 Agpalo, op cit., p. 38 citing US v. Toribio, 15 Phil 7 (1910); US v. Navarro, 19

Phil 134 (1911).

13 Francisco, Statutory Construction, 3rd ed., (1968) pp. 145-

146 citing Crawford, Statutory Construction, pp. 337-338.

14 Black, Handbook on the Construction and Interpretation of the Laws (2nd ed),
pp. 258-259. See also Commissioner of Custom v. Relunia, 105 Phil 875 (1959);
People v. Yabut, 58 Phil 499 (1933).

15 Alcantara, Statutes, 1990 ed., p. 26 citing Dwarris on Statutes, p. 237.

16 Entitled In re: Rules and Regulations Governing the Conduct of Initiative on

the Constitution, and Initiative and Referendum on National and Local Laws and
promulgated on January 16, 1991 by the COMELEC with Commissioner Haydee
B. Yorac as Acting Chairperson and Commissioners Alfredo E. Abueg, Jr.,
Leopoldo L. Africa, Andres R. Flores, Dario C. Rama and Magdara B.
Dimaampao.

17 15 SCRA 569.

18 Sec. 5(b), R.A. No. 6735.

19 Sec. 5(b), R.A. No. 6735.

20 Sec. 7, R.A. No. 6735.

21 Sec. 9(b), R.A. No. 6735.

22 Sec. 8, R.A. No. 6735 in relation to Sec. 4, Art. XVII of the Constitution.

23 Sec. 9(b), R.A. No. 6735.

24 Sec. 10, R.A. No. 6735.

25 Cruz, Philippine Political Law, 1995 ed., p. 98.

26 See July 8, 1986 Debates of the Concom, p. 399.

27 1995 ed., p. 1207.

28 Cruz, op cit., p. 99.

29 320 US 99.
30 Balbuena v. Secretary of Education, 110 Phil 150 (1910).

31 People v. Rosenthal, 68 Phil 328 (1939).

32 Calalang v. Williams, 70 Phil 726 (1940).

33 Rubi v. Provincial Board of Mindoro, 39 Phil 669 (1919).

34 International Hardwood v. Pangil Federation of Labor, 70 Phil 602 (1940).

35 Phil. Association of Colleges and Universities v. Secretary of Education, 97

Phil 806 (1955).

36 Edu v. Ericta, 35 SCRA 481 (1990); Agustin v. Edu, 88 SCRA 195 (1979).

37 Pepsi Cola Bottling Co. vs. Municipality of Tanawan Leyte, 69 SCRA 460
(1976).

38 Maceda v. Macaraig, 197 SCRA 771 (1991).

39 Osmena v. Orbos, 220 SCRA 703 (1993).

40 Chiongbian v. Orbos, 245 SCRA 253 (1995).

41 Garcia v. COMELEC, et al., G.R. No. 111511, October 5, 1993.

42 Garcia, et al. v. COMELEC, et al., G.R. No. 111230, September 30, 1994.

43 Subic Bay Metropolitan Authority v. COMELEC, et al., G.R. No. 125416,

September 26, 1996.

44 Malonzo vs. COMELEC, et al., G.R. No. 127066, March 11, 1997.

FRANCISCO, J., concurring and dissenting:

1 Article II, Section 1, 1987 Constitution.

2 Article VI, Section 32, and Article XVII, Section 2, 1987 Constitution.

3 Petition, p. 5.

4 Paras v. Commission on Elections, G.R. No. 123619, December 4, 1996.

5 Tamayo v. Gsell, 35 Phil. 953, 980.

6 Section 3 (a), Republic Act No 6735.

7 Section 3(a) [a.1], Republic Act No 6735.

8 Uytengsu v. Republic, 95 Phil. 890, 893

9 Petition in Intervention filed by Sen. Raul Roco, pp. 15-16.

PANGANIBAN, J., concurring and dissenting:

1 Apart from its text on "national initiative" which could be used by analogy, RA
6735 contains sufficient provisions covering initiative on the Constitution, which
are clear enough and speak for themselves, like:
Sec. 2. Statement of Policy. — The power of the people under a system of
initiative and referendum to directly propose, enact, approve or reject, in whole or
in part, the Constitution, laws, ordinances, or resolution passed by any legislative
body upon compliance with the requirements of this Act is hereby affirmed,
recognized and guaranteed.

Sec. 3. Definition of Terms. — For purposes of this Act, the following terms shall
mean:

(a) "Initiative" is the power of the people to propose amendments

to the Constitution or to propose and enact legislation's through an
election called for the purpose.

There are three (3) systems of initiative, namely:

a.1 Initiative on the Constitution which refers to a petition

proposing amendments to the Constitution;

a.2 Initiative on statutes which refers to a petition proposing to

enact a national legislation; and

a.3 Initiative on local legislation which refers to a petition

proposing to enact a regional, provincial, city, municipal, or
barangay law, resolution or ordinance.

xxx xxx xxx

(e) "Plebiscite" is the electoral process by which an initiative on

the Constitution is approved or rejected by the people

(f) "Petition" is the written instrument containing the proposition

and the required number of signatories. It shall be in a form to be
determined by and submitted to the Commission on Elections,
hereinafter referred to as the Commission

xxx xxx xxx

Sec. 5 Requirements. — . . .

(b) A petition for an initiative on the 1987 Constitution must have

at least twelve per centum (12 %) of the total number of registered
voters as signatories, of which every legislative district must be
represented by at least three per centum (3%) of the registered
voters therein. Initiative on the Constitution may be exercised only
after five (5) years from the ratification of the 1987 Constitution
and only once every five (5) years thereafter.

Sec. 9. Effectivity of Initiative or Referendum Proposition. —

xxx xxx xxx

(b) The proposition in an initiative on the Constitution approved by

a majority of the votes cast in the plebiscite shall become effective
as to the day of the plebiscite.

xxx xxx xxx

(c) The petition shall state the following:

 c.1 contents or text of the proposed law sought to
be enacted, approved or rejected, amended or
repealed, as the case may be;

c.2 the proposition;

c.3 the reason or reasons therefor;

c.4 that it is not one of the exceptions provided

herein;

c.5 signatures of the petitioners or registered

voters; and

c.6 an abstract or summary proposition in not more

than one hundred (100) words which shall be
legibly written or printed at the top of every page of
the petition.

xxx xxx xxx

Sec. 19. Applicability of the Omnibus Election Code. — The Omnibus Election
Code and other election laws, not inconsistent with the provisions of this Act,
shall apply to all initiatives and referenda.

Sec. 20. Rules and Regulations. — The Commission is hereby empowered to

promulgate such rules and regulations as may be necessary to carry out the
purposes of this Act. (Emphasis supplied)

2 G.R. No. 125416, September 26, 1996.

3 237 SCRA 279, 282, September 30, 1994.

4 Sec. 20, R.A. 6735.

5 United States vs. Rosika Schwimmer, 279 U.S. 644, 655 (1929).

G.R. No. L-68635 May 14, 1987

IN THE MATTER OF PROCEEDINGS FOR DISCIPLINARY ACTION AGAINST ATTY.

WENCESLAO LAURETA, AND OF CONTEMPT PROCEEDINGS AGAINST EVA
MARAVILLA-ILUSTRE in G.R. No. 68635, entitled "EVA MARAVILLA-ILUSTRE, vs. HON.
INTERMEDIATE APPELLATE COURT, ET AL."

RESOLUTION

PER CURIAM:

Before us are 1) Atty. Wenceslao Laureta's Motion for Reconsideration of the Per Curiam
Resolution of this Court promulgated on March 12, 1987, finding him guilty of grave professional
misconduct and suspending him indefinitely from the practice of law; and 2) Eva Maravilla-
Ilustre's Motion for Reconsideration of the same Resolution holding her in contempt and
ordering her to pay a fine of P1,000.00.
Essentially, Atty. Laureta maintains that the Order of suspension without hearing violated his
right to life and due process of law and by reason thereof the Order is null and void; that the
acts of misconduct imputed to him are without basis; that the charge against him that it was he
who had circulated to the press copies of the Complaint filed before the Tanodbayan is
unfounded such that, even in this Court's Resolution, his having distributed copies to the press
is not stated positively; that the banner headline which appeared In the Daily Express is
regrettable but that he was not responsible for such "misleading headline;" that he "did nothing
of the sort" being fully conscious of his responsibilities as a law practitioner and officer of the
Court; that as a former newspaperman, he would not have been satisfied with merely circulating
copies of the Complaint to the press in envelopes where his name appears; "he himself would
have written stories about the case in a manner that sells newspapers; even a series of juicy
articles perhaps, something that would have further subjected the respondent justices to far
worse publicity;" that, on the contrary, the press conference scheduled by Ilustre was cancelled
through his efforts in order to prevent any further adverse publicity resulting from the filing of the
complaint before the Tanodbayan; that, as a matter of fact, it was this Court's Resolution that
was serialized in the Bulletin Today, which newspaper also made him the subject of a scathing
editorial but that he "understands the cooperation because after all, the Court rendered a
favorable judgment in the Bulletin union case last year;" that he considered it "below his dignity
to plead for the chance to present his side" with the Editor, Mr. Ben Rodriguez, "a long-time
personal friend" since he "can afford to be the sacrificial lamb if only to help the Honorable Court
uphold its integrity;" that he was called by a reporter of DZRH and was asked to comment on
the case filed before the Tanodbayan but that his remarks were confined to the filing of the case
by Ilustre herself, and that the judgment of the trial Court had attained its finality long ago; that
he is not Ilustre's counsel before the Tanodbayan and did not prepare the complaint filed before
it, his professional services having been terminated upon the final dismissal of Ilustre's case
before this Court; that similarities in the language and phraseology used in the Ilustre letters, in
pleadings before this Court and before the Tanodbayan do not prove his authorship since other
lawyers "even of a mediocre caliber" could very easily have reproduced them; that the
discussions on the merits in the Per Curiam Resolution are "more properly addressed to the
Tanodbayan, Justice Raul M. Gonzales being competent to deal with the case before him;" that
he takes exception to the accusation that he has manifested lack of respect for and exposed to
public ridicule the two highest Courts of the land, all he did having been to call attention to errors
or injustice committed in the promulgation of judgments or orders; that he has "not authorized or
assisted and/or abetted and could not have prevented the contemptuous statements, conduct,
acts and malicious charges of Eva Maravilla Ilustre who was no longer his client when these
alleged acts were done; that "he is grateful to this Court for the reminder on the first duty of a
lawyer which is to the Court and not to his client, a duty that he has always impressed upon his
law students;" and finally, that "for the record, he is sorry for the adverse publicity generated by
the filing of the complaint against the Justices before the Tanodbayan."

In her own Motion for Reconsideration, Eva Maravilla-Ilustre also raises as her main ground the
alleged deprivation of her constitutional right to due process. She maintains that as contempt
proceedings are commonly treated as criminal in nature, the mode of procedure and rules of
evidence in criminal prosecution should be assimilated, as far as practicable, in this proceeding,
and that she should be given every opportunity to present her side. Additionally, she states that,
with some sympathetic lawyers, they made an "investigation" and learned that the Resolution of
the First Division was arrived at without any deliberation by its members; that Court personnel
were "tight-lipped about the matter, which is shrouded mystery" thereby prompting her to pursue
a course which she thought was legal and peaceful; that there is nothing wrong in making public
the manner of voting by the Justices, and it was for that reason that she addressed Identical
letters to Associate Justices Andres Narvasa, Ameurfina M. Herrera, Isagani Cruz and
Florentino Feliciano; that "if the lawyers of my opponents were not a Solicitor General, and
member of the Supreme Court and a Division Chairman, respectively, the resolution of May 14,
1986 would not have aroused my suspicion;" that instead of taking the law into her own hands
or joining any violent movement, she took the legitimate step of making a peaceful investigation
into how her case was decided, and brought her grievance to the Tanodbayan "in exasperation"
against those whom she felt had committed injustice against her "in an underhanded manner."

We deny reconsideration in both instances.

The argument premised on lack of hearing and due process, is not impressed with merit. What
due process abhors is absolute lack of opportunity to be heard (Tajonera vs. Lamaroza, et al.,
110 SCRA 438 [1981]). The word "hearing" does not necessarily connote a "trial-type"
proceeding. In the show-cause Resolution of this Court, dated January 29, 1987, Atty. Laureta
was given sufficient opportunity to inform this Court of the reasons why he should not be
subjected to dispose action. His Answer, wherein he prayed that the action against him be
dismissed, contained twenty-two (22) pages, double spaced. Eva Maravilla-Ilustre was also
given a like opportunity to explain her statements, conduct, acts and charges against the Court
and/or the official actions of the Justices concerned. Her Compliance Answer, wherein she
prayed that the contempt proceeding against her be dismissed, contained nineteen (19) pages,
double spaced. Both were afforded ample latitude to explain matters fully. Atty. Laureta denied
having authored the letters written by Ilustre, his being her counsel before the Tanodbayan, his
having circularized to the press copies of the complaint filed before said body, and his having
committed acts unworthy of his profession. But the Court believed otherwise and found that
those letters and the charges levelled against the Justices concerned, of themselves and by
themselves, betray not only their malicious and contemptuous character, but also the lack of
respect for the two highest Courts of the land, a complete obliviousness to the fundamental
principle of separation of powers, and a wanton disregard of the cardinal doctrine of
independence of the Judiciary. Res ipsa loquitur. Nothing more needed to have been said or
proven. The necessity to conduct any further evidentially hearing was obviated (See People vs.
Hon. Valenzuela, G.R. Nos. 63950-60, April 19, 1985, 135 SCRA 712). Atty. Laureta and Ilustre
were given ample opportunity to be heard, and were, in fact, heard.

(1)

In his Motion for Reconsideration, Atty. Laureta reiterates his allegations in his Answer to the
show-cause Resolution that his professional services were terminated by Ilustre after the
dismissal of the main petition by this Court; that he had nothing to do with the contemptuous
letters to the individual Justices; and that he is not Ilustre's counsel before the Tanodbayan.

Significantly enough, however, copy of the Tanodbayan Resolution dismissing Ilustre's

Complaint was furnished Atty. Laureta as "counsel for the complainant" at his address of record.
Of note, too, is the fact that it was he who was following up the Complaint before the
Tanodbayan and, after its dismissal, the Motion for Reconsideration of the Order of dismissal.

Of import, as well, is the report of Lorenzo C. Bardel, a process server of this Court, that after
having failed to serve copy of the Per Curiam Resolution of March 12, 1987 of this Court on
Ilustre personally at her address of record, "101 F. Manalo St., Cubao, Quezon City," having
been informed that she is 6 not a resident of the place," he proceeded to the residence of Atty.
Laureta where the latter's wife "voluntarily received the two copies of decision for her husband
and for Ms. Maravina-Ilustre" (p. 670, Rollo, Vol. 11).

That Ilustre subsequently received copy of this Court's Resolution delivered to Mrs. Laureta is
shown by the fact that she filed, as of March 27, 1987, a "Petition for Extension of Time to file
Motion for Reconsideration" and subsequently the Motion for Reconsideration. In that Petition
Ilustre acknowledged receipt of the Resolution on March 12, 1987, the very same date Mrs.
Laureta received copy thereof. If, indeed, the lawyer-client relationship between her husband
and Ilustre had been allegedly completely severed, all Mrs. Laureta had to do was to return to
the Sheriff the copy intended for Ilustre. As it was, however, service on Atty. Laureta proved to
be service on Ilustre as well. The close tie- up between the corespondents is heightened by the
fact that three process servers of this Court failed to serve copy of this Court's Per Curiam
Resolution on Ilustre personally.

Noteworthy, as well, is that by Atty. Laureta's own admission, he was the one called by a
"reporter" of DZRH to comment on the Ilustre charges before the Tanodbayan. If, in fact, he had
nothing to do with the complaint, he would not have been pinpointed at all. And if his disclaimer
were the truth, the logical step for him to have taken was to refer the caller to the lawyer/s
allegedly assisting Ilustre, at the very least, out of elementary courtesy and propriety. But he did
nothing of the sort. " He gave his comment with alacrity.

The impudence and lack of respect of Atty. Laureta for this Court again surfaces when he
asserts in his Motion for Reconsideration that he "understands the cooperation" of the Bulletin
Today as manifested in the serialized publication of the Per Curiam Resolution of this Court and
his being subjected to a scathing editorial by the same newspaper "because after all, the Court
rendered a favorable judgment in the Bulletin union case last year." The malice lurking in that
statement is most unbecoming of an officer of the Court and is an added reason for denying
reconsideration.

Further, Atty. Laureta stubbornly contends that discussions on the merits in the Court's Per
Curiam Resolution are more properly addressed to the Tanodbayan, forgetting, however, his
own discourse on the merits in his Answer to this Court's Resolution dated January 29, 1987.
He thus incorrigibly insists on subordinating the Judiciary to the executive notwithstanding the
categorical pronouncement in the Per Curiam Resolution of March 12, 1987, that Article 204 of
the Revised Penal Code has no application to the members of a collegiate Court; that a charge
of violation of the Anti-Graft and Corrupt Practices Act on the ground that a collective decision is
"unjust" cannot prosper; plus the clear and extended dissertation in the same Per Curiam
Resolution on the fundamental principle of separation of powers and of checks and balances,
pursuant to which it is this Court "entrusted exclusively with the judicial power to adjudicate with
finality all justifiable disputes, public and private. No other department or agency may pass upon
its judgments or declare them 'unjust' upon controlling and irresistible reasons of public policy
and of sound practice."

Atty. Laureta's protestations that he has done his best to protect and uphold the dignity of this
Court are belied by environmental facts and circumstances. His apologetic stance for the
"adverse publicity" generated by the filing of the charges against the Justices concerned before
the Tanodbayan rings with insincerity. The complaint was calculated precisely to serve that very
purpose. The threat to bring the case to "another forum of justice" was implemented to the fun.
Besides, he misses the heart of the matter. Exposure to the glare of publicity is an occupational
hazard. If he has been visited with disciplinary sanctions it is because by his conduct, acts and
statements, he has, overall, deliberately sought to destroy the "authenticity, integrity, and
conclusiveness of collegiate acts," to "undermine the role of the Supreme Court as the final
arbiter of all justifiable disputes," and to subvert public confidence in the integrity of the Courts
and the Justices concerned, and in the orderly administration of justice.

In fine, we discern nothing in Atty. Laureta's Motion for Reconsideration that would call for a
modification, much less a reversal, of our finding that he is guilty of grave professional
misconduct that renders him unfit to continue to be entrusted with the duties and responsibilities
pertaining to an attorney and officer of the Court.

(2)

Neither do we find merit in Ilustre's Motion for Reconsideration. She has turned deaf ears to any
reason or clarification. She and her counsel have refused to accept the untenability of their case
and the inevitability of losing in Court. They have allowed suspicion alone to blind their actions
and in so doing degraded the administration of justice. "Investigation" was utterly uncalled for.
All conclusions and judgments of the Court, be they en banc or by Division, are arrived at only
after deliberation. The fact that no dissent was indicated in the Minutes of the proceedings held
on May 14, 1986 showed that the members of the Division voted unanimously. Court personnel
are not in a position to know the voting in any case because all deliberations are held behind
closed doors without any one of them being present. No malicious inferences should have been
drawn from their inability to furnish the information Ilustre and Atty. Laureta desired The
personality of the Solicitor General never came into the picture. It was Justice Abad Santos, and
not Justice Yap, who was Chairman of the First Division when the Resolution of May 14, 1986
denying the Petition was rendered. Thereafter Justice Yap inhibited himself from any
participation. The fact that the Court en banc upheld the challenged Resolutions of the First
Division emphasizes the irrespective of Ilustre's case irrespective of the personalities involved.

Additionally, Ilustre has been trifling with this Court. She has given our process servers the run-
around. Three of them failed to serve on her personally her copy of this Court's Per Curiam
Resolution of March 12, 1987 at her address of record. Mrs. Laureta informed process server
Lorenzo C. Bardel that Ilustre was residing at 17-D, Quezon St., Tondo, Manila. Romeo C.
Regala, another process server, went to that address to serve copy of the Resolution but he
reported:
 4. That inspite of diligent efforts to locate the address of ms.Eva Maravilla-Ilustre,
said address could not be located;

5. That I even asked the occupants (Cerdan Family) of No. 17 Quezon Street,
Tondo, Manila, and they informed that there is no such Ms. Eva Maravilla-Ilustre
in the neighborhood and/or in the vicinity; ... (p. 672, Rollo, Vol. 11).

The third process server, Nelson C. Cabesuela, was also unable to serve copy of this Court's
Resolution on Ilustre. He reported:

2. On March 17, 1987, at about 9:30 A.M., I arrived at the house in the address
furnished at; the notice of judgment (101 Felix Manalo St., Cubao, Quezon City),
and was received by an elderly woman who admitted to be the owner of the
house but vehemently refused to be Identified, and told me that she does not
know the addressee Maravilla, and told me further that she always meets
different persons looking for Miss Maravilla because the latter always gives the
address of her house;

3. That, I was reminded of an incident that I also experienced in the same place
trying to serve a resolution to Miss Maravilla which was returned unserved
because she is not known in the place; ... (p. 674, Rollo, Vol. II).

And yet, in her Petition for Extension of Time and in her Motion for Reconsideration she persists
in giving that address at 101 Felix Manalo St., Cubao, Quezon City, where our process servers
were told that she was not a resident of and that she was unknown thereat. If for her
contumacious elusiveness and lack of candor alone, Ilustre deserves no further standing before
this Court.

ACCORDINGLY, the respective Motions for reconsideration of Atty. Wenceslao G. Laureta for
the setting aside of the order suspending him from the practice of law, and of Eva Maravilla
Ilustre for the lifting of the penalty for contempt are DENIED, and this denial is FINAL. Eva
Maravilla Ilustre shall pay the fine of P1,000.00 imposed on her within ten (10) days from notice,
or, suffer imprisonment for ten (10) days upon failure to pay said fine within the stipulated
period.

SO ORDERED.

Teehankee, C.J., Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.

Yap, J., * took no part.

Footnotes

* As in the past, Justice Pedro L. Yap took no part.

G.R. No. 71977 February 27, 1987

DEMETRIO G. DEMETRIA, M.P., AUGUSTO S. SANCHEZ, M.P., ORLANDO S. MERCADO,

M.P., HONORATO Y. AQUINO, M.P., ZAFIRO L. RESPICIO, M.P., DOUGLAS R. CAGAS,
M.P., OSCAR F. SANTOS, M.P., ALBERTO G. ROMULO, M.P., CIRIACO R. ALFELOR, M.P.,
ISIDORO E. REAL, M.P., EMIGDIO L. LINGAD, M.P., ROLANDO C. MARCIAL, M.P., PEDRO
M. MARCELLANA, M.P., VICTOR S. ZIGA, M.P., and ROGELIO V. GARCIA.
M.P., petitioners,
vs.
HON. MANUEL ALBA in his capacity as the MINISTER OF THE BUDGET and VICTOR
MACALINGCAG in his capacity as the TREASURER OF THE PHILIPPINES, respondents.
FERNAN, J.:

Assailed in this petition for prohibition with prayer for a writ of preliminary injunction is the
constitutionality of the first paragraph of Section 44 of Presidential Decree No. 1177, otherwise
known as the "Budget Reform Decree of 1977."

Petitioners, who filed the instant petition as concerned citizens of this country, as members of
the National Assembly/Batasan Pambansa representing their millions of constituents, as parties
with general interest common to all the people of the Philippines, and as taxpayers whose vital
interests may be affected by the outcome of the reliefs prayed for" 1 listed the grounds relied
upon in this petition as follows:

A. SECTION 44 OF THE 'BUDGET REFORM DECREE OF 1977' INFRINGES

UPON THE FUNDAMENTAL LAW BY AUTHORIZING THE ILLEGAL
TRANSFER OF PUBLIC MONEYS.

B. SECTION 44 OF PRESIDENTIAL DECREE NO. 1177 IS REPUGNANT TO

THE CONSTITUTION AS IT FAILS TO SPECIFY THE OBJECTIVES AND
PURPOSES FOR WHICH THE PROPOSED TRANSFER OF FUNDS ARE TO
BE MADE.

C. SECTION 44 OF PRESIDENTIAL DECREE NO. 1177 ALLOWS THE

PRESIDENT TO OVERRIDE THE SAFEGUARDS, FORM AND PROCEDURE
PRESCRIBED BY THE CONSTITUTION IN APPROVING APPROPRIATIONS.

D. SECTION 44 OF THE SAME DECREE AMOUNTS TO AN UNDUE

DELEGATION OF LEGISLATIVE POWERS TO THE EXECUTIVE.

E. THE THREATENED AND CONTINUING TRANSFER OF FUNDS BY THE

PRESIDENT AND THE IMPLEMENTATION THEREOF BY THE BUDGET
MINISTER AND THE TREASURER OF THE PHILIPPINES ARE WITHOUT OR
IN EXCESS OF THEIR AUTHORITY AND JURISDICTION. 2

Commenting on the petition in compliance with the Court resolution dated September 19, 1985,
the Solicitor General, for the public respondents, questioned the legal standing of petitioners,
who were allegedly merely begging an advisory opinion from the Court, there being no
justiciable controversy fit for resolution or determination. He further contended that the provision
under consideration was enacted pursuant to Section 16[5], Article VIII of the 1973 Constitution;
and that at any rate, prohibition will not lie from one branch of the government to a coordinate
branch to enjoin the performance of duties within the latter's sphere of responsibility.

On February 27, 1986, the Court required the petitioners to file a Reply to the Comment. This,
they did, stating, among others, that as a result of the change in the administration, there is a
need to hold the resolution of the present case in abeyance "until developments arise to enable
the parties to concretize their respective stands." 3

Thereafter, We required public respondents to file a rejoinder. The Solicitor General filed a
rejoinder with a motion to dismiss, setting forth as grounds therefor the abrogation of Section
16[5], Article VIII of the 1973 Constitution by the Freedom Constitution of March 25, 1986, which
has allegedly rendered the instant petition moot and academic. He likewise cited the "seven
pillars" enunciated by Justice Brandeis in Ashwander v. TVA, 297 U.S. 288 (1936) 4 as basis for
the petition's dismissal.

In the case of Evelio B. Javier v. The Commission on Elections and Arturo F. Pacificador, G.R.
Nos. 68379-81, September 22, 1986, We stated that:

The abolition of the Batasang Pambansa and the disappearance of the office in
dispute between the petitioner and the private respondents — both of whom
have gone their separate ways — could be a convenient justification for
 dismissing the case. But there are larger issues involved that must be resolved
now, once and for all, not only to dispel the legal ambiguities here raised. The
more important purpose is to manifest in the clearest possible terms that this
Court will not disregard and in effect condone wrong on the simplistic and
tolerant pretext that the case has become moot and academic.

The Supreme Court is not only the highest arbiter of legal questions but also the
conscience of the government. The citizen comes to us in quest of law but we
must also give him justice. The two are not always the same. There are times
when we cannot grant the latter because the issue has been settled and decision
is no longer possible according to the law. But there are also times when
although the dispute has disappeared, as in this case, it nevertheless cries out to
be resolved. Justice demands that we act then, not only for the vindication of the
outraged right, though gone, but also for the guidance of and as a restraint upon
the future.

It is in the discharge of our role in society, as above-quoted, as well as to avoid great disservice
to national interest that We take cognizance of this petition and thus deny public respondents'
motion to dismiss. Likewise noteworthy is the fact that the new Constitution, ratified by the
Filipino people in the plebiscite held on February 2, 1987, carries verbatim section 16[5], Article
VIII of the 1973 Constitution under Section 24[5], Article VI. And while Congress has not
officially reconvened, We see no cogent reason for further delaying the resolution of the case at
bar.

The exception taken to petitioners' legal standing deserves scant consideration. The case
of Pascual v. Secretary of Public Works, et al., 110 Phil. 331, is authority in support of
petitioners' locus standi. Thus:

Again, it is well-settled that the validity of a statute may be contested only by one
who will sustain a direct injury in consequence of its enforcement. Yet, there are
many decisions nullifying at the instance of taxpayers, laws providing for the
disbursement of public funds, upon the theory that the expenditure of public
funds by an officer of the state for the purpose of administering
an unconstitutional actconstitutes a misapplication of such funds which may be
enjoined at the request of a taxpayer. Although there are some decisions to the
contrary, the prevailing view in the United States is stated in the American
Jurisprudence as follows:

In the determination of the degree of interest essential to give the

requisite standing to attack the constitutionality of a statute, the
general rule is that not only persons individually affected, but
also taxpayers have sufficient interest in preventing the illegal
expenditures of moneys raised by taxation and may therefore
question the constitutionality of statutes requiring expenditure of
public moneys. [ 11 Am. Jur. 761, Emphasis supplied. ]

Moreover, in Tan v. Macapagal, 43 SCRA 677 and Sanidad v. Comelec, 73 SCRA 333, We said
that as regards taxpayers' suits, this Court enjoys that open discretion to entertain the same or
not.

The conflict between paragraph 1 of Section 44 of Presidential Decree No. 1177 and Section
16[5], Article VIII of the 1973 Constitution is readily perceivable from a mere cursory reading
thereof. Said paragraph 1 of Section 44 provides:

The President shall have the authority to transfer any fund, appropriated for the
different departments, bureaus, offices and agencies of the Executive
Department, which are included in the General Appropriations Act, to any
program, project or activity of any department, bureau, or office included in the
General Appropriations Act or approved after its enactment.

On the other hand, the constitutional provision under consideration reads as follows:
 Sec. 16[5]. No law shall be passed authorizing any transfer of appropriations,
however, the President, the Prime Minister, the Speaker, the Chief Justice of the
Supreme Court, and the heads of constitutional commis ions may by law be
authorized to augment any item in the general appropriations law for their
respective offices from savings in other items of their respective appropriations.

The prohibition to transfer an appropriation for one item to another was explicit and categorical
under the 1973 Constitution. However, to afford the heads of the different branches of the
government and those of the constitutional commissions considerable flexibility in the use of
public funds and resources, the constitution allowed the enactment of a law authorizing the
transfer of funds for the purpose of augmenting an item from savings in another item in the
appropriation of the government branch or constitutional body concerned. The leeway granted
was thus limited. The purpose and conditions for which funds may be transferred were
specified, i.e. transfer may be allowed for the purpose of augmenting an item and such transfer
may be made only if there are savings from another item in the appropriation of the government
branch or constitutional body.

Paragraph 1 of Section 44 of P.D. No. 1177 unduly over extends the privilege granted under
said Section 16[5]. It empowers the President to indiscriminately transfer funds from one
department, bureau, office or agency of the Executive Department to any program, project or
activity of any department, bureau or office included in the General Appropriations Act or
approved after its enactment, without regard as to whether or not the funds to be transferred are
actually savings in the item from which the same are to be taken, or whether or not the transfer
is for the purpose of augmenting the item to which said transfer is to be made. It does not only
completely disregard the standards set in the fundamental law, thereby amounting to an undue
delegation of legislative powers, but likewise goes beyond the tenor thereof. Indeed, such
constitutional infirmities render the provision in question null and void.

"For the love of money is the root of all evil: ..." and money belonging to no one in particular, i.e.
public funds, provide an even greater temptation for misappropriation and embezzlement. This,
evidently, was foremost in the minds of the framers of the constitution in meticulously
prescribing the rules regarding the appropriation and disposition of public funds as embodied in
Sections 16 and 18 of Article VIII of the 1973 Constitution. Hence, the conditions on the release
of money from the treasury [Sec. 18(1)]; the restrictions on the use of public funds for public
purpose [Sec. 18(2)]; the prohibition to transfer an appropriation for an item to another [See.
16(5) and the requirement of specifications [Sec. 16(2)], among others, were all safeguards
designed to forestall abuses in the expenditure of public funds. Paragraph 1 of Section 44 puts
all these safeguards to naught. For, as correctly observed by petitioners, in view of the unlimited
authority bestowed upon the President, "... Pres. Decree No. 1177 opens the floodgates for the
enactment of unfunded appropriations, results in uncontrolled executive expenditures, diffuses
accountability for budgetary performance and entrenches the pork barrel system as the ruling
party may well expand [sic] public money not on the basis of development priorities but on
political and personal expediency." 5The contention of public respondents that paragraph 1 of
Section 44 of P.D. 1177 was enacted pursuant to Section 16(5) of Article VIII of the 1973
Constitution must perforce fall flat on its face.

Another theory advanced by public respondents is that prohibition will not lie from one branch of
the government against a coordinate branch to enjoin the performance of duties within the
latter's sphere of responsibility.

Thomas M. Cooley in his "A Treatise on the Constitutional Limitations," Vol. 1, Eight Edition,
Little, Brown and Company, Boston, explained:

... The legislative and judicial are coordinate departments of the government, of
equal dignity; each is alike supreme in the exercise of its proper functions, and
cannot directly or indirectly, while acting within the limits of its authority, be
subjected to the control or supervision of the other, without an unwarrantable
assumption by that other of power which, by the Constitution, is not conferred
upon it. The Constitution apportions the powers of government, but it does not
make any one of the three departments subordinate to another, when exercising
the trust committed to it. The courts may declare legislative enactments
 unconstitutional and void in some cases, but not because the judicial power is
superior in degree or dignity to the legislative. Being required to declare what the
law is in the cases which come before them, they must enforce the Constitution,
as the paramount law, whenever a legislative enactment comes in conflict with it.
But the courts sit, not to review or revise the legislative action, but to enforce the
legislative will, and it is only where they find that the legislature has failed to keep
within its constitutional limits, that they are at liberty to disregard its action; and in
doing so, they only do what every private citizen may do in respect to the
mandates of the courts when the judges assumed to act and to render judgments
or decrees without jurisdiction. "In exercising this high authority, the judges claim
no judicial supremacy; they are only the administrators of the public will. If an act
of the legislature is held void, it is not because the judges have any control over
the legislative power, but because the act is forbidden by the Constitution, and
because the will of the people, which is therein declared, is paramount to that of
their representatives expressed in any law." [Lindsay v. Commissioners, & c., 2
Bay, 38, 61; People v. Rucker, 5 Col. 5; Russ v. Com., 210 Pa. St. 544; 60 Atl.
169, 1 L.R.A. [N.S.] 409, 105 Am. St. Rep. 825] (pp. 332-334).

Indeed, where the legislature or the executive branch is acting within the limits of its authority,
the judiciary cannot and ought not to interfere with the former. But where the legislature or the
executive acts beyond the scope of its constitutional powers, it becomes the duty of the judiciary
to declare what the other branches of the government had assumed to do as void. This is the
essence of judicial power conferred by the Constitution "in one Supreme Court and in such
lower courts as may be established by law" [Art. VIII, Section 1 of the 1935 Constitution; Art. X,
Section 1 of the 1973 Constitution and which was adopted as part of the Freedom Constitution,
and Art. VIII, Section 1 of the 1987 Constitution] and which power this Court has exercised in
many instances. *

Public respondents are being enjoined from acting under a provision of law which We have
earlier mentioned to be constitutionally infirm. The general principle relied upon cannot therefore
accord them the protection sought as they are not acting within their "sphere of responsibility"
but without it.

The nation has not recovered from the shock, and worst, the economic destitution brought about
by the plundering of the Treasury by the deposed dictator and his cohorts. A provision which
allows even the slightest possibility of a repetition of this sad experience cannot remain written
in our statute books.

WHEREFORE, the instant petition is granted. Paragraph 1 of Section 44 of Presidential Decree

No. 1177 is hereby declared null and void for being unconstitutional.

SO ORDER RED.

Teehankee, C.J., Yap, Narvasa, Melencio-Herrera, Alampay, Gutierrez, Jr., Cruz, Paras,
Feliciano, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.

Footnotes

1 Petition, p. 3, Rollo.

2 pp. 6-7, Rollo

3 p. 169, Rollo.

4 The relevant portions read as follows:

The Court developed, for its own governance in the case confessedly within its
jurisdiction, a series of rules under which it has avoided passing upon a large
part of all the constitutional questions pressed upon it for decision. They are:
1. The Court will not pass upon the constitutionality of legislation in a friendly,
non-adversary proceeding, declining because to decide such questions "is
legitimate only in the last resort, and as a necessity in the determination of real,
earnest and vital controversy between individuals. It never was the thought tht,
by means of a friendly suit, a party beaten in the legislature could transfer to the
courts an inquiry as to the constitutionality of the legislative act." Chicago &
Grand Trunk Ry. v. Wellman, 143 U.S. 339, 345.

2. The Court will not "anticipate question of constitutional law in advance of the
necessity of deciding it." Liverpool. N.Y. & P.S.S. Co. v. Emigration
Commissioners, 113 U.S. 33, 39 ... "It is not the habit of the Court to decide
questions of a constitutional nature unless absolutely necessary to a decision of
the case. 'Burton v. United States. 196 U.S. 283, 295.

3. The Court will not formulate a rule of constitutional law broader than is
required by the precise facts to which it is to be applied." Liverpool, N.Y. & P.S.S.
Co. v. Emigration Commissioners, supra.

4. The Court will not pass upon a constitutional question although properly
presented by the record, if there is also present some other ground upon which
the case may be disposed of. This rule has found most varied application. Thus,
if a case can be decided on either of two grounds, one involving a constitutional
question, the other a question of statutory construction or general law, the Court
will decide only the latter. Siler v. Louisville & Nashville R. Co., 213 U.S. 175,
191; Light v. United States, 220 U.S. 523, 538. Appeals from the highest court of
a state challenging its decision of a question under the Federal Constitution are
frequently dismissed because the judgment can be sustained on an independent
state ground. Berea College v. Kentucky, 211 U.S. 45, 53.

5. The Court will not pass upon the validity of a statute upon complaint of one
who fails to show that he is injured by its operation. Tyler v. The Judges, 179
U.S. 405; Hendrick v. Maryland, 235 U.S. 610, 621. Among the many
applications of this rule, none is more striking than the denial of the right of
challenge to one who lacks a personal or property right. Thus, the challenge by a
public official interested only in the performance of his official duty will not be
entertained..... In Fairchild v. Hughes, 258 U.S. 126, the Court affirmed the
dismissal of a suit brought by a citizenwho sought to have the Nineteenth
Amendment declared unconstitutional. In Massachusetts v. Mellon, 262 U.S.
447, the challenge of the federal Maternity Act was not entertained although
made by the Commonwealth on behalf of all its citizens.

6. The Court will not pass upon the constitutionality of a statute at the instance of
one who has availed himself of its benefits. Great Falls Mfg. Co. v. Attorney
General, 124, U.S. 581 . . .

7. "When the validity of an act of the Congress is drawn in question, and even if a
serious doubt of constitutionality is raised, it is a cardinal principle that this Court
will first ascertain whether a construction of the statute is fairly possible by which
the question may be avoided.' Cromwell v. Benson, 285 U.S. 22, 62." [pp. 176-
177, Rollo].

5 p. 14, Rollo.

* Casanovas vs. Hord 8 Phil. 125; McGirr vs. Hamilton, 30 Phil. 563; Compania
General de Tabacos vs. Board of Public Utility, 34 Phil. 136; Central Capiz vs.
Ramirez, 40 Phil. 883; Concepcion vs. Paredes, 42 Phil. 599; US vs. Ang Tang
Ho 43 Phil. 6; McDaniel vs. Apacible, 44 Phil. 248; People vs. Pomar, 46 Phil.
440; Agcaoili vs. Suguitan, 48 Phil. 676; Government of P.I. vs. Springer, 50 Phil.
259; Manila Electric Co. vs. Pasay Transp. Co., 57 Phil. 600: People vs.
Linsangan; 62 Phil. 464; People and Hongkong & Shanghai Banking Corp. vs.
Jose O. Vera, 65 Phil. 56; People vs. Carlos, 78 Phil. 535; City of Baguio vs.
 Nawasa, 106 Phil. 144; City of Cebu vs. Nawasa, 107 Phil, 1112; Rutter vs.
Esteban 93 Phil. 68.

G.R. No. L-45081 July 15, 1936

JOSE A. ANGARA, petitioner,

vs.
THE ELECTORAL COMMISSION, PEDRO YNSUA, MIGUEL CASTILLO, and DIONISIO C.
MAYOR,respondents.

Godofredo Reyes for petitioner.

Office of the Solicitor General Hilado for respondent Electoral Commission.
Pedro Ynsua in his own behalf.
No appearance for other respondents.

LAUREL, J.:

This is an original action instituted in this court by the petitioner, Jose A. Angara, for the
issuance of a writ of prohibition to restrain and prohibit the Electoral Commission, one of the
respondents, from taking further cognizance of the protest filed by Pedro Ynsua, another
respondent, against the election of said petitioner as member of the National Assembly for the
first assembly district of the Province of Tayabas.

The facts of this case as they appear in the petition and as admitted by the respondents are as
follows:

(1) That in the elections of September 17, 1935, the petitioner, Jose A. Angara, and the
respondents, Pedro Ynsua, Miguel Castillo and Dionisio Mayor, were candidates voted
for the position of member of the National Assembly for the first district of the Province of
Tayabas;

(2) That on October 7, 1935, the provincial board of canvassers, proclaimed the
petitioner as member-elect of the National Assembly for the said district, for having
received the most number of votes;

(3) That on November 15, 1935, the petitioner took his oath of office;

(4) That on December 3, 1935, the National Assembly in session assembled, passed the
following resolution:

[No. 8]

RESOLUCION CONFIRMANDO LAS ACTAS DE AQUELLOS

DIPUTADOS CONTRA QUIENES NO SE HA PRESENTADO
PROTESTA.

Se resuelve: Que las actas de eleccion de los Diputados contra quienes

no se hubiere presentado debidamente una protesta antes de la
adopcion de la presente resolucion sean, como por la presente, son
aprobadas y confirmadas.

Adoptada, 3 de diciembre, 1935.

(5) That on December 8, 1935, the herein respondent Pedro Ynsua filed before the
Electoral Commission a "Motion of Protest" against the election of the herein petitioner,
Jose A. Angara, being the only protest filed after the passage of Resolutions No. 8
aforequoted, and praying, among other-things, that said respondent be declared elected
member of the National Assembly for the first district of Tayabas, or that the election of
said position be nullified;
 (6) That on December 9, 1935, the Electoral Commission adopted a resolution,
paragraph 6 of which provides:

6. La Comision no considerara ninguna protesta que no se haya presentado en o

antes de este dia.

(7) That on December 20, 1935, the herein petitioner, Jose A. Angara, one of the
respondents in the aforesaid protest, filed before the Electoral Commission a "Motion to
Dismiss the Protest", alleging (a) that Resolution No. 8 of Dismiss the Protest", alleging
(a) that Resolution No. 8 of the National Assembly was adopted in the legitimate
exercise of its constitutional prerogative to prescribe the period during which protests
against the election of its members should be presented; (b) that the aforesaid resolution
has for its object, and is the accepted formula for, the limitation of said period; and (c)
that the protest in question was filed out of the prescribed period;

(8) That on December 27, 1935, the herein respondent, Pedro Ynsua, filed an "Answer
to the Motion of Dismissal" alleging that there is no legal or constitutional provision
barring the presentation of a protest against the election of a member of the National
Assembly after confirmation;

(9) That on December 31, 1935, the herein petitioner, Jose A. Angara, filed a "Reply" to
the aforesaid "Answer to the Motion of Dismissal";

(10) That the case being submitted for decision, the Electoral Commission promulgated
a resolution on January 23, 1936, denying herein petitioner's "Motion to Dismiss the
Protest."

The application of the petitioner sets forth the following grounds for the issuance of the writ
prayed for:

(a) That the Constitution confers exclusive jurisdiction upon the electoral Commission
solely as regards the merits of contested elections to the National Assembly;

(b) That the Constitution excludes from said jurisdiction the power to regulate the
proceedings of said election contests, which power has been reserved to the Legislative
Department of the Government or the National Assembly;

(c) That like the Supreme Court and other courts created in pursuance of the
Constitution, whose exclusive jurisdiction relates solely to deciding the merits of
controversies submitted to them for decision and to matters involving their internal
organization, the Electoral Commission can regulate its proceedings only if the National
Assembly has not availed of its primary power to so regulate such proceedings;

(d) That Resolution No. 8 of the National Assembly is, therefore, valid and should be
respected and obeyed;

(e) That under paragraph 13 of section 1 of the ordinance appended to the Constitution
and paragraph 6 of article 7 of the Tydings-McDuffie Law (No. 127 of the 73rd Congress
of the United States) as well as under section 1 and 3 (should be sections 1 and 2) of
article VIII of the Constitution, this Supreme Court has jurisdiction to pass upon the
fundamental question herein raised because it involves an interpretation of the
Constitution of the Philippines.

On February 25, 1936, the Solicitor-General appeared and filed an answer in behalf of the
respondent Electoral Commission interposing the following special defenses:

(a) That the Electoral Commission has been created by the Constitution as an
instrumentality of the Legislative Department invested with the jurisdiction to decide "all
contests relating to the election, returns, and qualifications of the members of the
National Assembly"; that in adopting its resolution of December 9, 1935, fixing this date
as the last day for the presentation of protests against the election of any member of the
 National Assembly, it acted within its jurisdiction and in the legitimate exercise of the
implied powers granted it by the Constitution to adopt the rules and regulations essential
to carry out the power and functions conferred upon the same by the fundamental law;
that in adopting its resolution of January 23, 1936, overruling the motion of the petitioner
to dismiss the election protest in question, and declaring itself with jurisdiction to take
cognizance of said protest, it acted in the legitimate exercise of its quasi-judicial
functions a an instrumentality of the Legislative Department of the Commonwealth
Government, and hence said act is beyond the judicial cognizance or control of the
Supreme Court;

(b) That the resolution of the National Assembly of December 3, 1935, confirming the
election of the members of the National Assembly against whom no protest had thus far
been filed, could not and did not deprive the electoral Commission of its jurisdiction to
take cognizance of election protests filed within the time that might be set by its own
rules:

(c) That the Electoral Commission is a body invested with quasi-judicial functions,
created by the Constitution as an instrumentality of the Legislative Department, and is
not an "inferior tribunal, or corporation, or board, or person" within the purview of section
226 and 516 of the Code of Civil Procedure, against which prohibition would lie.

The respondent Pedro Ynsua, in his turn, appeared and filed an answer in his own behalf on
March 2, 1936, setting forth the following as his special defense:

(a) That at the time of the approval of the rules of the Electoral Commission on
December 9, 1935, there was no existing law fixing the period within which protests
against the election of members of the National Assembly should be filed; that in fixing
December 9, 1935, as the last day for the filing of protests against the election of
members of the National Assembly, the Electoral Commission was exercising a power
impliedly conferred upon it by the Constitution, by reason of its quasi-judicial attributes;

(b) That said respondent presented his motion of protest before the Electoral
Commission on December 9, 1935, the last day fixed by paragraph 6 of the rules of the
said Electoral Commission;

(c) That therefore the Electoral Commission acquired jurisdiction over the protest filed by
said respondent and over the parties thereto, and the resolution of the Electoral
Commission of January 23, 1936, denying petitioner's motion to dismiss said protest was
an act within the jurisdiction of the said commission, and is not reviewable by means of a
writ of prohibition;

(d) That neither the law nor the Constitution requires confirmation by the National
Assembly of the election of its members, and that such confirmation does not operate to
limit the period within which protests should be filed as to deprive the Electoral
Commission of jurisdiction over protest filed subsequent thereto;

(e) That the Electoral Commission is an independent entity created by the Constitution,
endowed with quasi-judicial functions, whose decision are final and unappealable;

( f ) That the electoral Commission, as a constitutional creation, is not an inferior tribunal,

corporation, board or person, within the terms of sections 226 and 516 of the Code of
Civil Procedure; and that neither under the provisions of sections 1 and 2 of article II
(should be article VIII) of the Constitution and paragraph 13 of section 1 of the
Ordinance appended thereto could it be subject in the exercise of its quasi-judicial
functions to a writ of prohibition from the Supreme Court;

(g) That paragraph 6 of article 7 of the Tydings-McDuffie Law (No. 127 of the 73rd
Congress of the united States) has no application to the case at bar.

The case was argued before us on March 13, 1936. Before it was submitted for decision, the
petitioner prayed for the issuance of a preliminary writ of injunction against the respondent
Electoral Commission which petition was denied "without passing upon the merits of the case"
by resolution of this court of March 21, 1936.

There was no appearance for the other respondents.

The issues to be decided in the case at bar may be reduced to the following two principal
propositions:

1. Has the Supreme Court jurisdiction over the Electoral Commission and the subject
matter of the controversy upon the foregoing related facts, and in the affirmative,

2. Has the said Electoral Commission acted without or in excess of its jurisdiction in
assuming to the cognizance of the protest filed the election of the herein petitioner
notwithstanding the previous confirmation of such election by resolution of the National
Assembly?

We could perhaps dispose of this case by passing directly upon the merits of the controversy.
However, the question of jurisdiction having been presented, we do not feel justified in evading
the issue. Being a case primæ impressionis, it would hardly be consistent with our sense of duty
to overlook the broader aspect of the question and leave it undecided. Neither would we be
doing justice to the industry and vehemence of counsel were we not to pass upon the question
of jurisdiction squarely presented to our consideration.

The separation of powers is a fundamental principle in our system of government. It obtains not
through express provision but by actual division in our Constitution. Each department of the
government has exclusive cognizance of matters within its jurisdiction, and is supreme within its
own sphere. But it does not follow from the fact that the three powers are to be kept separate
and distinct that the Constitution intended them to be absolutely unrestrained and independent
of each other. The Constitution has provided for an elaborate system of checks and balances to
secure coordination in the workings of the various departments of the government. For example,
the Chief Executive under our Constitution is so far made a check on the legislative power that
this assent is required in the enactment of laws. This, however, is subject to the further check
that a bill may become a law notwithstanding the refusal of the President to approve it, by a vote
of two-thirds or three-fourths, as the case may be, of the National Assembly. The President has
also the right to convene the Assembly in special session whenever he chooses. On the other
hand, the National Assembly operates as a check on the Executive in the sense that its consent
through its Commission on Appointments is necessary in the appointments of certain officers;
and the concurrence of a majority of all its members is essential to the conclusion of treaties.
Furthermore, in its power to determine what courts other than the Supreme Court shall be
established, to define their jurisdiction and to appropriate funds for their support, the National
Assembly controls the judicial department to a certain extent. The Assembly also exercises the
judicial power of trying impeachments. And the judiciary in turn, with the Supreme Court as the
final arbiter, effectively checks the other departments in the exercise of its power to determine
the law, and hence to declare executive and legislative acts void if violative of the Constitution.

But in the main, the Constitution has blocked out with deft strokes and in bold lines, allotment of
power to the executive, the legislative and the judicial departments of the government. The
overlapping and interlacing of functions and duties between the several departments, however,
sometimes makes it hard to say just where the one leaves off and the other begins. In times of
social disquietude or political excitement, the great landmarks of the Constitution are apt to be
forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is the
only constitutional organ which can be called upon to determine the proper allocation of powers
between the several departments and among the integral or constituent units thereof.

As any human production, our Constitution is of course lacking perfection and perfectibility, but
as much as it was within the power of our people, acting through their delegates to so provide,
that instrument which is the expression of their sovereignty however limited, has established a
republican government intended to operate and function as a harmonious whole, under a
system of checks and balances, and subject to specific limitations and restrictions provided in
the said instrument. The Constitution sets forth in no uncertain language the restrictions and
limitations upon governmental powers and agencies. If these restrictions and limitations are
transcended it would be inconceivable if the Constitution had not provided for a mechanism by
which to direct the course of government along constitutional channels, for then the distribution
of powers would be mere verbiage, the bill of rights mere expressions of sentiment, and the
principles of good government mere political apothegms. Certainly, the limitation and restrictions
embodied in our Constitution are real as they should be in any living constitution. In the United
States where no express constitutional grant is found in their constitution, the possession of this
moderating power of the courts, not to speak of its historical origin and development there, has
been set at rest by popular acquiescence for a period of more than one and a half centuries. In
our case, this moderating power is granted, if not expressly, by clear implication from section 2
of article VIII of our constitution.

The Constitution is a definition of the powers of government. Who is to determine the nature,
scope and extent of such powers? The Constitution itself has provided for the instrumentality of
the judiciary as the rational way. And when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other departments; it does not in reality
nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of authority under the
Constitution and to establish for the parties in an actual controversy the rights which that
instrument secures and guarantees to them. This is in truth all that is involved in what is termed
"judicial supremacy" which properly is the power of judicial review under the Constitution. Even
then, this power of judicial review is limited to actual cases and controversies to be exercised
after full opportunity of argument by the parties, and limited further to the constitutional question
raised or the very lis mota presented. Any attempt at abstraction could only lead to dialectics
and barren legal questions and to sterile conclusions unrelated to actualities. Narrowed as its
function is in this manner, the judiciary does not pass upon questions of wisdom, justice or
expediency of legislation. More than that, courts accord the presumption of constitutionality to
legislative enactments, not only because the legislature is presumed to abide by the
Constitution but also because the judiciary in the determination of actual cases and
controversies must reflect the wisdom and justice of the people as expressed through their
representatives in the executive and legislative departments of the governments of the
government.

But much as we might postulate on the internal checks of power provided in our Constitution, it
ought not the less to be remembered that, in the language of James Madison, the system itself
is not "the chief palladium of constitutional liberty . . . the people who are authors of this blessing
must also be its guardians . . . their eyes must be ever ready to mark, their voice to pronounce .
. . aggression on the authority of their constitution." In the Last and ultimate analysis, then, must
the success of our government in the unfolding years to come be tested in the crucible of
Filipino minds and hearts than in consultation rooms and court chambers.

In the case at bar, the national Assembly has by resolution (No. 8) of December 3, 1935,
confirmed the election of the herein petitioner to the said body. On the other hand, the Electoral
Commission has by resolution adopted on December 9, 1935, fixed said date as the last day for
the filing of protests against the election, returns and qualifications of members of the National
Assembly, notwithstanding the previous confirmation made by the National Assembly as
aforesaid. If, as contended by the petitioner, the resolution of the National Assembly has the
effect of cutting off the power of the Electoral Commission to entertain protests against the
election, returns and qualifications of members of the National Assembly, submitted after
December 3, 1935, then the resolution of the Electoral Commission of December 9, 1935, is
mere surplusage and had no effect. But, if, as contended by the respondents, the Electoral
Commission has the sole power of regulating its proceedings to the exclusion of the National
Assembly, then the resolution of December 9, 1935, by which the Electoral Commission fixed
said date as the last day for filing protests against the election, returns and qualifications of
members of the National Assembly, should be upheld.

Here is then presented an actual controversy involving as it does a conflict of a grave

constitutional nature between the National Assembly on the one hand, and the Electoral
Commission on the other. From the very nature of the republican government established in our
country in the light of American experience and of our own, upon the judicial department is
thrown the solemn and inescapable obligation of interpreting the Constitution and defining
constitutional boundaries. The Electoral Commission, as we shall have occasion to refer
hereafter, is a constitutional organ, created for a specific purpose, namely to determine all
contests relating to the election, returns and qualifications of the members of the National
Assembly. Although the Electoral Commission may not be interfered with, when and while
acting within the limits of its authority, it does not follow that it is beyond the reach of the
constitutional mechanism adopted by the people and that it is not subject to constitutional
restrictions. The Electoral Commission is not a separate department of the government, and
even if it were, conflicting claims of authority under the fundamental law between department
powers and agencies of the government are necessarily determined by the judiciary in justifiable
and appropriate cases. Discarding the English type and other European types of constitutional
government, the framers of our constitution adopted the American type where the written
constitution is interpreted and given effect by the judicial department. In some countries which
have declined to follow the American example, provisions have been inserted in their
constitutions prohibiting the courts from exercising the power to interpret the fundamental law.
This is taken as a recognition of what otherwise would be the rule that in the absence of direct
prohibition courts are bound to assume what is logically their function. For instance, the
Constitution of Poland of 1921, expressly provides that courts shall have no power to examine
the validity of statutes (art. 81, chap. IV). The former Austrian Constitution contained a similar
declaration. In countries whose constitutions are silent in this respect, courts have assumed this
power. This is true in Norway, Greece, Australia and South Africa. Whereas, in Czechoslovakia
(arts. 2 and 3, Preliminary Law to constitutional Charter of the Czechoslovak Republic, February
29, 1920) and Spain (arts. 121-123, Title IX, Constitutional of the Republic of 1931) especial
constitutional courts are established to pass upon the validity of ordinary laws. In our case, the
nature of the present controversy shows the necessity of a final constitutional arbiter to
determine the conflict of authority between two agencies created by the Constitution. Were we
to decline to take cognizance of the controversy, who will determine the conflict? And if the
conflict were left undecided and undetermined, would not a void be thus created in our
constitutional system which may be in the long run prove destructive of the entire framework?
To ask these questions is to answer them. Natura vacuum abhorret, so must we avoid
exhaustion in our constitutional system. Upon principle, reason and authority, we are clearly of
the opinion that upon the admitted facts of the present case, this court has jurisdiction over the
Electoral Commission and the subject mater of the present controversy for the purpose of
determining the character, scope and extent of the constitutional grant to the Electoral
Commission as "the sole judge of all contests relating to the election, returns and qualifications
of the members of the National Assembly."

Having disposed of the question of jurisdiction, we shall now proceed to pass upon the second
proposition and determine whether the Electoral Commission has acted without or in excess of
its jurisdiction in adopting its resolution of December 9, 1935, and in assuming to take
cognizance of the protest filed against the election of the herein petitioner notwithstanding the
previous confirmation thereof by the National Assembly on December 3, 1935. As able counsel
for the petitioner has pointed out, the issue hinges on the interpretation of section 4 of Article VI
of the Constitution which provides:

"SEC. 4. There shall be an Electoral Commission composed of three Justice of the Supreme
Court designated by the Chief Justice, and of six Members chosen by the National Assembly,
three of whom shall be nominated by the party having the largest number of votes, and three by
the party having the second largest number of votes therein. The senior Justice in the
Commission shall be its Chairman. The Electoral Commission shall be the sole judge of all
contests relating to the election, returns and qualifications of the members of the National
Assembly." It is imperative, therefore, that we delve into the origin and history of this
constitutional provision and inquire into the intention of its framers and the people who adopted
it so that we may properly appreciate its full meaning, import and significance.

The original provision regarding this subject in the Act of Congress of July 1, 1902 (sec. 7, par.
5) laying down the rule that "the assembly shall be the judge of the elections, returns, and
qualifications of its members", was taken from clause 1 of section 5, Article I of the Constitution
of the United States providing that "Each House shall be the Judge of the Elections, Returns,
and Qualifications of its own Members, . . . ." The Act of Congress of August 29, 1916 (sec. 18,
par. 1) modified this provision by the insertion of the word "sole" as follows: "That the Senate
and House of Representatives, respectively, shall be the sole judges of the elections, returns,
and qualifications of their elective members . . ." apparently in order to emphasize the exclusive
the Legislative over the particular case s therein specified. This court has had occasion to
characterize this grant of power to the Philippine Senate and House of Representatives,
respectively, as "full, clear and complete" (Veloso vs. Boards of Canvassers of Leyte and Samar
[1919], 39 Phil., 886, 888.)

The first step towards the creation of an independent tribunal for the purpose of deciding
contested elections to the legislature was taken by the sub-committee of five appointed by the
Committee on Constitutional Guarantees of the Constitutional Convention, which sub-committee
submitted a report on August 30, 1934, recommending the creation of a Tribunal of
Constitutional Security empowered to hear legislature but also against the election of executive
officers for whose election the vote of the whole nation is required, as well as to initiate
impeachment proceedings against specified executive and judicial officer. For the purpose of
hearing legislative protests, the tribunal was to be composed of three justices designated by the
Supreme Court and six members of the house of the legislature to which the contest
corresponds, three members to be designed by the majority party and three by the minority, to
be presided over by the Senior Justice unless the Chief Justice is also a member in which case
the latter shall preside. The foregoing proposal was submitted by the Committee on
Constitutional Guarantees to the Convention on September 15, 1934, with slight modifications
consisting in the reduction of the legislative representation to four members, that is, two
senators to be designated one each from the two major parties in the Senate and two
representatives to be designated one each from the two major parties in the House of
Representatives, and in awarding representation to the executive department in the persons of
two representatives to be designated by the President.

Meanwhile, the Committee on Legislative Power was also preparing its report. As submitted to
the Convention on September 24, 1934 subsection 5, section 5, of the proposed Article on the
Legislative Department, reads as follows:

The elections, returns and qualifications of the members of either house and all cases
contesting the election of any of their members shall be judged by an Electoral
Commission, constituted, as to each House, by three members elected by the members
of the party having the largest number of votes therein, three elected by the members of
the party having the second largest number of votes, and as to its Chairman, one Justice
of the Supreme Court designated by the Chief Justice.

The idea of creating a Tribunal of Constitutional Security with comprehensive jurisdiction as

proposed by the Committee on Constitutional Guarantees which was probably inspired by the
Spanish plan (art. 121, Constitution of the Spanish Republic of 1931), was soon abandoned in
favor of the proposition of the Committee on Legislative Power to create a similar body with
reduced powers and with specific and limited jurisdiction, to be designated as a Electoral
Commission. The Sponsorship Committee modified the proposal of the Committee on
Legislative Power with respect to the composition of the Electoral Commission and made further
changes in phraseology to suit the project of adopting a unicameral instead of a bicameral
legislature. The draft as finally submitted to the Convention on October 26, 1934, reads as
follows:

(6) The elections, returns and qualifications of the Members of the National Assembly
and all cases contesting the election of any of its Members shall be judged by an
Electoral Commission, composed of three members elected by the party having the
largest number of votes in the National Assembly, three elected by the members of the
party having the second largest number of votes, and three justices of the Supreme
Court designated by the Chief Justice, the Commission to be presided over by one of
said justices.

During the discussion of the amendment introduced by Delegates Labrador, Abordo, and
others, proposing to strike out the whole subsection of the foregoing draft and inserting in lieu
thereof the following: "The National Assembly shall be the soled and exclusive judge of the
elections, returns, and qualifications of the Members", the following illuminating remarks were
made on the floor of the Convention in its session of December 4, 1934, as to the scope of the
said draft:

xxx xxx xxx

Mr. VENTURA. Mr. President, we have a doubt here as to the scope of the meaning of
the first four lines, paragraph 6, page 11 of the draft, reading: "The elections, returns and
qualifications of the Members of the National Assembly and all cases contesting the
election of any of its Members shall be judged by an Electoral Commission, . . ." I should
like to ask from the gentleman from Capiz whether the election and qualification of the
member whose elections is not contested shall also be judged by the Electoral
Commission.

Mr. ROXAS. If there is no question about the election of the members, there is nothing to
be judged; that is why the word "judge" is used to indicate a controversy. If there is no
question about the election of a member, there is nothing to be submitted to the
Electoral Commission and there is nothing to be determined.

Mr. VENTURA. But does that carry the idea also that the Electoral Commission shall
confirm also the election of those whose election is not contested?

Mr. ROXAS. There is no need of confirmation. As the gentleman knows, the action of the
House of Representatives confirming the election of its members is just a matter of the
rules of the assembly. It is not constitutional. It is not necessary. After a man files his
credentials that he has been elected, that is sufficient, unless his election is contested.

Mr. VENTURA. But I do not believe that that is sufficient, as we have observed that for
purposes of the auditor, in the matter of election of a member to a legislative body,
because he will not authorize his pay.

Mr. ROXAS. Well, what is the case with regards to the municipal president who is
elected? What happens with regards to the councilors of a municipality? Does anybody
confirm their election? The municipal council does this: it makes a canvass and
proclaims — in this case the municipal council proclaims who has been elected, and it
ends there, unless there is a contest. It is the same case; there is no need on the part of
the Electoral Commission unless there is a contest. The first clause refers to the case
referred to by the gentleman from Cavite where one person tries to be elected in place of
another who was declared elected. From example, in a case when the residence of the
man who has been elected is in question, or in case the citizenship of the man who has
been elected is in question.

However, if the assembly desires to annul the power of the commission, it may do so by
certain maneuvers upon its first meeting when the returns are submitted to the
assembly. The purpose is to give to the Electoral Commission all the powers exercised
by the assembly referring to the elections, returns and qualifications of the
members. When there is no contest, there is nothing to be judged.

Mr. VENTURA. Then it should be eliminated.

Mr. ROXAS. But that is a different matter, I think Mr. Delegate.

Mr. CINCO. Mr. President, I have a similar question as that propounded by the
gentleman from Ilocos Norte when I arose a while ago. However I want to ask more
questions from the delegate from Capiz. This paragraph 6 on page 11 of the draft cites
cases contesting the election as separate from the first part of the sections which refers
to elections, returns and qualifications.

Mr. ROXAS. That is merely for the sake of clarity. In fact the cases of contested
elections are already included in the phrase "the elections, returns and qualifications."
This phrase "and contested elections" was inserted merely for the sake of clarity.

Mr. CINCO. Under this paragraph, may not the Electoral Commission, at its own
instance, refuse to confirm the elections of the members."

Mr. ROXAS. I do not think so, unless there is a protest.

 Mr. LABRADOR. Mr. President, will the gentleman yield?

THE PRESIDENT. The gentleman may yield, if he so desires.

Mr. ROXAS. Willingly.

Mr. LABRADOR. Does not the gentleman from Capiz believe that unless this power is
granted to the assembly, the assembly on its own motion does not have the right to
contest the election and qualification of its members?

Mr. ROXAS. I have no doubt but that the gentleman is right. If this draft is retained as it
is, even if two-thirds of the assembly believe that a member has not the qualifications
provided by law, they cannot remove him for that reason.

Mr. LABRADOR. So that the right to remove shall only be retained by the Electoral
Commission.

Mr. ROXAS. By the assembly for misconduct.

Mr. LABRADOR. I mean with respect to the qualifications of the members.

Mr. ROXAS. Yes, by the Electoral Commission.

Mr. LABRADOR. So that under this draft, no member of the assembly has the right to
question the eligibility of its members?

Mr. ROXAS. Before a member can question the eligibility, he must go to the Electoral
Commission and make the question before the Electoral Commission.

Mr. LABRADOR. So that the Electoral Commission shall decide whether the election is
contested or not contested.

Mr. ROXAS. Yes, sir: that is the purpose.

Mr. PELAYO. Mr. President, I would like to be informed if the Electoral Commission has
power and authority to pass upon the qualifications of the members of the National
Assembly even though that question has not been raised.

Mr. ROXAS. I have just said that they have no power, because they can only judge.

In the same session, the first clause of the aforesaid draft reading "The election, returns and
qualifications of the members of the National Assembly and" was eliminated by the Sponsorship
Committee in response to an amendment introduced by Delegates Francisco, Ventura, Vinzons,
Rafols, Lim, Mumar and others. In explaining the difference between the original draft and the
draft as amended, Delegate Roxas speaking for the Sponsorship Committee said:

xxx xxx xxx

Sr. ROXAS. La diferencia, señor Presidente, consiste solamente en obviar la objecion

apuntada por varios Delegados al efecto de que la primera clausula del draft que dice:
"The elections, returns and qualifications of the members of the National Assembly"
parece que da a la Comision Electoral la facultad de determinar tambien la eleccion de
los miembros que no ha sido protestados y para obviar esa dificultad, creemos que la
enmienda tien razon en ese sentido, si enmendamos el draft, de tal modo que se lea
como sigue: "All cases contesting the election", de modo que los jueces de la Comision
Electoral se limitaran solamente a los casos en que haya habido protesta contra las
actas." Before the amendment of Delegate Labrador was voted upon the following
interpellation also took place:

El Sr. CONEJERO. Antes de votarse la enmienda, quisiera

 El Sr. PRESIDENTE. ¿Que dice el Comite?

El Sr. ROXAS. Con mucho gusto.

El Sr. CONEJERO. Tal como esta el draft, dando tres miembros a la mayoria, y otros
tres a la minoria y tres a la Corte Suprema, ¿no cree Su Señoria que esto equivale
practicamente a dejar el asunto a los miembros del Tribunal Supremo?

El Sr. ROXAS. Si y no. Creemos que si el tribunal o la Commission esta constituido en

esa forma, tanto los miembros de la mayoria como los de la minoria asi como los
miembros de la Corte Suprema consideraran la cuestion sobre la base de sus meritos,
sabiendo que el partidismo no es suficiente para dar el triunfo.

El Sr. CONEJERO. ¿Cree Su Señoria que en un caso como ese, podriamos hacer que
tanto los de la mayoria como los de la minoria prescindieran del partidismo?

El Sr. ROXAS. Creo que si, porque el partidismo no les daria el triunfo.

xxx xxx xxx

The amendment introduced by Delegates Labrador, Abordo and others seeking to restore the
power to decide contests relating to the election, returns and qualifications of members of the
National Assembly to the National Assembly itself, was defeated by a vote of ninety-eight (98)
against fifty-six (56).

In the same session of December 4, 1934, Delegate Cruz (C.) sought to amend the draft by
reducing the representation of the minority party and the Supreme Court in the Electoral
Commission to two members each, so as to accord more representation to the majority party.
The Convention rejected this amendment by a vote of seventy-six (76) against forty-six (46),
thus maintaining the non-partisan character of the commission.

As approved on January 31, 1935, the draft was made to read as follows:

(6) All cases contesting the elections, returns and qualifications of the Members of the
National Assembly shall be judged by an Electoral Commission, composed of three
members elected by the party having the largest number of votes in the National
Assembly, three elected by the members of the party having the second largest number
of votes, and three justices of the Supreme Court designated by the Chief Justice, the
Commission to be presided over by one of said justices.

The Style Committee to which the draft was submitted revised it as follows:

SEC. 4. There shall be an Electoral Commission composed of three Justices of the

Supreme Court designated by the Chief Justice, and of six Members chosen by the
National Assembly, three of whom shall be nominated by the party having the largest
number of votes, and three by the party having the second largest number of votes
therein. The senior Justice in the Commission shall be its chairman. The Electoral
Commission shall be the sole judge of the election, returns, and qualifications of the
Members of the National Assembly.

When the foregoing draft was submitted for approval on February 8, 1935, the Style Committee,
through President Recto, to effectuate the original intention of the Convention, agreed to insert
the phrase "All contests relating to" between the phrase "judge of" and the words "the elections",
which was accordingly accepted by the Convention.

The transfer of the power of determining the election, returns and qualifications of the members
of the legislature long lodged in the legislative body, to an independent, impartial and non-
partisan tribunal, is by no means a mere experiment in the science of government.

Cushing, in his Law and Practice of Legislative Assemblies (ninth edition, chapter VI, pages 57,
58), gives a vivid account of the "scandalously notorious" canvassing of votes by political parties
in the disposition of contests by the House of Commons in the following passages which are
partly quoted by the petitioner in his printed memorandum of March 14, 1936:

153. From the time when the commons established their right to be the exclusive judges
of the elections, returns, and qualifications of their members, until the year 1770, two
modes of proceeding prevailed, in the determination of controverted elections, and rights
of membership. One of the standing committees appointed at the commencement of
each session, was denominated the committee of privileges and elections, whose
functions was to hear and investigate all questions of this description which might be
referred to them, and to report their proceedings, with their opinion thereupon, to the
house, from time to time. When an election petition was referred to this committee they
heard the parties and their witnesses and other evidence, and made a report of all the
evidence, together with their opinion thereupon, in the form of resolutions, which were
considered and agreed or disagreed to by the house. The other mode of proceeding was
by a hearing at the bar of the house itself. When this court was adopted, the case was
heard and decided by the house, in substantially the same manner as by a committee.
The committee of privileges and elections although a select committee. The committee
of privileges and elections although a select committee was usually what is called an
open one; that is to say, in order to constitute the committee, a quorum of the members
named was required to be present, but all the members of the house were at liberty to
attend the committee and vote if they pleased.

154. With the growth of political parties in parliament questions relating to the right of
membership gradually assumed a political character; so that for many years previous to
the year 1770, controverted elections had been tried and determined by the house of
commons, as mere party questions, upon which the strength of contending factions
might be tested. Thus, for Example, in 1741, Sir Robert Walpole, after repeated attacks
upon his government, resigned his office in consequence of an adverse vote upon the
Chippenham election. Mr. Hatsell remarks, of the trial of election cases, as conducted
under this system, that "Every principle of decency and justice were notoriously and
openly prostituted, from whence the younger part of the house were insensibly, but too
successfully, induced to adopt the same licentious conduct in more serious matters, and
in questions of higher importance to the public welfare." Mr. George Grenville, a
distinguished member of the house of commons, undertook to propose a remedy for the
evil, and, on the 7th of March, 1770, obtained the unanimous leave of the house to bring
in a bill, "to regulate the trial of controverted elections, or returns of members to serve in
parliament." In his speech to explain his plan, on the motion for leave, Mr. Grenville
alluded to the existing practice in the following terms: "Instead of trusting to the merits of
their respective causes, the principal dependence of both parties is their private interest
among us; and it is scandalously notorious that we are as earnestly canvassed to attend
in favor of the opposite sides, as if we were wholly self-elective, and not bound to act by
the principles of justice, but by the discretionary impulse of our own inclinations; nay, it is
well known, that in every contested election, many members of this house, who are
ultimately to judge in a kind of judicial capacity between the competitors, enlist
themselves as parties in the contention, and take upon themselves the partial
management of the very business, upon which they should determine with the strictest
impartiality."

155. It was to put an end to the practices thus described, that Mr. Grenville brought in a
bill which met with the approbation of both houses, and received the royal assent on the
12th of April, 1770. This was the celebrated law since known by the name of the
Grenville Act; of which Mr. Hatsell declares, that it "was one of the nobles works, for the
honor of the house of commons, and the security of the constitution, that was ever
devised by any minister or statesman." It is probable, that the magnitude of the evil, or
the apparent success of the remedy, may have led many of the contemporaries of the
measure to the information of a judgement, which was not acquiesced in by some of the
leading statesmen of the day, and has not been entirely confirmed by subsequent
experience. The bill was objected to by Lord North, Mr. De Grey, afterwards chief justice
of the common pleas, Mr. Ellis, Mr. Dyson, who had been clerk of the house, and Mr.
Charles James Fox, chiefly on the ground, that the introduction of the new system was
an essential alteration of the constitution of parliament, and a total abrogation of one of
the most important rights and jurisdictions of the house of commons.
As early as 1868, the House of Commons in England solved the problem of insuring the non-
partisan settlement of the controverted elections of its members by abdicating its prerogative to
two judges of the King's Bench of the High Court of Justice selected from a rota in accordance
with rules of court made for the purpose. Having proved successful, the practice has become
imbedded in English jurisprudence (Parliamentary Elections Act, 1868 [31 & 32 Vict. c. 125] as
amended by Parliamentary Elections and Corrupt Practices Act. 1879 [42 & 43 Vict. c. 75], s. 2;
Corrupt and Illegal Practices Preventions Act, 1883 [46 & 47 Vict. c. 51;, s. 70; Expiring Laws
Continuance Act, 1911 [1 & 2 Geo. 5, c. 22]; Laws of England, vol. XII, p. 408, vol. XXI, p. 787).
In the Dominion of Canada, election contests which were originally heard by the Committee of
the House of Commons, are since 1922 tried in the courts. Likewise, in the Commonwealth of
Australia, election contests which were originally determined by each house, are since 1922
tried in the High Court. In Hungary, the organic law provides that all protests against the election
of members of the Upper House of the Diet are to be resolved by the Supreme Administrative
Court (Law 22 of 1916, chap. 2, art. 37, par. 6). The Constitution of Poland of March 17, 1921
(art. 19) and the Constitution of the Free City of Danzig of May 13, 1922 (art. 10) vest the
authority to decide contested elections to the Diet or National Assembly in the Supreme Court.
For the purpose of deciding legislative contests, the Constitution of the German Reich of July 1,
1919 (art. 31), the Constitution of the Czechoslovak Republic of February 29, 1920 (art. 19) and
the Constitution of the Grecian Republic of June 2, 1927 (art. 43), all provide for an Electoral
Commission.

The creation of an Electoral Commission whose membership is recruited both from the
legislature and the judiciary is by no means unknown in the United States. In the presidential
elections of 1876 there was a dispute as to the number of electoral votes received by each of
the two opposing candidates. As the Constitution made no adequate provision for such a
contingency, Congress passed a law on January 29, 1877 (United States Statutes at Large, vol.
19, chap. 37, pp. 227-229), creating a special Electoral Commission composed of five members
elected by the Senate, five members elected by the House of Representatives, and five justices
of the Supreme Court, the fifth justice to be selected by the four designated in the Act. The
decision of the commission was to be binding unless rejected by the two houses voting
separately. Although there is not much of a moral lesson to be derived from the experience of
America in this regard, judging from the observations of Justice Field, who was a member of
that body on the part of the Supreme Court (Countryman, the Supreme Court of the United
States and its Appellate Power under the Constitution [Albany, 1913] — Relentless Partisanship
of Electoral Commission, p. 25 et seq.), the experiment has at least abiding historical interest.

The members of the Constitutional Convention who framed our fundamental law were in their
majority men mature in years and experience. To be sure, many of them were familiar with the
history and political development of other countries of the world. When , therefore, they deemed
it wise to create an Electoral Commission as a constitutional organ and invested it with the
exclusive function of passing upon and determining the election, returns and qualifications of the
members of the National Assembly, they must have done so not only in the light of their own
experience but also having in view the experience of other enlightened peoples of the world.
The creation of the Electoral Commission was designed to remedy certain evils of which the
framers of our Constitution were cognizant. Notwithstanding the vigorous opposition of some
members of the Convention to its creation, the plan, as hereinabove stated, was approved by
that body by a vote of 98 against 58. All that can be said now is that, upon the approval of the
constitutional the creation of the Electoral Commission is the expression of the wisdom and
"ultimate justice of the people". (Abraham Lincoln, First Inaugural Address, March 4, 1861.)

From the deliberations of our Constitutional Convention it is evident that the purpose was to
transfer in its totality all the powers previously exercised by the legislature in matters pertaining
to contested elections of its members, to an independent and impartial tribunal. It was not so
much the knowledge and appreciation of contemporary constitutional precedents, however, as
the long-felt need of determining legislative contests devoid of partisan considerations which
prompted the people, acting through their delegates to the Convention, to provide for this body
known as the Electoral Commission. With this end in view, a composite body in which both the
majority and minority parties are equally represented to off-set partisan influence in its
deliberations was created, and further endowed with judicial temper by including in its
membership three justices of the Supreme Court.
The Electoral Commission is a constitutional creation, invested with the necessary authority in
the performance and execution of the limited and specific function assigned to it by the
Constitution. Although it is not a power in our tripartite scheme of government, it is, to all intents
and purposes, when acting within the limits of its authority, an independent organ. It is, to be
sure, closer to the legislative department than to any other. The location of the provision
(section 4) creating the Electoral Commission under Article VI entitled "Legislative Department"
of our Constitution is very indicative. Its compositions is also significant in that it is constituted by
a majority of members of the legislature. But it is a body separate from and independent of the
legislature.

The grant of power to the Electoral Commission to judge all contests relating to the election,
returns and qualifications of members of the National Assembly, is intended to be as complete
and unimpaired as if it had remained originally in the legislature. The express lodging of that
power in the Electoral Commission is an implied denial of the exercise of that power by the
National Assembly. And this is as effective a restriction upon the legislative power as an
express prohibition in the Constitution (Ex parte Lewis, 45 Tex. Crim. Rep., 1;
State vs.Whisman, 36 S.D., 260; L.R.A., 1917B, 1). If we concede the power claimed in behalf
of the National Assembly that said body may regulate the proceedings of the Electoral
Commission and cut off the power of the commission to lay down the period within which
protests should be filed, the grant of power to the commission would be ineffective. The
Electoral Commission in such case would be invested with the power to determine contested
cases involving the election, returns and qualifications of the members of the National Assembly
but subject at all times to the regulative power of the National Assembly. Not only would the
purpose of the framers of our Constitution of totally transferring this authority from the legislative
body be frustrated, but a dual authority would be created with the resultant inevitable clash of
powers from time to time. A sad spectacle would then be presented of the Electoral Commission
retaining the bare authority of taking cognizance of cases referred to, but in reality without the
necessary means to render that authority effective whenever and whenever the National
Assembly has chosen to act, a situation worse than that intended to be remedied by the framers
of our Constitution. The power to regulate on the part of the National Assembly in procedural
matters will inevitably lead to the ultimate control by the Assembly of the entire proceedings of
the Electoral Commission, and, by indirection, to the entire abrogation of the constitutional
grant. It is obvious that this result should not be permitted.

We are not insensible to the impassioned argument or the learned counsel for the petitioner
regarding the importance and necessity of respecting the dignity and independence of the
national Assembly as a coordinate department of the government and of according validity to its
acts, to avoid what he characterized would be practically an unlimited power of the commission
in the admission of protests against members of the National Assembly. But as we have pointed
out hereinabove, the creation of the Electoral Commission carried with it ex necesitate rei the
power regulative in character to limit the time with which protests intrusted to its cognizance
should be filed. It is a settled rule of construction that where a general power is conferred or
duty enjoined, every particular power necessary for the exercise of the one or the performance
of the other is also conferred (Cooley, Constitutional Limitations, eight ed., vol. I, pp. 138, 139).
In the absence of any further constitutional provision relating to the procedure to be followed in
filing protests before the Electoral Commission, therefore, the incidental power to promulgate
such rules necessary for the proper exercise of its exclusive power to judge all contests relating
to the election, returns and qualifications of members of the National Assembly, must be
deemed by necessary implication to have been lodged also in the Electoral Commission.

It is, indeed, possible that, as suggested by counsel for the petitioner, the Electoral Commission
may abuse its regulative authority by admitting protests beyond any reasonable time, to the
disturbance of the tranquillity and peace of mind of the members of the National Assembly. But
the possibility of abuse is not argument against the concession of the power as there is no
power that is not susceptible of abuse. In the second place, if any mistake has been committed
in the creation of an Electoral Commission and in investing it with exclusive jurisdiction in all
cases relating to the election, returns, and qualifications of members of the National Assembly,
the remedy is political, not judicial, and must be sought through the ordinary processes of
democracy. All the possible abuses of the government are not intended to be corrected by the
judiciary. We believe, however, that the people in creating the Electoral Commission reposed as
much confidence in this body in the exclusive determination of the specified cases assigned to
it, as they have given to the Supreme Court in the proper cases entrusted to it for decision. All
the agencies of the government were designed by the Constitution to achieve specific purposes,
and each constitutional organ working within its own particular sphere of discretionary action
must be deemed to be animated with the same zeal and honesty in accomplishing the great
ends for which they were created by the sovereign will. That the actuations of these
constitutional agencies might leave much to be desired in given instances, is inherent in the
perfection of human institutions. In the third place, from the fact that the Electoral Commission
may not be interfered with in the exercise of its legitimate power, it does not follow that its acts,
however illegal or unconstitutional, may not be challenge in appropriate cases over which the
courts may exercise jurisdiction.

But independently of the legal and constitutional aspects of the present case, there are
considerations of equitable character that should not be overlooked in the appreciation of the
intrinsic merits of the controversy. The Commonwealth Government was inaugurated on
November 15, 1935, on which date the Constitution, except as to the provisions mentioned in
section 6 of Article XV thereof, went into effect. The new National Assembly convened on
November 25th of that year, and the resolution confirming the election of the petitioner, Jose A.
Angara was approved by that body on December 3, 1935. The protest by the herein respondent
Pedro Ynsua against the election of the petitioner was filed on December 9 of the same year.
The pleadings do not show when the Electoral Commission was formally organized but it does
appear that on December 9, 1935, the Electoral Commission met for the first time and approved
a resolution fixing said date as the last day for the filing of election protest. When, therefore, the
National Assembly passed its resolution of December 3, 1935, confirming the election of the
petitioner to the National Assembly, the Electoral Commission had not yet met; neither does it
appear that said body had actually been organized. As a mater of fact, according to certified
copies of official records on file in the archives division of the National Assembly attached to the
record of this case upon the petition of the petitioner, the three justices of the Supreme Court
the six members of the National Assembly constituting the Electoral Commission were
respectively designated only on December 4 and 6, 1935. If Resolution No. 8 of the National
Assembly confirming non-protested elections of members of the National Assembly had the
effect of limiting or tolling the time for the presentation of protests, the result would be that the
National Assembly — on the hypothesis that it still retained the incidental power of regulation in
such cases — had already barred the presentation of protests before the Electoral Commission
had had time to organize itself and deliberate on the mode and method to be followed in a
matter entrusted to its exclusive jurisdiction by the Constitution. This result was not and could
not have been contemplated, and should be avoided.

From another angle, Resolution No. 8 of the National Assembly confirming the election of
members against whom no protests had been filed at the time of its passage on December 3,
1935, can not be construed as a limitation upon the time for the initiation of election contests.
While there might have been good reason for the legislative practice of confirmation of the
election of members of the legislature at the time when the power to decide election contests
was still lodged in the legislature, confirmation alone by the legislature cannot be construed as
depriving the Electoral Commission of the authority incidental to its constitutional power to be
"the sole judge of all contest relating to the election, returns, and qualifications of the members
of the National Assembly", to fix the time for the filing of said election protests. Confirmation by
the National Assembly of the returns of its members against whose election no protests have
been filed is, to all legal purposes, unnecessary. As contended by the Electoral Commission in
its resolution of January 23, 1936, overruling the motion of the herein petitioner to dismiss the
protest filed by the respondent Pedro Ynsua, confirmation of the election of any member is not
required by the Constitution before he can discharge his duties as such member. As a matter of
fact, certification by the proper provincial board of canvassers is sufficient to entitle a member-
elect to a seat in the national Assembly and to render him eligible to any office in said body (No.
1, par. 1, Rules of the National Assembly, adopted December 6, 1935).

Under the practice prevailing both in the English House of Commons and in the Congress of the
United States, confirmation is neither necessary in order to entitle a member-elect to take his
seat. The return of the proper election officers is sufficient, and the member-elect presenting
such return begins to enjoy the privileges of a member from the time that he takes his oath of
office (Laws of England, vol. 12, pp. 331. 332; vol. 21, pp. 694, 695; U. S. C. A., Title 2, secs.
21, 25, 26). Confirmation is in order only in cases of contested elections where the decision is
adverse to the claims of the protestant. In England, the judges' decision or report in controverted
elections is certified to the Speaker of the House of Commons, and the House, upon being
informed of such certificate or report by the Speaker, is required to enter the same upon the
Journals, and to give such directions for confirming or altering the return, or for the issue of a
writ for a new election, or for carrying into execution the determination as circumstances may
require (31 & 32 Vict., c. 125, sec. 13). In the United States, it is believed, the order or decision
of the particular house itself is generally regarded as sufficient, without any actual alternation or
amendment of the return (Cushing, Law and Practice of Legislative Assemblies, 9th ed., sec.
166).

Under the practice prevailing when the Jones Law was still in force, each house of the
Philippine Legislature fixed the time when protests against the election of any of its members
should be filed. This was expressly authorized by section 18 of the Jones Law making each
house the sole judge of the election, return and qualifications of its members, as well as by a
law (sec. 478, Act No. 3387) empowering each house to respectively prescribe by resolution the
time and manner of filing contest in the election of member of said bodies. As a matter of
formality, after the time fixed by its rules for the filing of protests had already expired, each
house passed a resolution confirming or approving the returns of such members against whose
election no protests had been filed within the prescribed time. This was interpreted as cutting off
the filing of further protests against the election of those members not theretofore contested
(Amistad vs. Claravall [Isabela], Second Philippine Legislature, Record — First Period, p. 89;
Urguello vs. Rama [Third District, Cebu], Sixth Philippine Legislature; Fetalvero vs. Festin
[Romblon], Sixth Philippine Legislature, Record — First Period, pp. 637-640;
Kintanar vs. Aldanese [Fourth District, Cebu], Sixth Philippine Legislature, Record — First
Period, pp. 1121, 1122; Aguilar vs. Corpus [Masbate], Eighth Philippine Legislature, Record —
First Period, vol. III, No. 56, pp. 892, 893). The Constitution has repealed section 18 of the
Jones Law. Act No. 3387, section 478, must be deemed to have been impliedly abrogated also,
for the reason that with the power to determine all contest relating to the election, returns and
qualifications of members of the National Assembly, is inseparably linked the authority to
prescribe regulations for the exercise of that power. There was thus no law nor constitutional
provisions which authorized the National Assembly to fix, as it is alleged to have fixed on
December 3, 1935, the time for the filing of contests against the election of its members. And
what the National Assembly could not do directly, it could not do by indirection through the
medium of confirmation.

Summarizing, we conclude:

(a) That the government established by the Constitution follows fundamentally the theory
of separation of power into the legislative, the executive and the judicial.

(b) That the system of checks and balances and the overlapping of functions and duties
often makes difficult the delimitation of the powers granted.

(c) That in cases of conflict between the several departments and among the agencies
thereof, the judiciary, with the Supreme Court as the final arbiter, is the only
constitutional mechanism devised finally to resolve the conflict and allocate constitutional
boundaries.

(d) That judicial supremacy is but the power of judicial review in actual and appropriate
cases and controversies, and is the power and duty to see that no one branch or agency
of the government transcends the Constitution, which is the source of all authority.

(e) That the Electoral Commission is an independent constitutional creation with specific
powers and functions to execute and perform, closer for purposes of classification to the
legislative than to any of the other two departments of the governments.

(f ) That the Electoral Commission is the sole judge of all contests relating to the
election, returns and qualifications of members of the National Assembly.

(g) That under the organic law prevailing before the present Constitution went into effect,
each house of the legislature was respectively the sole judge of the elections, returns,
and qualifications of their elective members.
 (h) That the present Constitution has transferred all the powers previously exercised by
the legislature with respect to contests relating to the elections, returns and qualifications
of its members, to the Electoral Commission.

(i) That such transfer of power from the legislature to the Electoral Commission was full,
clear and complete, and carried with it ex necesitate rei the implied power inter alia to
prescribe the rules and regulations as to the time and manner of filing protests.

( j) That the avowed purpose in creating the Electoral Commission was to have an
independent constitutional organ pass upon all contests relating to the election, returns
and qualifications of members of the National Assembly, devoid of partisan influence or
consideration, which object would be frustrated if the National Assembly were to retain
the power to prescribe rules and regulations regarding the manner of conducting said
contests.

(k) That section 4 of article VI of the Constitution repealed not only section 18 of the
Jones Law making each house of the Philippine Legislature respectively the sole judge
of the elections, returns and qualifications of its elective members, but also section 478
of Act No. 3387 empowering each house to prescribe by resolution the time and manner
of filing contests against the election of its members, the time and manner of notifying
the adverse party, and bond or bonds, to be required, if any, and to fix the costs and
expenses of contest.

(l) That confirmation by the National Assembly of the election is contested or not, is not
essential before such member-elect may discharge the duties and enjoy the privileges of
a member of the National Assembly.

(m) That confirmation by the National Assembly of the election of any member against
whom no protest had been filed prior to said confirmation, does not and cannot deprive
the Electoral Commission of its incidental power to prescribe the time within which
protests against the election of any member of the National Assembly should be filed.

We hold, therefore, that the Electoral Commission was acting within the legitimate exercise of its
constitutional prerogative in assuming to take cognizance of the protest filed by the respondent
Pedro Ynsua against the election of the herein petitioner Jose A. Angara, and that the resolution
of the National Assembly of December 3, 1935 can not in any manner toll the time for filing
protests against the elections, returns and qualifications of members of the National Assembly,
nor prevent the filing of a protest within such time as the rules of the Electoral Commission
might prescribe.

In view of the conclusion reached by us relative to the character of the Electoral Commission as
a constitutional creation and as to the scope and extent of its authority under the facts of the
present controversy, we deem it unnecessary to determine whether the Electoral Commission is
an inferior tribunal, corporation, board or person within the purview of sections 226 and 516 of
the Code of Civil Procedure.

The petition for a writ of prohibition against the Electoral Commission is hereby denied, with
costs against the petitioner. So ordered.

Avanceña, C. J., Diaz, Concepcion, and Horrilleno, JJ., concur.

Separate Opinions

ABAD SANTOS, J., concurring:

I concur in the result and in most of the views so ably expressed in the preceding opinion. I am,
however, constrained to withhold my assent to certain conclusions therein advanced.
The power vested in the Electoral Commission by the Constitution of judging of all contests
relating to the election, returns, and qualifications of the members of the National Assembly, is
judicial in nature. (Thomas vs. Loney, 134 U.S., 372; 33 Law. ed., 949, 951.) On the other hand,
the power to regulate the time in which notice of a contested election may be given, is legislative
in character. (M'Elmoyle vs. Cohen, 13 Pet., 312; 10 Law. ed., 177; Missouri vs. Illinois, 200 U.
S. 496; 50 Law. ed., 572.)

It has been correctly stated that the government established by the Constitution follows
fundamentally the theory of the separation of powers into legislative, executive, and judicial.
Legislative power is vested in the National Assembly. (Article VI, sec. 1.) In the absence of any
clear constitutional provision to the contrary, the power to regulate the time in which notice of a
contested election may be given, must be deemed to be included in the grant of legislative
power to the National Assembly.

The Constitution of the United States contains a provision similar to the that found in Article VI,
section 4, of the Constitution of the Philippines. Article I, section 5, of the Constitution of the
United States provides that each house of the Congress shall be the judge of the elections,
returns, and qualifications of its own members. Notwithstanding this provision, the Congress has
assumed the power to regulate the time in which notice of a contested election may be given.
Thus section 201, Title 2, of the United States Code Annotated prescribes:

Whenever any person intends to contest an election of any Member of the House of
Representatives of the United States, he shall, within thirty days after the result of such
election shall have been determined by the officer or board of canvassers authorized by
law to determine the same, give notice, in writing, to the Member whose seat he designs
to contest, of his intention to contest the same, and, in such notice, shall specify
particularly the grounds upon which he relies in the contest. (R. S., par. 105.)

The Philippine Autonomy Act, otherwise known as the Jones Law, also contained a provision to
the effect that the Senate and House of Representatives, respectively, shall be the sole judges
of the elections, returns, and qualifications of their elective members. Notwithstanding this
provision, the Philippine Legislature passed the Election Law, section 478 of which reads as
follows:

The Senate and the House of Representatives shall by resolution respectively prescribe
the time and manner of filing contest in the election of members of said bodies, the time
and manner of notifying the adverse party, and bond or bonds, to be required, if any, and
shall fix the costs and expenses of contest which may be paid from their respective
funds.

The purpose sought to be attained by the creation of the Electoral Commission was not to erect
a body that would be above the law, but to raise legislative elections contests from the category
of political to that of justiciable questions. The purpose was not to place the commission beyond
the reach of the law, but to insure the determination of such contests with the due process of
law.

Section 478 of the Election Law was in force at the time of the adoption of the Constitution,
Article XV, section 2, of which provides that —

All laws of the Philippine Islands shall continue in force until the inauguration of the
Commonwealth of the Philippines; thereafter, such laws shall remain operative, unless
inconsistent with this Constitution, until amended, altered, modified, or repealed by the
National Assembly, and all references in such laws to the Government or officials of the
Philippine Islands shall be construed, in so far as applicable, to refer to the Government
and corresponding officials under this Constitution.

The manifest purpose of this constitutional provision was to insure the orderly processes of
government, and to prevent any hiatus in its operations after the inauguration of the
Commonwealth of the Philippines. It was thus provided that all laws of the Philippine Islands
shall remain operative even after the inauguration of the Commonwealth of the Philippines,
unless inconsistent with the Constitution, and that all references in such laws to the government
or officials of the Philippine Islands shall be construed, in so far as applicable, to refer to the
government and corresponding officials under the Constitution. It would seem to be consistent
not only with the spirit but the letter of the Constitution to hold that section 478 of the Election
Law remains operative and should now be construed to refer to the Electoral Commission,
which, in so far as the power to judge election contests is concerned, corresponds to either the
Senate or the House of Representative under the former regime. It is important to observe in
this connection that said section 478 of the Election Law vested the power to regulate the time
and manner in which notice of a contested election may be given, not in the Philippine
Legislature but in the Senate and House of Representatives singly. In other words, the authority
to prescribe the time and manner of filing contests in the elections of members of the Philippine
Legislature was by statute lodged separately in the bodies clothed with power to decide such
contests. Construing section 478 of the Election Law to refer to the National Assembly, as
required by Article XV, section 2, of the Constitution, it seems reasonable to conclude that the
authority to prescribe the time and manner of filing contests in the election of members of the
National Assembly is vested in the Electoral Commission, which is now the body clothed with
power to decide such contests.

In the light of what has been said, the resolution of the National Assembly of December 3, 1935,
could not have the effect of barring the right of the respondent Pedro Ynsua to contest the
election of the petitioner. By the same token, the Electoral Commission was authorized by law
to adopt its resolution of December 9, 1935, which fixed the time with in which written contests
must be filed with the commission.

Having been filed within the time fixed by its resolutions, the Electoral Commission has
jurisdiction to hear and determine the contest filed by the respondent Pedro Ynsua against the
petitioner Jose A. Angara.

G.R. No. 127882 December 1, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., Represented by its Chairman F'LONG

MIGUEL M. LUMAYONG; WIGBERTO E. TAÑADA; PONCIANO BENNAGEN; JAIME
TADEO; RENATO R. CONSTANTINO JR.; F'LONG AGUSTIN M. DABIE; ROBERTO P.
AMLOY; RAQIM L. DABIE; SIMEON H. DOLOJO; IMELDA M. GANDON; LENY B.
GUSANAN; MARCELO L. GUSANAN; QUINTOL A. LABUAYAN; LOMINGGES D. LAWAY;
BENITA P. TACUAYAN; Minors JOLY L. BUGOY, Represented by His Father UNDERO D.
BUGOY and ROGER M. DADING; Represented by His Father ANTONIO L. DADING; ROMY
M. LAGARO, Represented by His Father TOTING A. LAGARO; MIKENY JONG B.
LUMAYONG, Represented by His Father MIGUEL M. LUMAYONG; RENE T. MIGUEL,
Represented by His Mother EDITHA T. MIGUEL; ALDEMAR L. SAL, Represented by His
Father DANNY M. SAL; DAISY RECARSE, Represented by Her Mother LYDIA S. SANTOS;
EDWARD M. EMUY; ALAN P. MAMPARAIR; MARIO L. MANGCAL; ALDEN S. TUSAN;
AMPARO S. YAP; VIRGILIO CULAR; MARVIC M.V.F. LEONEN; JULIA REGINA CULAR,
GIAN CARLO CULAR, VIRGILIO CULAR JR., Represented by Their Father VIRGILIO
CULAR; PAUL ANTONIO P. VILLAMOR, Represented by His Parents JOSE VILLAMOR
and ELIZABETH PUA-VILLAMOR; ANA GININA R. TALJA, Represented by Her Father
MARIO JOSE B. TALJA; SHARMAINE R. CUNANAN, Represented by Her Father
ALFREDO M. CUNANAN; ANTONIO JOSE A. VITUG III, Represented by His Mother
ANNALIZA A. VITUG, LEAN D. NARVADEZ, Represented by His Father MANUEL E.
NARVADEZ JR.; ROSERIO MARALAG LINGATING, Represented by Her Father RIO
OLIMPIO A. LINGATING; MARIO JOSE B. TALJA; DAVID E. DE VERA; MARIA MILAGROS
L. SAN JOSE; Sr. SUSAN O. BOLANIO, OND; LOLITA G. DEMONTEVERDE; BENJIE L.
NEQUINTO;1 ROSE LILIA S. ROMANO; ROBERTO S. VERZOLA; EDUARDO AURELIO C.
REYES; LEAN LOUEL A. PERIA, Represented by His Father ELPIDIO V. PERIA;2 GREEN
FORUM PHILIPPINES; GREEN FORUM WESTERN VISAYAS (GF-WV); ENVIRONMENTAL
LEGAL ASSISTANCE CENTER (ELAC); KAISAHAN TUNGO SA KAUNLARAN NG
KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN);3 PARTNERSHIP FOR
AGRARIAN REFORM and RURAL DEVELOPMENT SERVICES, INC. (PARRDS);
PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN THE
RURAL AREAS, INC. (PHILDHRRA); WOMEN'S LEGAL BUREAU (WLB); CENTER FOR
ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI); UPLAND DEVELOPMENT
INSTITUTE (UDI); KINAIYAHAN FOUNDATION, INC.; SENTRO NG ALTERNATIBONG
LINGAP PANLIGAL (SALIGAN); and LEGAL RIGHTS AND NATURAL RESOURCES
CENTER, INC. (LRC), petitioners,
vs.
VICTOR O. RAMOS, Secretary, Department of Environment and Natural Resources
(DENR); HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGB-DENR);
RUBEN TORRES, Executive Secretary; and WMC (PHILIPPINES), INC.,4 respondents.

RESOLUTION

PANGANIBAN, J.:

All mineral resources are owned by the State. Their exploration, development and utilization
(EDU) must always be subject to the full control and supervision of the State. More specifically,
given the inadequacy of Filipino capital and technology in large-scale EDU activities, the State
may secure the help of foreign companies in all relevant matters -- especially financial and
technical assistance -- provided that, at all times, the State maintains its right of full control. The
foreign assistor or contractor assumes all financial, technical and entrepreneurial risks in the
EDU activities; hence, it may be given reasonable management, operational, marketing, audit
and other prerogatives to protect its investments and to enable the business to succeed.

Full control is not anathematic to day-to-day management by the contractor, provided that the
State retains the power to direct overall strategy; and to set aside, reverse or modify plans and
actions of the contractor. The idea of full control is similar to that which is exercised by the board
of directors of a private corporation: the performance of managerial, operational, financial,
marketing and other functions may be delegated to subordinate officers or given to contractual
entities, but the board retains full residual control of the business.

Who or what organ of government actually exercises this power of control on behalf of the
State? The Constitution is crystal clear: the President. Indeed, the Chief Executive is the official
constitutionally mandated to "enter into agreements with foreign owned corporations." On the
other hand, Congress may review the action of the President once it is notified of "every
contract entered into in accordance with this [constitutional] provision within thirty days from its
execution." In contrast to this express mandate of the President and Congress in the EDU of
natural resources, Article XII of the Constitution is silent on the role of the judiciary. However,
should the President and/or Congress gravely abuse their discretion in this regard, the courts
may -- in a proper case -- exercise their residual duty under Article VIII. Clearly then, the
judiciary should not inordinately interfere in the exercise of this presidential power of control
over the EDU of our natural resources.

The Constitution should be read in broad, life-giving strokes. It should not be used to strangulate
economic growth or to serve narrow, parochial interests. Rather, it should be construed to grant
the President and Congress sufficient discretion and reasonable leeway to enable them to
attract foreign investments and expertise, as well as to secure for our people and our posterity
the blessings of prosperity and peace.

On the basis of this control standard, this Court upholds the constitutionality of the Philippine
Mining Law, its Implementing Rules and Regulations -- insofar as they relate to financial and
technical agreements -- as well as the subject Financial and Technical Assistance Agreement
(FTAA).5

Background

The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of
(1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules
and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA dated March
30, 1995,6 executed by the government with Western Mining Corporation (Philippines), Inc.
(WMCP).7

On January 27, 2004, the Court en banc promulgated its Decision8 granting the Petition and
declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the
entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs
are service contracts prohibited by the 1987 Constitution.

The Decision struck down the subject FTAA for being similar to service contracts, 9 which,
though permitted under the 1973 Constitution,10 were subsequently denounced for being
antithetical to the principle of sovereignty over our natural resources, because they allowed
foreign control over the exploitation of our natural resources, to the prejudice of the Filipino
nation.

The Decision quoted several legal scholars and authors who had criticized service contracts
for, inter alia, vesting in the foreign contractor exclusive management and control of the
enterprise, including operation of the field in the event petroleum was discovered; control of
production, expansion and development; nearly unfettered control over the disposition and sale
of the products discovered/extracted; effective ownership of the natural resource at the point of
extraction; and beneficial ownership of our economic resources. According to the Decision, the
1987 Constitution (Section 2 of Article XII) effectively banned such service contracts.

Subsequently, respondents filed separate Motions for Reconsideration. In a Resolution dated

March 9, 2004, the Court required petitioners to comment thereon. In the Resolution of June 8,
2004, it set the case for Oral Argument on June 29, 2004.

After hearing the opposing sides, the Court required the parties to submit their respective
Memoranda in amplification of their arguments. In a Resolution issued later the same day, June
29, 2004, the Court noted, inter alia, the Manifestation and Motion (in lieu of comment) filed by
the Office of the Solicitor General (OSG) on behalf of public respondents. The OSG said that it
was not interposing any objection to the Motion for Intervention filed by the Chamber of Mines of
the Philippines, Inc. (CMP) and was in fact joining and adopting the latter's Motion for
Reconsideration.

Memoranda were accordingly filed by the intervenor as well as by petitioners, public

respondents, and private respondent, dwelling at length on the three issues discussed below.
Later, WMCP submitted its Reply Memorandum, while the OSG -- in obedience to an Order of
this Court -- filed a Compliance submitting copies of more FTAAs entered into by the
government.

Three Issues Identified by the Court

During the Oral Argument, the Court identified the three issues to be resolved in the present
controversy, as follows:

1. Has the case been rendered moot by the sale of WMC shares in WMCP to Sagittarius (60
percent of Sagittarius' equity is owned by Filipinos and/or Filipino-owned corporations while 40
percent is owned by Indophil Resources NL, an Australian company) and by the subsequent
transfer and registration of the FTAA from WMCP to Sagittarius?

2. Assuming that the case has been rendered moot, would it still be proper to resolve the
constitutionality of the assailed provisions of the Mining Law, DAO 96-40 and the WMCP FTAA?

3. What is the proper interpretation of the phrase Agreements Involving Either Technical or
Financial Assistancecontained in paragraph 4 of Section 2 of Article XII of the Constitution?

Should the Motion for Reconsideration Be Granted?

Respondents' and intervenor's Motions for Reconsideration should be granted, for the reasons
discussed below. The foregoing three issues identified by the Court shall now be taken
up seriatim.

First Issue:

Mootness

In declaring unconstitutional certain provisions of RA 7942, DAO 96-40, and the WMCP FTAA,
the majority Decision agreed with petitioners' contention that the subject FTAA had been
executed in violation of Section 2 of Article XII of the 1987 Constitution. According to petitioners,
the FTAAs entered into by the government with foreign-owned corporations are limited by the
fourth paragraph of the said provision to agreements involving only technical or financial
assistance for large-scale exploration, development and utilization of minerals, petroleum and
other mineral oils. Furthermore, the foreign contractor is allegedly permitted by the FTAA in
question to fully manage and control the mining operations and, therefore, to acquire "beneficial
ownership" of our mineral resources.

The Decision merely shrugged off the Manifestation by WMPC informing the Court (1) that on
January 23, 2001, WMC had sold all its shares in WMCP to Sagittarius Mines, Inc., 60 percent
of whose equity was held by Filipinos; and (2) that the assailed FTAA had likewise been
transferred from WMCP to Sagittarius.11 The ponencia declared that the instant case
had not been rendered moot by the transfer and registration of the FTAA to a Filipino-owned
corporation, and that the validity of the said transfer remained in dispute and awaited final
judicial determination.12Patently therefore, the Decision is anchored on the assumption that
WMCP had remained a foreign corporation.

The crux of this issue of mootness is the fact that WMCP, at the time it entered into the
FTAA, happened to be wholly owned by WMC Resources International Pty., Ltd. (WMC), which
in turn was a wholly owned subsidiary of Western Mining Corporation Holdings Ltd., a publicly
listed major Australian mining and exploration company.

The nullity of the FTAA was obviously premised upon the contractor being
a foreign corporation. Had the FTAA been originally issued to a Filipino-owned corporation,
there would have been no constitutionality issue to speak of. Upon the other hand, the
conveyance of the WMCP FTAA to a Filipino corporation can be likened to the sale of land to a
foreigner who subsequently acquires Filipino citizenship, or who later resells the same land to a
Filipino citizen. The conveyance would be validated, as the property in question would no longer
be owned by a disqualified vendee.

And, inasmuch as the FTAA is to be implemented now by a Filipino corporation, it is no longer

possible for the Court to declare it unconstitutional. The case pending in the Court of Appeals is
a dispute between two Filipino companies (Sagittarius and Lepanto), both claiming the right to
purchase the foreign shares in WMCP. So, regardless of which side eventually wins, the FTAA
would still be in the hands of a qualified Filipino company. Considering that there is no longer
any justiciable controversy, the plea to nullify the Mining Law has become a virtual petition for
declaratory relief, over which this Court has no original jurisdiction.

In their Final Memorandum, however, petitioners argue that the case has not become moot,
considering the invalidity of the alleged sale of the shares in WMCP from WMC to Sagittarius,
and of the transfer of the FTAA from WMCP to Sagittarius, resulting in the change of contractor
in the FTAA in question. And even assuming that the said transfers were valid, there still exists
an actual case predicated on the invalidity of RA 7942 and its Implementing Rules and
Regulations (DAO 96-40). Presently, we shall discuss petitioners' objections to the transfer of
both the shares and the FTAA. We shall take up the alleged invalidity of RA 7942 and DAO 96-
40 later on in the discussion of the third issue.

No Transgression of the Constitution

by the Transfer of the WMCP Shares
Petitioners claim, first, that the alleged invalidity of the transfer of the WMCP shares to
Sagittarius violates the fourth paragraph of Section 2 of Article XII of the
Constitution; second, that it is contrary to the provisions of the WMCP FTAA itself;
and third, that the sale of the shares is suspect and should therefore be the subject of a case in
which its validity may properly be litigated.

On the first ground, petitioners assert that paragraph 4 of Section 2 of Article XII permits the
government to enter into FTAAs only with foreign-owned corporations. Petitioners insist that the
first paragraph of this constitutional provision limits the participation of Filipino corporations in
the exploration, development and utilization of natural resources to only three species of
contracts -- production sharing, co-production and joint venture -- to the exclusion of all other
arrangements or variations thereof, and the WMCP FTAA may therefore not be validly assumed
and implemented by Sagittarius. In short, petitioners claim that a Filipino corporation is not
allowed by the Constitution to enter into an FTAA with the government.

However, a textual analysis of the first paragraph of Section 2 of Article XII does not support
petitioners' argument. The pertinent part of the said provision states: "Sec. 2. x x x The
exploration, development and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter into
co-production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such
citizens. x x x." Nowhere in the provision is there any express limitation or restriction insofar as
arrangements other than the three aforementioned contractual schemes are concerned.

Neither can one reasonably discern any implied stricture to that effect. Besides, there is no
basis to believe that the framers of the Constitution, a majority of whom were obviously
concerned with furthering the development and utilization of the country's natural resources,
could have wanted to restrict Filipino participation in that area. This point is clear, especially in
the light of the overarching constitutional principle of giving preference and priority to Filipinos
and Filipino corporations in the development of our natural resources.

Besides, even assuming (purely for argument's sake) that a constitutional limitation barring
Filipino corporations from holding and implementing an FTAA actually exists, nevertheless, such
provision would apply only to the transfer of the FTAA to Sagittarius, but definitely not to the
sale of WMC's equity stake in WMCP to Sagittarius. Otherwise, an unreasonable curtailment of
property rights without due process of law would ensue. Petitioners' argument must therefore
fail.

FTAA Not Intended

Solely for Foreign Corporation

Equally barren of merit is the second ground cited by petitioners -- that the FTAA was intended
to apply solely to a foreign corporation, as can allegedly be seen from the provisions therein.
They manage to cite only one WMCP FTAA provision that can be regarded as clearly intended
to apply only to a foreign contractor: Section 12, which provides for international commercial
arbitration under the auspices of the International Chamber of Commerce, after local remedies
are exhausted. This provision, however, does not necessarily imply that the WMCP FTAA
cannot be transferred to and assumed by a Filipino corporation like Sagittarius, in which event
the said provision should simply be disregarded as a superfluity.

No Need for a Separate

Litigation of the Sale of Shares

Petitioners claim as third ground the "suspicious" sale of shares from WMC to Sagittarius;
hence, the need to litigate it in a separate case. Section 40 of RA 7942 (the Mining Law)
allegedly requires the President's prior approval of a transfer.

A re-reading of the said provision, however, leads to a different conclusion. "Sec.

40. Assignment/Transfer -- A financial or technical assistance agreement may be assigned or
transferred, in whole or in part, to a qualified person subject to the prior approval of the
President: Provided, That the President shall notify Congress of every financial or technical
assistance agreement assigned or converted in accordance with this provision within thirty (30)
days from the date of the approval thereof."

Section 40 expressly applies to the assignment or transfer of the FTAA, not to the sale and
transfer of shares of stock in WMCP. Moreover, when the transferee of an FTAA is
another foreign corporation, there is a logical application of the requirement of prior approval by
the President of the Republic and notification to Congress in the event of assignment or transfer
of an FTAA. In this situation, such approval and notification are appropriate safeguards,
considering that the new contractor is the subject of a foreign government.

On the other hand, when the transferee of the FTAA happens to be a Filipino corporation, the
need for such safeguard is not critical; hence, the lack of prior approval and notification may not
be deemed fatal as to render the transfer invalid. Besides, it is not as if approval by the
President is entirely absent in this instance. As pointed out by private respondent in its
Memorandum,13 the issue of approval is the subject of one of the cases brought by Lepanto
against Sagittarius in GR No. 162331. That case involved the review of the Decision of the
Court of Appeals dated November 21, 2003 in CA-GR SP No. 74161, which affirmed the DENR
Order dated December 31, 2001 and the Decision of the Office of the President dated July 23,
2002, both approving the assignment of the WMCP FTAA to Sagittarius.

Petitioners also question the sale price and the financial capacity of the transferee. According to
the Deed of Absolute Sale dated January 23, 2001, executed between WMC and Sagittarius,
the price of the WMCP shares was fixed at US$9,875,000, equivalent to P553 million at an
exchange rate of 56:1. Sagittarius had an authorized capital stock of P250 million and a paid up
capital of P60 million. Therefore, at the time of approval of the sale by the DENR, the debt-to-
equity ratio of the transferee was over 9:1 -- hardly ideal for an FTAA contractor, according to
petitioners.

However, private respondents counter that the Deed of Sale specifically provides that the
payment of the purchase price would take place only after Sagittarius' commencement of
commercial production from mining operations, if at all. Consequently, under the circumstances,
we believe it would not be reasonable to conclude, as petitioners did, that the transferee's high
debt-to-equity ratio per se necessarily carried negative implications for the enterprise; and it
would certainly be improper to invalidate the sale on that basis, as petitioners propose.

FTAA Not Void,

Thus Transferrable

To bolster further their claim that the case is not moot, petitioners insist that the FTAA is void
and, hence cannot be transferred; and that its transfer does not operate to cure the
constitutional infirmity that is inherent in it; neither will a change in the circumstances of one of
the parties serve to ratify the void contract.

While the discussion in their Final Memorandum was skimpy, petitioners in their Comment (on
the MR) did ratiocinate that this Court had declared the FTAA to be void because, at the time it
was executed with WMCP, the latter was a fully foreign-owned corporation, in which the former
vested full control and management with respect to the exploration, development and utilization
of mineral resources, contrary to the provisions of paragraph 4 of Section 2 of Article XII of the
Constitution. And since the FTAA was per se void, no valid right could be transferred; neither
could it be ratified, so petitioners conclude.

Petitioners have assumed as fact that which has yet to be established. First and foremost, the
Decision of this Court declaring the FTAA void has not yet become final. That was precisely the
reason the Court still heard Oral Argument in this case. Second, the FTAA does not vest in the
foreign corporation full control and supervision over the exploration, development and utilization
of mineral resources, to the exclusion of the government. This point will be dealt with in greater
detail below; but for now, suffice it to say that a perusal of the FTAA provisions will prove that
the government has effective overall direction and control of the mining operations, including
marketing and product pricing, and that the contractor's work programs and budgets are subject
to its review and approval or disapproval.
As will be detailed later on, the government does not have to micro-manage the mining
operations and dip its hands into the day-to-day management of the enterprise in order to be
considered as having overall control and direction. Besides, for practical and pragmatic reasons,
there is a need for government agencies to delegate certain aspects of the management work to
the contractor. Thus the basis for declaring the FTAA void still has to be revisited, reexamined
and reconsidered.

Petitioners sniff at the citation of Chavez v. Public Estates Authority,14 and Halili v.
CA,15 claiming that the doctrines in these cases are wholly inapplicable to the instant case.

Chavez clearly teaches: "Thus, the Court has ruled consistently that where a Filipino citizen
sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is
corrected by the subsequent sale to a citizen. Similarly, where the alien who buys the land
subsequently acquires Philippine citizenship, the sale is validated since the purpose of the
constitutional ban to limit land ownership to Filipinos has been achieved. In short, the law
disregards the constitutional disqualification of the buyer to hold land if the land is subsequently
transferred to a qualified party, or the buyer himself becomes a qualified party."16

In their Comment, petitioners contend that in Chavez and Halili, the object of the transfer (the
land) was not what was assailed for alleged unconstitutionality. Rather, it was the transaction
that was assailed; hence subsequent compliance with constitutional provisions would cure its
infirmity. In contrast, in the instant case it is the FTAA itself, the object of the transfer, that is
being assailed as invalid and unconstitutional. So, petitioners claim that the subsequent transfer
of a void FTAA to a Filipino corporation would not cure the defect.

Petitioners are confusing themselves. The present Petition has been filed, precisely because
the grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be
gainsaid that anyone would have asserted that the same FTAA was void if it had at the outset
been issued to a Filipino corporation. The FTAA, therefore, is not per se defective or
unconstitutional. It was questioned only because it had been issued to an allegedly non-
qualified, foreign-owned corporation.

We believe that this case is clearly analogous to Halili, in which the land acquired by a non-
Filipino was re-conveyed to a qualified vendee and the original transaction was thereby cured.
Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the
invalidity of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a
Filipino corporation -- can no longer be assailed; the objective of the constitutional provision -- to
keep the exploration, development and utilization of our natural resources in Filipino hands --
has been served.

More accurately speaking, the present situation is one degree better than that obtaining
in Halili, in which the original sale to a non-Filipino was clearly and indisputably violative of the
constitutional prohibition and thus void ab initio. In the present case, the issuance/grant of the
subject FTAA to the then foreign-owned WMCP was not illegal, void or unconstitutional at the
time. The matter had to be brought to court, precisely for adjudication as to whether the FTAA
and the Mining Law had indeed violated the Constitution. Since, up to this point, the decision of
this Court declaring the FTAA void has yet to become final, to all intents and purposes, the
FTAA must be deemed valid and constitutional.17

At bottom, we find completely outlandish petitioners' contention that an FTAA could be entered
into by the government only with a foreign corporation, never with a Filipino enterprise. Indeed,
the nationalistic provisions of the Constitution are all anchored on the protection of Filipino
interests. How petitioners can now argue that foreigners have the exclusive right to FTAAs
totally overturns the entire basis of the Petition -- preference for the Filipino in the exploration,
development and utilization of our natural resources. It does not take deep knowledge of law
and logic to understand that what the Constitution grants to foreigners should be equally
available to Filipinos.

Second Issue:
 Whether the Court Can Still Decide the Case,
Even Assuming It Is Moot

All the protagonists are in agreement that the Court has jurisdiction to decide this controversy,
even assuming it to be moot.

Petitioners stress the following points. First, while a case becomes moot and academic
when "there is no more actual controversy between the parties or no useful purpose can be
served in passing upon the merits,"18 what is at issue in the instant case is not only the validity of
the WMCP FTAA, but also the constitutionality of RA 7942 and its Implementing Rules and
Regulations. Second, the acts of private respondent cannot operate to cure the law of its
alleged unconstitutionality or to divest this Court of its jurisdiction to decide. Third, the
Constitution imposes upon the Supreme Court the duty to declare invalid any law that offends
the Constitution.

Petitioners also argue that no amendatory laws have been passed to make the Mining Act of
1995 conform to constitutional strictures (assuming that, at present, it does not); that public
respondents will continue to implement and enforce the statute until this Court rules otherwise;
and that the said law continues to be the source of legal authority in accepting, processing and
approving numerous applications for mining rights.

Indeed, it appears that as of June 30, 2002, some 43 FTAA applications had been filed with the
Mines and Geosciences Bureau (MGB), with an aggregate area of 2,064,908.65 hectares --
spread over Luzon, the Visayas and Mindanao19 -- applied for. It may be a bit far-fetched to
assert, as petitioners do, that each and every FTAA that was entered into under the provisions
of the Mining Act "invites potential litigation" for as long as the constitutional issues are not
resolved with finality. Nevertheless, we must concede that there exists the distinct possibility
that one or more of the future FTAAs will be the subject of yet another suit grounded on
constitutional issues.

But of equal if not greater significance is the cloud of uncertainty hanging over the mining
industry, which is even now scaring away foreign investments. Attesting to this climate of
anxiety is the fact that the Chamber of Mines of the Philippines saw the urgent need to intervene
in the case and to present its position during the Oral Argument; and that Secretary General
Romulo Neri of the National Economic Development Authority (NEDA) requested this Court to
allow him to speak, during that Oral Argument, on the economic consequences of the Decision
of January 27, 2004.20

We are convinced. We now agree that the Court must recognize the exceptional character of
the situation and the paramount public interest involved, as well as the necessity for a ruling to
put an end to the uncertainties plaguing the mining industry and the affected communities as a
result of doubts cast upon the constitutionality and validity of the Mining Act, the subject FTAA
and future FTAAs, and the need to avert a multiplicity of suits. Paraphrasing Gonzales v.
Commission on Elections,21 it is evident that strong reasons of public policy demand that the
constitutionality issue be resolved now.22

In further support of the immediate resolution of the constitutionality issue, public respondents
cite Acop v. Guingona,23 to the effect that the courts will decide a question -- otherwise moot and
academic -- if it is "capable of repetition, yet evading review."24 Public respondents ask the Court
to avoid a situation in which the constitutionality issue may again arise with respect to another
FTAA, the resolution of which may not be achieved until after it has become too late for our
mining industry to grow out of its infancy. They also recall Salonga v. Cruz Paño,25 in which this
Court declared that "(t)he Court also has the duty to formulate guiding and controlling
constitutional principles, precepts, doctrines or rules. It has the symbolic function of educating
the bench and bar on the extent of protection given by constitutional guarantees. x x x."

The mootness of the case in relation to the WMCP FTAA led the undersigned ponente to state
in his dissent to the Decision that there was no more justiciable controversy and the plea to
nullify the Mining Law has become a virtual petition for declaratory relief.26 The entry of the
Chamber of Mines of the Philippines, Inc., however, has put into focus the seriousness of the
allegations of unconstitutionality of RA 7942 and DAO 96-40 which converts the case to one for
prohibition27 in the enforcement of the said law and regulations.

Indeed, this CMP entry brings to fore that the real issue in this case is whether paragraph 4 of
Section 2 of Article XII of the Constitution is contravened by RA 7942 and DAO 96-40, not
whether it was violated by specific acts implementing RA 7942 and DAO 96-40. "[W]hen an act
of the legislative department is seriously alleged to have infringed the Constitution, settling the
controversy becomes the duty of this Court. By the mere enactment of the questioned law or the
approval of the challenged action, the dispute is said to have ripened into a judicial controversy
even without any other overt act."28 This ruling can be traced from Tañada v. Angara,29 in which
the Court said:

"In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of
the legislative branch is seriously alleged to have infringed the Constitution, it becomes
not only the right but in fact the duty of the judiciary to settle the dispute.

xxxxxxxxx

"As this Court has repeatedly and firmly emphasized in many cases, it will not shirk,
digress from or abandon its sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought before it in appropriate cases,
committed by any officer, agency, instrumentality or department of the government."30

Additionally, the entry of CMP into this case has also effectively forestalled any possible
objections arising from the standing or legal interest of the original parties.

For all the foregoing reasons, we believe that the Court should proceed to a resolution of the
constitutional issues in this case.

Third Issue:

The Proper Interpretation of the Constitutional Phrase

"Agreements Involving Either Technical or Financial Assistance"

The constitutional provision at the nucleus of the controversy is paragraph 4 of Section 2 of

Article XII of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced in
full:

"Sec. 2. All lands of the public domain, waters, 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. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture or production-sharing agreements with Filipino citizens
or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as
may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, beneficial use may be the
measure and limit of the grant.

"The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.

"The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays and lagoons.
 "The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development,
and utilization of minerals, petroleum, and other mineral oils according to the
general terms and conditions provided by law, based on real contributions to the
economic growth and general welfare of the country. In such agreements, the State shall
promote the development and use of local scientific and technical resources.

"The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution."31

No Restriction of Meaning by
a Verba Legis Interpretation

To interpret the foregoing provision, petitioners adamantly assert that the language of the
Constitution should prevail; that the primary method of interpreting it is to seek the ordinary
meaning of the words used in its provisions. They rely on rulings of this Court, such as the
following:

"The fundamental principle in constitutional construction however is that the primary

source from which to ascertain constitutional intent or purpose is the language of the
provision itself. The presumption is that the words in which the constitutional provisions
are couched express the objective sought to be attained. In other words, verba
legis prevails. Only when the meaning of the words used is unclear and equivocal should
resort be made to extraneous aids of construction and interpretation, such as the
proceedings of the Constitutional Commission or Convention to shed light on and
ascertain the true intent or purpose of the provision being construed."32

Very recently, in Francisco v. The House of Representatives,33 this Court indeed had the
occasion to reiterate the well-settled principles of constitutional construction:

"First, verba legis, that is, wherever possible, the words used in the Constitution must be
given their ordinary meaning except where technical terms are employed. x x x.

xxxxxxxxx

"Second, where there is ambiguity, ratio legis est anima. The words of the Constitution
should be interpreted in accordance with the intent of its framers. x x x.

xxxxxxxxx

"Finally, ut magis valeat quam pereat. The Constitution is to be interpreted as a whole."34

For ease of reference and in consonance with verba legis, we reconstruct and stratify the
aforequoted Section 2 as follows:

1. All natural resources are owned by the State. Except for agricultural lands, natural
resources cannot be alienated by the State.

2. The exploration, development and utilization (EDU) of natural resources shall be

under the full control and supervision of the State.

3. The State may undertake these EDU activities through either of the following:

(a) By itself directly and solely

(b) By (i) co-production; (ii) joint venture; or (iii) production sharing agreements
with Filipino citizens or corporations, at least 60 percent of the capital of which is
owned by such citizens
 4. Small-scale utilization of natural resources may be allowed by law in favor of Filipino
citizens.

5. For large-scale EDU of minerals, petroleum and other mineral oils, the President may
enter into "agreements with foreign-owned corporations involving either technical or
financial assistance according to the general terms and conditions provided by law x x
x."

Note that in all the three foregoing mining activities -- exploration, development and utilization --
the State may undertake such EDU activities by itself or in tandem with Filipinos or Filipino
corporations, except in two instances: first, in small-scale utilization of natural resources, which
Filipinos may be allowed by law to undertake; and second, in large-scale EDU of minerals,
petroleum and mineral oils, which may be undertaken by the State via "agreementswith foreign-
owned corporations involving either technical or financial assistance" as provided by law.

Petitioners claim that the phrase "agreements x x x involving either technical or financial
assistance" simply means technical assistance or financial assistance agreements, nothing
more and nothing else. They insist that there is no ambiguity in the phrase, and that a plain
reading of paragraph 4 quoted above leads to the inescapable conclusion that what a foreign-
owned corporation may enter into with the government is merely an agreement
for eitherfinancial or technical assistance only, for the large-scale exploration, development and
utilization of minerals, petroleum and other mineral oils; such a limitation, they argue, excludes
foreign management and operation of a mining enterprise.35

This restrictive interpretation, petitioners believe, is in line with the general policy enunciated by
the Constitution reserving to Filipino citizens and corporations the use and enjoyment of the
country's natural resources. They maintain that this Court's Decision36 of January 27, 2004
correctly declared the WMCP FTAA, along with pertinent provisions of RA 7942, void for
allowing a foreign contractor to have direct and exclusive management of a mining enterprise.
Allowing such a privilege not only runs counter to the "full control and supervision" that the State
is constitutionally mandated to exercise over the exploration, development and utilization of the
country's natural resources; doing so also vests in the foreign company "beneficial ownership"
of our mineral resources. It will be recalled that the Decision of January 27, 2004 zeroed in on
"management or other forms of assistance" or other activities associated with the "service
contracts" of the martial law regime, since "the management or operation of mining activities by
foreign contractors, which is the primary feature of service contracts, was precisely the evil that
the drafters of the 1987 Constitution sought to eradicate."

On the other hand, the intervenor37 and public respondents argue that the FTAA allowed by
paragraph 4 is not merely an agreement for supplying limited and specific financial or technical
services to the State. Rather, such FTAA is a comprehensive agreement for the foreign-owned
corporation's integrated exploration, development and utilization of mineral, petroleum or other
mineral oils on a large-scale basis. The agreement, therefore, authorizes the foreign contractor's
rendition of a whole range of integrated and comprehensive services, ranging from the
discovery to the development, utilization and production of minerals or petroleum products.

We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 could
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 for financial 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."38
Plainly, none of the three connotations convey a sense of exclusivity. 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.

In short, it allows for the possibility that matters, other than those explicitly mentioned, could be
made part of the agreement. Thus, we are now led to the conclusion 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.

Second, 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 anyone's mind about their
true intent. For example, they would have used the sentence foreign corporations
are absolutely prohibited from involvement in the management or operation of mining or
similar ventures or words of similar import. A search for such stringent wording yields negative
results. Thus, we come to the inevitable conclusion that 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.

Deletion of "Service Contracts" to

Avoid Pitfalls of Previous Constitutions,
Not to Ban Service Contracts Per Se

Third, we do not see how a verba legis approach leads to the conclusion that "the management
or operation of mining activities by foreign contractors, which is the primary feature of service
contracts, was precisely the evil that the drafters of the 1987 Constitution sought to
eradicate." Nowhere in the above-quoted Section can be discerned the objective to keep out of
foreign hands the management or operation of mining activities or the plan to eradicate service
contracts as these were understood in the 1973 Constitution. Still, petitioners maintain that the
deletion or omission from the 1987 Constitution of the term "service contracts" found in the 1973
Constitution sufficiently proves the drafters' intent to exclude foreigners from the management of
the affected enterprises.

To our mind, however, such intent cannot be definitively and conclusively established from the
mere failure to carry the same expression or term over to the new Constitution, absent a more
specific, explicit and unequivocal statement to that effect. What petitioners seek (a complete
ban on foreign participation in the management of mining operations, as previously allowed by
the earlier Constitutions) is nothing short of bringing about a momentous sea change in the
economic and developmental policies; and the fundamentally capitalist, free-enterprise
philosophy of our government. We cannot imagine such a radical shift being undertaken by our
government, to the great prejudice of the mining sector in particular and our economy in
general, merely on the basis of the omission of the terms service contract from or the failure to
carry them over to the new Constitution. There has to be a much more definite and even
unarguable basis for such a drastic reversal of policies.

Fourth, a literal and restrictive interpretation of paragraph 4, such as that proposed by

petitioners, suffers from certain internal logical inconsistencies that generate ambiguities in the
understanding of the provision. As the intervenor pointed out, there has never been any
constitutional or statutory provision that reserved to Filipino citizens or corporations, at least 60
percent of which is Filipino-owned, the rendition of financial or technical assistance to
companies engaged in mining or the development of any other natural resource. The taking out
of foreign-currency or peso-denominated loans or any other kind of financial assistance, as well
as the rendition of technical assistance -- whether to the State or to any other entity in the
Philippines -- has never been restricted in favor of Filipino citizens or corporations having a
certain minimum percentage of Filipino equity. Such a restriction would certainly be
preposterous and unnecessary. As a matter of fact, financial, and even technical
assistance, regardless of the nationality of its source, would be welcomed in the mining industry
anytime with open arms, on account of the dearth of local capital and the need to continually
update technological know-how and improve technical skills.

There was therefore no need for a constitutional provision specifically allowing foreign-owned
corporations to render financial or technical assistance, whether in respect of mining or some
other resource development or commercial activity in the Philippines. The last point needs to
be emphasized: if merely financial or technical assistance agreements are allowed, there
would be no need to limit them to large-scale mining operations, as there would be far
greater need for them in the smaller-scale mining activities (and even in non-mining
areas). Obviously, the provision in question was intended to refer to agreements other
than those for mere financial or technical assistance.

In like manner, there would be no need to require the President of the Republic to report to
Congress, if only financial or technical assistance agreements are involved. Such agreements
are in the nature of foreign loans that -- pursuant to Section 20 of Article VII39 of the 1987
Constitution -- the President may contract or guarantee, merely with the prior concurrence of the
Monetary Board. In turn, the Board is required to report to Congress within thirty days from the
end of every quarter of the calendar year, not thirty days after the agreement is entered into.

And if paragraph 4 permits only agreements for loans and other forms of financial, or technical
assistance, what is the point of requiring that they be based on real contributions to the
economic growth and general welfare of the country? For instance, how is one to measure and
assess the "real contributions" to the "economic growth" and "general welfare" of the country
that may ensue from a foreign-currency loan agreement or a technical-assistance agreement
for, say, the refurbishing of an existing power generating plant for a mining operation
somewhere in Mindanao? Such a criterion would make more sense when applied to a major
business investment in a principal sector of the industry.

The conclusion is clear and inescapable -- a verba legis construction shows that paragraph 4 is
not to be understood as one limited only to foreign loans (or other forms of financial support)
and to technical assistance. There is definitely more to it than that. These are provisions
permitting participation by foreign companies; requiring the President's report to
Congress; and using, as yardstick, contributions based on economic growth and general
welfare. These were neither accidentally inserted into the Constitution nor carelessly
cobbled together by the drafters in lip service to shallow nationalism. The provisions
patently have significance and usefulness in a context that allows agreements with foreign
companies to include more than mere financial or technical assistance.

Fifth, it is argued that Section 2 of Article XII authorizes nothing more than a rendition of specific
and limited financial service or technical assistance by a foreign company. This argument begs
the question "To whom or for whom would it be rendered"? or Who is being assisted? If the
answer is "The State," then it necessarily implies that the State itself is the
one directly and solely undertaking the large-scale exploration, development and utilization of a
mineral resource, so it follows that the State must itself bear the liability and cost of repaying the
financing sourced from the foreign lender and/or of paying compensation to the foreign entity
rendering technical assistance.

However, it is of common knowledge, and of judicial notice as well, that the government is and
has for many many years been financially strapped, to the point that even the most essential
services have suffered serious curtailments -- education and health care, for instance, not to
mention judicial services -- have had to make do with inadequate budgetary allocations. Thus,
government has had to resort to build-operate-transfer and similar arrangements with the
private sector, in order to get vital infrastructure projects built without any governmental outlay.

The very recent brouhaha over the gargantuan "fiscal crisis" or "budget deficit" merely confirms
what the ordinary citizen has suspected all along. After the reality check, one will have to admit
the implausibility of a direct undertaking -- by the State itself -- of large-scale exploration,
development and utilization of minerals, petroleum and other mineral oils. Such an undertaking
entails not only humongous capital requirements, but also the attendant risk of never finding and
developing economically viable quantities of minerals, petroleum and other mineral oils.40

It is equally difficult to imagine that such a provision restricting foreign companies to the
rendition of only financial or technical assistance to the government was deliberately crafted by
the drafters of the Constitution, who were all well aware of the capital-intensive and technology-
oriented nature of large-scale mineral or petroleum extraction and the country's deficiency in
precisely those areas.41 To say so would be tantamount to asserting that the provision was
purposely designed to ladle the large-scale development and utilization of mineral, petroleum
and related resources with impossible conditions; and to remain forever and permanently
"reserved" for future generations of Filipinos.

A More Reasonable Look

at the Charter's Plain Language

Sixth, we shall now look closer at the plain language of the Charter and examining the logical
inferences. The drafters chose to emphasize and highlight agreements x x x involving either
technical or financial assistance in relation to foreign corporations' participation in large-scale
EDU. The inclusion of this clause on "technical or financial assistance" recognizes the fact that
foreign business entities and multinational corporations are the ones with the resources and
know-how to provide technical and/or financial assistance of the magnitude and type required
for large-scale exploration, development and utilization of these resources.

The drafters -- whose ranks included many academicians, economists, businessmen, lawyers,
politicians and government officials -- were not unfamiliar with the practices of foreign
corporations and multinationals.

Neither were they so naïve as to believe that these entities would provide "assistance" without
conditionalities or some quid pro quo. Definitely, as business persons well know and as a matter
of judicial notice, this matter is not just a question of signing a promissory note or executing a
technology transfer agreement. Foreign corporations usually require that they be given a say in
the management, for instance, of day-to-day operations of the joint venture. They would
demand the appointment of their own men as, for example, operations managers, technical
experts, quality control heads, internal auditors or comptrollers. Furthermore, they would
probably require seats on the Board of Directors -- all these to ensure the success of the
enterprise and the repayment of the loans and other financial assistance and to make certain
that the funding and the technology they supply would not go to waste. Ultimately, they would
also want to protect their business reputation and bottom lines.42

In short, the drafters will have to be credited with enough pragmatism and savvy to know that
these foreign entities will not enter into such "agreements involving assistance" without requiring
arrangements for the protection of their investments, gains and benefits.

Thus, by specifying such "agreements involving assistance," the drafters necessarily gave
implied assent to everything that these agreements necessarily entailed; or that could
reasonably be deemed necessary to make them tenable and effective, including management
authority with respect to the day-to-day operations of the enterprise and measures for the
protection of the interests of the foreign corporation, PROVIDED THAT Philippine sovereignty
over natural resources and full control over the enterprise undertaking the EDU activities remain
firmly in the State.

Petitioners' Theory Deflated by the

Absence of Closing-Out Rules or Guidelines

Seventh and final point regarding the plain-language approach, one of the practical difficulties
that results from it is the fact that there is nothing by way of transitory provisions that would
serve to confirm the theory that the omission of the term "service contract" from the 1987
Constitution signaled the demise of service contracts.

The framers knew at the time they were deliberating that there were various service contracts
extant and in force and effect, including those in the petroleum industry. Many of these service
contracts were long-term (25 years) and had several more years to run. If they had meant to
ban service contracts altogether, they would have had to provide for the termination or
pretermination of the existing contracts. Accordingly, they would have supplied the specifics and
the when and how of effecting the extinguishment of these existing contracts (or at least the
mechanics for determining them); and of putting in place the means to address the just claims of
the contractors for compensation for their investments, lost opportunities, and so on, if not for
the recovery thereof.

If the framers had intended to put an end to service contracts, they would have at least left
specific instructions to Congress to deal with these closing-out issues, perhaps by way of
general guidelines and a timeline within which to carry them out. The following are some extant
examples of such transitory guidelines set forth in Article XVIII of our Constitution:

"Section 23. Advertising entities affected by paragraph (2), Section 11 of Article XVI of
this Constitution shall have five years from its ratification to comply on a graduated and
proportionate basis with the minimum Filipino ownership requirement therein.

xxxxxxxxx

"Section 25. After the expiration in 1991 of the Agreement between the Republic of the
Philippines and the United States of America concerning military bases, foreign military
bases, troops, or facilities shall not be allowed in the Philippines except under a treaty
duly concurred in by the Senate and, when the Congress so requires, ratified by a
majority of the votes cast by the people in a national referendum held for that purpose,
and recognized as a treaty by the other contracting State.

"Section 26. The authority to issue sequestration or freeze orders under Proclamation
No. 3 dated March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain
operative for not more than eighteen months after the ratification of this Constitution.
However, in the national interest, as certified by the President, the Congress may extend
such period.

A sequestration or freeze order shall be issued only upon showing of a prima facie case.
The order and the list of the sequestered or frozen properties shall forthwith be
registered with the proper court. For orders issued before the ratification of this
Constitution, the corresponding judicial action or proceeding shall be filed within six
months from its ratification. For those issued after such ratification, the judicial action or
proceeding shall be commenced within six months from the issuance thereof.

The sequestration or freeze order is deemed automatically lifted if no judicial action or

proceeding is commenced as herein provided." 43]

It is inconceivable that the drafters of the Constitution would leave such an important matter --
an expression of sovereignty as it were -- indefinitely hanging in the air in a formless and
ineffective state. Indeed, the complete absence of even a general framework only serves to
further deflate petitioners' theory, like a child's balloon losing its air.

Under the circumstances, the logical inconsistencies resulting from petitioners' literal and
purely verba legisapproach to paragraph 4 of Section 2 of Article XII compel a resort to other
aids to interpretation.

Petitioners' Posture Also Negated

by Ratio Legis Et Anima

Thus, in order to resolve the inconsistencies, incongruities and ambiguities encountered and to
supply the deficiencies of the plain-language approach, there is a need for recourse to the
proceedings of the 1986 Constitutional Commission. There is a need for ratio legis et anima.

Service Contracts Not

"Deconstitutionalized"
Pertinent portions of the deliberations of the members of the Constitutional Commission
(ConCom) conclusively show that they discussed agreements involving either technical or
financial assistance in the same breadth as service contracts and used the terms
interchangeably. The following exchange between Commissioner Jamir (sponsor of the
provision) and Commissioner Suarez irrefutably proves that the "agreements involving technical
or financial assistance" were none other than service contracts.

THE PRESIDENT. Commissioner Jamir is recognized. We are still on Section 3.

MR. JAMIR. Yes, Madam President. With respect to the second paragraph of Section 3,
my amendment by substitution reads: THE PRESIDENT MAY ENTER INTO
AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER
TECHNICAL OR FINANCIAL ASSISTANCE FOR LARGE-SCALE EXPLORATION,
DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES ACCORDING TO
THE TERMS AND CONDITIONS PROVIDED BY LAW.

MR. VILLEGAS. The Committee accepts the amendment. Commissioner Suarez will
give the background.

MR. JAMIR. Thank you.

THE PRESIDENT. Commissioner Suarez is recognized.

MR. SUAREZ. Thank you, Madam President.

Will Commissioner Jamir answer a few clarificatory questions?

MR. JAMIR. Yes, Madam President.

MR. SUAREZ. This particular portion of the section has reference to what was
popularly known before as service contracts, among other things, is that correct?

MR. JAMIR. Yes, Madam President.

MR. SUAREZ. As it is formulated, the President may enter into service contracts but
subject to the guidelines that may be promulgated by Congress?

MR. JAMIR. That is correct.

MR. SUAREZ. Therefore, that aspect of negotiation and consummation will fall on the
President, not upon Congress?

MR. JAMIR. That is also correct, Madam President.

MR. SUAREZ. Except that all of these contracts, service or otherwise, must be made
strictly in accordance with guidelines prescribed by Congress?

MR. JAMIR. That is also correct.

MR. SUAREZ. And the Gentleman is thinking in terms of a law that uniformly covers
situations of the same nature?

MR. JAMIR. That is 100 percent correct.

MR. SUAREZ. I thank the Commissioner.

MR. JAMIR. Thank you very much.44

The following exchange leaves no doubt that the commissioners knew exactly what they were
dealing with: service contracts.
THE PRESIDENT. Commissioner Gascon is recognized.

MR. GASCON. Commissioner Jamir had proposed an amendment with regard to

special service contractswhich was accepted by the Committee. Since the Committee
has accepted it, I would like to ask some questions.

THE PRESIDENT. Commissioner Gascon may proceed.

MR. GASCON. As it is proposed now, such service contracts will be entered into by
the President with the guidelines of a general law on service contract to be enacted by
Congress. Is that correct?

MR. VILLEGAS. The Commissioner is right, Madam President.

MR. GASCON. According to the original proposal, if the President were to enter into a
particular agreement, he would need the concurrence of Congress. Now that it has been
changed by the proposal of Commissioner Jamir in that Congress will set the general
law to which the President shall comply, the President will, therefore, not need the
concurrence of Congress every time he enters into service contracts. Is that correct?

MR. VILLEGAS. That is right.

MR. GASCON. The proposed amendment of Commissioner Jamir is in indirect contrast

to my proposed amendment, so I would like to object and present my proposed
amendment to the body.

xxxxxxxxx

MR. GASCON. Yes, it will be up to the body.

I feel that the general law to be set by Congress as regard service contract
agreements which the President will enter into might be too general or since we do not
know the content yet of such a law, it might be that certain agreements will be
detrimental to the interest of the Filipinos. This is in direct contrast to my proposal which
provides that there be effective constraints in the implementation of service contracts.

So instead of a general law to be passed by Congress to serve as a guideline to the

President when entering into service contract agreements, I propose that
every service contract entered into by the President would need the concurrence of
Congress, so as to assure the Filipinos of their interests with regard to the issue in
Section 3 on all lands of the public domain. My alternative amendment, which we will
discuss later, reads: THAT THE PRESIDENT SHALL ENTER INTO SUCH
AGREEMENTS ONLY WITH THE CONCURRENCE OF TWO-THIRDS VOTE OF ALL
THE MEMBERS OF CONGRESS SITTING SEPARATELY.

xxxxxxxxx

MR. BENGZON. The reason we made that shift is that we realized the original proposal
could breed corruption. By the way, this is not just confined to service contracts but
also to financial assistance. If we are going to make every single contract subject to
the concurrence of Congress – which, according to the Commissioner's amendment is
the concurrence of two-thirds of Congress voting separately – then (1) there is a very
great chance that each contract will be different from another; and (2) there is a great
temptation that it would breed corruption because of the great lobbying that is going to
happen. And we do not want to subject our legislature to that.

Now, to answer the Commissioner's apprehension, by "general law," we do not mean

statements of motherhood. Congress can build all the restrictions that it wishes into that
general law so that every contract entered into by the President under that specific area
will have to be uniform. The President has no choice but to follow all the guidelines that
will be provided by law.
 MR. GASCON. But my basic problem is that we do not know as of yet the contents of
such a general law as to how much constraints there will be in it. And to my mind,
although the Committee's contention that the regular concurrence from Congress would
subject Congress to extensive lobbying, I think that is a risk we will have to take since
Congress is a body of representatives of the people whose membership will be changing
regularly as there will be changing circumstances every time certain agreements are
made. It would be best then to keep in tab and attuned to the interest of the Filipino
people, whenever the President enters into any agreement with regard to such an
important matter as technical or financial assistance for large-scale exploration,
development and utilization of natural resources or service contracts, the people's
elected representatives should be on top of it.

xxxxxxxxx

MR. OPLE. Madam President, we do not need to suspend the session. If Commissioner
Gascon needs a few minutes, I can fill up the remaining time while he completes his
proposed amendment. I just wanted to ask Commissioner Jamir whether he would
entertain a minor amendment to his amendment, and it reads as follows: THE
PRESIDENT SHALL SUBSEQUENTLY NOTIFY CONGRESS OF EVERY SERVICE
CONTRACT ENTERED INTO IN ACCORDANCE WITH THE GENERAL LAW. I think
the reason is, if I may state it briefly, as Commissioner Bengzon said, Congress can
always change the general law later on to conform to new perceptions of standards that
should be built into service contracts. But the only way Congress can do this is if there
were a notification requirement from the Office of the President that such service
contracts had been entered into, subject then to the scrutiny of the Members of
Congress. This pertains to a situation where the service contracts are already entered
into, and all that this amendment seeks is the reporting requirement from the Office of
the President. Will Commissioner Jamir entertain that?

MR. JAMIR. I will gladly do so, if it is still within my power.

MR. VILLEGAS. Yes, the Committee accepts the amendment.

xxxxxxxxx

SR. TAN. Madam President, may I ask a question?

THE PRESIDENT. Commissioner Tan is recognized.

SR. TAN. Am I correct in thinking that the only difference between these future service
contracts and the past service contracts under Mr. Marcos is the general law to be
enacted by the legislature and the notification of Congress by the President? That is the
only difference, is it not?

MR. VILLEGAS. That is right.

SR. TAN. So those are the safeguards.

MR. VILLEGAS. Yes. There was no law at all governing service contracts before.

SR. TAN. Thank you, Madam President.45

More Than Mere Financial

and Technical Assistance
Entailed by the Agreements

The clear words of Commissioner Jose N. Nolledo quoted below explicitly and eloquently
demonstrate that the drafters knew that the agreements with foreign corporations were going to
entail not mere technical or financial assistance but, rather, foreign investment in and
management of an enterprise involved in large-scale exploration, development and utilization of
minerals, petroleum, and other mineral oils.
 THE PRESIDENT. Commissioner Nolledo is recognized.

MR. NOLLEDO. Madam President, I have the permission of the Acting Floor Leader to
speak for only two minutes in favor of the amendment of Commissioner Gascon.

THE PRESIDENT. Commissioner Nolledo may proceed.

MR. NOLLEDO. With due respect to the members of the Committee and Commissioner
Jamir, I am in favor of the objection of Commissioner Gascon.

Madam President, I was one of those who refused to sign the 1973 Constitution,
and one of the reasons is that there were many provisions in the Transitory
Provisions therein that favored aliens. I was shocked when I read a provision
authorizing service contracts while we, in this Constitutional Commission,
provided for Filipino control of the economy. We are, therefore, providing for
exceptional instances where aliens may circumvent Filipino control of our
economy. And one way of circumventing the rule in favor of Filipino control of the
economy is to recognize service contracts.

As far as I am concerned, if I should have my own way, I am for the complete

deletion of this provision. However, we are presenting a compromise in the
sense that we are requiring a two-thirds vote of all the Members of Congress as
a safeguard. I think we should not mistrust the future Members of Congress by
saying that the purpose of this provision is to avoid corruption. We cannot claim
that they are less patriotic than we are. I think the Members of this Commission
should know that entering into service contracts is an exception to the rule on
protection of natural resources for the interest of the nation, and therefore, being
an exception it should be subject, whenever possible, to stringent rules. It seems
to me that we are liberalizing the rules in favor of aliens.

I say these things with a heavy heart, Madam President. I do not claim to be a
nationalist, but I love my country. Although we need investments, we must
adopt safeguards that are truly reflective of the sentiments of the people and
not mere cosmetic safeguards as they now appear in the Jamir amendment.
(Applause)

Thank you, Madam President.46

Another excerpt, featuring then Commissioner (now Chief Justice) Hilario G. Davide Jr.,
indicates the limitations of the scope of such service contracts -- they are valid only in regard to
minerals, petroleum and other mineral oils, not to all natural resources.

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. Thank you, Madam President. This is an amendment to the Jamir
amendment and also to the Ople amendment. I propose to delete "NATURAL
RESOURCES" and substitute it with the following: MINERALS, PETROLEUM AND
OTHER MINERAL OILS. On the Ople amendment, I propose to add: THE
NOTIFICATION TO CONGRESS SHALL BE WITHIN THIRTY DAYS FROM THE
EXECUTION OF THE SERVICE CONTRACT.

THE PRESIDENT. What does the Committee say with respect to the first amendment in
lieu of "NATURAL RESOURCES"?

MR. VILLEGAS. Could Commissioner Davide explain that?

MR. DAVIDE. Madam President, with the use of "NATURAL RESOURCES" here, it
would necessarily include all lands of the public domain, our marine resources, forests,
parks and so on. So we would like to limit the scope of these service contracts to those
areas really where these may be needed, the exploitation, development and exploration
of minerals, petroleum and other mineral oils. And so, we believe that we should really, if
 we want to grant service contracts at all, limit the same to only those particular areas
where Filipino capital may not be sufficient, and not to all natural resources.

MR. SUAREZ. Just a point of clarification again, Madam President. When the
Commissioner made those enumerations and specifications, I suppose he deliberately
did not include "agricultural land"?

MR. DAVIDE. That is precisely the reason we have to enumerate what these resources
are into which service contracts may enter. So, beyond the reach of any service
contract will be lands of the public domain, timberlands, forests, marine resources,
fauna and flora, wildlife and national parks.47

After the Jamir amendment was voted upon and approved by a vote of 21 to 10 with 2
abstentions, Commissioner Davide made the following statement, which is very relevant to our
quest:

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals,

petroleum and mineral oils. The Commission has just approved the possible foreign
entry into the development, exploration and utilization of these minerals, petroleum and
other mineral oils by virtue of the Jamir amendment. I voted in favor of the Jamir
amendment because it will eventually give way to vesting in exclusively Filipino citizens
and corporations wholly owned by Filipino citizens the right to utilize the other natural
resources. This means that as a matter of policy, natural resources should be utilized
and exploited only by Filipino citizens or corporations wholly owned by such citizens. But
by virtue of the Jamir amendment, since we feel that Filipino capital may not be enough
for the development and utilization of minerals, petroleum and other mineral oils, the
President can enter into service contracts with foreign corporations precisely for the
development and utilization of such resources. And so, there is nothing to fear that we
will stagnate in the development of minerals, petroleum and mineral oils because we
now allow service contracts. x x x."48

The foregoing are mere fragments of the framers' lengthy discussions of the provision dealing
with agreements x x x involving either technical or financial assistance, which ultimately became
paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any doubt, the members of
the ConCom were actually debating about the martial-law-era service contracts for which they
were crafting appropriate safeguards.

In the voting that led to the approval of Article XII by the ConCom, the explanations given by
Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this provision
on account of their objections to the "constitutionalization" of the "service contract" concept.

Mr. Gascon said, "I felt that if we would constitutionalize any provision on service contracts,
this should always be with the concurrence of Congress and not guided only by a general law to
be promulgated by Congress."49 Mr. Garcia explained, "Service contracts are given
constitutional legitimization in Sec. 3, even when they have been proven to be inimical to the
interests of the nation, providing, as they do, the legal loophole for the exploitation of our natural
resources for the benefit of foreign interests."50 Likewise, Mr. Tadeo cited inter alia the fact that
service contracts continued to subsist, enabling foreign interests to benefit from our natural
resources.51 It was hardly likely that these gentlemen would have objected so strenuously,
had the provision called for mere technical or financial assistance and nothing more.

The deliberations of the ConCom and some commissioners' explanation of their votes leave no
room for doubt that the service contract concept precisely underpinned the commissioners'
understanding of the "agreements involving either technical or financial assistance."

Summation of the
Concom Deliberations
At this point, we sum up the matters established, based on a careful reading of the ConCom
deliberations, as follows:

· In their deliberations on what was to become paragraph 4, the framers used the
term service contracts in referring to agreements x x x involving either technical or
financial assistance.

· They spoke of service contracts as the concept was understood in the 1973
Constitution.

· It was obvious from their discussions that they were not about to ban or
eradicate service contracts.

· Instead, they were plainly crafting provisions to put in place safeguards that would
eliminate or minimize the abuses prevalent during the marital law regime. In brief, they
were going to permit service contracts with foreign corporations as contractors, but with
safety measures to prevent abuses, as an exception to the general norm established in
the first paragraph of Section 2 of Article XII. This provision reserves or limits to Filipino
citizens -- and corporations at least 60 percent of which is owned by such citizens -- the
exploration, development and utilization of natural resources.

· This provision was prompted by the perceived insufficiency of Filipino capital and the
felt need for foreign investments in the EDU of minerals and petroleum resources.

· The framers for the most part debated about the sort of safeguards that would be
considered adequate and reasonable. But some of them, having more "radical" leanings,
wanted to ban service contracts altogether; for them, the provision would permit aliens to
exploit and benefit from the nation's natural resources, which they felt should be
reserved only for Filipinos.

· In the explanation of their votes, the individual commissioners were heard by the entire
body. They sounded off their individual opinions, openly enunciated their philosophies,
and supported or attacked the provisions with fervor. Everyone's viewpoint was heard.

· In the final voting, the Article on the National Economy and Patrimony -- including
paragraph 4 allowing service contracts with foreign corporations as an exception to the
general norm in paragraph 1 of Section 2 of the same article -- was resoundingly
approved by a vote of 32 to 7, with 2 abstentions.

Agreements Involving Technical

or Financial Assistance Are

Service Contracts With Safeguards

From the foregoing, we are impelled to conclude that the phrase agreements involving either
technical or financial assistance, referred to in paragraph 4, are in fact service contracts. But
unlike those of the 1973 variety, the new ones are between foreign corporations acting as
contractors on the one hand; and on the other, the government as principal or "owner" of the
works. In the new service contracts, the foreign contractors provide capital, technology and
technical know-how, and managerial expertise in the creation and operation of large-scale
mining/extractive enterprises; and the government, through its agencies (DENR, MGB), actively
exercises control and supervision over the entire operation.

Such service contracts may be entered into only with respect to minerals, petroleum and other
mineral oils. The grant thereof is subject to several safeguards, among which are these
requirements:

(1) The service contract shall be crafted in accordance with a general law that will set
standard or uniform terms, conditions and requirements, presumably to attain a certain
 uniformity in provisions and avoid the possible insertion of terms disadvantageous to the
country.

(2) The President shall be the signatory for the government because, supposedly before
an agreement is presented to the President for signature, it will have been vetted several
times over at different levels to ensure that it conforms to law and can withstand public
scrutiny.

(3) Within thirty days of the executed agreement, the President shall report it to
Congress to give that branch of government an opportunity to look over the agreement
and interpose timely objections, if any.

Use of the Record of the

ConCom to Ascertain Intent

At this juncture, we shall address, rather than gloss over, the use of the "framers' intent"
approach, and the criticism hurled by petitioners who quote a ruling of this Court:

"While it is permissible in this jurisdiction to consult the debates and proceedings of the
constitutional convention in order to arrive at the reason and purpose of the resulting
Constitution, resort thereto may be had only when other guides fail as said proceedings
are powerless to vary the terms of the Constitution when the meaning is clear. Debates
in the constitutional convention 'are of value as showing the views of the individual
members, and as indicating the reason for their votes, but they give us no light as to the
views of the large majority who did not talk, much less the mass of our fellow citizens
whose votes at the polls gave that instrument the force of fundamental law. We think it
safer to construe the constitution from what appears upon its face.' The proper
interpretation therefore depends more on how it was understood by the people adopting
it than in the framers' understanding thereof."52

The notion that the deliberations reflect only the views of those members who spoke out and not
the views of the majority who remained silent should be clarified. We must never forget that
those who spoke out were heard by those who remained silent and did not react. If the latter
were silent because they happened not to be present at the time, they are presumed to have
read the minutes and kept abreast of the deliberations. By remaining silent, they are deemed to
have signified their assent to and/or conformity with at least some of the views propounded or
their lack of objections thereto. It was incumbent upon them, as representatives of the entire
Filipino people, to follow the deliberations closely and to speak their minds on the matter if they
did not see eye to eye with the proponents of the draft provisions.

In any event, each and every one of the commissioners had the opportunity to speak out and to
vote on the matter. Moreover, the individual explanations of votes are on record, and they show
where each delegate stood on the issues. In sum, we cannot completely denigrate the value
or usefulness of the record of the ConCom, simply because certain members chose not
to speak out.

It is contended that the deliberations therein did not necessarily reflect the thinking of the voting
population that participated in the referendum and ratified the Constitution. Verily, whether we
like it or not, it is a bit too much to assume that every one of those who voted to ratify the
proposed Charter did so only after carefully reading and mulling over it, provision by provision.

Likewise, it appears rather extravagant to assume that every one of those who did in fact bother
to read the draft Charter actually understood the import of its provisions, much less analyzed it
vis-à-vis the previous Constitutions. We believe that in reality, a good percentage of those who
voted in favor of it did so more out of faith and trust. For them, it was the product of the hard
work and careful deliberation of a group of intelligent, dedicated and trustworthy men and
women of integrity and conviction, whose love of country and fidelity to duty could not be
questioned.
In short, a large proportion of the voters voted "yes" because the drafters, or a majority of them,
endorsed the proposed Constitution. What this fact translates to is the inescapable conclusion
that many of the voters in the referendum did not form their own isolated judgment about the
draft Charter, much less about particular provisions therein. They only relied or fell back and
acted upon the favorable endorsement or recommendation of the framers as a group. In other
words, by voting yes, they may be deemed to have signified their voluntary adoption of the
understanding and interpretation of the delegates with respect to the proposed Charter and its
particular provisions. "If it's good enough for them, it's good enough for me;" or, in many
instances, "If it's good enough for President Cory Aquino, it's good enough for me."

And even for those who voted based on their own individual assessment of the proposed
Charter, there is no evidence available to indicate that their assessment or understanding of its
provisions was in fact different from that of the drafters. This unwritten assumption seems to be
petitioners' as well. For all we know, this segment of voters must have read and understood the
provisions of the Constitution in the same way the framers had, an assumption that would
account for the favorable votes.

Fundamentally speaking, in the process of rewriting the Charter, the members of the ConCom
as a group were supposed to represent the entire Filipino people. Thus, we cannot but regard
their views as being very much indicative of the thinking of the people with respect to the
matters deliberated upon and to the Charter as a whole.

It is therefore reasonable and unavoidable to make the following conclusion, based on

the above arguments. As written by the framers and ratified and adopted by the people,
the Constitution allows the continued use of service contracts with foreign corporations -
- as contractors who would invest in and operate and manage extractive enterprises,
subject to the full control and supervision of the State -- sans the abuses of the past
regime. The purpose is clear: to develop and utilize our mineral, petroleum and other
resources on a large scale for the immediate and tangible benefit of the Filipino people.

In view of the foregoing discussion, we should reverse the Decision of January 27, 2004, and in
fact now hold a view different from that of the Decision, which had these findings: (a) paragraph
4 of Section 2 of Article XII limits foreign involvement in the local mining industry to agreements
strictly for either financial or technical assistance only; (b) the same paragraph precludes
agreements that grant to foreign corporations the management of local mining operations, as
such agreements are purportedly in the nature of service contracts as these were understood
under the 1973 Constitution; (c) these service contracts were supposedly "de-constitutionalized"
and proscribed by the omission of the term service contracts from the 1987 Constitution; (d)
since the WMCP FTAA contains provisions permitting the foreign contractor to manage the
concern, the said FTAA is invalid for being a prohibited service contract; and (e) provisions of
RA 7942 and DAO 96-40, which likewise grant managerial authority to the foreign contractor,
are also invalid and unconstitutional.

Ultimate Test: State's "Control"

Determinative of Constitutionality

But we are not yet at the end of our quest. Far from it. It seems that we are confronted with a
possible collision of constitutional provisions. On the one hand, paragraph 1 of Section 2 of
Article XII explicitly mandates the State to exercise "full control and supervision" over the
exploration, development and utilization of natural resources. On the other hand, paragraph 4
permits safeguarded service contracts with foreign contractors. Normally, pursuant thereto, the
contractors exercise management prerogatives over the mining operations and the enterprise
as a whole. There is thus a legitimate ground to be concerned that either the State's full control
and supervision may rule out any exercise of management authority by the foreign contractor;
or, the other way around, allowing the foreign contractor full management prerogatives may
ultimately negate the State's full control and supervision.

Ut Magis Valeat
Quam Pereat
Under the third principle of constitutional construction laid down in Francisco -- 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. Before any further discussion, we must stress the
primacy and supremacy of the principle of sovereignty and State control and supervision over all
aspects of exploration, development and utilization of the country's natural resources, as
mandated in the first paragraph of Section 2 of Article XII.

But in the next breadth we have to point out that "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 nation's development. This scenario renders paragraph 4 inoperative and
useless. And as respondents have correctly pointed out, the government does not have to
micro-manage 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 control53 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.

On the resolution of these questions will depend the validity and constitutionality of certain
provisions of the Philippine Mining Act of 1995 (RA 7942) and its Implementing Rules and
Regulations (DAO 96-40), as well as the WMCP FTAA.

Indeed, petitioners charge54 that RA 7942, as well as its Implementing Rules and Regulations,
makes it possible for FTAA contracts to cede full control and management of mining enterprises
over to fully foreign-owned corporations, with the result that the State is allegedly reduced to a
passive regulator dependent on submitted plans and reports, with weak review and audit
powers. The State does not supposedly act as the owner of the natural resources for and on
behalf of the Filipino people; it practically has little effective say in the decisions made by the
enterprise. Petitioners then conclude that the law, the implementing regulations, and the WMCP
FTAA cede "beneficial ownership" of the mineral resources to the foreign contractor.

A careful scrutiny of the provisions of RA 7942 and its Implementing Rules belies petitioners'
claims. Paraphrasing the Constitution, Section 4 of the statute clearly affirms the State's control
thus:

"Sec. 4. Ownership of Mineral Resources. – Mineral resources are owned by the State
and the exploration, development, utilization and processing thereof shall be under its
 full control and supervision. The State may directly undertake such activities or it may
enter into mineral agreements with contractors.

"The State shall recognize and protect the rights of the indigenous cultural communities
to their ancestral lands as provided for by the Constitution."

The aforequoted provision is substantively reiterated in Section 2 of DAO 96-40 as follows:

"Sec. 2. Declaration of Policy. All mineral resources in public and private lands within the
territory and exclusive economic zone of the Republic of the Philippines are owned by
the State. It shall be the responsibility of the State to promote their rational exploration,
development, utilization and conservation through the combined efforts of the
Government and private sector in order to enhance national growth in a way that
effectively safeguards the environment and protects the rights of affected communities."

Sufficient Control Over Mining

Operations Vested in the State
by RA 7942 and DAO 96-40

RA 7942 provides for the State's 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 DENR's power of over-all supervision and periodic
review for "the conservation, management, development and proper use of the State's
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
government's 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 contractor's 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.
Once these plans and reports are approved, the contractor is bound to comply with its
commitments therein. Figures for mineral production and sales are regularly monitored and
subjected to government review, in order to ensure that the products and by-products are
disposed of at the best prices possible; even copies of sales agreements have to be submitted
to and registered with MGB. And the contractor is mandated to open its books of accounts and
records for scrutiny, so as to enable the State to determine if the government share has been
fully paid.

The State may likewise compel the contractor's compliance with mandatory requirements on
mine safety, health and environmental protection, and the use of anti-pollution technology and
facilities. Moreover, the contractor is also obligated to assist in the development of the mining
community and to pay royalties to the indigenous peoples concerned.

Cancellation of the FTAA may be the penalty for violation of any of its terms and conditions
and/or noncompliance with statutes or regulations. This general, all-around, multipurpose
sanction is no trifling matter, especially to a contractor who may have yet to recover the tens or
hundreds of millions of dollars sunk into a mining project.

Overall, considering the provisions of the statute and the regulations just discussed, we believe
that the State definitely possesses the means by which it can have the ultimate word in the
operation of the enterprise, set directions and objectives, and detect deviations and
noncompliance by the contractor; likewise, it has the capability to enforce compliance and to
impose sanctions, should the occasion therefor arise.

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.

Section 3(aq) of RA 7942

Not Unconstitutional

An objection has been expressed that Section 3(aq)55 of RA 7942 -- which allows a foreign
contractor to apply for and hold an exploration permit -- is unconstitutional. The reasoning is that
Section 2 of Article XII of the Constitution does not allow foreign-owned corporations to
undertake mining operations directly. They may act only as contractors of the State under an
FTAA; and the State, as the party directly undertaking exploitation of its natural resources, must
hold through the government all exploration permits and similar authorizations. Hence, Section
3(aq), in permitting foreign-owned corporations to hold exploration permits, is unconstitutional.

The objection, however, is not well-founded. While the Constitution mandates the State to
exercise full control and supervision over the exploitation of mineral resources, nowhere does it
require the government to hold all exploration permits and similar authorizations. In fact, there is
no prohibition at all against foreign or local corporations or contractors holding exploration
permits. The reason is not hard to see.

Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified person

the right to conduct exploration for all minerals in specified areas. Such a permit does not
amount to an authorization to extract and carry off the mineral resources that may be
discovered. This phase involves nothing but expenditures for exploring the contract area and
locating the mineral bodies. As no extraction is involved, there are no revenues or incomes to
speak of. In short, the exploration permit is an authorization for the grantee to spend its own
funds on exploration programs that are pre-approved by the government, without any right to
recover anything should no minerals in commercial quantities be discovered. The State risks
nothing and loses nothing by granting these permits to local or foreign firms; in fact, it stands to
gain in the form of data generated by the exploration activities.

Pursuant to Section 24 of RA 7942, an exploration permit grantee who determines the

commercial viability of a mining area may, within the term of the permit, file with the MGB a
declaration of mining project feasibility accompanied by a work program for development. The
approval of the mining project feasibility and compliance with other requirements of RA 7942
vests in the grantee the exclusive right to an MPSA or any other mineral agreement, or to an
FTAA.

Thus, the permit grantee may apply for an MPSA, a joint venture agreement, a co-production
agreement, or an FTAA over the permit area, and the application shall be approved if the permit
grantee meets the necessary qualifications and the terms and conditions of any such
agreement. Therefore, the contractor will be in a position to extract minerals and earn revenues
only when the MPSA or another mineral agreement, or an FTAA, is granted. At that point, the
contractor's rights and obligations will be covered by an FTAA or a mineral agreement.

But prior to the issuance of such FTAA or mineral agreement, the exploration permit grantee (or
prospective contractor) cannot yet be deemed to have entered into any contract or agreement
with the State, and the grantee would definitely need to have some document or instrument as
evidence of its right to conduct exploration works within the specified area. This need is met by
the exploration permit issued pursuant to Sections 3(aq), 20 and 23 of RA 7942.

In brief, the exploration permit serves a practical and legitimate purpose in that it
protects the interests and preserves the rights of the exploration permit grantee (the
would-be contractor) -- foreign or local -- during the period of time that it is spending
heavily on exploration works, without yet being able to earn revenues to recoup any of
its investments and expenditures. Minus this permit and the protection it affords, the
exploration works and expenditures may end up benefiting only claim-jumpers. Such a
possibility tends to discourage investors and contractors. Thus, Section 3(aq) of RA 7942 may
not be deemed unconstitutional.

The Terms of the WMCP FTAA

A Deference to State Control

A perusal of the WMCP FTAA also reveals a slew of stipulations providing for State control and
supervision:

1. The contractor is obligated to account for the value of production and sale of minerals
(Clause 1.4).

2. The contractor's work program, activities and budgets must be approved by/on behalf
of the State (Clause 2.1).

3. The DENR secretary has the power to extend the exploration period (Clause 3.2-a).

4. Approval by the State is necessary for incorporating lands into the FTAA contract area
(Clause 4.3-c).

5. The Bureau of Forest Development is vested with discretion in regard to approving the
inclusion of forest reserves as part of the FTAA contract area (Clause 4.5).

6. The contractor is obliged to relinquish periodically parts of the contract area not
needed for exploration and development (Clause 4.6).

7. A Declaration of Mining Feasibility must be submitted for approval by the State

(Clause 4.6-b).

8. The contractor is obligated to report to the State its exploration activities (Clause 4.9).

9. The contractor is required to obtain State approval of its work programs for the
succeeding two-year periods, containing the proposed work activities and expenditures
budget related to exploration (Clause 5.1).

10. The contractor is required to obtain State approval for its proposed expenditures for
exploration activities (Clause 5.2).
 11. The contractor is required to submit an annual report on geological, geophysical,
geochemical and other information relating to its explorations within the FTAA area
(Clause 5.3-a).

12. The contractor is to submit within six months after expiration of exploration period a
final report on all its findings in the contract area (Clause 5.3-b).

13. The contractor, after conducting feasibility studies, shall submit a declaration of
mining feasibility, along with a description of the area to be developed and mined, a
description of the proposed mining operations and the technology to be employed, and a
proposed work program for the development phase, for approval by the DENR secretary
(Clause 5.4).

14. The contractor is obliged to complete the development of the mine, including
construction of the production facilities, within the period stated in the approved work
program (Clause 6.1).

15. The contractor is obligated to submit for approval of the DENR secretary a work
program covering each period of three fiscal years (Clause 6.2).

16. The contractor is to submit reports to the DENR secretary on the production, ore
reserves, work accomplished and work in progress, profile of its work force and
management staff, and other technical information (Clause 6.3).

17. Any expansions, modifications, improvements and replacements of mining facilities

shall be subject to the approval of the secretary (Clause 6.4).

18. The State has control with respect to the amount of funds that the contractor may
borrow within the Philippines (Clause 7.2).

19. The State has supervisory power with respect to technical, financial and marketing
issues (Clause 10.1-a).

20. The contractor is required to ensure 60 percent Filipino equity in the contractor,
within ten years of recovering specified expenditures, unless not so required by
subsequent legislation (Clause 10.1).

21. The State has the right to terminate the FTAA for the contractor's unremedied
substantial breach thereof (Clause 13.2);

22. The State's approval is needed for any assignment of the FTAA by the contractor to
an entity other than an affiliate (Clause 14.1).

We should elaborate a little on the work programs and budgets, and what they mean with
respect to the State's ability to exercise full control and effective supervision over the enterprise.
For instance, throughout the initial five-year exploration and feasibility phase of the project, the
contractor is mandated by Clause 5.1 of the WMCP FTAA to submit a series of work programs
(copy furnished the director of MGB) to the DENR secretary for approval. The programs will
detail the contractor's proposed exploration activities and budget covering each subsequent
period of two fiscal years.

In other words, the concerned government officials will be informed beforehand of the proposed
exploration activities and expenditures of the contractor for each succeeding two-year period,
with the right to approve/disapprove them or require changes or adjustments therein if deemed
necessary.

Likewise, under Clause 5.2(a), the amount that the contractor was supposed to spend for
exploration activities during the first contract year of the exploration period was fixed at not less
than P24 million; and then for the succeeding years, the amount shall be as agreed between the
DENR secretary and the contractor prior to the commencement of each subsequent fiscal year.
If no such agreement is arrived upon, the previous year's expenditure commitment shall apply.
This provision alone grants the government through the DENR secretary a very big say in the
exploration phase of the project. This fact is not something to be taken lightly, considering that
the government has absolutely no contribution to the exploration expenditures or work activities
and yet is given veto power over such a critical aspect of the project. We cannot but construe as
very significant such a degree of control over the project and, resultantly, over the mining
enterprise itself.

Following its exploration activities or feasibility studies, if the contractor believes that any part of
the contract area is likely to contain an economic mineral resource, it shall submit to the DENR
secretary a declaration of mining feasibility (per Clause 5.4 of the FTAA), together with a
technical description of the area delineated for development and production, a description of the
proposed mining operations including the technology to be used, a work program for
development, an environmental impact statement, and a description of the contributions to the
economic and general welfare of the country to be generated by the mining operations
(pursuant to Clause 5.5).

The work program for development is subject to the approval of the DENR secretary. Upon its
approval, the contractor must comply with it and complete the development of the mine,
including the construction of production facilities and installation of machinery and equipment,
within the period provided in the approved work program for development (per Clause 6.1).

Thus, notably, the development phase of the project is likewise subject to the control and
supervision of the government. It cannot be emphasized enough that the proper and timely
construction and deployment of the production facilities and the development of the mine are of
pivotal significance to the success of the mining venture. Any missteps here will potentially be
very costly to remedy. Hence, the submission of the work program for development to the
DENR secretary for approval is particularly noteworthy, considering that so many millions of
dollars worth of investments -- courtesy of the contractor -- are made to depend on the State's
consideration and action.

Throughout the operating period, the contractor is required to submit to the DENR secretary for
approval, copy furnished the director of MGB, work programs covering each period of three
fiscal years (per Clause 6.2). During the same period (per Clause 6.3), the contractor is
mandated to submit various quarterly and annual reports to the DENR secretary, copy furnished
the director of MGB, on the tonnages of production in terms of ores and concentrates, with
corresponding grades, values and destinations; reports of sales; total ore reserves, total
tonnage of ores, work accomplished and work in progress (installations and facilities related to
mining operations), investments made or committed, and so on and so forth.

Under Section VIII, during the period of mining operations, the contractor is also required to
submit to the DENR secretary (copy furnished the director of MGB) the work program and
corresponding budget for the contract area, describing the mining operations that are proposed
to be carried out during the period covered. The secretary is, of course, entitled to grant or deny
approval of any work program or budget and/or propose revisions thereto. Once the
program/budget has been approved, the contractor shall comply therewith.

In sum, the above provisions of the WMCP FTAA taken together, far from constituting a
surrender of control and a grant of beneficial ownership of mineral resources to the contractor in
question, bestow upon the State more than adequate control and supervision over the
activities of the contractor and the enterprise.

No Surrender of Control
Under the WMCP FTAA

Petitioners, however, take aim at Clause 8.2, 8.3, and 8.5 of the WMCP FTAA which, they say,
amount to a relinquishment of control by the State, since it "cannot truly impose its own
discretion" in respect of the submitted work programs.

"8.2. The Secretary shall be deemed to have approved any Work Programme or Budget
or variation thereofsubmitted by the Contractor unless within sixty (60) days after
submission by the Contractor the Secretary gives notice declining such approval or
 proposing a revision of certain features and specifying its reasons therefor ('the
Rejection Notice').

8.3. If the Secretary gives a Rejection Notice, the Parties shall promptly meet and
endeavor to agree on amendments to the Work Programme or Budget. If the Secretary
and the Contractor fail to agree on the proposed revision within 30 days from delivery of
the Rejection Notice then the Work Programme or Budget or variation thereof proposed
by the Contractor shall be deemed approved, so as not to unnecessarily delay the
performance of the Agreement.

8.4. x x x x x x x x x

8.5. So far as is practicable, the Contractor shall comply with any approved Work
Programme and Budget. It is recognized by the Secretary and the Contractor that the
details of any Work Programmes or Budgets may require changes in the light of
changing circumstances. The Contractor may make such changes without approval of
the Secretary provided they do not change the general objective of any Work
Programme, nor entail a downward variance of more than twenty per centum
(20percent) of the relevant Budget. All other variations to an approved Work Programme
or Budget shall be submitted for approval of the Secretary."

From the provisions quoted above, petitioners generalize by asserting that the government does
not participate in making critical decisions regarding the operations of the mining firm.
Furthermore, while the State can require the submission of work programs and budgets, the
decision of the contractor will still prevail, if the parties have a difference of opinion with regard
to matters affecting operations and management.

We hold, however, that the foregoing provisions do not manifest a relinquishment of control. For
instance, Clause 8.2 merely provides a mechanism for preventing the business or mining
operations from grinding to a complete halt as a result of possibly over-long and unjustified
delays in the government's handling, processing and approval of submitted work programs and
budgets. Anyway, the provision does give the DENR secretary more than sufficient time (60
days) to react to submitted work programs and budgets. It cannot be supposed that proper
grounds for objecting thereto, if any exist, cannot be discovered within a period of two months.

On the other hand, Clause 8.3 seeks to provide a temporary, stop-gap solution in the event a
disagreement over the submitted work program or budget arises between the State and the
contractor and results in a stalemate or impasse, in order that there will be no unreasonably
long delays in the performance of the works.

These temporary or stop-gap solutions are not necessarily evil or wrong. Neither does it follow
that the government will inexorably be aggrieved if and when these temporary remedies come
into play. First, avoidance of long delays in these situations will undoubtedly redound to the
benefit of the State as well as the contractor. Second, who is to say that the work program or
budget proposed by the contractor and deemed approved under Clause 8.3 would not be the
better or more reasonable or more effective alternative? The contractor, being the "insider," as it
were, may be said to be in a better position than the State -- an outsider looking in -- to
determine what work program or budget would be appropriate, more effective, or more suitable
under the circumstances.

All things considered, we take exception to the characterization of the DENR secretary as a
subservient nonentity whom the contractor can overrule at will, on account of Clause 8.3. And
neither is it true that under the same clause, the DENR secretary has no authority whatsoever to
disapprove the work program. As Respondent WMCP reasoned in its Reply-Memorandum, the
State -- despite Clause 8.3 -- still has control over the contract area and it may, as sovereign
authority, prohibit work thereon until the dispute is resolved. And ultimately, the State may
terminate the agreement, pursuant to Clause 13.2 of the same FTAA, citing substantial breach
thereof. Hence, it clearly retains full and effective control of the exploitation of the mineral
resources.
On the other hand, Clause 8.5 is merely an acknowledgment of the parties' need for flexibility,
given that no one can accurately forecast under all circumstances, or predict how situations may
change. Hence, while approved work programs and budgets are to be followed and complied
with as far as practicable, there may be instances in which changes will have to be effected, and
effected rapidly, since events may take shape and unfold with suddenness and urgency. Thus,
Clause 8.5 allows the contractor to move ahead and make changes without the express or
implicit approval of the DENR secretary. Such changes are, however, subject to certain
conditions that will serve to limit or restrict the variance and prevent the contractor from straying
very far from what has been approved.

Clause 8.5 provides the contractor a certain amount of flexibility to meet unexpected situations,
while still guaranteeing that the approved work programs and budgets are not abandoned
altogether. Clause 8.5 does not constitute proof that the State has relinquished control. And
ultimately, should there be disagreement with the actions taken by the contractor in this instance
as well as under Clause 8.3 discussed above, the DENR secretary may resort to
cancellation/termination of the FTAA as the ultimate sanction.

Discretion to Select Contract

Area Not an Abdication of Control

Next, petitioners complain that the contractor has full discretion to select -- and the government
has no say whatsoever as to -- the parts of the contract area to be relinquished pursuant to
Clause 4.6 of the WMCP FTAA.56This clause, however, does not constitute abdication of
control. Rather, it is a mere acknowledgment of the fact that the contractor will have determined,
after appropriate exploration works, which portions of the contract area do not contain minerals
in commercial quantities sufficient to justify developing the same and ought therefore to be
relinquished. The State cannot just substitute its judgment for that of the contractor and dictate
upon the latter which areas to give up.

Moreover, we can be certain that the contractor's self-interest will propel proper and efficient
relinquishment. According to private respondent,57 a mining company tries to relinquish as much
non-mineral areas as soon as possible, because the annual occupation fees paid to the
government are based on the total hectarage of the contract area, net of the areas relinquished.
Thus, the larger the remaining area, the heftier the amount of occupation fees to be paid by the
contractor. Accordingly, relinquishment is not an issue, given that the contractor will not want to
pay the annual occupation fees on the non-mineral parts of its contract area. Neither will it want
to relinquish promising sites, which other contractors may subsequently pick up.

Government Not a Subcontractor

Petitioners further maintain that the contractor can compel the government to exercise its power
of eminent domain to acquire surface areas within the contract area for the contractor's use.
Clause 10.2 (e) of the WMCP FTAA provides that the government agrees that the contractor
shall "(e) have the right to require the Government at the Contractor's own cost, to purchase or
acquire surface areas for and on behalf of the Contractor at such price and terms as may be
acceptable to the contractor. At the termination of this Agreement such areas shall be sold by
public auction or tender and the Contractor shall be entitled to reimbursement of the costs of
acquisition and maintenance, adjusted for inflation, from the proceeds of sale."

According to petitioners, "government becomes a subcontractor to the contractor" and may, on

account of this provision, be compelled "to make use of its power of eminent domain, not for
public purposes but on behalf of a private party, i.e., the contractor." Moreover, the power of the
courts to determine the amount corresponding to the constitutional requirement of just
compensation has allegedly also been contracted away by the government, on account of the
latter's commitment that the acquisition shall be at such terms as may be acceptable to the
contractor.

However, private respondent has proffered a logical explanation for the provision.58 Section
10.2(e) contemplates a situation applicable to foreign-owned corporations. WMCP, at the time
of the execution of the FTAA, was a foreign-owned corporation and therefore not qualified to
own land. As contractor, it has at some future date to construct the infrastructure -- the mine
processing plant, the camp site, the tailings dam, and other infrastructure -- needed for the
large-scale mining operations. It will then have to identify and pinpoint, within the FTAA contract
area, the particular surface areas with favorable topography deemed ideal for such
infrastructure and will need to acquire the surface rights. The State owns the mineral deposits in
the earth, and is also qualified to own land.

Section 10.2(e) sets forth the mechanism whereby the foreign-owned contractor, disqualified to
own land, identifies to the government the specific surface areas within the FTAA contract area
to be acquired for the mine infrastructure. The government then acquires ownership of the
surface land areas on behalf of the contractor, in order to enable the latter to proceed to fully
implement the FTAA.

The contractor, of course, shoulders the purchase price of the land. Hence, the provision allows
it, after termination of the FTAA, to be reimbursed from proceeds of the sale of the surface
areas, which the government will dispose of through public bidding. It should be noted that this
provision will not be applicable to Sagittarius as the present FTAA contractor, since it is a
Filipino corporation qualified to own and hold land. As such, it may therefore freely negotiate
with the surface rights owners and acquire the surface property in its own right.

Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being aware of
the rationale for the said provision. That provision does not call for the exercise of the power of
eminent domain -- and determination of just compensation is not an issue -- as much as it calls
for a qualified party to acquire the surface rights on behalf of a foreign-owned contractor.

Rather than having the foreign contractor act through a dummy corporation, having the State do
the purchasing is a better alternative. This will at least cause the government to be aware of
such transaction/s and foster transparency in the contractor's dealings with the local property
owners. The government, then, will not act as a subcontractor of the contractor; rather, it will
facilitate the transaction and enable the parties to avoid a technical violation of the Anti-Dummy
Law.

Absence of Provision
Requiring Sale at Posted
Prices Not Problematic

The supposed absence of any provision in the WMCP FTAA directly and explicitly requiring the
contractor to sell the mineral products at posted or market prices is not a problem. Apart from
Clause 1.4 of the FTAA obligating the contractor to account for the total value of mineral
production and the sale of minerals, we can also look to Section 35 of RA 7942, which
incorporates into all FTAAs certain terms, conditions and warranties, including the following:

"(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."

For that matter, Section 56(n) of DAO 99-56 specifically obligates an FTAA contractor to
dispose of the minerals and by-products at the highest market price and to register with the
MGB a copy of the sales agreement. After all, the provisions of prevailing statutes as well as
rules and regulations are deemed written into contracts.

Contractor's Right to Mortgage

Not Objectionable Per Se

Petitioners also question the absolute right of the contractor under Clause 10.2 (l) to mortgage
and encumber not only its rights and interests in the FTAA and the infrastructure and
improvements introduced, but also the mineral products extracted. Private respondents do not
touch on this matter, but we believe that this provision may have to do with the conditions
imposed by the creditor-banks of the then foreign contractor WMCP to secure the lendings
made or to be made to the latter. Ordinarily, banks lend not only on the security of mortgages
on fixed assets, but also on encumbrances of goods produced that can easily be sold and
converted into cash that can be applied to the repayment of loans. Banks even lend on the
security of accounts receivable that are collectible within 90 days.59

It is not uncommon to find that a debtor corporation has executed deeds of assignment "by way
of security" over the production for the next twelve months and/or the proceeds of the sale
thereof -- or the corresponding accounts receivable, if sold on terms -- in favor of its creditor-
banks. Such deeds may include authorizing the creditors to sell the products themselves and to
collect the sales proceeds and/or the accounts receivable.

Seen in this context, Clause 10.2(l) is not something out of the ordinary or objectionable. In any
case, as will be explained below, even if it is allowed to mortgage or encumber the mineral end-
products themselves, the contractor is not freed of its obligation to pay the government its basic
and additional shares in the net mining revenue, which is the essential thing to consider.

In brief, the alarum raised over the contractor's right to mortgage the minerals is simply
unwarranted. Just the same, the contractor must account for the value of mineral production
and the sales proceeds therefrom. Likewise, under the WMCP FTAA, the government remains
entitled to its sixty percent share in the net mining revenues of the contractor. The latter's right
to mortgage the minerals does not negate the State's right to receive its share of net mining
revenues.

Shareholders Free to Sell Their Stocks

Petitioners likewise criticize Clause 10.2(k), which gives the contractor authority "to change its
equity structure at any time." This provision may seem somewhat unusual, but considering that
WMCP then was 100 percent foreign-owned, any change would mean that such percentage
would either stay unaltered or be decreased in favor of Filipino ownership. Moreover, the
foreign-held shares may change hands freely. Such eventuality is as it should be.

We believe it is not necessary for government to attempt to limit or restrict the freedom of the
shareholders in the contractor to freely transfer, dispose of or encumber their shareholdings,
consonant with the unfettered exercise of their business judgment and discretion. Rather, what
is critical is that, regardless of the identity, nationality and percentage ownership of the various
shareholders of the contractor -- and regardless of whether these shareholders decide to take
the company public, float bonds and other fixed-income instruments, or allow the creditor-banks
to take an equity position in the company -- the foreign-owned contractor is always in a position
to render the services required under the FTAA, under the direction and control of the
government.

Contractor's Right to Ask

For Amendment Not Absolute

With respect to Clauses 10.4(e) and (i), petitioners complain that these provisions bind
government to allow amendments to the FTAA if required by banks and other financial
institutions as part of the conditions for new lendings. However, we do not find anything wrong
with Clause 10.4(e), which only states that "if the Contractor seeks to obtain financing
contemplated herein from banks or other financial institutions, (the Government shall) cooperate
with the Contractor in such efforts provided that such financing arrangements will in no event
reduce the Contractor's obligations or the Government's rights
hereunder." The colatilla obviously safeguards the State's interests; if breached, it will give the
government cause to object to the proposed amendments.

On the other hand, Clause 10.4(i) provides that "the Government shall favourably consider any
request from [the] Contractor for amendments of this Agreement which are necessary in order
for the Contractor to successfully obtain the financing." Petitioners see in this provision a
complete renunciation of control. We disagree.

The proviso does not say that the government shall grant any request for amendment. Clause
10.4(i) only obliges the State to favorably consider any such request, which is not at all
unreasonable, as it is not equivalent to saying that the government must automatically consent
to it. This provision should be read together with the rest of the FTAA provisions instituting
government control and supervision over the mining enterprise. The clause should not be given
an interpretation that enables the contractor to wiggle out of the restrictions imposed upon it by
merely suggesting that certain amendments are requested by the lenders.

Rather, it is up to the contractor to prove to the government that the requested changes to the
FTAA are indispensable, as they enable the contractor to obtain the needed financing; that
without such contract changes, the funders would absolutely refuse to extend the loan; that
there are no other sources of financing available to the contractor (a very unlikely scenario); and
that without the needed financing, the execution of the work programs will not proceed. But the
bottom line is, in the exercise of its power of control, the government has the final say on
whether to approve or disapprove such requested amendments to the FTAA. In short, approval
thereof is not mandatory on the part of the government.

In fine, the foregoing evaluation and analysis of the aforementioned FTAA provisions
sufficiently overturns petitioners' litany of objections to and criticisms of the State's
alleged lack of control.

Financial Benefits Not

Surrendered to the Contractor

One of the main reasons certain provisions of RA 7942 were struck down was the finding
mentioned in the Decision that beneficial ownership of the mineral resources had been
conveyed to the contractor. This finding was based on the underlying assumption, common to
the said provisions, that the foreign contractor manages the mineral resources in the same way
that foreign contractors in service contracts used to. "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 nation's mineral resources to these
contractors, leaving the State with nothing but bare title thereto."60 As the WMCP FTAA
contained similar provisions deemed by the ponente to be abhorrent to the Constitution, the
Decision struck down the Contract as well.

Beneficial ownership has been defined as ownership recognized by law and capable of being
enforced in the courts at the suit of the beneficial owner.61 Black's Law Dictionary indicates that
the term is used in two senses: first, to indicate the interest of a beneficiary in trust property
(also called "equitable ownership"); and second, to refer to the power of a corporate shareholder
to buy or sell the shares, though the shareholder is not registered in the corporation's books as
the owner.62 Usually, beneficial ownership is distinguished from naked ownership, which is the
enjoyment of all the benefits and privileges of ownership, as against possession of the bare title
to property.

An assiduous examination of the WMCP FTAA uncovers no indication that it confers upon
WMCP ownership, beneficial or otherwise, of the mining property it is to develop, the minerals to
be produced, or the proceeds of their sale, which can be legally asserted and enforced as
against the State.

As public respondents correctly point out, any interest the contractor may have in the proceeds
of the mining operation is merely the equivalent of the consideration the government has
undertaken to pay for its services. All lawful contracts require such mutual prestations, and the
WMCP FTAA is no different. The contractor commits to perform certain services for the
government in respect of the mining operation, and in turn it is to be compensated out of the net
mining revenues generated from the sale of mineral products. What would be objectionable is a
contractual provision that unduly benefits the contractor far in excess of the service rendered or
value delivered, if any, in exchange therefor.

A careful perusal of the statute itself and its implementing rules reveals that neither RA 7942 nor
DAO 99-56 can be said to convey beneficial ownership of any mineral resource or product to
any foreign FTAA contractor.
Equitable Sharing
of Financial Benefits

On the contrary, DAO 99-56, entitled "Guidelines Establishing the Fiscal Regime of Financial or
Technical Assistance Agreements" aims to ensure an equitable sharing of the benefits derived
from mineral resources. These benefits are to be equitably shared among the government
(national and local), the FTAA contractor, and the affected communities. The purpose is to
ensure sustainable mineral resources development; and a fair, equitable, competitive and stable
investment regime for the large-scale exploration, development and commercial utilization of
minerals. The general framework or concept followed in crafting the fiscal regime of the FTAA is
based on the principle that the government expects real contributions to the economic growth
and general welfare of the country, while the contractor expects a reasonable return on its
investments in the project.63

Specifically, under the fiscal regime, the government's expectation is, inter alia, the receipt of its
share from the taxes and fees normally paid by a mining enterprise. On the other hand, the
FTAA contractor is granted by the government certain fiscal and non-fiscal incentives64 to help
support the former's cash flow during the most critical phase (cost recovery) and to make the
Philippines competitive with other mineral-producing countries. After the contractor has
recovered its initial investment, it will pay all the normal taxes and fees comprising the basic
share of the government, plus an additional share for the government based on the options and
formulae set forth in DAO 99-56.

The said DAO spells out the financial benefits the government will receive from an FTAA,
referred to as "the Government Share," composed of a basic government share and
an additional government share.

The basic government share is comprised of all direct taxes, fees and royalties, as well as
other payments made by the contractor during the term of the FTAA. These are amounts paid
directly to (i) the national government (through the Bureau of Internal Revenue, Bureau of
Customs, Mines & Geosciences Bureau and other national government agencies imposing
taxes or fees), (ii) the local government units where the mining activity is conducted, and (iii)
persons and communities directly affected by the mining project. The major taxes and other
payments constituting the basic government share are enumerated below:65

Payments to the National Government:

· Excise tax on minerals - 2 percent of the gross output of mining operations

· Contractor' income tax - maximum of 32 percent of taxable income for

corporations

· Customs duties and fees on imported capital equipment -the rate is set by the
Tariff and Customs Code (3-7 percent for chemicals; 3-10 percent for explosives;
3-15 percent for mechanical and electrical equipment; and 3-10 percent for
vehicles, aircraft and vessels

· VAT on imported equipment, goods and services – 10 percent of value

· Royalties due the government on minerals extracted from mineral reservations,

if applicable – 5 percent of the actual market value of the minerals produced

· Documentary stamp tax - the rate depends on the type of transaction

· Capital gains tax on traded stocks - 5 to 10 percent of the value of the shares

· Withholding tax on interest payments on foreign loans -15 percent of the

amount of interest

· Withholding tax on dividend payments to foreign stockholders – 15 percent of

the dividend
 · Wharfage and port fees

· Licensing fees (for example, radio permit, firearms permit, professional fees)

· Other national taxes and fees.

Payments to Local Governments:

· Local business tax - a maximum of 2 percent of gross sales or receipts (the rate
varies among local government units)

· Real property tax - 2 percent of the fair market value of the property, based on
an assessment level set by the local government

· Special education levy - 1 percent of the basis used for the real property tax

· Occupation fees - PhP50 per hectare per year; PhP100 per hectare per year if
located in a mineral reservation

· Community tax - maximum of PhP10,500 per year

· All other local government taxes, fees and imposts as of the effective date of
the FTAA - the rate and the type depend on the local government

Other Payments:

· Royalty to indigenous cultural communities, if any – 1 percent of gross output

from mining operations

· Special allowance - payment to claim owners and surface rights holders

Apart from the basic share, an additional government share is also collected from the FTAA
contractor in accordance with the second paragraph of Section 81 of RA 7942, which provides
that the government share shall be comprised of, among other things, certain taxes, duties and
fees. The subject proviso reads:

"The Government share in a financial or technical assistance agreement shall consist

of, among other things, the contractor's corporate income tax, excise tax, special allowance,
withholding tax due from the contractor's foreign stockholders arising from dividend or interest
payments to the said foreign stockholder in case of a foreign national, and all such other taxes,
duties and fees as provided for under existing laws." (Bold types supplied.)

The government, through the DENR and the MGB, has interpreted the insertion of the
phrase among other things as signifying that the government is entitled to an "additional
government share" to be paid by the contractor apart from the "basic share," in order to attain a
fifty-fifty sharing of net benefits from mining.

The additional government share is computed by using one of three options or schemes
presented in DAO 99-56: (1) a fifty-fifty sharing in the cumulative present value of cash flows;
(2) the share based on excess profits; and (3) the sharing based on the cumulative net mining
revenue. The particular formula to be applied will be selected by the contractor, with a written
notice to the government prior to the commencement of the development and construction
phase of the mining project.66

Proceeds from the government shares arising from an FTAA contract are distributed to and
received by the different levels of government in the following proportions:

National 50 percent
Government
 Provincial 10 percent
Government

Municipal 20 percent
Government

Affected Barangays 20 percent

The portion of revenues remaining after the deduction of the basic and additional government
shares is what goes to the contractor.

Government's Share in an
FTAA Not Consisting Solely
of Taxes, Duties and Fees

In connection with the foregoing discussion on the basic and additional government shares, it
is pertinent at this juncture to mention the criticism leveled at the second paragraph of Section
81 of RA 7942, quoted earlier. The said proviso has been denounced, because, allegedly, the
State's share in FTAAs with foreign contractors has been limited to taxes, fees and duties only;
in effect, the State has been deprived of a share in the after-tax income of the enterprise. In the
face of this allegation, one has to consider that the law does not define the term among other
things; and the Office of the Solicitor General, in its Motion for Reconsideration, appears to have
erroneously claimed that the phrase refers to indirect taxes.

The law provides no definition of the term among other things, for the reason that Congress
deliberately avoided setting unnecessary limitations as to what may constitute compensation to
the State for the exploitation and use of mineral resources. But the inclusion of that phrase
clearly and unmistakably reveals the legislative intent to have the State collect more than just
the usual taxes, duties and fees. Certainly, there is nothing in that phrase -- or in the second
paragraph of Section 81 -- that would suggest that such phrase should be interpreted as
referring only to taxes, duties, fees and the like.

Precisely for that reason, to fulfill the legislative intent behind the inclusion of the phrase among
other things in the second paragraph of Section 81,67 the DENR structured and formulated in
DAO 99-56 the said additional government share. Such a share was to consist not of taxes,
but of a share in the earnings or cash flows of the mining enterprise. The additional
government share was to be paid by the contractor on top of the basic share, so as to achieve a
fifty-fifty sharing -- between the government and the contractor -- of net benefits from mining. In
the Ramos-DeVera paper, the explanation of the three options or formulas68 -- presented in
DAO 99-56 for the computation of the additional government share -- serves to debunk the
claim that the government's take from an FTAA consists solely of taxes, fees and duties.

Unfortunately, the Office of the Solicitor General -- although in possession of the relevant data --
failed to fully replicate or echo the pertinent elucidation in the Ramos-DeVera paper regarding
the three schemes or options for computing the additional government share presented in DAO
99-56. Had due care been taken by the OSG, the Court would have been duly apprised of the
real nature and particulars of the additional share.

But, perhaps, on account of the esoteric discussion in the Ramos-DeVera paper, and the even
more abstruse mathematical jargon employed in DAO 99-56, the OSG omitted any mention of
the three options. Instead, the OSG skipped to a side discussion of the effect of indirect
taxes, which had nothing at all to do with the additional government share, to begin
with. Unfortunately, this move created the wrong impression, pointed out in Justice Antonio T.
Carpio's Opinion, that the OSG had taken the position that the additional government share
consisted of indirect taxes.

In any event, what is quite evident is the fact that the additional government share, as
formulated, has nothing to do with taxes -- direct or indirect -- or with duties, fees or charges. To
repeat, it is over and above the basic government share composed of taxes and duties. Simply
put, the additional share may be (a) an amount that will result in a 50-50 sharing of the
cumulative present value of the cash flows69 of the enterprise; (b) an amount equivalent to 25
percent of the additional or excess profits of the enterprise, reckoned against a benchmark
return on investments; or (c) an amount that will result in a fifty-fifty sharing of the cumulative net
mining revenue from the end of the recovery period up to the taxable year in question. The
contractor is required to select one of the three options or formulae for computing the additional
share, an option it will apply to all of its mining operations.

As used above, "net mining revenue" is defined as the gross output from mining operations for a
calendar year, less deductible expenses (inclusive of taxes, duties and fees). Such revenue
would roughly be equivalent to "taxable income" or income before income tax. Definitely, as
compared with, say, calculating the additional government share on the basis of net income
(after income tax), the net mining revenue is a better and much more reasonable basis for such
computation, as it gives a truer picture of the profitability of the company.

To demonstrate that the three options or formulations will operate as intended, Messrs. Ramos
and de Vera also performed some quantifications of the government share via a financial
modeling of each of the three options discussed above. They found that the government would
get the highest share from the option that is based on the net mining revenue, as compared with
the other two options, considering only the basic and the additional shares; and that, even
though production rate decreases, the government share will actually increase when the net
mining revenue and the additional profit-based options are used.

Furthermore, it should be noted that the three options or formulae do not yet take into account
the indirect taxes70and other financial contributions71 of mining projects. These indirect taxes
and other contributions are real and actual benefits enjoyed by the Filipino people and/or
government. Now, if some of the quantifiable items are taken into account in the computations,
the financial modeling would show that the total government share increases to 60 percent or
higher -- in one instance, as much as 77 percent and even 89 percent -- of the net present value
of total benefits from the project. As noted in the Ramos-DeVera paper, these results are not at
all shabby, considering that the contractor puts in all the capital requirements and assumes all
the risks, without the government having to contribute or risk anything.

Despite the foregoing explanation, Justice Carpio still insisted during the Court's deliberations
that the phrase among other things refers only to taxes, duties and fees. We are bewildered by
his position. On the one hand, he condemns the Mining Law for allegedly limiting the
government's benefits only to taxes, duties and fees; and on the other, he refuses to allow the
State to benefit from the correct and proper interpretation of the DENR/MGB. To remove all
doubts then, we hold that the State's share is not limited to taxes, duties and fees only and that
the DENR/MGB interpretation of the phrase among other things is correct. Definitely, this
DENR/MGB interpretation is not only legally sound, but also greatly advantageous to the
government.

One last point on the subject. The legislature acted judiciously in not defining the terms among
other things and, instead, leaving it to the agencies concerned to devise and develop the
various modes of arriving at a reasonable and fair amount for the additional government
share. As can be seen from DAO 99-56, the agencies concerned did an admirable job of
conceiving and developing not just one formula, but three different formulae for arriving at the
additional government share. Each of these options is quite fair and reasonable; and, as
Messrs. Ramos and De Vera stated, other alternatives or schemes for a possible improvement
of the fiscal regime for FTAAs are also being studied by the government.

Besides, not locking into a fixed definition of the term among other things will ultimately be more
beneficial to the government, as it will have that innate flexibility to adjust to and cope with
rapidly changing circumstances, particularly those in the international markets. Such flexibility is
especially significant for the government in terms of helping our mining enterprises remain
competitive in world markets despite challenging and shifting economic scenarios.

In conclusion, we stress that we do not share the view that in FTAAs with foreign
contractors under RA 7942, the government's share is limited to taxes, fees and duties.
Consequently, we find the attacks on the second paragraph of Section 81 of RA 7942
totally unwarranted.
Collections Not Made Uncertain
by the Third Paragraph of Section 81

The third or last paragraph of Section 8172 provides that the government share in FTAAs shall
be collected when the contractor shall have recovered its pre-operating expenses and
exploration and development expenditures. The objection has been advanced that, on account
of the proviso, the collection of the State's share is not even certain, as there is no time limit in
RA 7942 for this grace period or recovery period.

We believe that Congress did not set any time limit for the grace period, preferring to leave it to
the concerned agencies, which are, on account of their technical expertise and training, in a
better position to determine the appropriate durations for such recovery periods. After all, these
recovery periods are determined, to a great extent, by technical and technological factors
peculiar to the mining industry. Besides, with developments and advances in technology and in
the geosciences, we cannot discount the possibility of shorter recovery periods. At any rate, the
concerned agencies have not been remiss in this area. The 1995 and 1996 Implementing Rules
and Regulations of RA 7942 specify that the period of recovery, reckoned from the date of
commercial operation, shall be for a period not exceeding five years, or until the date
of actual recovery, whichever comes earlier.

Approval of Pre-Operating
Expenses Required by RA 7942

Still, RA 7942 is criticized for allegedly not requiring government approval of pre-operating,
exploration and development expenses of the foreign contractors, who are in effect given
unfettered discretion to determine the amounts of such expenses. Supposedly, nothing prevents
the contractors from recording such expenses in amounts equal to the mining revenues
anticipated for the first 10 or 15 years of commercial production, with the result that the share of
the State will be zero for the first 10 or 15 years. Moreover, under the circumstances, the
government would be unable to say when it would start to receive its share under the FTAA.

We believe that the argument is based on incorrect information as well as speculation.

Obviously, certain crucial provisions in the Mining Law were overlooked. Section 23, dealing
with the rights and obligations of the exploration permit grantee, states: "The permittee shall
undertake exploration work on the area as specified by its permit based on an approved work
program." The next proviso reads: "Any expenditure in excess of the yearly budget of
the approved work program may be carried forward and credited to the succeeding years
covering the duration of the permit. x x x." (underscoring supplied)

Clearly, even at the stage of application for an exploration permit, the applicant is required to
submit -- for approval by the government -- a proposed work program for exploration, containing
a yearly budget of proposed expenditures. The State has the opportunity to pass upon (and
approve or reject) such proposed expenditures, with the foreknowledge that -- if approved --
these will subsequently be recorded as pre-operating expenses that the contractor will have to
recoup over the grace period. That is not all.

Under Section 24, an exploration permit holder who determines the commercial viability of a
project covering a mining area may, within the term of the permit, file with the Mines and
Geosciences Bureau a declaration of mining project feasibility. This declaration is to be
accompanied by a work program for development for the Bureau's approval, the necessary
prelude for entering into an FTAA, a mineral production sharing agreement (MPSA), or some
other mineral agreement. At this stage, too, the government obviously has the opportunity to
approve or reject the proposed work program and budgeted expenditures for development
works on the project. Such expenditures will ultimately become the pre-operating and
development costs that will have to be recovered by the contractor.

Naturally, with the submission of approved work programs and budgets for the exploration and
the development/construction phases, the government will be able to scrutinize and approve or
reject such expenditures. It will be well-informed as to the amounts of pre-operating and other
expenses that the contractor may legitimately recover and the approximate period of time
needed to effect such a recovery. There is therefore no way the contractor can just randomly
post any amount of pre-operating expenses and expect to recover the same.

The aforecited provisions on approved work programs and budgets have counterparts in
Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. The said
provision requires certain terms and conditions to be incorporated into FTAAs; among them, "a
firm commitment x x x of an amount corresponding to the expenditure obligation that will be
invested in the contract area" and "representations and warranties x x x to timely deploy
these [financing, managerial and technical expertise and technological] resources under its
supervision pursuant to the periodic work programs and related budgets x x x," as well as "work
programs and minimum expenditures commitments." (underscoring supplied)

Unarguably, given the provisions of Section 35, the State has every opportunity to pass upon
the proposed expenditures under an FTAA and approve or reject them. It has access to all the
information it may need in order to determine in advance the amounts of pre-operating and
developmental expenses that will have to be recovered by the contractor and the amount of
time needed for such recovery.

In summary, we cannot agree that the third or last paragraph of Section 81 of RA 7942 is
in any manner unconstitutional.

No Deprivation of Beneficial Rights

It is also claimed that aside from the second and the third paragraphs of Section 81 (discussed
above), Sections 80, 84 and 112 of RA 7942 also operate to deprive the State of beneficial
rights of ownership over mineral resources; and give them away for free to private business
enterprises (including foreign owned corporations). Likewise, the said provisions have been
construed as constituting, together with Section 81, an ingenious attempt to resurrect the old
and discredited system of "license, concession or lease."

Specifically, Section 80 is condemned for limiting the State's share in a mineral production-
sharing agreement (MPSA) to just the excise tax on the mineral product. Under Section 151(A)
of the Tax Code, such tax is only 2 percent of the market value of the gross output of the
minerals. The colatilla in Section 84, the portion considered offensive to the Constitution,
reiterates the same limitation made in Section 80.73

It should be pointed out that Section 80 and the colatilla in Section 84 pertain only to MPSAs
and have no application to FTAAs. These particular statutory provisions do not come within the
issues that were defined and delineated by this Court during the Oral Argument -- particularly
the third issue, which pertained exclusively to FTAAs. Neither did the parties argue upon them
in their pleadings. Hence, this Court cannot make any pronouncement in this case regarding the
constitutionality of Sections 80 and 84 without violating the fundamental rules of due process.
Indeed, the two provisos will have to await another case specifically placing them in issue.

On the other hand, Section 11274 is disparaged for allegedly reverting FTAAs and all mineral
agreements to the old and discredited "license, concession or lease" system. This Section
states in relevant part that "the provisions of Chapter XIV [which includes Sections 80 to 82] on
government share in mineral production-sharing agreement x x x shall immediately govern
and apply to a mining lessee or contractor." (underscoring supplied) This provision is construed
as signifying that the 2 percent excise tax which, pursuant to Section 80, comprises the
government share in MPSAs shall now also constitute the government share in FTAAs -- as well
as in co-production agreements and joint venture agreements -- to the exclusion of revenues of
any other nature or from any other source.

Apart from the fact that Section 112 likewise does not come within the issues delineated by this
Court during the Oral Argument, and was never touched upon by the parties in their pleadings, it
must also be noted that the criticism hurled against this Section is rooted in unwarranted
conclusions made without considering other relevant provisions in the statute. Whether Section
112 may properly apply to co-production or joint venture agreements, the fact of the matter is
that it cannot be made to apply to FTAAs.
First, Section 112 does not specifically mention or refer to FTAAs; the only reason it is being
applied to them at all is the fact that it happens to use the word "contractor." Hence, it is a bit of
a stretch to insist that it covers FTAAs as well. Second, mineral agreements, of which there are
three types -- MPSAs, co-production agreements, and joint venture agreements -- are covered
by Chapter V of RA 7942. On the other hand, FTAAs are covered by and in fact are the subject
of Chapter VI, an entirely different chapter altogether. The law obviously intends to treat them as
a breed apart from mineral agreements, since Section 35 (found in Chapter VI) creates a long
list of specific terms, conditions, commitments, representations and warranties -- which have not
been made applicable to mineral agreements -- to be incorporated into FTAAs.

Third, under Section 39, the FTAA contractor is given the option to "downgrade" -- to convert
the FTAA into a mineral agreement at any time during the term if the economic viability of the
contract area is inadequate to sustain large-scale mining operations. Thus, there is no reason to
think that the law through Section 112 intends to exact from FTAA contractors merely the same
government share (a 2 percent excise tax) that it apparently demands from contractors under
the three forms of mineral agreements. In brief, Section 112 does not apply to FTAAs.

Notwithstanding the foregoing explanation, Justices Carpio and Morales maintain that the Court
must rule now on the constitutionality of Sections 80, 84 and 112, allegedly because the WMCP
FTAA contains a provision which grants the contractor unbridled and "automatic" authority to
convert the FTAA into an MPSA; and should such conversion happen, the State would be
prejudiced since its share would be limited to the 2 percent excise tax. Justice Carpio adds that
there are five MPSAs already signed just awaiting the judgment of this Court on respondents'
and intervenor's Motions for Reconsideration. We hold however that, at this point, this argument
is based on pure speculation. The Court cannot rule on mere surmises and hypothetical
assumptions, without firm factual anchor. We repeat: basic due process requires that we hear
the parties who have a real legal interest in the MPSAs (i.e. the parties who executed them)
before these MPSAs can be reviewed, or worse, struck down by the Court. Anything less than
that requirement would be arbitrary and capricious.

In any event, the conversion of the present FTAA into an MPSA is problematic. First, the
contractor must comply with the law, particularly Section 39 of RA 7942; inter alia, it must
convincingly show that the "economic viability of the contract is found to be inadequate to justify
large-scale mining operations;" second, it must contend with the President's exercise of the
power of State control over the EDU of natural resources; and third, it will have to risk a possible
declaration of the unconstitutionality (in a proper case) of Sections 80, 84 and 112.

The first requirement is not as simple as it looks. Section 39 contemplates a situation in which
an FTAA has already been executed and entered into, and is presumably being implemented,
when the contractor "discovers" that the mineral ore reserves in the contract area are not
sufficient to justify large-scale mining, and thus the contractor requests the conversion of the
FTAA into an MPSA. The contractor in effect needs to explain why, despite its exploration
activities, including the conduct of various geologic and other scientific tests and procedures in
the contract area, it was unable to determine correctly the mineral ore reserves and the
economic viability of the area. The contractor must explain why, after conducting such
exploration activities, it decided to file a declaration of mining feasibility, and to apply for an
FTAA, thereby leading the State to believe that the area could sustain large-scale mining. The
contractor must justify fully why its earlier findings, based on scientific procedures, tests and
data, turned out to be wrong, or were way off. It must likewise prove that its new findings, also
based on scientific tests and procedures, are correct. Right away, this puts the contractor's
technical capabilities and expertise into serious doubt. We wonder if anyone would relish being
in this situation. The State could even question and challenge the contractor's qualification and
competence to continue the activity under an MPSA.

All in all, while there may be cogent grounds to assail the aforecited Sections, this Court
-- on considerations of due process -- cannot rule upon them here. Anyway, if later on
these Sections are declared unconstitutional, such declaration will not affect the other
portions since they are clearly separable from the rest.

Our Mineral Resources Not

Given Away for Free by RA 7942
Nevertheless, if only to disabuse our minds, we should address the contention that our mineral
resources are effectively given away for free by the law (RA 7942) in general and by Sections
80, 81, 84 and 112 in particular.

Foreign contractors do not just waltz into town one day and leave the next, taking away mineral
resources without paying anything. In order to get at the minerals, they have to invest huge
sums of money (tens or hundreds of millions of dollars) in exploration works first. If the
exploration proves unsuccessful, all the cash spent thereon will not be returned to the foreign
investors; rather, those funds will have been infused into the local economy, to remain there
permanently. The benefits therefrom cannot be simply ignored. And assuming that the foreign
contractors are successful in finding ore bodies that are viable for commercial exploitation, they
do not just pluck out the minerals and cart them off. They have first to build camp sites and
roadways; dig mine shafts and connecting tunnels; prepare tailing ponds, storage areas and
vehicle depots; install their machinery and equipment, generator sets, pumps, water tanks and
sewer systems, and so on.

In short, they need to expend a great deal more of their funds for facilities, equipment and
supplies, fuel, salaries of local labor and technical staff, and other operating expenses. In the
meantime, they also have to pay taxes,75 duties, fees, and royalties. All told, the exploration,
pre-feasibility, feasibility, development and construction phases together add up to as many as
eleven years.76 The contractors have to continually shell out funds for the duration of over a
decade, before they can commence commercial production from which they would eventually
derive revenues. All that money translates into a lot of "pump-priming" for the local economy.

Granted that the contractors are allowed subsequently to recover their pre-operating expenses,
still, that eventuality will happen only after they shall have first put out the cash and fueled the
economy. Moreover, in the process of recouping their investments and costs, the foreign
contractors do not actually pull out the money from the economy. Rather, they recover or recoup
their investments out of actual commercial production by not paying a portion of the basic
government share corresponding to national taxes, along with the additional government share,
for a period of not more than five years77 counted from the commencement of commercial
production.

It must be noted that there can be no recovery without commencing actual commercial
production. In the meantime that the contractors are recouping costs, they need to continue
operating; in order to do so, they have to disburse money to meet their various needs. In short,
money is continually infused into the economy.

The foregoing discussion should serve to rid us of the mistaken belief that, since the foreign
contractors are allowed to recover their investments and costs, the end result is that they
practically get the minerals for free, which leaves the Filipino people none the better for it.

All Businesses Entitled

to Cost Recovery

Let it be put on record that not only foreign contractors, but all businessmen and all business
entities in general, have to recoup their investments and costs. That is one of the first things a
student learns in business school. Regardless of its nationality, and whether or not a business
entity has a five-year cost recovery period, it will -- must -- have to recoup its investments, one
way or another. This is just common business sense. Recovery of investments is absolutely
indispensable for business survival; and business survival ensures soundness of the economy,
which is critical and contributory to the general welfare of the people. Even government
corporations must recoup their investments in order to survive and continue in operation. And,
as the preceding discussion has shown, there is no business that gets ahead or earns profits
without any cost to it.

It must also be stressed that, though the State owns vast mineral wealth, such wealth is not
readily accessible or transformable into usable and negotiable currency without the intervention
of the credible mining companies. Those untapped mineral resources, hidden beneath tons of
earth and rock, may as well not be there for all the good they do us right now. They have first to
be extracted and converted into marketable form, and the country needs the foreign contractor's
funds, technology and know-how for that.

After about eleven years of pre-operation and another five years for cost recovery, the foreign
contractors will have just broken even. Is it likely that they would at that point stop their
operations and leave? Certainly not. They have yet to make profits. Thus, for the remainder of
the contract term, they must strive to maintain profitability. During this period, they pay the
whole of the basic government share and the additional government share which, taken
together with indirect taxes and other contributions, amount to approximately 60 percent or
more of the entire financial benefits generated by the mining venture.

In sum, we can hardly talk about foreign contractors taking our mineral resources for free. It
takes a lot of hard cash to even begin to do what they do. And what they do in this country
ultimately benefits the local economy, grows businesses, generates employment, and creates
infrastructure, as discussed above. Hence, we definitely disagree with the sweeping claim that
no FTAA under Section 81 will ever make any real contribution to the growth of the economy or
to the general welfare of the country. This is not a plea for foreign contractors. Rather, this is a
question of focusing the judicial spotlight squarely on all the pertinent facts as they bear upon
the issue at hand, in order to avoid leaping precipitately to ill-conceived conclusions not solidly
grounded upon fact.

Repatriation of After-Tax Income

Another objection points to the alleged failure of the Mining Law to ensure real contributions to
the economic growth and general welfare of the country, as mandated by Section 2 of Article XII
of the Constitution. Pursuant to Section 81 of the law, the entire after-tax income arising from
the exploitation of mineral resources owned by the State supposedly belongs to the foreign
contractors, which will naturally repatriate the said after-tax income to their home countries,
thereby resulting in no real contribution to the economic growth of this country. Clearly, this
contention is premised on erroneous assumptions.

First, as already discussed in detail hereinabove, the concerned agencies have correctly
interpreted the second paragraph of Section 81 of RA 7942 to mean that the government is
entitled to an additional share, to be computed based on any one of the following factors: net
mining revenues, the present value of the cash flows, or excess profits reckoned against a
benchmark rate of return on investments. So it is not correct to say that all of the after-tax
income will accrue to the foreign FTAA contractor, as the government effectively receives a
significant portion thereof.

Second, the foreign contractors can hardly "repatriate the entire after-tax income to their home
countries." Even a bit of knowledge of corporate finance will show that it will be impossible to
maintain a business as a "going concern" if the entire "net profit" earned in any particular year
will be taken out and repatriated. The "net income" figure reflected in the bottom line is a mere
accounting figure not necessarily corresponding to cash in the bank, or other quick assets. In
order to produce and set aside cash in an amount equivalent to the bottom line figure, one may
need to sell off assets or immediately collect receivables or liquidate short-term investments; but
doing so may very likely disrupt normal business operations.

In terms of cash flows, the funds corresponding to the net income as of a particular point in time
are actually in usein the normal course of business operations. Pulling out such net
income disrupts the cash flows and cash position of the enterprise and, depending on the
amount being taken out, could seriously cripple or endanger the normal operations and financial
health of the business enterprise. In short, no sane business person, concerned with
maintaining the mining enterprise as a going concern and keeping a foothold in its
market, can afford to repatriate the entire after-tax income to the home country.

The State's Receipt of Sixty

Percent of an FTAA Contractor's
After-Tax Income Not Mandatory
We now come to the next objection which runs this way: In FTAAs with a foreign contractor, the
State must receive at least 60 percent of the after-tax income from the exploitation of its mineral
resources. This share is the equivalent of the constitutional requirement that at least 60 percent
of the capital, and hence 60 percent of the income, of mining companies should remain in
Filipino hands.

First, we fail to see how we can properly conclude that the Constitution mandates the State to
extract at least 60 percent of the after-tax income from a mining company run by a foreign
contractor. The argument is that the Charter requires the State's partner in a co-production
agreement, joint venture agreement or MPSA to be a Filipino corporation (at least 60 percent
owned by Filipino citizens).

We question the logic of this reasoning, premised on a supposedly parallel or analogous

situation. We are, after all, dealing with an essentially different equation, one that involves
different elements. The Charter did not intend to fix an iron-clad rule on the 60 percent
share, applicable to all situations at all times and in all circumstances.If ever such was the
intention of the framers, they would have spelt it out in black and white. Verba legis will serve to
dispel unwarranted and untenable conclusions.

Second, if we would bother to do the math, we might better appreciate the impact (and
reasonableness) of what we are demanding of the foreign contractor. Let us use
a simplified illustration. Let us base it on gross revenues of, say, P500. After deducting
operating expenses, but prior to income tax, suppose a mining firm makes a taxable
incomeof P100. A corporate income tax of 32 percent results in P32 of taxable income going to
the government, leaving the mining firm with P68. Government then takes 60 percent thereof,
equivalent to P40.80, leaving only P27.20 for the mining firm.

At this point the government has pocketed P32.00 plus P40.80, or a total of P72.80 for
every P100 of taxable income, leaving the mining firm with only P27.20. But that is not all. The
government has also taken 2 percent excise tax "off the top," equivalent to another P10. Under
the minimum 60 percent proposal, the government nets around P82.80 (not counting other
taxes, duties, fees and charges) from a taxable income of P100 (assuming gross revenues
of P500, for purposes of illustration). On the other hand, the foreign contractor, which provided
all the capital, equipment and labor, and took all the entrepreneurial risks -- receives P27.20.
One cannot but wonder whether such a distribution is even remotely equitable and reasonable,
considering the nature of the mining business. The amount of P82.80 out of P100.00 is really a
lot – it does not matter that we call part of it excise tax or income tax, and another portion
thereof income from exploitation of mineral resources. Some might think it wonderful to be able
to take the lion's share of the benefits. But we have to ask ourselves if we are really serious in
attracting the investments that are the indispensable and key element in generating the
monetary benefits of which we wish to take the lion's share. Fairness is a credo not only in
law, but also in business.

Third, the 60 percent rule in the petroleum industry cannot be insisted upon at all times in the
mining business. The reason happens to be the fact that in petroleum operations, the bulk of
expenditures is in exploration, but once the contractor has found and tapped into the deposit,
subsequent investments and expenditures are relatively minimal. The crude (or gas) keeps
gushing out, and the work entailed is just a matter of piping, transporting and storing. Not so in
mineral mining. The ore body does not pop out on its own. Even after it has been located, the
contractor must continually invest in machineries and expend funds to dig and build tunnels in
order to access and extract the minerals from underneath hundreds of tons of earth and rock.

As already stated, the numerous intrinsic differences involved in their respective operations and
requirements, cost structures and investment needs render it highly inappropriate to use
petroleum operations FTAAs as benchmarks for mining FTAAs. Verily, we cannot just ignore the
realities of the distinctly different situations and stubbornly insist on the "minimum 60 percent."

The Mining and the Oil Industries

Different From Each Other
To stress, there is no independent showing that the taking of at least a 60 percent share in the
after-tax income of a mining company operated by a foreign contractor is fair and reasonable
under most if not all circumstances. The fact that some petroleum companies like Shell acceded
to such percentage of sharing does not ipso facto mean that it is per se reasonable and
applicable to non-petroleum situations (that is, mining companies) as well. We can take judicial
notice of the fact that there are, after all, numerous intrinsic differences involved in their
respective operations and equipment or technological requirements, costs structures and capital
investment needs, and product pricing and markets.

There is no showing, for instance, that mining companies can readily cope with a 60 percent
government share in the same way petroleum companies apparently can. What we have is a
suggestion to enforce the 60 percent quota on the basis of a disjointed analogy. The only factor
common to the two disparate situations is the extraction of natural resources.

Indeed, we should take note of the fact that Congress made a distinction between mining firms
and petroleum companies. In Republic Act No. 7729 -- "An Act Reducing the Excise Tax Rates
on Metallic and Non-Metallic Minerals and Quarry Resources, Amending for the Purpose
Section 151(a) of the National Internal Revenue Code, as amended" -- the lawmakers fixed the
excise tax rate on metallic and non-metallic minerals at two percent of the actual market value
of the annual gross output at the time of removal. However, in the case of petroleum, the
lawmakers set the excise tax rate for the first taxable sale at fifteen percent of the fair
international market price thereof.

There must have been a very sound reason that impelled Congress to impose two very
dissimilar excise tax rate. We cannot assume, without proof, that our honorable legislators acted
arbitrarily, capriciously and whimsically in this instance. We cannot just ignore the reality of two
distinctly different situations and stubbornly insist on going "minimum 60 percent."

To repeat, the mere fact that gas and oil exploration contracts grant the State 60 percent of the
net revenues does not necessarily imply that mining contracts should likewise yield a minimum
of 60 percent for the State. Jumping to that erroneous conclusion is like comparing apples with
oranges. The exploration, development and utilization of gas and oil are simply different from
those of mineral resources.

To stress again, the main risk in gas and oil is in the exploration. But once oil in commercial
quantities is struck and the wells are put in place, the risk is relatively over and black gold simply
flows out continuously with comparativelyless need for fresh investments and technology.

On the other hand, even if minerals are found in viable quantities, there is still need
for continuous fresh capital and expertise to dig the mineral ores from the mines. Just because
deposits of mineral ores are found in one area is no guarantee that an equal amount can be
found in the adjacent areas. There are simply continuing risks and need for more capital,
expertise and industry all the time.

Note, however, that the indirect benefits -- apart from the cash revenues -- are much more in the
mineral industry. As mines are explored and extracted, vast employment is created, roads and
other infrastructure are built, and other multiplier effects arise. On the other hand, once oil wells
start producing, there is less need for employment. Roads and other public works need not be
constructed continuously. In fine, there is no basis for saying that government revenues from
the oil industry and from the mineral industries are to be identical all the time.

Fourth, to our mind, the proffered "minimum 60 percent" suggestion tends to limit the flexibility
and tie the hands of government, ultimately hampering the country's competitiveness in the
international market, to the detriment of the Filipino people. This "you-have-to-give-us-60-
percent-of-after-tax-income-or-we-don't-do- business-with-you" approach is quite perilous. True,
this situation may not seem too unpalatable to the foreign contractor during good years, when
international market prices are up and the mining firm manages to keep its costs in check.
However, under unfavorable economic and business conditions, with costs spiraling skywards
and minerals prices plummeting, a mining firm may consider itself lucky to make just minimal
profits.
The inflexible, carved-in-granite demand for a 60 percent government share may spell the end
of the mining venture, scare away potential investors, and thereby further worsen the already
dismal economic scenario. Moreover, such an unbending or unyielding policy prevents the
government from responding appropriately to changing economic conditions and shifting market
forces. This inflexibility further renders our country less attractive as an investment option
compared with other countries.

And fifth, for this Court to decree imperiously that the government's share should be not less
than 60 percent of the after-tax income of FTAA contractors at all times is nothing short of
dictating upon the government. The result, ironically, is that the State ends up losing control. To
avoid compromising the State's full control and supervision over the exploitation of mineral
resources, this Court must back off from insisting upon a "minimum 60 percent" rule. It is
sufficient that the State has the power and means, should it so decide, to get a 60 percent share
(or more) in the contractor's net mining revenues or after-tax income, or whatever other basis
the government may decide to use in reckoning its share. It is not necessary for it to do so in
every case, regardless of circumstances.

In fact, the government must be trusted, must be accorded the liberty and the utmost flexibility
to deal, negotiate and transact with contractors and third parties as it sees fit; and upon terms
that it ascertains to be most favorable or most acceptable under the circumstances, even if it
means agreeing to less than 60 percent. Nothing must prevent the State from agreeing to a
share less than that, should it be deemed fit; otherwise the State will be deprived of full control
over mineral exploitation that the Charter has vested in it.

To stress again, there is simply no constitutional or legal provision fixing the minimum share of
the government in an FTAA at 60 percent of the net profit. For this Court to decree such
minimum is to wade into judicial legislation, and thereby inordinately impinge on the control
power of the State. Let it be clear: the Court is not against the grant of more benefits to the
State; in fact, the more the better. If during the FTAA negotiations, the President can secure 60
percent,78 or even 90 percent, then all the better for our people. But, if under the peculiar
circumstances of a specific contract, the President could secure only 50 percent or 55 percent,
so be it. Needless to say, the President will have to report (and be responsible for) the specific
FTAA to Congress, and eventually to the people.

Finally, if it should later be found that the share agreed to is grossly disadvantageous to the
government, the officials responsible for entering into such a contract on its behalf will have to
answer to the courts for their malfeasance. And the contract provision voided. But this Court
would abuse its own authority should it force the government's hand to adopt the 60 percent
demand of some of our esteemed colleagues.

Capital and Expertise Provided,

Yet All Risks Assumed by Contractor

Here, we will repeat what has not been emphasized and appreciated enough: the fact that the
contractor in an FTAA provides all the needed capital, technical and managerial expertise, and
technology required to undertake the project.

In regard to the WMCP FTAA, the then foreign-owned WMCP as contractor committed, at the
very outset, to make capital investments of up to US$50 million in that single mining project.
WMCP claims to have already poured in well over P800 million into the country as of February
1998, with more in the pipeline. These resources, valued in the tens or hundreds of millions of
dollars, are invested in a mining project that provides no assurance whatsoever that any part of
the investment will be ultimately recouped.

At the same time, the contractor must comply with legally imposed environmental standards and
the social obligations, for which it also commits to make significant expenditures of funds.
Throughout, the contractor assumes all the risks79 of the business, as mentioned earlier. These
risks are indeed very high, considering that the rate of success in exploration is extremely low.
The probability of finding any mineral or petroleum in commercially viable quantities is estimated
to be about 1:1,000 only. On that slim chance rides the contractor's hope of recouping
investments and generating profits. And when the contractor has recouped its initial investments
in the project, the government share increases to sixty percent of net benefits -- without the
State ever being in peril of incurring costs, expenses and losses.

And even in the worst possible scenario -- an absence of commercial quantities of minerals to
justify development -- the contractor would already have spent several million pesos for
exploration works, before arriving at the point in which it can make that determination and
decide to cut its losses. In fact, during the first year alone of the exploration period, the
contractor was already committed to spend not less than P24 million. The FTAA therefore
clearly ensures benefits for the local economy, courtesy of the contractor.

All in all, this setup cannot be regarded as disadvantageous to the State or the Filipino
people; it certainly cannot be said to convey beneficial ownership of our mineral
resources to foreign contractors.

Deductions Allowed by the

WMCP FTAA Reasonable

Petitioners question whether the State's weak control might render the sharing arrangements
ineffective. They cite the so-called "suspicious" deductions allowed by the WMCP FTAA in
arriving at the net mining revenue, which is the basis for computing the government share. The
WMCP FTAA, for instance, allows expenditures for "development within and outside the
Contract Area relating to the Mining Operations,"80 "consulting fees incurred both inside
and outside the Philippines for work related directly to the Mining Operations,"81 and "the
establishment and administration of field offices including administrative overheads incurred
within and outside the Philippines which are properly allocatable to the Mining Operations and
reasonably related to the performance of the Contractor's obligations and exercise of its rights
under this Agreement."82

It is quite well known, however, that mining companies do perform some marketing activities
abroad in respect of selling their mineral products and by-products. Hence, it would not be
improper to allow the deduction of reasonable consulting fees incurred abroad, as well as
administrative expenses and overheads related to marketing offices also located abroad --
provided that these deductions are directly related or properly allocatable to the mining
operations and reasonably related to the performance of the contractor's obligations and
exercise of its rights. In any event, more facts are needed. Until we see how these provisions
actually operate, mere "suspicions" will not suffice to propel this Court into taking action.

Section 7.9 of the WMCP FTAA

Invalid and Disadvantageous

Having defended the WMCP FTAA, we shall now turn to two defective provisos. Let us start
with Section 7.9 of the WMCP FTAA. While Section 7.7 gives the government a 60 percent
share in the net mining revenues of WMCP from the commencement of commercial production,
Section 7.9 deprives the government of part or all of the said 60 percent. Under the latter
provision, should WMCP's foreign shareholders -- who originally owned 100 percent of the
equity -- sell 60 percent or more of its outstanding capital stock to a Filipino citizen or
corporation, the State loses its right to receive its 60 percent share in net mining revenues under
Section 7.7.

Section 7.9 provides:

The percentage of Net Mining Revenues payable to the Government pursuant to Clause
7.7 shall be reduced by 1percent of Net Mining Revenues for every 1percent ownership
interest in the Contractor (i.e., WMCP) held by a Qualified Entity.83

Evidently, what Section 7.7 grants to the State is taken away in the next breath by Section
7.9 without any offsetting compensation to the State. Thus, in reality, the State has no vested
right to receive any income from the FTAA for the exploitation of its mineral resources. Worse, it
would seem that what is given to the State in Section 7.7 is by mere tolerance of WMCP's
foreign stockholders, who can at any time cut off the government's entire 60 percent share.
They can do so by simply selling 60 percent of WMCP's outstanding capital stock to a Philippine
citizen or corporation. Moreover, the proceeds of such sale will of course accrue to the foreign
stockholders of WMCP, not to the State.

The sale of 60 percent of WMCP's outstanding equity to a corporation that is 60 percent Filipino-
owned and 40 percent foreign-owned will still trigger the operation of Section 7.9. Effectively,
the State will lose its right to receive all 60 percent of the net mining revenues of WMCP;
and foreign stockholders will own beneficially up to 64 percent of WMCP, consisting of the
remaining 40 percent foreign equity therein, plus the 24 percent pro-rata share in the buyer-
corporation.84

In fact, the January 23, 2001 sale by WMCP's foreign stockholder of the entire outstanding
equity in WMCP to Sagittarius Mines, Inc. -- a domestic corporation at least 60 percent Filipino
owned -- may be deemed to have automatically triggered the operation of Section 7.9, without
need of further action by any party, and removed the State's right to receive the 60 percent
share in net mining revenues.

At bottom, Section 7.9 has the effect of depriving the State of its 60 percent share in the net
mining revenues of WMCP without any offset or compensation whatsoever. It is possible that
the inclusion of the offending provision was initially prompted by the desire to provide some form
of incentive for the principal foreign stockholder in WMCP to eventually reduce its equity
position and ultimately divest in favor of Filipino citizens and corporations. However, as finally
structured, Section 7.9 has the deleterious effect of depriving government of the entire 60
percent share in WMCP's net mining revenues, without any form of compensation whatsoever.
Such an outcome is completely unacceptable.

The whole point of developing the nation's natural resources is to benefit the Filipino people,
future generations included. And the State as sovereign and custodian of the nation's natural
wealth is mandated to protect, conserve, preserve and develop that part of the national
patrimony for their benefit. Hence, the Charter lays great emphasis on "real contributions to the
economic growth and general welfare of the country"85 as essential guiding principles to be kept
in mind when negotiating the terms and conditions of FTAAs.

Earlier, we held (1) that the State must be accorded the liberty and the utmost flexibility to deal,
negotiate and transact with contractors and third parties as it sees fit, and upon terms that it
ascertains to be most favorable or most acceptable under the circumstances, even if that should
mean agreeing to less than 60 percent; (2) that it is not necessary for the State to extract a 60
percent share in every case and regardless of circumstances; and (3) that should the State be
prevented from agreeing to a share less than 60 percent as it deems fit, it will be deprived of the
full control over mineral exploitation that the Charter has vested in it.

That full control is obviously not an end in itself; it exists and subsists precisely because of the
need to serve and protect the national interest. In this instance, national interest finds particular
application in the protection of the national patrimony and the development and exploitation of
the country's mineral resources for the benefit of the Filipino people and the enhancement of
economic growth and the general welfare of the country. Undoubtedly, such full control can
be misused and abused, as we now witness.

Section 7.9 of the WMCP FTAA effectively gives away the State's share of net mining revenues
(provided for in Section 7.7) without anything in exchange. Moreover, this outcome
constitutes unjust enrichment on the part of the local and foreign stockholders of WMCP. By
their mere divestment of up to 60 percent equity in WMCP in favor of Filipino citizens and/or
corporations, the local and foreign stockholders get a windfall. Their share in the net mining
revenues of WMCP is automatically increased, without their having to pay the government
anything for it. In short, the provision in question is without a doubt grossly disadvantageous to
the government, detrimental to the interests of the Filipino people, and violative of public policy.

Moreover, it has been reiterated in numerous decisions86 that the parties to a contract may
establish any agreements, terms and conditions that they deem convenient; but these should
not be contrary to law, morals, good customs, public order or public policy.87 Being precisely
violative of anti-graft provisions and contrary to public policy, Section 7.9 must therefore be
stricken off as invalid.
Whether the government officials concerned acceded to that provision by sheer mistake or with
full awareness of the ill consequences, is of no moment. It is hornbook doctrine that the principle
of estoppel does not operate against the government for the act of its agents,88 and that it is
never estopped by any mistake or error on their part.89 It is therefore possible and proper to
rectify the situation at this time. Moreover, we may also say that the FTAA in question does not
involve mere contractual rights; being impressed as it is with public interest, the contractual
provisions and stipulations must yield to the common good and the national interest.

Since the offending provision is very much separable90 from Section 7.7 and the rest of the
FTAA, the deletion of Section 7.9 can be done without affecting or requiring the invalidation of
the WMCP FTAA itself. Such a deletion will preserve for the government its due share of the
benefits. This way, the mandates of the Constitution are complied with and the interests of the
government fully protected, while the business operations of the contractor are not needlessly
disrupted.

Section 7.8(e) of the WMCP FTAA

Also Invalid and Disadvantageous

Section 7.8(e) of the WMCP FTAA is likewise invalid. It provides thus:

"7.8 The Government Share shall be deemed to include all of the following sums:

"(a) all Government taxes, fees, levies, costs, imposts, duties and royalties
including excise tax, corporate income tax, customs duty, sales tax, value added
tax, occupation and regulatory fees, Government controlled price stabilization
schemes, any other form of Government backed schemes, any tax on dividend
payments by the Contractor or its Affiliates in respect of revenues from the
Mining Operations and any tax on interest on domestic and foreign loans or other
financial arrangements or accommodations, including loans extended to the
Contractor by its stockholders;

"(b) any payments to local and regional government, including taxes, fees, levies,
costs, imposts, duties, royalties, occupation and regulatory fees and
infrastructure contributions;

"(c) any payments to landowners, surface rights holders, occupiers, indigenous

people or Claimowners;

"(d) costs and expenses of fulfilling the Contractor's obligations to contribute to

national development in accordance with Clause 10.1(i) (1) and 10.1(i) (2);

"(e) an amount equivalent to whatever benefits that may be extended in the

future by the Government to the Contractor or to financial or technical assistance
agreement contractors in general;

"(f) all of the foregoing items which have not previously been offset against the
Government Share in an earlier Fiscal Year, adjusted for inflation." (underscoring
supplied)

Section 7.8(e) is out of place in the FTAA. It makes no sense why, for instance, money spent by
the government for the benefit of the contractor in building roads leading to the mine site should
still be deductible from the State's share in net mining revenues. Allowing this deduction results
in benefiting the contractor twice over. It constitutes unjust enrichment on the part of the
contractor at the expense of the government, since the latter is effectively being made to pay
twice for the same item.91 For being grossly disadvantageous and prejudicial to the government
and contrary to public policy, Section 7.8(e) is undoubtedly invalid and must be declared to be
without effect. Fortunately, this provision can also easily be stricken off without affecting the rest
of the FTAA.

Nothing Left Over

After Deductions?
In connection with Section 7.8, an objection has been raised: Specified in Section 7.8 are
numerous items of deduction from the State's 60 percent share. After taking these into account,
will the State ever receive anything for its ownership of the mineral resources?

We are confident that under normal circumstances, the answer will be yes. If we examine the
various items of "deduction" listed in Section 7.8 of the WMCP FTAA, we will find that they
correspond closely to the components or elements of the basic government share established
in DAO 99-56, as discussed in the earlier part of this Opinion.

Likewise, the balance of the government's 60 percent share -- after netting out the items of
deduction listed in Section 7.8 --corresponds closely to the additional government
share provided for in DAO 99-56 which, we once again stress, has nothing at all to do with
indirect taxes. The Ramos-DeVera paper92 concisely presents the fiscal contribution of an FTAA
under DAO 99-56 in this equation:

Receipts from an FTAA = basic gov't share + add'l gov't share

Transposed into a similar equation, the fiscal payments system from the WMCP FTAA assumes
the following formulation:

Government's 60 percent share in net mining revenues of WMCP = items listed in Sec.
7.8 of the FTAA + balance of Gov't share, payable 4 months from the end of the fiscal
year

It should become apparent that the fiscal arrangement under the WMCP FTAA is very similar to
that under DAO 99-56, with the "balance of government share payable 4 months from end of
fiscal year" being the equivalent of the additional government share computed in accordance
with the "net-mining-revenue-based option" under DAO 99-56, as discussed above. As we have
emphasized earlier, we find each of the three options for computing the additional government
share -- as presented in DAO 99-56 -- to be sound and reasonable.

We therefore conclude that there is nothing inherently wrong in the fiscal regime of the
WMCP FTAA, and certainly nothing to warrant the invalidation of the FTAA in its entirety.

Section 3.3 of the WMCP

FTAA Constitutional

Section 3.3 of the WMCP FTAA is assailed for violating supposed constitutional restrictions on
the term of FTAAs. The provision in question reads:

"3.3 This Agreement shall be renewed by the Government for a further period of twenty-
five (25) years under the same terms and conditions provided that the Contractor lodges
a request for renewal with the Government not less than sixty (60) days prior to the
expiry of the initial term of this Agreement and provided that the Contractor is not in
breach of any of the requirements of this Agreement."

Allegedly, the above provision runs afoul of Section 2 of Article XII of the 1987 Constitution,
which states:

"Sec. 2. All lands of the public domain, waters, 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. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture or production-sharing agreements with Filipino citizens
or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for irrigation, water
 supply, fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.

"The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.

"The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays and lagoons.

"The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources.

"The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution."93

We hold that the term limitation of twenty-five years does not apply to FTAAs. The reason is that
the above provision is found within paragraph 1 of Section 2 of Article XII, which refers to
mineral agreements -- co-production agreements, joint venture agreements and mineral
production-sharing agreements -- which the government may enter into with Filipino citizens and
corporations, at least 60 percent owned by Filipino citizens. The word "such" clearly refers to
these three mineral agreements -- CPAs, JVAs and MPSAs -- not to FTAAs.

Specifically, FTAAs are covered by paragraphs 4 and 5 of Section 2 of Article XII of the
Constitution. It will be noted that there are no term limitations provided for in the said
paragraphs dealing with FTAAs. This shows that FTAAs are sui generis, in a class of their own.
This omission was obviously a deliberate move on the part of the framers. They probably
realized that FTAAs would be different in many ways from MPSAs, JVAs and CPAs. The reason
the framers did not fix term limitations applicable to FTAAs is that they preferred to leave the
matter to the discretion of the legislature and/or the agencies involved in implementing the laws
pertaining to FTAAs, in order to give the latter enough flexibility and elbow room to meet
changing circumstances.

Note also that, as previously stated, the exploratory phrases of an FTAA lasts up to eleven
years. Thereafter, a few more years would be gobbled up in start-up operations. It may take
fifteen years before an FTAA contractor can start earning profits. And thus, the period of 25
years may really be short for an FTAA. Consider too that in this kind of agreement, the
contractor assumes all entrepreneurial risks. If no commercial quantities of minerals are found,
the contractor bears all financial losses. To compensate for this long gestation period and extra
business risks, it would not be totally unreasonable to allow it to continue EDU activities for
another twenty five years.

In any event, the complaint is that, in essence, Section 3.3 gives the contractor the power to
compel the government to renew the WMCP FTAA for another 25 years and deprives the State
of any say on whether to renew the contract.

While we agree that Section 3.3 could have been worded so as to prevent it from favoring the
contractor, this provision does not violate any constitutional limits, since the said term limitation
does not apply at all to FTAAs. Neither can the provision be deemed in any manner to be illegal,
as no law is being violated thereby. It is certainly not illegal for the government to waive its
option to refuse the renewal of a commercial contract.

Verily, the government did not have to agree to Section 3.3. It could have said "No" to the
stipulation, but it did not. It appears that, in the process of negotiations, the other contracting
party was able to convince the government to agree to the renewal terms. Under the
circumstances, it does not seem proper for this Court to intervene and step in to undo what
might have perhaps been a possible miscalculation on the part of the State. If government
believes that it is or will be aggrieved by the effects of Section 3.3, the remedy is the
renegotiation of the provision in order to provide the State the option to not renew the FTAA.

Financial Benefits for Foreigners

Not Forbidden by the Constitution

Before leaving this subject matter, we find it necessary for us to rid ourselves of the false belief
that the Constitution somehow forbids foreign-owned corporations from deriving financial
benefits from the development of our natural or mineral resources.

The Constitution has never prohibited foreign corporations from acquiring and enjoying
"beneficial interest" in the development of Philippine natural resources. The State itself need not
directly undertake exploration, development, and utilization activities. Alternatively, the
Constitution authorizes the government to enter into joint venture agreements (JVAs), co-
production agreements (CPAs) and mineral production sharing agreements (MPSAs) with
contractors who are Filipino citizens or corporations that are at least 60 percent Filipino-owned.
They may do the actual "dirty work" -- the mining operations.

In the case of a 60 percent Filipino-owned corporation, the 40 percent individual and/or

corporate non-Filipino stakeholders obviously participate in the beneficial interest derived from
the development and utilization of our natural resources. They may receive by way of dividends,
up to 40 percent of the contractor's earnings from the mining project. Likewise, they may have a
say in the decisions of the board of directors, since they are entitled to representation therein to
the extent of their equity participation, which the Constitution permits to be up to 40 percent of
the contractor's equity. Hence, the non-Filipino stakeholders may in that manner also participate
in the management of the contractor's natural resource development work. All of this is
permitted by our Constitution, for any natural resource, and without limitation even in regard to
the magnitude of the mining project or operations (see paragraph 1 of Section 2 of Article XII).

It is clear, then, that there is nothing inherently wrong with or constitutionally objectionable about
the idea of foreign individuals and entities having or enjoying "beneficial interest" in -- and
participating in the management of operations relative to -- the exploration, development and
utilization of our natural resources.

FTAA More Advantageous

Than Other Schemes
Like CPA, JVA and MPSA

A final point on the subject of beneficial interest. We believe the FTAA is a more advantageous
proposition for the government as compared with other agreements permitted by the
Constitution. In a CPA that the government enters into with one or more contractors, the
government shall provide inputs to the mining operations other than the mineral resource
itself.94

In a JVA, a JV company is organized by the government and the contractor, with both parties
having equity shares (investments); and the contractor is granted the exclusive right to conduct
mining operations and to extract minerals found in the area.95 On the other hand, in an MPSA,
the government grants the contractor the exclusive right to conduct mining operations within the
contract area and shares in the gross output; and the contractor provides the necessary
financing, technology, management and manpower.

The point being made here is that, in two of the three types of agreements under consideration,
the government has to ante up some risk capital for the enterprise. In other words, government
funds (public moneys) are withdrawn from other possible uses, put to work in the venture
and placed at risk in case the venture fails. This notwithstanding, management and control of
the operations of the enterprise are -- in all three arrangements -- in the hands of the contractor,
with the government being mainly a silent partner. The three types of agreement mentioned
above apply to any natural resource, without limitation and regardless of the size or magnitude
of the project or operations.
In contrast to the foregoing arrangements, and pursuant to paragraph 4 of Section 2 of Article
XII, the FTAA is limited to large-scale projects and only for minerals, petroleum and other
mineral oils. Here, the Constitution removes the 40 percent cap on foreign ownership and allows
the foreign corporation to own up to 100 percent of the equity. Filipino capital may not be
sufficient on account of the size of the project, so the foreign entity may have to ante up all the
risk capital.

Correlatively, the foreign stakeholder bears up to 100 percent of the risk of loss if the project
fails. In respect of the particular FTAA granted to it, WMCP (then 100 percent foreign owned)
was responsible, as contractor, for providing the entire equity, including all the inputs for the
project. It was to bear 100 percent of the risk of loss if the project failed, but its maximum
potential "beneficial interest" consisted only of 40 percent of the net beneficial interest, because
the other 60 percent is the share of the government, which will never be exposed to any risk of
loss whatsoever.

In consonance with the degree of risk assumed, the FTAA vested in WMCP the day-to-day
management of the mining operations. Still such management is subject to the overall control
and supervision of the State in terms of regular reporting, approvals of work programs and
budgets, and so on.

So, one needs to consider in relative terms, the costs of inputs for, degree of risk attendant to,
and benefits derived or to be derived from a CPA, a JVA or an MPSA vis-à-vis those pertaining
to an FTAA. It may not be realistically asserted that the foreign grantee of an FTAA is being
unduly favored or benefited as compared with a foreign stakeholder in a corporation holding a
CPA, a JVA or an MPSA. Seen the other way around, the government is definitely better off with
an FTAA than a CPA, a JVA or an MPSA.

Developmental Policy on the Mining Industry

During the Oral Argument and in their Final Memorandum, petitioners repeatedly urged the
Court to consider whether mining as an industry and economic activity deserved to be accorded
priority, preference and government support as against, say, agriculture and other activities in
which Filipinos and the Philippines may have an "economic advantage." For instance, a recent
US study96 reportedly examined the economic performance of all local US counties that were
dependent on mining and 20 percent of whose labor earnings between 1970 and 2000 came
from mining enterprises.

The study -- covering 100 US counties in 25 states dependent on mining -- showed that per
capita income grew about 30 percent less in mining-dependent communities in the 1980s and
25 percent less for the entire period 1980 to 2000; the level of per capita income was also lower.
Therefore, given the slower rate of growth, the gap between these and other local counties
increased.

Petitioners invite attention to the OXFAM America Report's warning to developing nations that
mining brings with it serious economic problems, including increased regional inequality,
unemployment and poverty. They also cite the final report97 of the Extractive Industries Review
project commissioned by the World Bank (the WB-EIR Report), which warns of environmental
degradation, social disruption, conflict, and uneven sharing of benefits with local communities
that bear the negative social and environmental impact. The Report suggests that countries
need to decide on the best way to exploit their natural resources, in order to maximize the value
added from the development of their resources and ensure that they are on the path to
sustainable development once the resources run out.

Whatever priority or preference may be given to mining vis-à-vis other economic or non-
economic activities is a question of policy that the President and Congress will have to address;
it is not for this Court to decide. This Court declares what the Constitution and the laws say,
interprets only when necessary, and refrains from delving into matters of policy.

Suffice it to say that the State control accorded by the Constitution over mining activities
assures a proper balancing of interests. More pointedly, such control will enable the President to
demand the best mining practices and the use of the best available technologies to protect the
environment and to rehabilitate mined-out areas. Indeed, under the Mining Law, the government
can ensure the protection of the environment during and after mining. It can likewise provide for
the mechanisms to protect the rights of indigenous communities, and thereby mold a more
socially-responsive, culturally-sensitive and sustainable mining industry.

Early on during the launching of the Presidential Mineral Industry Environmental Awards on
February 6, 1997, then President Fidel V. Ramos captured the essence of balanced and
sustainable mining in these words:

"Long term, high profit mining translates into higher revenues for government, more
decent jobs for the population, more raw materials to feed the engines of downstream
and allied industries, and improved chances of human resource and countryside
development by creating self-reliant communities away from urban centers.

xxxxxxxxx

"Against a fragile and finite environment, it is sustainability that holds the key. In
sustainable mining, we take a middle ground where both production and protection goals
are balanced, and where parties-in-interest come to terms."

Neither has the present leadership been remiss in addressing the concerns of sustainable
mining operations. Recently, on January 16, 2004 and April 20, 2004, President Gloria
Macapagal Arroyo issued Executive Orders Nos. 270 and 270-A, respectively, "to
promote responsible mineral resources exploration, development and utilization, in order to
enhance economic growth, in a manner that adheres to the principles of sustainable
development and with due regard for justice and equity, sensitivity to the culture of the Filipino
people and respect for Philippine sovereignty."98

REFUTATION OF DISSENTS

The Court will now take up a number of other specific points raised in the dissents of Justices
Carpio and Morales.

1. Justice Morales introduced us to Hugh Morgan, former president and chief executive officer
of Western Mining Corporation (WMC) and former president of the Australian Mining Industry
Council, who spearheaded the vociferous opposition to the filing by aboriginal peoples of native
title claims against mining companies in Australia in the aftermath of the
landmark Mabo decision by the Australian High Court. According to sources quoted by our
esteemed colleague, Morgan was also a racist and a bigot. In the course of
protesting Mabo, Morgan allegedly uttered derogatory remarks belittling the aboriginal culture
and race.

An unwritten caveat of this introduction is that this Court should be careful not to permit the
entry of the likes of Hugh Morgan and his hordes of alleged racist-bigots at WMC. With all due
respect, such scare tactics should have no place in the discussion of this case. We are
deliberating on the constitutionality of RA 7942, DAO 96-40 and the FTAA originally granted to
WMCP, which had been transferred to Sagittarius Mining, a Filipino corporation. We are not
discussing the apparition of white Anglo-Saxon racists/bigots massing at our gates.

2. On the proper interpretation of the phrase agreements involving either technical or financial
assistance, Justice Morales points out that at times we "conveniently omitted" the use of the
disjunctive either…or, which according to her denotes restriction; hence the phrase must be
deemed to connote restriction and limitation.

But, as Justice Carpio himself pointed out during the Oral Argument, the disjunctive
phrase either technical or financial assistance would, strictly speaking, literally mean that a
foreign contractor may provide only one or the other, but not both. And if both technical and
financial assistance were required for a project, the State would have to deal with at least two
different foreign contractors -- one for financial and the other for technical assistance. And
following on that, a foreign contractor, though very much qualified to provide both kinds of
assistance, would nevertheless be prohibited from providing one kind as soon as it shall have
agreed to provide the other.

But if the Court should follow this restrictive and literal construction, can we really find two (or
more) contractors who are willing to participate in one single project -- one to provide the
"financial assistance" only and the other the "technical assistance" exclusively; it would be
excellent if these two or more contractors happen to be willing and are able to cooperate and
work closely together on the same project (even if they are otherwise competitors). And it would
be superb if no conflicts would arise between or among them in the entire course of the
contract. But what are the chances things will turn out this way in the real world? To think that
the framers deliberately imposed this kind of restriction is to say that they were either
exceedingly optimistic, or incredibly naïve. This begs the question -- What laudable objective or
purpose could possibly be served by such strict and restrictive literal interpretation?

3. Citing Oposa v. Factoran Jr., Justice Morales claims that a service contract is not a contract
or property right which merits protection by the due process clause of the Constitution, but
merely a license or privilege which may be validly revoked, rescinded or withdrawn by executive
action whenever dictated by public interest or public welfare.

Oposa cites Tan v. Director of Forestry and Ysmael v. Deputy Executive Secretary as authority.
The latter cases dealt specifically with timber licenses only. Oposa allegedly reiterated that a
license is merely a permit or privilege to do what otherwise would be unlawful, and is not a
contract between the authority, federal, state or municipal, granting it and the person to whom it
is granted; neither is it property or a property right, nor does it create a vested right; nor is it
taxation. Thus this Court held that the granting of license does not create irrevocable rights,
neither is it property or property rights.

Should Oposa be deemed applicable to the case at bar, on the argument that natural resources
are also involved in this situation? We do not think so. A grantee of a timber license, permit or
license agreement gets to cut the timber already growing on the surface; it need not dig up tons
of earth to get at the logs. In a logging concession, the investment of the licensee is not as
substantial as the investment of a large-scale mining contractor. If a timber license were
revoked, the licensee packs up its gear and moves to a new area applied for, and starts over;
what it leaves behind are mainly the trails leading to the logging site.

In contrast, the mining contractor will have sunk a great deal of money (tens of millions of
dollars) into the ground, so to speak, for exploration activities, for development of the mine site
and infrastructure, and for the actual excavation and extraction of minerals, including the
extensive tunneling work to reach the ore body. The cancellation of the mining contract will
utterly deprive the contractor of its investments (i.e., prevent recovery of investments), most of
which cannot be pulled out.

To say that an FTAA is just like a mere timber license or permit and does not involve contract or
property rights which merit protection by the due process clause of the Constitution, and may
therefore be revoked or cancelled in the blink of an eye, is to adopt a well-nigh confiscatory
stance; at the very least, it is downright dismissive of the property rights of businesspersons and
corporate entities that have investments in the mining industry, whose investments, operations
and expenditures do contribute to the general welfare of the people, the coffers of government,
and the strength of the economy. Such a pronouncement will surely discourage investments
(local and foreign) which are critically needed to fuel the engine of economic growth and move
this country out of the rut of poverty. In sum, Oposa is not applicable.

4. Justice Morales adverts to the supposedly "clear intention" of the framers of the Constitution
to reserve our natural resources exclusively for the Filipino people. She then quoted from the
records of the ConCom deliberations a passage in which then Commissioner Davide explained
his vote, arguing in the process that aliens ought not be allowed to participate in the enjoyment
of our natural resources. One passage does not suffice to capture the tenor or substance of the
entire extensive deliberations of the commissioners, or to reveal the clear intention of the
framers as a group. A re-reading of the entire deliberations (quoted here earlier) is necessary if
we are to understand the true intent of the framers.
5. Since 1935, the Filipino people, through their Constitution, have decided that the retardation
or delay in the exploration, development or utilization of the nation's natural resources is merely
secondary to the protection and preservation of their ownership of the natural resources, so
says Justice Morales, citing Aruego. If it is true that the framers of the 1987 Constitution did not
care much about alleviating the retardation or delay in the development and utilization of our
natural resources, why did they bother to write paragraph 4 at all? Were they merely paying lip
service to large-scale exploration, development and utilization? They could have just completely
ignored the subject matter and left it to be dealt with through a future constitutional amendment.
But we have to harmonize every part of the Constitution and to interpret each provision in a
manner that would give life and meaning to it and to the rest of the provisions. It is obvious that
a literal interpretation of paragraph 4 will render it utterly inutile and inoperative.

6. According to Justice Morales, the deliberations of the Constitutional Commission do not

support our contention that the framers, by specifying such agreements involving financial or
technical assistance, necessarily gave implied assent to everything that these agreements
implicitly entailed, or that could reasonably be deemed necessary to make them tenable and
effective, including management authority in the day-to-day operations. As proof thereof, she
quotes one single passage from the ConCom deliberations, consisting of an exchange among
Commissioners Tingson, Garcia and Monsod.

However, the quoted exchange does not serve to contradict our argument; it even bolsters it.
Comm. Christian Monsod was quoted as saying: "xxx I think we have to make a distinction that
it is not really realistic to say that we will borrow on our own terms. Maybe we can say that we
inherited unjust loans, and we would like to repay these on terms that are not prejudicial to our
own growth. But the general statement that we should only borrow on our own terms is a bit
unrealistic." Comm. Monsod is one who knew whereof he spoke.

7. Justice Morales also declares that the optimal time for the conversion of an FTAA into an
MPSA is after completion of the exploration phase and just before undertaking the development
and construction phase, on account of the fact that the requirement for a minimum investment of
$50 million is applicable only during the development, construction and utilization phase, but not
during the exploration phase, when the foreign contractor need merely comply with minimum
ground expenditures. Thus by converting, the foreign contractor maximizes its profits by
avoiding its obligation to make the minimum investment of $50 million.

This argument forgets that the foreign contractor is in the game precisely to make money. In
order to come anywhere near profitability, the contractor must first extract and sell the mineral
ore. In order to do that, it must also develop and construct the mining facilities, set up its
machineries and equipment and dig the tunnels to get to the deposit. The contractor is thus
compelled to expend funds in order to make profits. If it decides to cut back on investments and
expenditures, it will necessarily sacrifice the pace of development and utilization; it will
necessarily sacrifice the amount of profits it can make from the mining operations. In fact, at
certain less-than-optimal levels of operation, the stream of revenues generated may not even be
enough to cover variable expenses, let alone overhead expenses; this is a dismal situation
anyone would want to avoid. In order to make money, one has to spend money. This truism
applies to the mining industry as well.

8. Mortgaging the minerals to secure a foreign FTAA contractor's obligations is anomalous,

according to Justice Morales since the contractor was from the beginning obliged to provide all
financing needed for the mining operations. However, the mortgaging of minerals by the
contractor does not necessarily signify that the contractor is unable to provide all financing
required for the project, or that it does not have the financial capability to undertake large-scale
operations. Mortgaging of mineral products, just like the assignment (by way of security) of
manufactured goods and goods in inventory, and the assignment of receivables, is an ordinary
requirement of banks, even in the case of clients with more than sufficient financial resources.
And nowadays, even the richest and best managed corporations make use of bank credit
facilities -- it does not necessarily signify that they do not have the financial resources or are
unable to provide the financing on their own; it is just a manner of maximizing the use of their
funds.
9. Does the contractor in reality acquire the surface rights "for free," by virtue of the fact that it is
entitled to reimbursement for the costs of acquisition and maintenance, adjusted for inflation?
We think not. The "reimbursement" is possible only at the end of the term of the contract, when
the surface rights will no longer be needed, and the land previously acquired will have to be
disposed of, in which case the contractor gets reimbursement from the sales proceeds. The
contractor has to pay out the acquisition price for the land. That money will belong to the seller
of the land. Only if and when the land is finally sold off will the contractor get any
reimbursement. In other words, the contractor will have been cash-out for the entire duration of
the term of the contract -- 25 or 50 years, depending. If we calculate the cost of money at say 12
percent per annum, that is the cost or opportunity loss to the contractor, in addition to the
amount of the acquisition price. 12 percent per annum for 50 years is 600 percent; this, without
any compounding yet. The cost of money is therefore at least 600 percent of the original
acquisition cost; it is in addition to the acquisition cost. "For free"? Not by a long shot.

10. The contractor will acquire and hold up to 5,000 hectares? We doubt it. The acquisition by
the State of land for the contractor is just to enable the contractor to establish its mine site, build
its facilities, establish a tailings pond, set up its machinery and equipment, and dig mine shafts
and tunnels, etc. It is impossible that the surface requirement will aggregate 5,000 hectares.
Much of the operations will consist of the tunneling and digging underground, which will not
require possessing or using any land surface. 5,000 hectares is way too much for the needs of a
mining operator. It simply will not spend its cash to acquire property that it will not need; the
cash may be better employed for the actual mining operations, to yield a profit.

11. Justice Carpio claims that the phrase among other things (found in the second paragraph of
Section 81 of the Mining Act) is being incorrectly treated as a delegation of legislative power to
the DENR secretary to issue DAO 99-56 and prescribe the formulae therein on the State's share
from mining operations. He adds that the phrase among other things was not intended as a
delegation of legislative power to the DENR secretary, much less could it be deemed a valid
delegation of legislative power, since there is nothing in the second paragraph of Section 81
which can be said to grant any delegated legislative power to the DENR secretary. And even if
there were, such delegation would be void, for lack of any standards by which the delegated
power shall be exercised.

While there is nothing in the second paragraph of Section 81 which can directly be construed as
a delegation of legislative power to the DENR secretary, it does not mean that DAO 99-56 is
invalid per se, or that the secretary acted without any authority or jurisdiction in issuing DAO 99-
56. As we stated earlier in our Prologue, "Who or what organ of government actually exercises
this power of control on behalf of the State? The Constitution is crystal clear: the President.
Indeed, the Chief Executive is the official constitutionally mandated to 'enter into agreements
with foreign owned corporations.' On the other hand, Congress may review the action of the
President once it is notified of 'every contract entered into in accordance with this [constitutional]
provision within thirty days from its execution.'"It is the President who is constitutionally
mandated to enter into FTAAs with foreign corporations, and in doing so, it is within the
President's prerogative to specify certain terms and conditions of the FTAAs, for example,
the fiscal regime of FTAAs -- i.e., the sharing of the net mining revenues between the contractor
and the State.

Being the President's alter ego with respect to the control and supervision of the mining
industry, the DENR secretary, acting for the President, is necessarily clothed with the requisite
authority and power to draw up guidelines delineating certain terms and conditions, and
specifying therein the terms of sharing of benefits from mining, to be applicable to FTAAs in
general. It is important to remember that DAO 99-56 has been in existence for almost six years,
and has not been amended or revoked by the President.

The issuance of DAO 99-56 did not involve the exercise of delegated legislative power. The
legislature did not delegate the power to determine the nature, extent and composition of the
items that would come under the phrase among other things. The legislature's power pertains to
the imposition of taxes, duties and fees. This power was not delegated to the DENR secretary.
But the power to negotiate and enter into FTAAs was withheld from Congress, and reserved for
the President. In determining the sharing of mining benefits, i.e., in specifying what the
phrase among other things include, the President (through the secretary acting in his/her behalf)
was not determining the amount or rate of taxes, duties and fees, but rather the amount of
INCOME to be derived from minerals to be extracted and sold, income which belongs to the
State as owner of the mineral resources. We may say that, in the second paragraph of Section
81, the legislature in a sense intruded partially into the President's sphere of authority when the
former provided that

"The Government share in financial or technical assistance agreement shall consist of,
among other things, the contractor's corporate income tax, excise tax, special allowance,
withholding tax due from the contractor's foreign stockholders arising from dividend or
interest payments to the said foreign stockholder in case of a foreign national and all
such other taxes, duties and fees as provided for under existing laws." (Italics supplied)

But it did not usurp the President's authority since the provision merely included the enumerated
items as part of the government share, without foreclosing or in any way preventing (as in fact
Congress could not validly prevent) the President from determining what constitutes the State's
compensation derived from FTAAs. In this case, the President in effect directed the inclusion or
addition of "other things," viz., INCOME for the owner of the resources, in the government's
share, while adopting the items enumerated by Congress as part of the government share also.

12. Justice Carpio's insistence on applying the ejusdem generis rule of statutory construction to
the phrase among other things is therefore useless, and must fall by the wayside. There is no
point trying to construe that phrase in relation to the enumeration of taxes, duties and fees found
in paragraph 2 of Section 81, precisely because "the constitutional power to prescribe the
sharing of mining income between the State and mining companies,"to quote Justice
Carpio pursuant to an FTAA is constitutionally lodged with the President, not with
Congress. It thus makes no sense to persist in giving the phrase among other things a
restricted meaning referring only to taxes, duties and fees.

13. Strangely, Justice Carpio claims that the DENR secretary can change the formulae in DAO
99-56 any time even without the approval of the President, and the secretary is the sole
authority to determine the amount of consideration that the State shall receive in an FTAA,
because Section 5 of the DAO states that "xxx any amendment of an FTAA other than the
provision on fiscal regime shall require the negotiation with the Negotiation Panel and the
recommendation of the Secretary for approval of the President xxx". Allegedly, because of that
provision, if an amendment in the FTAA involves non-fiscal matters, the amendment requires
approval of the President, but if the amendment involves a change in the fiscal regime, the
DENR secretary has the final authority, and approval of the President may be dispensed with;
hence the secretary is more powerful than the President.

We believe there is some distortion resulting from the quoted provision being taken out of
context. Section 5 of DAO 99-56 reads as follows:

"Section 5. Status of Existing FTAAs. All FTAAs approved prior to the effectivity of this
Administrative Order shall remain valid and be recognized by the Government: Provided,
That should a Contractor desire to amend its FTAA, it shall do so by filing a Letter of
Intent (LOI) to the Secretary thru the Director. Provided, further, That if the Contractor
desires to amend the fiscal regime of its FTAA, it may do so by seeking for the
amendment of its FTAA's whole fiscal regime by adopting the fiscal regime provided
hereof: Provided, finally, That any amendment of an FTAA other than the provision on
fiscal regime shall require the negotiation with the Negotiating Panel and the
recommendation of the Secretary for approval of the President of the Republic of the
Philippines." (underscoring supplied)

It looks like another case of misapprehension. The proviso being objected to by Justice Carpio
is actually preceded by a phrase that requires a contractor desiring to amend the fiscal regime
of its FTAA, to amend the same by adopting the fiscal regime prescribed in DAO 99-56 -- i.e.,
solely in that manner, and in no other. Obviously, since DAO 99-56 was issued by the
secretary under the authority and with the presumed approval of the President, the
amendment of an FTAA by merely adopting the fiscal regime prescribed in said DAO 99-
56 (and nothing more) need not have the express clearance of the President anymore. It
is as if the same had been pre-approved. We cannot fathom the complaint that that makes the
secretary more powerful than the President, or that the former is trying to hide things from the
President or Congress.

14. Based on the first sentence of Section 5 of DAO 99-56, which states "[A]ll FTAAs approved
prior to the effectivity of this Administrative Order shall remain valid and be recognized by the
Government", Justice Carpio concludes that said Administrative Order
allegedly exempts FTAAs approved prior to its effectivity -- like the WMCP FTAA -- from having
to pay the State any share from their mining income, apart from taxes, duties and fees.

We disagree. What we see in black and white is the statement that the FTAAs approved before
the DAO came into effect are to continue to be valid and will be recognized by the
State. Nothing is said about their fiscal regimes. Certainly, there is no basis to claim that the
contractors under said FTAAs were being exempted from paying the government a share in
their mining incomes.

For the record, the WMCP FTAA is NOT and has never been exempt from paying the
government share. The WMCP FTAA has its own fiscal regime -- Section 7.7 -- which gives
the government a 60 percent share in the net mining revenues of WMCP from the
commencement of commercial production.

For that very reason, we have never said that DAO 99-56 is the basis for claiming that the
WMCP FTAA has a consideration. Hence, we find quite out of place Justice Carpio's statement
that ironically, DAO 99-56, the very authority cited to support the claim that the WMCP FTAA
has a consideration, does not apply to the WMCP FTAA. By its own express terms, DAO 99-56
does not apply to FTAAs executed before the issuance of DAO 99-56, like the WMCP FTAA.
The majority's position has allegedly no leg to stand on since even DAO 99-56, assuming it is
valid, cannot save the WMCP FTAA from want of consideration. Even assuming arguendo that
DAO 99-56 does not apply to the WMCP FTAA, nevertheless, the WMCP FTAA has its own
fiscal regime, found in Section 7.7 thereof. Hence, there is no such thing as "want of
consideration" here.

Still more startling is this claim: The majority supposedly agrees that the provisions of the
WMCP FTAA, which grant a sham consideration to the State, are void. Since the majority
agrees that the WMCP FTAA has a sham consideration, the WMCP FTAA thus lacks the third
element of a valid contract. The Decision should declare the WMCP FTAA void for want of
consideration unless it treats the contract as an MPSA under Section 80. Indeed the only
recourse of WMCP to save the validity of its contract is to convert it into an MPSA.

To clarify, we said that Sections 7.9 and 7.8(e) of the WMCP FTAA are provisions grossly
disadvantageous to government and detrimental to the interests of the Filipino people, as well
as violative of public policy, and must therefore be stricken off as invalid. Since the offending
provisions are very much separable from Section 7.7 and the rest of the FTAA, the deletion of
Sections 7.9 and 7.8(e) can be done without affecting or requiring the invalidation of the WMCP
FTAA itself, and such deletion will preserve for government its due share of the 60 percent
benefits. Therefore, the WMCP FTAA is NOT bereft of a valid consideration (assuming for the
nonce that indeed this is the "consideration" of the FTAA).

SUMMATION

To conclude, a summary of the key points discussed above is now in order.

The Meaning of "Agreements Involving

Either Technical or Financial Assistance"

Applying familiar principles of constitutional construction to the phrase agreements involving

either technical or financial assistance, the framers' choice of words does not indicate the intent
to exclude other modes of assistance, but rather implies that there are other things being
included or possibly being made part of the agreement, apart from financial or technical
assistance. The drafters avoided the use of restrictive and stringent phraseology; a verba
legis scrutiny of Section 2 of Article XII of the Constitution discloses not even a hint of a desire
to prohibit foreign involvement in the management or operation of mining activities, or
to eradicate service contracts. Such moves would necessarily imply an underlying drastic shift in
fundamental economic and developmental policies of the State. That change requires a much
more definite and irrefutable basis than mere omission of the words "service contract" from the
new Constitution.

Furthermore, a literal and restrictive interpretation of this paragraph leads to logical

inconsistencies. A constitutional provision specifically allowing foreign-owned corporations to
render financial or technical assistance in respect of mining or any other commercial activity
was clearly unnecessary; the provision was meant to refer to more than mere financial or
technical assistance.

Also, if paragraph 4 permits only agreements for financial or technical assistance, there would
be no point in requiring that they be "based on real contributions to the economic growth and
general welfare of the country." And considering that there were various long-term service
contracts still in force and effect at the time the new Charter was being drafted, the absence of
any transitory provisions to govern the termination and closing-out of the then existing service
contracts strongly militates against the theory that the mere omission of "service contracts"
signaled their prohibition by the new Constitution.

Resort to the deliberations of the Constitutional Commission is therefore unavoidable, and a

careful scrutiny thereof conclusively shows that the ConCom members discussed agreements
involving either technical or financial assistance in the same sense as service contracts and
used the terms interchangeably. The drafters in fact knew that the agreements with foreign
corporations were going to entail not mere technical or financial assistance but, rather, foreign
investment in and management of an enterprise for large-scale exploration, development and
utilization of minerals.

The framers spoke about service contracts as the concept was understood in the 1973
Constitution. It is obvious from their discussions that they did not intend to ban or eradicate
service contracts. Instead, they were intent on crafting provisions to put in place safeguards that
would eliminate or minimize the abuses prevalent during the martial law regime. In brief, they
were going to permit service contracts with foreign corporations as contractors, but with
safety measures to prevent abuses, as an exception to the general norm established in
the first paragraph of Section 2 of Article XII, which reserves or limits to Filipino citizens
and corporations at least 60 percent owned by such citizens the exploration,
development and utilization of mineral or petroleum resources. This was prompted by the
perceived insufficiency of Filipino capital and the felt need for foreign expertise in the EDU of
mineral resources.

Despite strong opposition from some ConCom members during the final voting, the Article on
the National Economy and Patrimony -- including paragraph 4 allowing service contracts with
foreign corporations as an exception to the general norm in paragraph 1 of Section 2 of the
same Article -- was resoundingly and overwhelmingly approved.

The drafters, many of whom were economists, academicians, lawyers, businesspersons and
politicians knew that foreign entities will not enter into agreements involving assistance without
requiring measures of protection to ensure the success of the venture and repayment of their
investments, loans and other financial assistance, and ultimately to protect the business
reputation of the foreign corporations. The drafters, by specifying such agreements involving
assistance, necessarily gave implied assent to everything that these agreements entailed or that
could reasonably be deemed necessary to make them tenable and effective -- including
management authority with respect to the day-to-day operations of the enterprise, and
measures for the protection of the interests of the foreign corporation, at least to the extent that
they are consistent with Philippine sovereignty over natural resources, the constitutional
requirement of State control, and beneficial ownership of natural resources remaining vested in
the State.

From the foregoing, it is clear that agreements involving either technical or financial
assistance referred to in paragraph 4 are in fact service contracts, but such new service
contracts are between foreign corporations acting as contractors on the one hand, and on the
other hand government as principal or "owner" (of the works), whereby the foreign contractor
provides the capital, technology and technical know-how, and managerial expertise in the
creation and operation of the large-scale mining/extractive enterprise, and government through
its agencies (DENR, MGB) actively exercises full control and supervision over the entire
enterprise.

Such service contracts may be entered into only with respect to minerals, petroleum and other
mineral oils. The grant of such service contracts is subject to several safeguards, among them:
(1) that the service contract be crafted in accordance with a general law setting standard or
uniform terms, conditions and requirements; (2) the President be the signatory for the
government; and (3) the President report the executed agreement to Congress within thirty
days.

Ultimate Test: Full State Control

To repeat, the primacy of the principle of the State's sovereign ownership of all mineral
resources, and its full control and supervision over all aspects of exploration, development and
utilization of natural resources must be upheld. But "full control and supervision" cannot be
taken literally to mean that the State controls and supervises everything down to the minutest
details and makes all required actions, as this would render impossible the legitimate exercise
by the contractor of a reasonable degree of management prerogative and authority,
indispensable to the proper functioning of the mining enterprise. Also, government need not
micro-manage mining operations and day-to-day affairs of the enterprise in order to be
considered as exercising full control and supervision.

Control, as utilized in Section 2 of Article XII, must be taken to mean a degree of control
sufficient to enable the State 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
government to regulate the conduct of affairs in various enterprises, and restrain activities
deemed not desirable or beneficial, with the end in view of 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 local affected communities. Such a degree of
control would be compatible with permitting the foreign contractor sufficient and reasonable
management authority over the enterprise it has invested in, to ensure efficient and profitable
operation.

Government Granted Full Control

by RA 7942 and DAO 96-40

Baseless are petitioners' sweeping claims that RA 7942 and its Implementing Rules and
Regulations make it possible for FTAA contracts to cede full control and management of mining
enterprises over to fully foreign owned corporations. Equally wobbly is the assertion that the
State is reduced to a passive regulator dependent on submitted plans and reports, with weak
review and audit powers and little say in the decision-making of the enterprise, for which
reasons "beneficial ownership" of the mineral resources is allegedly ceded to the foreign
contractor.

As discussed hereinabove, the State's full control and supervision over mining operations are
ensured through the following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e), (f),
(g), (h), (k), (l), (m) and (o)], 40, 57, 66, 69, 70, and Chapters XI and XVII; as well as the
following provisions of DAO 96-40: Sections7[(d) and (f)], 35(a-2), 53[(a-4) and (d)], 54, 56[(g),
(h), (l), (m) and (n)], 56(2), 60, 66, 144, 168, 171 and 270, and also Chapters XV, XVI and XXIV.

Through the foregoing provisions, the government agencies concerned are empowered to
approve or disapprove -- hence, in a position 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 enterprise. Once they have been
approved, the contractor's compliance with its commitments therein will be monitored. Figures
for mineral production and sales are regularly monitored and subjected to government review, to
ensure that the products and by-products are disposed of at the best prices; copies of sales
agreements have to be submitted to and registered with MGB.
The contractor is mandated to open its books of accounts and records for scrutiny, to enable the
State to determine that the government share has been fully paid. The State may likewise
compel compliance by the contractor with mandatory requirements on mine safety, health and
environmental protection, and the use of anti-pollution technology and facilities. The contractor
is also obligated to assist the development of the mining community, and pay royalties to the
indigenous peoples concerned. And violation of any of the FTAA's terms and conditions, and/or
non-compliance with statutes or regulations, may be penalized by cancellation of the FTAA.
Such sanction is significant to a contractor who may have yet to recover the tens or hundreds of
millions of dollars sunk into a mining project.

Overall, the State definitely has a pivotal say in the operation of the individual enterprises, and
can set directions and objectives, detect deviations and non-compliances by the contractor, and
enforce compliance and impose sanctions should the occasion arise. Hence, RA 7942 and DAO
96-40 vest in government more than a sufficient degree of control and supervision over the
conduct of mining operations.

Section 3(aq) of RA 7942 was objected to as being unconstitutional for allowing a foreign
contractor to apply for and hold an exploration permit. During the exploration phase, the permit
grantee (and prospective contractor) is spending and investing heavily in exploration activities
without yet being able to extract minerals and generate revenues. The exploration permit issued
under Sections 3(aq), 20 and 23 of RA 7942, which allows exploration but not extraction, serves
to protect the interests and rights of the exploration permit grantee (and would-be contractor),
foreign or local. Otherwise, the exploration works already conducted, and expenditures already
made, may end up only benefiting claim-jumpers. Thus, Section 3(aq) of RA 7942 is not
unconstitutional.

WMCP FTAA Likewise Gives the

State Full Control and Supervision

The WMCP FTAA obligates the contractor to account for the value of production and sale of
minerals (Clause 1.4); requires that the contractor's work program, activities and budgets be
approved by the State (Clause 2.1); gives the DENR secretary power to extend the exploration
period (Clause 3.2-a); requires approval by the State for incorporation of lands into the contract
area (Clause 4.3-c); requires Bureau of Forest Development approval for inclusion of forest
reserves as part of the FTAA contract area (Clause 4.5); obligates the contractor to periodically
relinquish parts of the contract area not needed for exploration and development (Clause 4.6);
requires submission of a declaration of mining feasibility for approval by the State (Clause 4.6-
b); obligates the contractor to report to the State the results of its exploration activities (Clause
4.9); requires the contractor to obtain State approval for its work programs for the succeeding
two year periods, containing the proposed work activities and expenditures budget related to
exploration (Clause 5.1); requires the contractor to obtain State approval for its proposed
expenditures for exploration activities (Clause 5.2); requires the contractor to submit an annual
report on geological, geophysical, geochemical and other information relating to its explorations
within the FTAA area (Clause 5.3-a); requires the contractor to submit within six months after
expiration of exploration period a final report on all its findings in the contract area (Clause 5.3-
b); requires the contractor after conducting feasibility studies to submit a declaration of mining
feasibility, along with a description of the area to be developed and mined, a description of the
proposed mining operations and the technology to be employed, and the proposed work
program for the development phase, for approval by the DENR secretary (Clause 5.4); obligates
the contractor to complete the development of the mine, including construction of the production
facilities, within the period stated in the approved work program (Clause 6.1); requires the
contractor to submit for approval a work program covering each period of three fiscal years
(Clause 6.2); requires the contractor to submit reports to the secretary on the production, ore
reserves, work accomplished and work in progress, profile of its work force and management
staff, and other technical information (Clause 6.3); subjects any expansions, modifications,
improvements and replacements of mining facilities to the approval of the secretary (Clause
6.4); subjects to State control the amount of funds that the contractor may borrow within the
Philippines (Clause 7.2); subjects to State supervisory power any technical, financial and
marketing issues (Clause 10.1-a); obligates the contractor to ensure 60 percent Filipino equity in
the contractor within ten years of recovering specified expenditures unless not so required by
subsequent legislation (Clause 10.1); gives the State the right to terminate the FTAA for
unremedied substantial breach thereof by the contractor (Clause 13.2); requires State approval
for any assignment of the FTAA by the contractor to an entity other than an affiliate (Clause
14.1).

In short, the aforementioned provisions of the WMCP FTAA, far from constituting a surrender of
control and a grant of beneficial ownership of mineral resources to the contractor in question,
vest the State with control and supervision over practically all aspects of the operations of the
FTAA contractor, including the charging of pre-operating and operating expenses, and the
disposition of mineral products.

There is likewise no relinquishment of control on account of specific provisions of the WMCP

FTAA. Clause 8.2 provides a mechanism to prevent the mining operations from grinding to a
complete halt as a result of possible delays of more than 60 days in the government's
processing and approval of submitted work programs and budgets. Clause 8.3 seeks to provide
a temporary, stop-gap solution in case a disagreement between the State and the contractor
(over the proposed work program or budget submitted by the contractor) should result in a
deadlock or impasse, to avoid unreasonably long delays in the performance of the works.

The State, despite Clause 8.3, still has control over the contract area, and it may, as sovereign
authority, prohibit work thereon until the dispute is resolved, or it may terminate the FTAA, citing
substantial breach thereof. Hence, the State clearly retains full and effective control.

Clause 8.5, which allows the contractor to make changes to approved work programs and
budgets without the prior approval of the DENR secretary, subject to certain limitations with
respect to the variance/s, merely provides the contractor a certain amount of flexibility to meet
unexpected situations, while still guaranteeing that the approved work programs and budgets
are not abandoned altogether. And if the secretary disagrees with the actions taken by the
contractor in this instance, he may also resort to cancellation/termination of the FTAA as the
ultimate sanction.

Clause 4.6 of the WMCP FTAA gives the contractor discretion to select parts of the contract
area to be relinquished. The State is not in a position to substitute its judgment for that of the
contractor, who knows exactly which portions of the contract area do not contain minerals in
commercial quantities and should be relinquished. Also, since the annual occupation fees paid
to government are based on the total hectarage of the contract area, net of the areas
relinquished, the contractor's self-interest will assure proper and efficient relinquishment.

Clause 10.2(e) of the WMCP FTAA does not mean that the contractor can compel government
to use its power of eminent domain. It contemplates a situation in which the contractor is a
foreign-owned corporation, hence, not qualified to own land. The contractor identifies the
surface areas needed for it to construct the infrastructure for mining operations, and the State
then acquires the surface rights on behalf of the former. The provision does not call for the
exercise of the power of eminent domain (or determination of just compensation); it seeks to
avoid a violation of the anti-dummy law.

Clause 10.2(l) of the WMCP FTAA giving the contractor the right to mortgage and encumber the
mineral products extracted may have been a result of conditions imposed by creditor-banks to
secure the loan obligations of WMCP. Banks lend also upon the security of encumbrances
on goods produced, which can be easily sold and converted into cash and applied to the
repayment of loans. Thus, Clause 10.2(l) is not something out of the ordinary. Neither is it
objectionable, because even though the contractor is allowed to mortgage or encumber the
mineral end-products themselves, the contractor is not thereby relieved of its obligation to pay
the government its basic and additional shares in the net mining revenue. The contractor's
ability to mortgage the minerals does not negate the State's right to receive its share of net
mining revenues.

Clause 10.2(k) which gives the contractor authority "to change its equity structure at any time,"
means that WMCP, which was then 100 percent foreign owned, could permit Filipino equity
ownership. Moreover, what is important is that the contractor, regardless of its ownership, is
always in a position to render the services required under the FTAA, under the direction and
control of the government.
Clauses 10.4(e) and (i) bind government to allow amendments to the FTAA if required by banks
and other financial institutions as part of the conditions of new lendings. There is nothing
objectionable here, since Clause 10.4(e) also provides that such financing arrangements should
in no event reduce the contractor's obligations or the government's rights under the FTAA.
Clause 10.4(i) provides that government shall "favourably consider" any request for
amendments of this agreement necessary for the contractor to successfully obtain financing.
There is no renunciation of control, as the proviso does not say that government shall
automatically grant any such request. Also, it is up to the contractor to prove the need for the
requested changes. The government always has the final say on whether to approve or
disapprove such requests.

In fine, the FTAA provisions do not reduce or abdicate State control.

No Surrender of Financial Benefits

The second paragraph of Section 81 of RA 7942 has been denounced for allegedly limiting the
State's share in FTAAs with foreign contractors to just taxes, fees and duties, and depriving the
State of a share in the after-tax income of the enterprise. However, the inclusion of the
phrase "among other things" in the second paragraph of Section 81 clearly and unmistakably
reveals the legislative intent to have the State collect more than just the usual taxes, duties and
fees.

Thus, DAO 99-56, the "Guidelines Establishing the Fiscal Regime of Financial or Technical
Assistance Agreements," spells out the financial benefits government will receive from an FTAA,
as consisting of not only a basic government share, comprised of all direct taxes, fees and
royalties, as well as other payments made by the contractor during the term of the FTAA, but
also an additional government share, being a share in the earnings or cash flows of the
mining enterprise, so as to achieve a fifty-fifty sharing of net benefits from mining between the
government and the contractor.

The additional government share is computed using one of three (3) options or schemes
detailed in DAO 99-56, viz., (1) the fifty-fifty sharing of cumulative present value of cash flows;
(2) the excess profit-related additional government share; and (3) the additional sharing based
on the cumulative net mining revenue. Whichever option or computation is used, the additional
government share has nothing to do with taxes, duties, fees or charges. The portion of revenues
remaining after the deduction of the basic and additional government shares is what goes to the
contractor.

The basic government share and the additional government share do not yet take into account
the indirect taxes and other financial contributions of mining projects, which are real and actual
benefits enjoyed by the Filipino people; if these are taken into account, total government share
increases to 60 percent or higher (as much as 77 percent, and 89 percent in one instance) of
the net present value of total benefits from the project.

The third or last paragraph of Section 81 of RA 7942 is slammed for deferring the payment of
the government share in FTAAs until after the contractor shall have recovered its pre-operating
expenses, exploration and development expenditures. Allegedly, the collection of the State's
share is rendered uncertain, as there is no time limit in RA 7942 for this grace period or
recovery period. But although RA 7942 did not limit the grace period, the concerned agencies
(DENR and MGB) in formulating the 1995 and 1996 Implementing Rules and Regulations
provided that the period of recovery, reckoned from the date of commercial operation, shall be
for a period not exceeding five years, or until the date of actual recovery, whichever comes
earlier.

And since RA 7942 allegedly does not require government approval for the pre-operating,
exploration and development expenses of the foreign contractors, it is feared that such
expenses could be bloated to wipe out mining revenues anticipated for 10 years, with the result
that the State's share is zero for the first 10 years. However, the argument is based on incorrect
information.
Under Section 23 of RA 7942, the applicant for exploration permit is required to submit a
proposed work program for exploration, containing a yearly budget of proposed expenditures,
which the State passes upon and either approves or rejects; if approved, the same will
subsequently be recorded as pre-operating expenses that the contractor will have to recoup
over the grace period.

Under Section 24, when an exploration permittee files with the MGB a declaration of mining
project feasibility, it must submit a work program for development, with corresponding budget,
for approval by the Bureau, before government may grant an FTAA or MPSA or other mineral
agreements; again, government has the opportunity to approve or reject the proposed work
program and budgeted expenditures for development works, which will become the pre-
operating and development costs that will have to be recovered. Government is able to know
ahead of time the amounts of pre-operating and other expenses to be recovered, and the
approximate period of time needed therefor. The aforecited provisions have counterparts in
Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. In sum,
the third or last paragraph of Section 81 of RA 7942 cannot be deemed defective.

Section 80 of RA 7942 allegedly limits the State's share in a mineral production-sharing

agreement (MPSA) to just the excise tax on the mineral product, i.e., only 2 percent of market
value of the minerals. The colatilla in Section 84 reiterates the same limitation in Section
80. However, these two provisions pertain only to MPSAs, and have no application to
FTAAs. These particular provisions do not come within the issues defined by this Court.
Hence, on due process grounds, no pronouncement can be made in this case in respect
of the constitutionality of Sections 80 and 84.

Section 112 is disparaged for reverting FTAAs and all mineral agreements to the old "license,
concession or lease" system, because it allegedly effectively reduces the government share in
FTAAs to just the 2 percent excise tax which pursuant to Section 80 comprises the government
share in MPSAs. However, Section 112 likewise does not come within the issues delineated by
this Court, and was never touched upon by the parties in their pleadings. Moreover, Section 112
may not properly apply to FTAAs. The mining law obviously meant to treat FTAAs as a breed
apart from mineral agreements. There is absolutely no basis to believe that the law intends to
exact from FTAA contractors merely the same government share (i.e., the 2 percent excise tax)
that it apparently demands from contractors under the three forms of mineral agreements.

While there is ground to believe that Sections 80, 84 and 112 are indeed unconstitutional, they
cannot be ruled upon here. In any event, they are separable; thus, a later finding of nullity will
not affect the rest of RA 7942.

In fine, the challenged provisions of RA 7942 cannot be said to surrender financial

benefits from an FTAA to the foreign contractors.

Moreover, there is no concrete basis for the view that, in FTAAs with a foreign contractor, the
State must receive at least 60 percent of the after-tax income from the exploitation of its mineral
resources, and that such share is the equivalent of the constitutional requirement that at least
60 percent of the capital, and hence 60 percent of the income, of mining companies should
remain in Filipino hands. Even if the State is entitled to a 60 percent share from other mineral
agreements (CPA, JVA and MPSA), that would not create a parallel or analogous situation for
FTAAs. We are dealing with an essentially different equation. Here we have the old apples and
oranges syndrome.

The Charter did not intend to fix an iron-clad rule of 60 percent share, applicable to all
situations, regardless of circumstances. There is no indication of such an intention on the part of
the framers. Moreover, the terms and conditions of petroleum FTAAs cannot serve as standards
for mineral mining FTAAs, because the technical and operational requirements, cost
structures and investment needs of off-shore petroleum exploration and drilling
companies do not have the remotest resemblance to those of on-shore mining
companies.

To take the position that government's share must be not less than 60 percent of after-tax
income of FTAA contractors is nothing short of this Court dictating upon the government. The
State resultantly ends up losing control. To avoid compromising the State's full control and
supervision over the exploitation of mineral resources, there must be no attempt to impose a
"minimum 60 percent" rule. It is sufficient that the State has the power and means, should it so
decide, to get a 60 percent share (or greater); and it is not necessary that the State does so
in every case.

Invalid Provisions of the WMCP FTAA

Section 7.9 of the WMCP FTAA clearly renders illusory the State's 60 percent share of WMCP's
revenues. Under Section 7.9, should WMCP's foreign stockholders (who originally owned 100
percent of the equity) sell 60 percent or more of their equity to a Filipino citizen or corporation,
the State loses its right to receive its share in net mining revenues under Section 7.7, without
any offsetting compensation to the State. And what is given to the State in Section 7.7 is by
mere tolerance of WMCP's foreign stockholders, who can at any time cut off the government's
entire share by simply selling 60 percent of WMCP's equity to a Philippine citizen or corporation.

In fact, the sale by WMCP's foreign stockholder on January 23, 2001 of the entire outstanding
equity in WMCP to Sagittarius Mines, Inc., a domestic corporation at least 60 percent Filipino
owned, can be deemed to have automatically triggered the operation of Section 7.9 and
removed the State's right to receive its 60 percent share. Section 7.9 of the WMCP FTAA
has effectively given away the State's share without anything in exchange.

Moreover, it constitutes unjust enrichment on the part of the local and foreign stockholders in
WMCP, because by the mere act of divestment, the local and foreign stockholders get a
windfall, as their share in the net mining revenues of WMCP is automatically increased, without
having to pay anything for it.

Being grossly disadvantageous to government and detrimental to the Filipino people, as well as
violative of public policy, Section 7.9 must therefore be stricken off as invalid. The FTAA in
question does not involve mere contractual rights but, being impressed as it is with public
interest, the contractual provisions and stipulations must yield to the common good and the
national interest. Since the offending provision is very much separable from the rest of the
FTAA, the deletion of Section 7.9 can be done without affecting or requiring the invalidation of
the entire WMCP FTAA itself.

Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent by
government for the benefit of the contractor to be deductible from the State's share in net mining
revenues, it results in benefiting the contractor twice over. This constitutes unjust enrichment on
the part of the contractor, at the expense of government. For being grossly disadvantageous
and prejudicial to government and contrary to public policy, Section 7.8(e) must also be
declared without effect. It may likewise be stricken off without affecting the rest of the FTAA.

EPILOGUE

AFTER ALL IS SAID AND DONE, it is clear that there is unanimous agreement in the Court
upon the key principle that the State must exercise full control and supervision over the
exploration, development and utilization of mineral resources.

The crux of the controversy is the amount of discretion to be accorded the Executive
Department, particularly the President of the Republic, in respect of negotiations over the terms
of FTAAs, particularly when it comes to the government share of financial benefits from
FTAAs. The Court believes that it is not unconstitutional to allow a wide degree of discretion to
the Chief Executive, given the nature and complexity of such agreements, the humongous
amounts of capital and financing required for large-scale mining operations, the complicated
technology needed, and the intricacies of international trade, coupled with the State's need to
maintain flexibility in its dealings, in order to preserve and enhance our country's
competitiveness in world markets.

We are all, in one way or another, sorely affected by the recently reported scandals involving
corruption in high places, duplicity in the negotiation of multi-billion peso government contracts,
huge payoffs to government officials, and other malfeasances; and perhaps, there is the desire
to see some measures put in place to prevent further abuse. However, dictating upon the
President what minimum share to get from an FTAA is not the solution.It sets a bad
precedent since such a move institutionalizes the very reduction if not deprivation of the State's
control. The remedy may be worse than the problem it was meant to address. In any event,
provisions in such future agreements which may be suspected to be grossly disadvantageous or
detrimental to government may be challenged in court, and the culprits haled before the bar of
justice.

Verily, under the doctrine of separation of powers and due respect for co-equal and coordinate
branches of government, this Court must restrain itself from intruding into policy matters and
must allow the President and Congress maximum discretion in using the resources of our
country and in securing the assistance of foreign groups to eradicate the grinding poverty of our
people and answer their cry for viable employment opportunities in the country.

"The judiciary is loath to interfere with the due exercise by coequal branches of government of
their official functions."99 As aptly spelled out seven decades ago by Justice George Malcolm,
"Just as the Supreme Court, as the guardian of constitutional rights, should not sanction
usurpations by any other department of government, so should it as strictly confine its own
sphere of influence to the powers expressly or by implication conferred on it by the Organic
Act."100 Let the development of the mining industry be the responsibility of the political branches
of government. And let not this Court interfere inordinately and unnecessarily.

The Constitution of the Philippines is the supreme law of the land. It is the repository of all the
aspirations and hopes of all the people. We fully sympathize with the plight of Petitioner La
Bugal B'laan and other tribal groups, and commend their efforts to uplift their communities.
However, we cannot justify the invalidation of an otherwise constitutional statute along with its
implementing rules, or the nullification of an otherwise legal and binding FTAA contract.

We must never forget that it is not only our less privileged brethren in tribal and cultural
communities who deserve the attention of this Court; rather, all parties concerned -- including
the State itself, the contractor (whether Filipino or foreign), and the vast majority of our citizens -
- equally deserve the protection of the law and of this Court. To stress, the benefits to be
derived by the State from mining activities must ultimately serve the great majority of our fellow
citizens. They have as much right and interest in the proper and well-ordered development and
utilization of the country's mineral resources as the petitioners.

Whether we consider the near term or take the longer view, we cannot overemphasize the need
for an appropriate balancing of interests and needs -- the need to develop our stagnating
mining industry and extract what NEDA Secretary Romulo Neri estimates is some US$840
billion (approx. PhP47.04 trillion) worth of mineral wealth lying hidden in the ground, in order to
jumpstart our floundering economy on the one hand, and on the other, the need to enhance our
nationalistic aspirations, protect our indigenous communities, and prevent irreversible ecological
damage.

This Court cannot but be mindful that any decision rendered in this case will ultimately impact
not only the cultural communities which lodged the instant Petition, and not only the larger
community of the Filipino people now struggling to survive amidst a fiscal/budgetary deficit, ever
increasing prices of fuel, food, and essential commodities and services, the shrinking value of
the local currency, and a government hamstrung in its delivery of basic services by a severe
lack of resources, but also countless future generations of Filipinos.

For this latter group of Filipinos yet to be born, their eventual access to education, health care
and basic services, their overall level of well-being, the very shape of their lives are even now
being determined and affected partly by the policies and directions being adopted and
implemented by government today. And in part by the this Resolution rendered by this Court
today.

Verily, the mineral wealth and natural resources of this country are meant to benefit not merely
a select group of people living in the areas locally affected by mining activities, but the entire
Filipino nation, present and future, to whom the mineral wealth really belong. This Court has
therefore weighed carefully the rights and interests of all concerned, and decided for the greater
good of the greatest number. JUSTICE FOR ALL, not just for some; JUSTICE FOR THE
PRESENT AND THE FUTURE, not just for the here and now.

WHEREFORE, the Court RESOLVES to GRANT the respondents' and the intervenors' Motions
for Reconsideration; to REVERSE and SET ASIDE this Court's January 27, 2004 Decision;
to DISMISS the Petition; and to issue this new judgment declaring CONSTITUTIONAL (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.

SO ORDERED.

Davide Jr., C.J., Sandoval-Gutierrez, Austria-Martinez, and Garcia, JJ., concur.

Puno, J., in the result and votes to invalidate sections 3.3; 7.8 and 7.9 of the WMC FTAA.
Quisumbing, J., in the result.
Ynares-Santiago, J., joins dissenting opinion of J. Antonio Carpio & J. Conchita C. Morales.
Carpio, and Carpio-Morales, JJ., see dissenting opinion.
Corona, J., certifies he voted affirmatively with the majority and he was allowed to do so
although he is on leave.
Callejo, Sr., J., concurs to the dissenting opinion of J. Carpio.
Azcuna, J., took no part-same reason.
Tinga, and Chico-Nazario, JJ., concur with a separate opinion.

CONCURRING OPINION

CHICO-NAZARIO, J.:

I concur in the well-reasoned ponencia of my esteemed colleague Mr. Justice Artemio V.

Panganiban. I feel obligated, however, to add the following observations:

I. RE "FULL CONTROL AND SUPERVISION"

With all due respect, I believe that the issue of unconstitutionality of Republic Act No. 7942, its
implementing rules, and the Financial Assistance Agreement between the Philippine
Government and WMPC (Philippines) Inc. (WMPC FTAA) executed pursuant to Rep. Act No.
7942 hinges, to a large extent, on the interpretation of the phrase in Section 2, Article XII of the
1987 Constitution, which states:

(T)he exploration, development, and utilization of natural resources shall be under

the full control and supervision of the State. x x x. (Emphasis supplied)

Construing said phrase vis-à-vis the entire provision, it appears from the deliberations in the
Constitutional Commission that the term "control" does not have the meaning it ordinarily has in
political law which is the power of a superior to substitute his judgment for that of an
inferior.1 Thus –

MR. NOLLEDO: Suppose a judicial entity is given the power to exploit natural resources
and, of course, there are decisions made by the governing board of that judicial entity,
can the state change the decisions of the governing board of that entity based on the
words "full control".

MR. VILLEGAS: If it is within the context of the contract, I think the State cannot violate
the laws of the land.2
Moreover, "full control and supervision" does not mean that foreign stockholders cannot be
legally elected as members of the board of a corporation doing business under, say, a co-
production, joint venture or profit-sharing agreement, 40% of whose capital is foreign owned.
Otherwise, and as Commissioner Romulo declared, it would be unfair to the foreign
stockholder3 and, per Commissioner Padilla, "refusing them a voice in management would
make a co-production, joint venture and production sharing illusory."4

It is apparently for the foregoing reasons that there was a disapproval of the amendment
proposed by Commissioner, now Mr. Chief Justice Davide, that the governing and managing
bodies of such corporations shall be vested exclusively in citizens of the Philippines5 so that
control of all corporations involved in the business of utilizing our natural resources would
always be in Filipino hands.

The disapproval must be juxtaposed with the fact that a provision substantially similar to the
proposed Davide amendment was approved with regard to educational institutions, viz:

Section 4 (2). Educational institutions, other than those established by religious groups
and mission boards, shall be owned solely by citizens of the Philippines or corporations
or associations at least sixty per centum of the capital of which is owned by such
citizens. The Congress may, however, require increased Filipino equity participation in
all educational institutions.

The control and administration of educational institutions shall be vested in citizens of

the Philippines. (Emphasis supplied)

From the foregoing, it can be clearly inferred that it was NOT the intention of the framers of the
Constitution to deprive governing boards of domestic corporations with non-Filipino members,
the right to control and administer the corporation that explores, develops and utilizes natural
resources insofar as agreements with the State for co-production, joint venture and production-
sharing are concerned, otherwise the Davide amendment would have been approved and, like
the prohibition in above-quoted Section 4(2), Article XIV, control and supervision of all business
involved in the exploration and development of mineral resources would have been left solely in
Filipino hands.

Accordingly, to the extent that the corporate board governs and manages the operations for the
exploration and use of natural resources, to that extent the "full control and supervision" thereof
by the State is diminished.

In effect, therefore, when the State enters into such agreements as provided in the Constitution,
it allows itself to surrender part of its sovereign right to full control and supervision of said
activities, the State having the right to partly surrender the exercise of sovereign powers under
the doctrine of auto-limitation.6

If foreigners (under joint ventures etc.) have a say in the management of the business of
utilizing natural resources as corporate directors of domestic corporations, there is no
justification for holding that foreign corporations who put in considerably large amounts of
money under agreements involving either technical or financial assistance for large scale
exploration, development and utilization of minerals, petroleum and other mineral oils are
prohibited from managing such business.

Indeed, to say that the Constitution requires the State to have full and total control and
supervision of the exploration, development and utilization of minerals when undertaken in a
large scale under agreements with foreign corporations involving huge amounts of money is to
divorce oneself from reality. As Mr. Justice Panganiban said, no firm would invest funds in such
enterprise unless it has a say in the management of the business.

To paraphrase this Court in one of its landmark cases, the fundamental law does not intend an
impossible undertaking.7 It must therefore be presumed that the Constitution did not at all intend
an interpretation of Section 2, Article XII which deprives the foreign corporation engaged in large
scale mining activities a measure of control in the management and operation of such activities,
and in said manner, remove from the realm of the possible the enterprise the Constitution
envisions thereunder.

This brings me to the final point raised by my esteemed colleague, Mme. Justice Conchita
Carpio Morales, that it is of no moment that the declaration of Rep. Act No. 7942 may
discourage foreign assistance and/or retard or delay the exploration, development or utilization
of the nation's natural resources as the Filipino people, as early as the 1935 Constitution, have
determined such matters as secondary to the protection and preservation of their ownership of
these natural resources. With due respect, I find such proposition not legally justifiable as it
looks backward to the justification in the 1935 Constitution instead of forward under the 1987
Constitution which expressly allows foreign participation in the exploration, development or
utilization of the nation's marine wealth to allow the State to take advantage of foreign funding or
technical assistance. As long as the means employed by such foreign assistance result in real
contributions to the economic growth of our country and enhance the general welfare of our
people, the development of our mineral resources by and through foreign corporations, such
FTAAs are not unconstitutional.

II. RE: REQUIREMENT THAT FTAAs MUST BE "BASED

ON REAL CONTRIBUTIONS TO THE ECONOMIC GROWTH
AND GENERAL WELFARE OF THE COUNTRY"

The policy behind Rep. Act No. 7942 is to promote the "rational exploration, development,
utilization and conservation" of the State-owned mineral resources "through the combined
efforts of government and the private sector in order to enhance national growth in a way that
effectively safe-guards the environment and protect the rights of affected communities".8 This
policy, with reference specifically to FTAAs, is in keeping with the constitutional precept that
FTAAs must be based on real contributions to the economic growth and general welfare of the
country. As has been said, "a statute derives its vitality from the purpose for which it is enacted
and to construe it in a manner that disregards or defeats such purpose is to nullify or destroy the
law."9 In this regard, much has been said about the alleged unconstitutionality of Section 81 of
Rep. Act No. 7942 as it allegedly allows for the waiver of the State's right to receive income from
the exploitation of its mineral resources as it limits the State's share in FTAAs with foreign
contractors to taxes, duties and fees. For clarity, the provision states –

SEC. 81. Government Share in Other Mineral Agreements. -- The share of the
Government in co-production and joint-venture agreements shall be negotiated by the
Government and the contractor taking into consideration the: (a) capital investment of
the project, (b) risks involved, (c) contribution of the project to the economy, and (d)
other factors that will provide for a fair and equitable sharing between the Government
and the contractor. The Government shall also be entitled to compensations for its other
contributions which shall be agreed upon by the parties, and shall consist, among other
things, the contractor's income tax, excise tax, special allowance, withholding tax due
from the contractor's foreign stockholders, arising from dividend or interest payments to
the said foreign stockholders, in case of a foreign national, and all such other taxes,
duties and fees as provided for under existing laws.

The Government share in financial or technical assistance agreement shall consist

of, among other things,the contractor's corporate income tax, excise tax, special
allowance, withholding tax due from the contractor's foreign stockholders arising from
dividend or interest payments to the said foreign stockholder in case of foreign
national and all such other taxes, duties and fees as provided for under existing
laws.

The collection of Government share in financial or technical assistance agreement shall

commence after the financial or technical assistance agreement contractor has fully
recovered its pre-operating expenses, exploration, and development expenditures,
inclusive. (Emphasis supplied)

The controversy revolves around the proper interpretation of "among other things" stated in the
second paragraph of Section 81. Mr. Justice Carpio is of the opinion that "among other things"
could only mean "among other taxes", referring to the unnamed "other taxes, duties, and fees
as provided for under existing laws" contained in the last clause of Section 81, paragraph 2. If
such were the correct interpretation, then truly, the provision is unconstitutional as a sharing
based only on taxes cannot be considered as contributing to the economic growth and general
welfare of the country. I am bothered, however, by the interpretation that the phrase "among
other things" refers to "and all such other taxes, duties and fees as provided for under existing
laws" since it would render the former phrase superfluous. In other words, there would have
been no need to include the phrase "among other things" if all it means is "all other taxes" since
the latter is already expressly stated in the provision. As it is a truism that all terms/phrases
used in a statute has relevance to the object of the law, then I find the view of Mr. Justice
Panganiban – that "all other things" means "additional government share" in the form of
"earnings or cash flow of the mining enterprise" as interpreted by the DENR -- more compelling.
Besides, such an interpretation would affirm the constitutionality of the provision which would
then be in keeping with the rudimentary principle that a law shall not be declared invalid unless
the conflict with the Constitution is clear beyond reasonable doubt.10 To justify nullification of a
law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and
argumentative implication.11

Finally, I wish to stress that it would appear that the constitutional mandate that large-scale
mining activities under FTAAs must be based on real contributions to the economic growth and
general welfare of the country is both a standard for the statute required to implement subject
provision as well as the vehicle for the exercise of the State's resultant residual control and
supervision of the mining activities.

In all FTAAs, the State is deemed to reserve its right to control the end to be achieved so that
real contributions to the economy can be realized and, in the final analysis, the business will
redound to the general welfare of the country.

However, the question of whether or not the FTAA will, in fact, redound to the general welfare of
the public involves a "judgment call" by our policy makers who are answerable to our people
during the appropriate electoral exercises and are not subject to judicial pronouncements based
on grave abuse of discretion.12

For the foregoing reasons, I vote to grant the motion for reconsideration.

DISSENTING OPINION

CARPIO, J.:

I dissent and vote to deny respondents' motions for reconsideration. I find that Section 3(aq),
Section 39, Section 80, the second paragraph of Section 81, the proviso in Section 84, and the
first proviso in Section 112 of Republic Act No. 79421 ("RA 7942") violate Section 2, Article XII of
the 1987 Constitution and are therefore unconstitutional.

In essence, these provisions of RA 7942 waive the State's ownership rights under the
Constitution over mineral resources. These provisions also abdicate the State's
constitutional duty to control and supervise fully the exploitation of mineral resources.

A. The Threshold Issue for Resolution

Petitioners claim that respondent Department of Environment and Natural Resources Secretary
Victor O. Ramos, in issuing the rules to implement RA 7942, gravely abused his discretion
amounting to lack or excess of jurisdiction. Petitioners assert that RA 7942 is unconstitutional
for the following reasons:

1. RA 7942 "allows fully foreign owned corporations to explore, develop, utilize and
exploit mineral resources in a manner contrary to Section 2, paragraph 4, Article XII of
the Constitution";
 2. RA 7942 "allows enjoyment by foreign citizens as well as fully foreign owned
corporations of the nation's marine wealth contrary to Section 2, paragraph 2 of Article
XII of the Constitution";

3. RA 7942 "violates Section 1, Article III of the Constitution";

4. RA 7942 "allows priority to foreign and fully foreign owned corporations in the
exploration, development and utilization of mineral resources contrary to Article XII of the
Constitution";

5. RA 7942 "allows the inequitable sharing of wealth contrary to Section 1,

paragraph 1, and Section 2, paragraph 4, Article XII of the
Constitution."2 (Emphasis supplied)

Petitioners also assail the validity of the Financial and Technical Assistance Agreement
between the Philippine Government and WMCP (Philippines), Inc. dated 2 March
19953 ("WMCP FTAA") for violation of Section 2, Article XII of the 1987 Constitution.

The issues that petitioners raise boil down to whether RA 7942 and the WMCP FTAA
violate Section 2, Article XII of the 1987 Constitution.

B. The Constitutional Declaration and Mandate

Section 2, Article XII of the 1987 Constitution4 provides as follows:

All x x x minerals, x x x petroleum, and other mineral oils, x x x and other natural
resources are owned by the State. x x x The exploration, development, and utilization
of natural resources shall be under the full control and supervision of the State. x x x.
(Emphasis supplied)

Two basic principles flow from this constitutional provision. First, the Constitution vests in
the State ownership of all mineral resources. Second, the Constitution mandates the State
to exercise full control and supervisionover the exploitation of mineral resources.

The first principle reiterates the Regalian doctrine, which established State ownership of natural
resources since the arrival of the Spaniards in the Philippines in the 16th century. The 1935,
1973 and 1987 Constitutions incorporate the Regalian doctrine.5 The State, as owner of the
nation's natural resources, exercises the attributes of ownership over its natural resources.6 An
important attribute of ownership is the right to receive the income from any commercial
exploitation of the natural resources.7

The second principle insures that the benefits of State ownership of natural resources accrue to
the Filipino people. The framers of the 1987 Constitution introduced the second principle to
avoid the adverse effects of the "license, concession or lease"8 system of exploitation under the
1935 and 1973 Constitutions.9 The "license, concession or lease" system enriched the private
concessionaires who controlled the exploitation of natural resources. However, the "license,
concession or lease" system left the Filipino people impoverished, starkly exemplified by the
nation's denuded forests whose exploitation did not benefit the Filipino people.

The framers of the 1987 Constitution clearly intended to abandon the "license, concession or
lease" system prevailing under the 1935 and 1973 Constitutions. This exchange in the
deliberations of the Constitutional Commission reveals this clear intent:

MR. DAVIDE: Thank you, Mr. Vice-President. I would like to seek some clarifications.

MR. VILLEGAS: Yes.

MR. DAVIDE: Under the proposal, I notice that except for the lands of the public domain,
all the other natural resources cannot be alienated and in respect to lands of the public
domain, private corporations with the required ownership by Filipino citizens can only
lease the same. Necessarily, insofar as other natural resources are concerned, it
 would only be the State which can exploit, develop, explore and utilize the same.
However, the State may enter into a joint venture, co-production or production-
sharing. Is that not correct?

MR. VILLEGAS: Yes.

MR. DAVIDE: Consequently, henceforth upon the approval of this Constitution, no

timber or forest concessions, permits or authorization can be exclusively granted
to any citizen of the Philippines nor to any corporation qualified to acquire lands
of the public domain?

MR. VILLEGAS: Would Commissioner Monsod like to comment on that? I think his
answer is "yes."

MR. DAVIDE: So, what will happen now to licenses or concessions earlier granted by
the Philippine government to private corporations or to Filipino citizens? Would they be
deemed repealed?

MR. VILLEGAS: This is not applied retroactively. They will be respected.10 (Emphasis
supplied)

To carry out this intent, the 1987 Constitution uses a different phraseology from that used in the
1935 and 1973 Constitutions. The previous Constitutions used the phrase "license, concession
or lease" in referring to exploitation of natural resources. The 1987 Constitution uses the phrase
"co-production, joint venture or production-sharing agreements," with "full control and
supervision" by the State. The change in language was a clear rejection of the old system of
"license, concession or lease."

The 1935 and 1973 Constitutions also used the words "belong to" in stating the Regalian
doctrine, thus declaring that natural resources "belong to the State." The 1987 Constitution uses
the word "owned," thus prescribing that natural resources are "owned" by the State. In using the
word "owned," the 1987 Constitution emphasizes the attributes of ownership, among which is
the right to the income of the property owned.11

The State as owner of the natural resources must receive income from the exploitation of its
natural resources. The payment of taxes, fees and charges, derived from the taxing or
police power of the State, is not a substitute.The State is duty bound to secure for the
Filipino people a fair share of the income from any exploitation of the nation's precious and
exhaustible natural resources. As explained succinctly by a textbook writer:

Under the former licensing, concession, or lease schemes, the government benefited
from such activities only through fees, charges and taxes. Such benefits were very
minimal compared with the enormous profits reaped by the licensees, concessionaires
or lessees who had control over the particular resources over which they had been given
exclusive right to exploit. Moreover, some of them disregarded the conservation of
natural resources. With the new role, the State will be able to obtain a greater share in
the profits. It can also actively husband our natural resources and engage in
development programs that will be beneficial to the nation.12 (Emphasis supplied)

Thus, the 1987 Constitution commands the State to exercise full control and supervision over
the exploitation of natural resources to insure that the State receives its fair share of the income.
In Miners Association of the Philippines v. Hon. Factoran, Jr., et al.,13 the Court ruled
that "the old system of exploration, development and utilization of natural resources
through 'license, concession or lease' x x x has been disallowed by Article XII, Section 2
of the 1987 Constitution." The Court explained:

Upon the effectivity of the 1987 Constitution on February 2, 1987, the State
assumed a more dynamic role in the exploration, development and utilization of
the natural resources of the country. Article XII, Section 2 of the said Charter explicitly
ordains that the exploration, development and utilization of natural resources shall be
under the full control and supervision of the State. Consonant therewith, the
 exploration, development and utilization of natural resources may be undertaken by
means of direct act of the State, or it may opt to enter into co-production, joint venture, or
production-sharing agreements, or it may enter into agreements with foreign-owned
corporations involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils according to
the general terms and conditions provided by law, based on real contributions to
the economic growth and general welfare of the country. (Emphasis supplied)

The old system of "license, concession or lease" which merely gave the State a pittance in the
form of taxes, fees and charges is now buried in history. Any attempt to resurrect it is
unconstitutional and deserves outright rejection by this Court.

The Constitution prohibits the alienation of all natural resources except agricultural lands.14 The
Constitution, however, allows the State to exploit commercially its natural resources and sell the
marketable products from such exploitation. This the State may do through a co-production,
joint venture or production-sharing arrangement with companies at least 60% Filipino owned.
The necessary implication is that the State, as owner of the natural resources, must receive
a fair share of the income from such commercial operation. The State may receive its share of
the net income in cash or in kind.

The State may also directly exploit its natural resources in either of two ways. The State may
set up its own company to engage in the exploitation of natural resources. Alternatively, the
State may enter into a financial or technical assistance agreement ("FTAA") with private
companies who act as contractors of the State. The State may seek from such contractors
either financial or technical assistance, or both, depending on the State's own needs. Under an
FTAA, the contractor, foreign or local, manages the contracted work or operations to the extent
of its financial or technical contribution, subject to the State's control and supervision.

Except in large-scale exploitation of certain minerals, the State's contractors must be 60%
Filipino owned companies. The State pays such contractors, for their technical services or
financial assistance, a share of the income from the exploitation of the natural resources. The
State retains the remainder of the income after paying the Filipino owned contractor.

In large-scale exploitation of minerals, petroleum and other mineral oils, the Constitution allows
the State to contract with "foreign-owned corporations" under an FTAA. This is still a direct
exploitation by the State but using a foreign instead of a local contractor. However, the
Constitution requires that the participation of foreign contractors must make a real contribution
to the national economy and the general welfare. The State pays the foreign contractor, for its
technical services or financial assistance, a share of the income from the exploitation of the
minerals, petroleum or other mineral oils. The State retains the rest of the income after paying
the foreign contractor.

Whether the FTAA contractor is local or foreign, the State must retain its fair share of the
income from the exploitation of the natural resources that it owns. To insure it retains its fair
share of the income, the State must exercise full control and supervision over the exploitation of
its natural resources. And whether the FTAA contractor is local or foreign, the State is directly
undertaking the exploitation of its natural resources, with the FTAA contractor providing
technical services or financing to the State. Since the State is directly undertaking the
exploitation, all exploration permits and similar authorizations are in the name of the
Philippine Government, which then authorizes the contractor to act on its behalf.

The State exercises full control and supervision over the mining operations in the Philippines of
the foreign contractor. However, the State does not exercise control and supervision over the
foreign contractor itself or its board of directors. The State does not also exercise any control or
supervision over the foreign contractor's mining operations in other countries, or even its non-
mining operations in the Philippines. There is no conflict of power between the State and the
foreign contractor's board of directors. By entering into an FTAA, the foreign contractor, through
its board of directors, agrees to manage the contracted work or operations to the extent of its
financial or technical contribution subject to the State's control and supervision.
No government should contract with a corporation, local or foreign, to exploit commercially the
nation's natural resources without the State receiving any income as owner of the natural
resources. Natural resources are non-renewable and exhaustible assets of the State. Certainly,
no government in its right mind should give away for free its natural resources to private
business enterprises, local or foreign, amidst widespread poverty among its people.

In sum, two basic constitutional principles govern the exploitation of natural resources in the
country. First, the State owns the country's natural resources and must benefit as owner from
any exploitation of its natural resources. Second, to insure that it receives its fair share as owner
of the natural resources, the State must exercise full control and supervision over the
exploitation of its natural resources.

We shall subject RA 7942 to constitutional scrutiny based on these two basic principles.

C. Waiver of Beneficial Rights from Ownership of Mineral Resources

RA 7942 contains five provisions which waive the State's right to receive income from the
exploitation of its mineral resources. These provisions are Sections 39, 80, 81, 84 and 112:

Section 39. Option to Convert into a Mineral Agreement. — The contractor has the
option to convert the financial or technical assistance agreement to a mineral
agreement at any time during the term of the agreement, if the economic viability
of the contract area is found to be inadequate to justify large-scale mining
operations, after proper notice to the Secretary as provided for under the implementing
rules and regulations: Provided, That the mineral agreement shall only be for the
remaining period of the original agreement.

In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the
corporation, partnership, association, or cooperative. Upon compliance with this
requirement by the contractor, the Secretary shall approve the conversion and
execute the mineral production-sharing agreement.

Section 80. Government Share in Mineral Production Sharing Agreement. — The total
government share in a mineral production sharing agreement shall be the excise
tax on mineral products as provided in Republic Act No. 7729, amending Section
151(a) of the National Internal Revenue Code, as amended.

Section 81. Government Share in Other Mineral Agreements. — The share of the
Government in co-production and joint-venture agreements shall be negotiated by the
Government and the contractor taking into consideration the: (a) capital investment of
the project, (b) risks involved, (c) contribution of the project to the economy, and (d)
other factors that will provide for a fair and equitable sharing between the Government
and the contractor. The Government shall also be entitled to compensation for its other
contributions which shall be agreed upon by the parties, and shall consist, among other
things, the contractor's income tax, excise tax, special allowance, withholding tax due
from the contractor's foreign stockholders arising from dividend or interest payments to
the said foreign stockholders, in case of a foreign national, and all such other taxes,
duties and fees as provided for under existing laws.

The Government share in financial or technical assistance agreement shall

consist of, among other things, the contractor's corporate income tax, excise tax,
special allowance, withholding tax due from the contractor's foreign stockholders
arising from dividend or interest payments to the said foreign stockholder in case
of a foreign national and all such other taxes, duties and fees as provided for
under existing laws.

The collection of Government share in financial or technical assistance agreement

shall commence after the financial or technical assistance agreement contractor
has fully recovered its pre-operating expenses, exploration, and development
expenditures, inclusive.
 Section 84. Excise Tax on Mineral Products. — The contractor shall be liable to pay the
excise tax on mineral products as provided for under Section 151 of the National Internal
Revenue Code: Provided, however, That with respect to a mineral production
sharing agreement, the excise tax on mineral products shall be the government
share under said agreement.

Section 112. Non-impairment of Existing Mining/Quarrying Rights. - All valid and

existing mining lease contracts, permits/licenses, leases pending renewal, mineral
production–sharing agreements granted under Executive Order No. 279, at the date of
effectivity of this Act, shall remain valid x x x Provided, That the provisions of Chapter
XIV15 on government share in mineral production-sharing agreement x x x shall
immediately govern and apply to a mining lessee or contractor unless the mining
lessee or contractor indicates his intention to the Secretary, in writing, not to avail of said
provisions: x x x.

(Emphasis supplied)

Section 80 of RA 7942 limits to the excise tax the State's share in a mineral production-
sharing agreement ("MPSA"). Section 80 expressly states that the excise tax on mineral
products shall constitute the "total government share in a mineral production sharing
agreement." Under Section 151(A) of the Tax Code, this excise tax on metallic and non-
metallic minerals is only 2% of the market value, as follows:

Section 151. Mineral Products. —

(A) Rates of Tax. — There shall be levied, assessed and collected on minerals, mineral
products and quarry resources, excise tax as follows:

(1) On coal and coke, a tax of Ten pesos (P10.00) per metric ton;

(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based
on the actual market value of the gross output thereof at the time of removal, in the case
of those locally extracted or produced; or the value used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax and value-added tax, in the case
of importation.

xxx

(3) On all metallic minerals, a tax based on the actual market value of the gross output
thereof at the time of removal, in the case of those locally extracted or produced; or the
value used by the Bureau of Customs in determining tariff and customs duties, net of
excise tax and value-added tax, in the case of importation, in accordance with the
following schedule:

(a) Copper and other metallic minerals:

(i) On the first three (3) years upon the effectivity of Republic Act No. 7729, one
percent (1%);

(ii) On the fourth and the fifth years, one and a half percent (1½%); and

(iii) On the sixth year and thereafter, two percent (2%).

(b) Gold and chromite, two percent (2%).

x x x. (Emphasis supplied)

Section 80 of RA 7942 does not allow the State to receive any income as owner of the
mineral resources.The proviso in Section 84 of RA 7942 reiterates this when it states that "the
excise tax on mineral products shall be the government share under said
agreement."16 The State receives only an excise tax flowing from its taxing power, not from its
ownership of the mineral resources. The excise tax is imposed not only on mineral products, but
also on alcohol, tobacco and automobiles17 produced by companies that do not exploit natural
resources owned by the State. The excise tax is not payment for the exploitation of the State's
natural resources, but payment for the "privilege of engaging in business."18 Clearly, under
Section 80 of RA 7942, the State does not receive as owner of the mineral resources any
income from the exploitation of its mineral resources.

The second paragraph of Section 81 of RA 7942 also limits the State's share in FTAAs with
foreign contractors to taxes, duties and fees. Section 81 of RA 7942 provides that the State's
share in FTAAs with foreign contractors –

shall consist of, among other things, the contractor's corporate income tax, excise tax,
special allowance, withholding tax due from the contractor's foreign stockholders arising
from dividend or interest payments to the said foreign stockholder in case of a foreign
national and all such other taxes, duties and fees as provided for under existing laws.
(Emphasis supplied)

RA 7942 does not explain the phrase "among other things." The Solicitor General states
correctly that the phrase refers to taxes.19 The phrase is an ejusdem generis phrase, and means
"among other taxes, duties and fees" since the items specifically enumerated are all taxes,
duties and fees. The last phrase "all such other taxes, duties and fees as provided for under
existing laws" at the end of the sentence clarifies further that the phrase "among other things"
refers to taxes, duties and fees.

The second paragraph of Section 81 does not require the Government and the foreign FTAA
contractor to negotiate the State's share. In contrast, the first paragraph of Section 81 expressly
provides that the "share of the Government in co-production and joint-venture agreements shall
be negotiated by the Government and the contractor" which is 60% Filipino owned.

In a co-production or joint venture agreement, the Government contributes other inputs or equity
in addition to its mineral resources.20 Thus, the first paragraph of Section 81 requires the
Government and the 60% Filipino owned company to negotiate the State's share. However, in
an FTAA with a foreign contractor under the second paragraph of Section 81, the Government's
contribution is only the mineral resources. Section 81 does not require the Government and the
foreign contractor to negotiate the State's share from the net proceeds because there is no
share for the State. Section 81 does not recognize the State's contribution of mineral
resources as worthy of any share of the net proceeds from the mining operations.

Thus, in FTAAs with foreign contractors under RA 7942, the State's share is limited to
taxes, fees and duties. The taxes include "withholding tax due from the contractor's foreign
stockholders arising from dividend or interest payments." All these taxes, fees and duties are
imposed pursuant to the State's taxing power. The tax on income, including dividend and
interest income, is imposed on all taxpayers whether or not they are stockholders of mining
companies. These taxes, fees and duties are not contractual payments to the State as owner of
the mineral resources but are mandatory exactions based on the taxing power of the State.

Section 112 of RA 7942 is another provision that violates Section 2, Article XII of the 1987
Constitution. Section 112 "immediately" reverts all mineral agreements to the old and
discredited "license, concession or lease" system outlawed by the 1987 Constitution. Section
112 states that "the provisions of Chapter XIV21 on government share in mineral
production-sharing agreement x x x shall immediately govern and apply to a mining
lessee or contractor." The contractor, local or foreign, will now pay only the "government
share in a mineral production-sharing agreement" under RA 7942. Section 80 of RA 7942,
which specifically governs MPSAs, limits the "government share" solely to the excise tax
on mineral products - 2% on metallic and non-metallic minerals and 3% on indigenous
petroleum.

In allowing the payment of the excise tax as the only share of the government in any mineral
agreement, whether co-production, joint venture or production-sharing, Section 112 of RA 7942
reinstates the old "license, concession or lease" system where the State receives only minimal
taxes, duties and fees. This clearly violates Section 2, Article XII of the Constitution and is
therefore unconstitutional. Section 112 of RA 7942 is a sweeping negation of the clear letter and
intent of the 1987 Constitution that the exploitation of the State's natural resources must benefit
primarily the Filipino people.

Of course, Section 112 gives contractors the option not to avail of the benefit of Section 112.
This is in the guise that the enactment of RA 7942 shall not impair pre-existing mining rights, as
the heading of Section 112 states. It is doubtful, however, if any contractor of sound mind would
refuse to receive 100% rather than only 40% of the net proceeds from the exploitation of
minerals under the FTAA.

Another provision that violates Section 2, Article XII of the Constitution is Section 39 of RA
7942. Section 39 grants the foreign contractor the option to convert the FTAA into a "mineral
production-sharing agreement" if the foreign contractor finds that the mineral deposits do not
justify large-scale mining operations. Section 39 of RA 7942 operates to deprive the State of
income from the mining operations and limits the State to the excise tax on mineral products.

Section 39 grants the foreign contractor the option to revert to the "license, concession or lease"
system which the 1987 Constitution has banned. The only requirement for the exercise of the
option is for the foreign contractor to divest 60% of its equity to a Philippine citizen or to a
corporation 60% Filipino owned. Section 39 states, "Upon compliance with this requirement
by the contractor, the Secretary shall approve the conversion and execute the mineral
production-sharing agreement." The foreign contractor only needs to give "proper notice to
the Secretary as provided for under the implementing rules and regulations" if the contractor
finds the contract area not viable for large-scale mining. Thus, Section 39 of RA 7942 is
unconstitutional.

Sections 39, 80, 81, 84 and 112 of RA 7942 operate to deprive the State of the beneficial rights
arising from its ownership of mineral resources. What Section 2, Article XII of the 1987
Constitution vests in absolute ownership to the State, Sections 80, 81, 84 and 112 of RA 7942
take away and give for free to private business enterprises, including foreign-owned companies.

The legislature has discretion whether to tax a business or product. If the legislature chooses to
tax a business or product, it is free to determine the rate or amount of the tax, provided it is not
confiscatory.22 The legislature has the discretion to impose merely a 2% excise tax on mineral
products. Courts cannot inquire into the wisdom of the amount of such tax, no matter how
meager it may be. This discretion of the legislature emanates from the State's taxing power, a
power vested solely in the legislature.

However, the legislature has no power to waive for free the benefits accruing to the State from
its ownership of mineral resources. Absent considerations of social justice, the legislature has
no power to give away for free what forms part of the national patrimony of the State. Any
surrender by the legislature of the nation's mineral resources, especially to foreign private
enterprises, is repugnant to the concept of national patrimony. Mineral resources form part of
the national patrimony under Article XII (National Economy and Patrimony) of the 1987
Constitution.

Under the last paragraph of Section 81, the collection of the State's so-called "share" (consisting
of taxes) in FTAAs with foreign contractors is not even certain. This paragraph provides that the
State's "share x x x shall commence after the financial or technical assistance agreement
contractor has fully recovered its pre-operating expenses, exploration, and development
expenditures." There is no time limit in RA 7942 for this grace period when the collection of the
State's "share" does not run.23

RA 7942 itself does not require government approval for the pre-operating, exploration and
development expenses of the foreign contractor. The determination of the amount of pre-
operating, exploration and development expenses is left solely to the discretion of the foreign
contractor. Nothing prevents the foreign contractor from recording pre-operating, exploration
and development expenses equal to the mining revenues it anticipates for the first 10 years. If
that happens, the State's share is ZERO for the first 10 years.
The Government cannot tell the Filipino people when the State will start to receive its "share"
(consisting of taxes) in mining revenues under the FTAA. The Executive Department cannot
correct these deficiencies in RA 7942 through remedial implementing rules. The correction
involves substantive legislation, not merely filling in the implementing details of the law.

Taxes, fees and duties cannot constitute payment for the State's share as owner of the mineral
resources. This was the mode of payment used under the old system of "license, concession or
lease" which the 1987 Constitution abrogated. Obviously, Sections 80, 81, 84 and 112 of RA
7942 constitute an ingenious attempt to resurrect the old and discredited system, which
the 1987 Constitution has now outlawed. Under the 1987 Constitution, the State must
receive its fair share as owner of the mineral resources, separate from taxes, fees and duties
paid by taxpayers. The legislature may waive taxes, fees and duties, but it cannot waive the
State's share in mining operations.

Any law waiving for free the State's right to the benefits arising from its ownership of mineral
resources is unconstitutional. Such law negates Section 2, Article XII of the 1987 Constitution
vesting ownership of mineral resources in the State. Such law will not contribute to "economic
growth and the general welfare of the country" as required in the fourth paragraph of Section 2.
Thus, in waiving the State's income from the exploitation of mineral resources, Section 80, the
second paragraph of Section 81, the proviso in Section 84, and Section 112 of RA 7942 violate
the Constitution and are therefore void.

D. Abdication of the State's Duty to Control and Supervise

Fully the Exploitation of Mineral Resources

The 1987 Constitution commands the State to exercise "full control and supervision" over
the exploitation of natural resources. The purpose of this mandatory directive is to insure that
the State receives its fair share in the exploitation of natural resources. The framers of the
Constitution were determined to avoid the disastrous mistakes of the past. Under the old system
of "license, concession or lease," the State gave full control to the concessionaires who
enriched themselves while paying the State minimal taxes, fees and charges.

Under the 1987 Constitution, for a co-production, joint venture or production-sharing agreement
to be valid the State must exercise full control and supervision over the mining operations. This
means that the State should approve all capital and operating expenses in the exploitation of
the natural resources. Approval of capital expenses determines how much capital is recoverable
by the mining contractor. Approval of operating expenses determines the reasonable amounts
deductible from the annual income from mining operations. Such approvals are essential
because the net income from mining operations, which is the basis of the State's share,
depends on the allowable amount of capital and operating expenses. There is approval of
capital and operating expenses when the State approves them, or if the State disapproves them
and a dispute arises, when their final allowance is subject to arbitration.

The provisions of RA 7942 on MPSAs and FTAAs do not give the State any control and
supervision over mining operations. The reason is obvious. The State's so-called "share" in a
mineral production-sharing agreement under Section 80 is limited solely to the excise tax on
mineral products. This excise tax is based on the market value of the mineral product
determined without reference to the capital or operating expenses of the mining contractor.

Likewise, the State's "share" in an FTAA under Section 81 has no relation to the capital or
operating expenses of the foreign contractor. The State's "share" constitutes the same excise
tax on mineral products, in addition to other direct and indirect taxes. The basis of the excise tax
is the selling price of the mineral product. Hence, there is no reason for the State to approve or
disapprove the capital or operating expenses of the mining contractor. Consequently, RA 7942
does not give the State any control and supervision over mining operations contrary to the
express command of the Constitution. This makes Section 80, the second paragraph of Section
81, the proviso in Section 84, and Section 112 of RA 7942 unconstitutional.

E. RA 7942 Will Not Contribute to Economic

Growth or General Welfare of the Country
The fourth paragraph of Section 2, Article XII of the 1987 Constitution requires that FTAAs with
foreign contractors must make "real contributions to the economic growth and general
welfare of the country." Under Section 81 of RA 7942, all the net proceeds arising from the
exploitation of mineral resources accrue to the foreign contractor even if the State owns the
mineral resources. The foreign contractor will naturally repatriate the entire after-tax net
proceeds to its home country. Sections 94(a) and 94(b) of RA 7942 guarantee the foreign
contractor the right to repatriate its after-tax net proceeds, as well as its entire capital
investment, after the termination of its mining operations in the country.24

Clearly, no FTAA under Section 81 will ever make any real contribution to the growth of the
economy or to the general welfare of the country. The foreign contractor, after it ceases to
operate in the country, can even remit to its home country the scrap value of its capital
equipment. Thus, the second paragraph of Section 81 of RA 7942 is unconstitutional for failure
to meet the constitutional requirement that the FTAA with a foreign contractor should make a
real contribution to the national economy and general welfare.

F. Example of FTAA that Complies with Section 2, Article XII of the 1987 Constitution

The Solicitor General warns that declaring unconstitutional RA 7942 or its provisions will
endanger the Philippine Government's contract with the foreign contractor extracting petroleum
in Malampaya, Palawan.25 On the contrary, the FTAA with the foreign petroleum contractor
meets the essential constitutional requirements since the State receives a fair share of the
income from the petroleum operations. The State also exercises control and supervision over
the exploitation of the petroleum. The petroleum FTAA provides enough safeguards to insure
that the petroleum operations will make a real contribution to the national economy and general
welfare.

The Service Contract dated 11 December 1990 between the Philippine Government as the first
party, and Occidental Philippines, Inc. and Shell Exploration B.V. as the second
party26 ("Occidental-Shell FTAA"), covering offshore exploitation of petroleum in Northwest
Palawan, contains the following provisions:

a. There is express recognition that the "conduct of Petroleum Operations shall be

under the full control and supervision of the Office of Energy Affairs," 27 now
Department of Energy ("DOE"), and that the "CONTRACTOR shall undertake and
execute the Petroleum Operations contemplated hereunder under the full control
and supervision of the OFFICE OF ENERGY AFFAIRS;"28

b. The State receives 60% of the net proceeds from the petroleum operations,
while the foreign contractor receives the remaining 40%;29

c. The DOE has a right to inspect and audit every year the foreign contractor's books
and accounts relating to the petroleum operations, and object in writing to any
expense (operating and capital expenses)30within 60 days from completion of the
audit, and if there is no amicable settlement, the dispute goes to arbitration;31

d. The operating expenses in any year cannot exceed 70% of the gross proceeds from
the sale of petroleum in the same year, and any excess may be carried over in
succeeding years;32

e. The Bureau of Internal Revenue ("BIR") can inspect and examine all the accounts,
books and records of the foreign contractor relating to the petroleum operations upon 24
hours written notice;33

f. The petroleum output is sold at posted or market prices;34

g. The foreign contractor pays the 32% Philippine corporate income tax on its 40% share
of the net proceeds, including withholding tax on dividends or remittances of
profits.35 (Emphasis supplied)
The Occidental-Shell FTAA gives the State its fair share of the income from the petroleum
operations of the foreign contractor. There is no question that the State receives its rightful
share, amounting to 60% of the net proceeds,in recognition of its ownership of the petroleum
resources. In addition, Occidental-Shell's 40% share in the net proceeds is subject to the 32%
Philippine income tax. The Occidental-Shell FTAA also gives the State, through the DOE and
BIR, full control and supervision over the petroleum operations of the foreign contractor. The
foreign contractor can recover only the capital and operating expenses approved by the
DOE or by the arbitral panel.36 The Occidental-Shell FTAA also contains other safeguards to
protect the interest of the State as owner of the petroleum resources. While the foreign
contractor manages the contracted work or operations to the extent of its financial or technical
contribution, there are sufficient safeguards in the FTAA to insure compliance with the
constitutional requirements. The terms of the Occidental-Shell FTAA are fair to the State and to
Occidental-Shell.

In FTAAs with a foreign contractor, the State must receive at least 60% percent of the net
proceeds from the exploitation of its mineral resources. This share is the equivalent of the
constitutional requirement that at least 60% of the capital, and hence 60% of the income, of
mining companies should remain in Filipino hands. Intervenor CMP and even respondent
WMCP agree that the State has a 60% interest in the mining operations under an FTAA
with a foreign contractor. Intervenor CMP asserts that the Philippine Government "stands in
the place of the 60% Filipino-owned company."37 Intervenor CMP also states that "the
contractor will get 40% of the financial benefits,"38 admitting that the State, which is the
owner of the mineral resources, will retain the remaining 60% of the net proceeds.

Respondent WMCP likewise admits that the 60%-40% "sharing ratio between the Philippine
Government and the Contractor is also in accordance with the 60%-40% equity
requirement for Filipino-owned corporations."39 Respondent WMCP even adds that the
60%-40% sharing ratio is "in line with the intent behind Section 2 of Article XII that the
Filipino people, as represented by the State, benefit primarily from the exploration,
development, and utilization of the Philippines' natural resources."40 If the State has a 60%
interest in the mining operations under an FTAA, then it must retain at least 60% of the net
proceeds.

Otherwise, there is no sense exploiting the State's natural resources if all or a major part of the
profits are remitted abroad, precluding any real contribution to the national economy or the
general welfare. The constitutional requirement of full control and supervision necessarily
means that the State must receive the income that corresponds to the party exercising full
control, and this logically means a majority of the income.

The Occidental-Shell FTAA satisfies these constitutional requirements because the State
receives 60% of the net proceeds and exercises full control and supervision of the petroleum
operations. The State's right to receive 60% of the net proceeds and its exercise of full control
and supervision are the essential constitutional requirements for the validity of any FTAA. The
name given to the contract is immaterial – whether a "Service Contract" or any other name -
provided these two essential constitutional requirements are present. Thus, the designation of
the Occidental-Shell FTAA as a "Service Contract" is inconsequential since the two essential
constitutional requirements for the validity of the contract as an FTAA are present.

With the State's right to receive 60% of the net proceeds, coupled with its control and
supervision, the petroleum operations in the Occidental-Shell FTAA are legally and in fact 60%
owned and controlled by Filipinos. Indeed, the State is directly undertaking the petroleum
exploitation with Occidental-Shell as the foreign contractor. The Occidental-Shell FTAA does not
provide for the issuance of exploration permits to Occidental-Shell precisely because the State
itself is directly undertaking the petroleum exploitation.

Section 3(aq) of RA 7942 allows the foreign contractor to hold the exploration permit under the
FTAA. However, Section 2, Article XII of the 1987 Constitution does not allow foreign owned
corporations to undertake directly mining operations. Foreign owned corporations can only act
as contractors of the State under the FTAA, which is one method for the State to undertake
directly the exploitation of its natural resources. The State, as the party directly undertaking the
exploitation of its natural resources, must hold through the Government all exploration permits
and similar authorizations. Section 3(aq) of RA 7942, in allowing foreign owned corporations to
hold exploration permits, is unconstitutional.

The Occidental-Shell FTAA, involving a far riskier offshore venture than land-based mining
operations, is a modelfor emulation if foreign contractors want to comply with the constitutional
requirements. Section 112 of RA 7942, however, negates the benefits of the State from the
Occidental-Shell FTAA.

Occidental-Shell can invoke Section 112 of RA 7942 and deny the State its 60% share of the
net proceeds from the exploitation of petroleum. Section 112 allows the foreign contractor to pay
only the "government share in a mineral production-sharing agreement" under RA 7942.
Section 80 of RA 7942 on MPSAs limits the "government share" solely to the excise tax – 2%
on metallic and non-metallic mineral products and 3% on petroleum. Section 112 of RA 7942 is
unconstitutional since it is contrary to Section 2, Article XII of the 1987 Constitution.

G. The WMCP FTAA Violates Section 2, Article XII of the 1987 Constitution

The WMCP FTAA41 ostensibly gives the State 60% share of the net mining revenue. In reality,
this 60% share is illusory. Section 7.7 of the WMCP FTAA provides that:

From the Commencement of Commercial Production, the Contractor shall pay a

government share of sixty per centum (60%) of Net Mining Revenues, calculated in
accordance with the following provisions (the Government Share). The Contractor shall
be entitled to retain the balance of all revenues from the Mining Operations. (Emphasis
supplied)

However, under Section 7.9 of the WMCP FTAA, if WMCP's foreign stockholders sell 60% of
their equity to a Philippine citizen or corporation, the State loses its right to receive its 60%
share of the net mining revenues under Section 7.7. Thus, Section 7.9 provides:

The percentage of Net Mining Revenues payable to the Government pursuant to

Clause 7.7 shall be reduced by 1% of Net Mining Revenues for every 1%
ownership interest in the Contractor held by a Qualified Entity. (Emphasis supplied)

What Section 7.7 gives to the State, Section 7.9 takes away without any offsetting
compensation to the State. In reality, the State has no vested right to receive any income from
the exploitation of its mineral resources. What the WMCP FTAA gives to the State in Section
7.7 is merely by tolerance of WMCP's foreign stockholders, who can at anytime cut off
the State's entire 60% share by selling 60% of WMCP's equity to a Philippine citizen or
corporation.42 The proceeds of such sale do not accrue to the State but belong entirely to the
foreign stockholders of WMCP.

Section 2.1 of the WMCP FTAA defines a "Qualified Entity" to include a corporation 60% Filipino
owned and 40% foreign owned.43 WMCP's foreign stockholders can sell 60% of WMCP's equity
to such corporation and the sale will still trigger the operation of Section 7.9 of the WMCP
FTAA. Thus, the State will receive ZERO percent of the income but the foreign stockholders will
own beneficially 64% of WMCP, consisting of their remaining 40% equity and 24% pro-rata
share in the buyer-corporation. WMCP will then invoke Section 39 of RA 7942 allowing it to
convert the FTAA into an MPSA, thus subjecting WMCP to pay only 2% excise tax on mineral
products in lieu of sharing its mining income with the State. This violates Section 2, Article XII of
the 1987 Constitution requiring that only corporations "at least sixty per centum of whose capital
is owned by such citizens" can enter into co-production, joint venture or production-sharing
agreements with the State.

The State, as owner of the mineral resources, must receive a fair share of the income from any
commercial exploitation of its mineral resources. Mineral resources form part of the national
patrimony, and so are the net proceeds from such resources. The Legislature or Executive
Department cannot waive the State's right to receive a fair share of the income from such
mineral resources.
The intervenor Chamber of Mines of the Philippines ("CMP") admits that under an FTAA with a
foreign contractor, the Philippine Government "stands in the place of the 60% Filipino owned
company" and hence must retain 60% of the net proceeds. Thus, intervenor CMP concedes
that:

x x x In other words, in the FTAA situation, the Government stands in the place of
the 60% Filipino-owned company, and the 100% foreign-owned contractor company
takes all the risks of failure to find a commercially viable large-scale ore body or oil
deposit, for which the contractor will get 40% of the financial benefits.44 (Emphasis
supplied)

For this reason, intervenor CMP asserts that the "contractor's stipulated share under the
WMCP FTAA is limited to a maximum of 40% of the net production."45 Intervenor CMP
further insists that "60% of its (contractor's) net returns from mining, if any, will go to the
Government under the WMCP FTAA."46Intervenor CMP, however, fails to consider that the
Government's 60% share is illusory because under Section 7.9 of the WMCP FTAA the foreign
stockholders of WMCP can reduce at any time to ZERO percent the Government's share.

If WMCP's foreign stockholders do not immediately sell 60% of WMCP's equity to a Philippine
citizen or corporation, the State in the meantime receives its 60% share. However, under
Section 7.10 of the WMCP FTAA, the State shall receive its share "after the offsetting of the
items referred to in Clauses 7.8 and 7.9," namely:

7.8. The Government Share shall be deemed to include all of the following sums:

(a) all Government taxes, fees, levies, costs, imposts, duties and royalties
including excise tax, corporate income tax, customs duty, sales tax, value added
tax, occupation and regulatory fees, Government controlled price stabilization
schemes, any other form of Government backed schemes, any tax on dividend
payments by the Contractor or its Affiliates in respect of revenues from the
Mining Operations and any tax on interest on domestic and foreign loans or other
financial arrangements or accommodation, including loans extended to the
Contractor by its stockholders;

(b) any payments to local and regional government, including taxes, fees, levies,
costs, imposts, duties, royalties, occupation and regulatory fees and
infrastructure contributions;

(c) any payments to landowners, surface rights holders, occupiers, indigenous

people or Claim-owners;

(d) costs and expenses of fulfilling the Contractor's obligations to contribute to

national development in accordance with Clause 10.1(i)(1) and 10.1(i)(2);

(e) an amount equivalent to whatever benefits that may be extended in the future
by the Government to the Contractor or to financial or technical assistance
agreement contractors in general;

(f) all of the foregoing items which have not previously been offset against the
Government Share in an earlier Fiscal year, adjusted for inflation.

7.9. The percentage of Net Mining Revenues payable to the Government pursuant to
Clause 7.7 shall be reduced by 1% of Net Mining Revenues for every 1% ownership
interest in the Contractor held by a Qualified Entity.

It makes no sense why under Section 7.8(e) money spent by the Government for the benefit of
the contractor, like building roads leading to the mine site, is deductible from the State's 60%
share of the Net Mining Revenues. Unless of course the purpose is solely to reduce further the
State's share regardless of any reason. In any event, the numerous deductions from the State's
60% share make one wonder if the State will ever receive anything for its ownership of the
mineral resources. Even assuming the State will receive something, the foreign stockholders of
WMCP can at anytime take it away by selling 60% of WMCP's equity to a Philippine citizen or
corporation.

In short, the State does not have any right to any share in the net income from the mining
operations under the WMCP FTAA. The stipulated 60% share of the Government is illusory.
The State is left to collect only the 2% excise tax as its sole share from the mining operations.

Indeed, on 23 January 2001, WMCP's foreign stockholders sold 100% of WMCP's equity to
Sagittarius Mines, Inc., a domestic corporation 60% Filipino owned and 40% foreign
owned.47 This sale automatically triggered the operation of Section 7.9 of the WMCP FTAA
reducing the State's share in the Net Mining Revenues to ZERO percent without any
offsetting compensation to the State. Thus, as of now, the State has no right under the
WMCP FTAA to receive any share in the mining revenues of the contractor, even though the
State owns the mineral resources being exploited under the WMCP FTAA.

Intervenor CMP anchors its arguments on the erroneous interpretation that the WMCP FTAA
gives the State 60% of the net income of the foreign contractor. Thus, intervenor CMP states
that "60% of its (WMCP's) net returns from mining, if any, will go to the Government under the
WMCP FTAA."48 This basic error in interpretation leads intervenor CMP to erroneous
conclusions of law and fact.

Like intervenor CMP, respondent WMCP also maintains that under the WMCP FTAA, the State
is "guaranteed" a 60% share of the foreign contractor's Net Mining Revenues. Respondent
WMCP contends, after quoting Section 7.7 of the WMCP FTAA, that:

In other words, the State is guaranteed a sixty per centum (60%) share of the
Mining Revenues, or 60% of the actual fruits of the endeavor. This is in line with
the intent behind Section 2 of Article XII that the Filipino people, as represented by
the State, benefit primarily from the exploration, development, and utilization of
the Philippines' natural resources.

Incidentally, this sharing ratio between the Philippine Government and the
Contractor is also in accordance with the 60%-40% equity requirement for Filipino-
owned corporations in Paragraph 1 of Section 2 of Article XII.49 (Italics and
underscoring in the original)

This so-called "guarantee" is a sham. Respondent WMCP gravely misleads this Court. Section
7.9 of the WMCP FTAA provides that the State's share "shall be reduced by 1% of Net
Mining Revenues for every 1% ownership interest in the Contractor held by a Qualified
Entity." This reduction is without any offsetting compensation to the State and constitutes a
waiver of the State's share to WMCP's foreign stockholders. The Executive Department cannot
give away for free, especially to foreigners, what forms part of the national patrimony. This
negates the constitutionally mandated State ownership of mineral resources for the benefit of
the Filipino people.

WMCP's stockholders may also invoke Section 112 of RA 7942 allowing a mining contractor to
pay the State's share in accordance with Section 80 of RA 7942. WMCP will end up paying
only the 2% excise tax to the Philippine Government for the exploitation of the mineral
resources the State owns. In short, the old and discredited system of "license, concession
or lease" will govern the WMCP FTAA.

The WMCP FTAA is also emphatic in stating that WMCP shall have exclusive right to exploit,
utilize, process and dispose of all mineral products produced under the WMCP FTAA.
Section 1.3 of the WMCP FTAA provides:

The Contractor shall have the exclusive right to explore, exploit, utilise, process and
dispose of all Mineral products and by-products thereof that may be derived or produced
from the Contract Area but shall not, by virtue only of this Agreement, acquire any title to
lands encompassed within the Contract Area.
Under the WMCP FTAA, the contractor has exclusive right to exploit, utilize and process the
mineral resources to the exclusion of third parties and even the Philippine Government. Since
WMCP's right is exclusive, the Government has no participation in approving the operating
expenses of the foreign contractor relating to the exploitation, utilization, and processing of
mineral resources. The Government will have to accept whatever operating expenses the
contractor decides to incur in exploiting, utilizing and processing mineral resources.

Under the WMCP FTAA, the contractor has exclusive right to dispose of the minerals
recovered in the mining operations. This means that the contractor can sell the minerals to any
buyer, local or foreign, at the price and terms the contractor chooses without any intervention
from the State. There is no requirement in the WMCP FTAA that the contractor must sell the
minerals at posted or market prices. The contractor has the sole right to "mortgage, charge or
encumber" the "Minerals produced from the Mining Operations."50

Section 8.3 of the WMCP FTAA also makes a sham of the DENR Secretary's authority to
approve the foreign contractor's Work Program. Section 8.3 provides:

If the Secretary gives a Rejection Notice the Parties shall promptly meet and endeavour
to agree on amendments to the Work Program or budget. If the Secretary and the
Contractor fail to agree on the proposed revision within 30 days from delivery of
the Rejection Notice then the Work Programme or Budget or variation thereof
proposed by the Contractor shall be deemed approved, so as not to unnecessarily
delay the performance of the Agreement. (Emphasis supplied)

The DENR Secretary is the representative of the State which owns the mineral resources. The
DENR Secretary implements the mining laws, including RA 7942. Section 8.3, however, treats
the DENR Secretary like a subservient non-entity whom the contractor can overrule at will.
Under Section 8.3 of the WMCP FTAA, the DENR Secretary has no authority whatsoever to
disapprove the Work Program. This is not what the Constitution means by full control and
supervision by the State of mining operations.

Section 10.4(i) of the WMCP FTAA compels the Philippine Government to agree to any
request by the foreign contractor to amend the WMCP FTAA to satisfy the conditions of
creditors of the contractor. Thus, Section 10.4(i) states:

(i) the Government shall favourably consider any request, from Contractor for
amendments of this Agreement which are necessary in order for the Contractor to
successfully obtain the financing;

x x x. (Emphasis supplied)

This provision requires the Government to favorably consider any request from the contractor -
which means that the Government must render a response favorable to the contractor. In
effect, the contractor has the right to amend the WMCP FTAA even against the will of the
Philippine Government just so the contractor can borrow money from banks.

True, the preceding Section 10.4(e) of the WMCP FTAA provides that "such financing
arrangements will in no event reduce the Contractor's obligations or the Government's rights."
However, Section 10.4(i) binds the Government to agree to any future amendment requested
by the foreign contractor even if the Government does not agree with the wisdom of the
amendment. This provision is contrary to the State's full control and supervision in the
exploitation of mineral resources.

Clearly, under the WMCP FTAA the State has no full control and supervision over the mining
operations of the contractor. Provisions in the WMCP FTAA that grant the State full control and
supervision are negated by other provisions that take away such control and supervision.

The WMCP FTAA also violates the constitutional limits on the term of an FTAA. Section 2,
Article XII of the 1987 Constitution limits the term of a mineral agreement to "a period not
exceeding twenty-five years, renewable for not more than twenty-five years, and under
such terms and conditions as may be provided by law." The original term cannot exceed 25
years, and at the end of such term, either the Government or the contracting party may decide
not to renew the mineral agreement. However, both the Government and the contracting party
may also decide to renew the agreement, in which case the renewal cannot exceed another 25
years. What is essential is that either party has the option to renew or not to renew the
mineral agreement at the end of the original term.

However, Section 3.3 of the WMCP FTAA binds the Philippine Government to an ironclad 50-
year term. Section 3.3 compels the Government to renew the FTAA for another 25 years
after the original 25-year term expires.Thus, Section 3.3 states:

This Agreement shall be renewed by the Government for a further period of twenty-
five (25) years under the same terms and conditions provided that the Contractor
lodges a request for a renewal with the Government not less than sixty (60) days prior
to the expiry of the initial term of this Agreement and provided that the Contractor is not
in breach of any of the requirements of this Agreement. (Emphasis supplied)

Under Section 3.3, the contractor has the option to renew or not to renew the agreement. The
Government has no such option and must renew the agreement once the contractor makes a
request for renewal. Section 3.3 violates the constitutional limits because it binds the
Government to a 50-year FTAA at the sole option of the contractor.

H. Arguments of the Solicitor General and the NEDA Secretary

The Solicitor General states that the "basic share" of the State in FTAAs involving large-scale
exploitation of minerals, petroleum and other mineral oils –

x x x consists of all direct taxes, fees and royalties, as well as other payments made by
the Contractor during the term of the FTAA. The amounts are paid to the (i) national
government, (ii) local governments, and (iii) persons directly affected by the mining
project. Some of the major taxes paid are as follows Section 3(g) of DAO-99-56:

A. Payments to National Government

· Excise tax on minerals – 2% of gross output of mining operations

· Contractor's income tax – 32% of taxable income for corporation

· Customs duties and fees - rate is set by Tariff and Customs Code

· VAT on imported equipment, goods and services - 10% of value

· Royalty on minerals extracted from mineral reservations, if applicable – 5% of

the actual market value of the minerals produced

· Documentary stamp tax – rate depends on the type of transaction

· Capital gains tax on traded stocks – 5 to 10% of the value

· Tax on interest payments on foreign loans – 15% of the interest

· Tax on foreign stockholders dividends - 15% of the dividend

· Wharfage and port fees

· Licensing fees (e.g., radio permit, firearms permit, professional fees)

B. Payments to Local Governments

· Local business tax - maximum of 2% of gross sale or receipt

 · Real property tax - 2% of the fair market value of property based on an
assessment level set by the local government

· Local business tax - maximum of 2% of gross sale or receipt

· Special education levy - 1% of the basis used in real property tax

· Occupation tax - 50 pesos per hectare per year; 100 pesos per hectare per year
if located in a mineral concession

· Community tax - 10,500 pesos maximum per year

· Other local taxes and fees - rate and type depends on the local government

C. Other Payments

· Royalty to indigenous cultural communities, if any - not less than 1% of the

gross output from mining operations

· Special allowance – payment to claim owners or surface right owners

The Solicitor General argues that the phrase "among other things" in the second paragraph of
Section 81 of RA 7942 means that the State "is entitled to an additional government share to
be paid by the Contractor." The Solicitor General explains:

An additional government share is collected from an FTAA contractor to fulfill the intent
of Section 81 of RA No. 7942, to wit:

Sec. 81. The Government share in an FTAA shall consist of, among other things,
the Contractor's corporate income tax, excise tax, special allowance, withholding
tax due from the Contractor's foreign stockholders arising from dividends or
interest payments to the said foreign stockholders in case of a foreign-owned
corporation and all such other taxes, duties and fees as provided for in existing
laws. (Underscoring supplied)

The phrase "among other things" indicates that the Government is entitled to an
additional share to be paid by the Contractor, aside from the basic share in order to
achieve the fifty-fifty sharing of net benefits from mining.

By including indirect taxes and other financial contributions in the form of fuel
tax; employees' payroll and fringe benefits; various withholding taxes on royalties
to land owners and claim owners, and employees' income; value added tax on
local goods, equipment, supplies and services; and expenditures for social
infrastructures in the mine site (hospitals, schools, etc.) and development of host
and neighboring communities, geosciences and mining technology, the
government share will be in the range of 60% or more of the total financial
benefits. (Bold and underscoring in the original)

The Solicitor General enumerates this "additional government share" as "indirect taxes and
other financial contributions in the form of fuel tax; employees' payroll and fringe
benefits; various withholding taxes on royalties to land owners and claim owners, and
employees' income; value added tax on local goods, equipment, supplies and services; x
x x." The Solicitor General's argument merely confirms that under Section 81 of RA 7942 the
State only receives taxes, duties and fees under the FTAA. The State does not receive, as
owner of the mineral resources, any income from the mining operations of the contractor.

In short, the "basic share" of the State consists of direct taxes by the national and local
governments. The "additional share" of the State consists of indirect taxes including even
fringe benefits to employees and compensation to private surface right owners. Direct
and indirect taxes, however, are impositions by the taxing authority, a burden borne by all
taxpayers whether or not they exploit the State's mineral resources. Fringe benefits of
employees are compensation for services rendered under an employer-employee relationship.
Compensation to surface right owners is payment for the damage suffered by private
landowners arising from the mining operations. All these direct and indirect taxes, as well as
other expenses of the contractor, do not constitute payment for the share of the State as
owner of the mineral resources.

Clearly, the so-called "share" of the State consists only of direct and indirect taxes, as well as
other operating expenses not even payable to the State. The Solicitor General in
effect concedes that under the second paragraph of Section 81, the State does not receive any
share of the net proceeds from the mining operations of the FTAA contractor. Despite this, the
Solicitor General insists that the State remains the owner of the mineral resources and
exercises full control over the mining operations of the FTAA contractor. The Solicitor General
has redefined the civil law concept of ownership,51 by giving the owner full control in the
exploitation of the property he owns but denying him the fruits or income from such exploitation.
The only satisfaction of the owner is that the FTAA contractor pays taxes to the Government.

However, even this psychological satisfaction is dubious. Under the third paragraph of Section
81 of RA 7942, the "collection of Government share in financial and technical assistance
agreement shall commence after the financial and technical assistance agreement contractor
has fully recovered its pre-operating expenses, exploration, and development expenditures,
inclusive." This provision does not defer the collection of the State's "share," but prevents the
accrual of the State's "share" until the contractor has fully recovered all its pre-operating,
exploration and development expenditures. This provision exempts for an undefined period
the contractor from all existing taxes that are part of the Government's so-called "share"
under Section 81.52 The Solicitor General has interpreted these taxes to include "other national
taxes and fees" as well as "other local taxes and fees."

Secretary Romulo L. Neri of the National Economic and Development Authority ("NEDA") has
warned this Court of the supposed dire repercussions to the nation's long-term economic growth
if this Court declares the assailed provisions of RA 7942 unconstitutional.53 Under the
Constitution, the NEDA is the "independent (economic) planning agency of the
government."54 However, in this case the NEDA Secretary has joined the chorus of the foreign
chambers of commerce to uphold the validity of RA 7942 as essential to entice foreign investors
to exploit the nation's mineral resources.

We cannot fault the foreign chambers of commerce for driving a hard bargain to maximize the
profits of foreign investors. We are, however, saddened that the NEDA Secretary is willing to
give away for free to foreign investors the State's share of the income from its ownership of
mineral resources. If the NEDA Secretary owns the mineral resources instead of the State, will
he allow the foreign contractor to exploit his mineral resources for free, the only obligation of the
foreign contractor being to pay taxes to the Government?

Secretary Neri claims that the potential tax collection from the mining industry alone is P57
billion as against the present collection of P2 billion. Secretary Neri adds that the potential tax
collection from incremental activities linked to mining is another P100 billion, thus putting
the total potential tax collection from mining and related industries at P157
billion.55 Secretary Neri also estimates the "potential mining wealth in the Philippines"
at P47 trillion or US$840 billion, 15 times our total foreign debt of US$56 billion.56

If all that the State will receive from its P47 trillion potential mineral wealth is the P157 billion in
direct and indirect taxes, then the State will truly receive only a pittance. The P157 billion in
taxes constitute a mere .33% or a third of 1% of the total mineral wealth of P47 trillion. Even
if the P157 billion is collected annually over 25 years, the original term of an FTAA, the total tax
collection will amount to only P3.92 trillion, or a mere 8.35% of the total mineral wealth. The rest
of the country's mineral wealth will flow out of the country if foreign contractors exploit our
mineral resources under FTAAs pursuant to RA 7942.

Secretary Neri also warns that foreign investors who have acquired local cement factories in the
last ten years will find their investments illegal if the Court declares unconstitutional the assailed
provisions of RA 7942.57 Such specious arguments deserve scant consideration. Cement
manufacturing is not a nationalized activity. Hence, foreigners can own 100% of cement
companies in this country. When the foreign investors acquired the local cement factories, they
spun off the quarry operations into separate companies 60% owned by Filipino citizens. The
foreign investors knew the constitutional requirements of holding quarry permits.

Besides, the quarrying requirement of cement companies is just a simple surface mining of
limestone. Such activity does not constitute large-scale exploitation of mineral resources. It
definitely cannot qualify for FTAAs with foreign contractors under the fourth paragraph of
Section 2, Article XII of the Constitution. Obviously, only a company at least 60% Filipino owned
can engage in such mining activity.

The offshore Occidental-Shell FTAA shows that even in riskier ventures involving far more
capital investments, the State can negotiate and secure at least 60% of the net proceeds from
the exploitation of mineral resources. Foreign contractors like Occidental-Shell are willing to pay
the State 60% of the net proceeds from petroleum operations, in addition to paying the
Government the 32% corporate income tax on its 40% share of the net proceeds. Even
intervenor CMP and respondent WMCP agree that the State has a 60% interest in mining
operations under an FTAA. I simply cannot fathom why the NEDA Secretary is willing to
accept a ZERO percent share in the income from the exploitation of inland mineral resources.

FTAAs like the WMCP FTAA, which gives the State an illusory 60% share of the net proceeds
from mining revenues, will only impoverish further the Filipino people. The nation's potential
mineral wealth of P47 trillion will contribute to economic development only if the bulk of the
wealth remains in the country, not if remitted abroad by foreign contractors.

I. Refutation of Arguments of Majority Opinion

The majority opinion advances the following arguments:

1. DENR Department Administrative Order No. 56-99 ("DAO 56-99") is the basis for
determining the State's share in the mining income of the foreign FTAA contractor. The
DENR Secretary issued DAO 56-99 pursuant to the phrase "among other things" in
Section 81 of RA 7942. The majority opinion claims that the phrase "among other
things" "clearly and unmistakably reveals the legislative intent to have the State
collect more than just the usual taxes, duties and fees." The majority
opinion anchors on the phrase "among other things" its argument that RA 7942
allows the State to collect a share in the mining income of the foreign FTAA contractor,
in addition to taxes, duties and fees. Thus, on the phrase "among other things"
depends whether the State and the Filipino people are entitled under RA 7942 to
share in the vast mineral wealth of the nation, estimated by NEDA at P47 trillion or
US$840 billion.

2. FTAAs, like the WMCP FTAA, are not subject to the term limit in Section 2, Article
XII of the 1987 Constitution. In short, while co-production, joint venture and production-
sharing agreements cannot exceed 25 years, renewable for another 25 years, as
provided in Section 2, Article XII of the 1987 Constitution, the WMCP FTAA is not
governed by the constitutional limitation. The majority opinion states that
the "constitutional term limitations do not apply to FTAAs." Thus, the majority
opinion upholds the validity of Section 3.3 of the WMCP FTAA providing for a 50-year
term at the sole option of WMCP.

3. Section 112 of RA 7942, placing "all valid and existing" mining agreements under
the fiscal regime prescribed in Section 80 of RA 7942, does not apply to FTAAs. Thus,
the majority opinion states, "[W]hether Section 112 may properly apply to co-
production or joint venture agreements, the fact of the matter is that it cannot be
made to apply to FTAAs."

4. Foreign FTAA contractors and even foreign corporations can hold exploration
permits, despite Section 2, Article XII of the 1987 Constitution reserving to Philippine
citizens and to corporations 60% Filipino owned the "exploration, development and
utilization of natural resources." Thus, the majority opinion states that "there is no
 prohibition at all against foreign or local corporations or contractors holding
exploration permits."

5. The Constitution does not require that the State's share in FTAAs or other mineral
agreements should be at least 60% of the net mining revenues. Thus, the majority
opinion states that "the Charter did not intend to fix an iron-clad rule on the 60
percent share, applicable to all situations at all times and in all circumstances."

I respond to the arguments of the majority opinion.

1. DAO 99-56 as Basis for Government's Share in FTAAs

The main thrust of my separate opinion is that mineral agreements under RA 7942, whether
FTAAs under Section 81 or MPSAs under Section 80, do not allow the State to receive any
share from the income of mining companies. The State can collect only taxes, duties and fees
from mining companies.

The majority opinion, however, points to the phrase "among other things" in the second
paragraph of Section 81 as the authority of the State to collect in FTAAs a share in the mining
income separate from taxes, duties and fees. The majority opinion can point to no other
provision in RA 7942 allowing the State to collect any share. The majority opinion admits that
limiting the State's share in any mineral agreement to taxes, duties and fees is
unconstitutional. Thus, the majority opinion's case rises or falls on whether the phrase
"among other things" allows the State to collect from FTAA contractors any income in
addition to taxes, duties and fees.

In the case of MPSAs, the majority opinion cannot point to any provision in RA 7942 allowing
the State to collect any share in MPSAs separate from taxes, duties and fees. The language of
Section 80 is so crystal clear – "the total government share in a mineral production sharing
agreement shall be the excise tax on mineral products" - that there is no dispute
whatsoever about it. The majority opinion merely states that the constitutionality of Section 80 is
not in issue in the present case. Section 81, the constitutionality of which the majority opinion
admits is in issue here, is intertwined with Sections 39, 80, 84 and 112. Resolving the
constitutionality of Section 81 necessarily involves a determination of the constitutionality of
Sections 39, 80, 84 and 112.

The WMCP FTAA, the constitutionality of which is certainly in issue, is governed not only by
Section 81 but also by Sections 39, 80 and 112. The reason is that the WMCP FTAA is a
reversible contract that gives WMCP the absolute option at anytime to convert the FTAA into
an MPSA. In short, the WMCP FTAA is like a single coin with two sides - one an FTAA and the
other an MPSA.

a. The Integrated Intent, Plan and Structure of RA 7942

The clear intent of RA 7942 is to limit the State's share from mining operations to taxes, duties
and fees, unless the State contributes equity in addition to the mineral resources. RA 7942 does
not recognize the mere contribution of mineral resources as entitling the State to receive a
share in the net mining revenues separate from taxes, duties and fees. Thus, Section 80
expressly states that the "total government share in a mineral production sharing
agreement shall be the excise tax on mineral products." Section 84 reiterates this by stating
that "with respect to mineral production sharing agreement, the excise tax on mineral
products shall be the government share under said agreement." The only share of the
State in an MPSA is the excise tax. Ironically, Sections 80 and 84 disallow the State from
sharing in the production or income, even as the contract itself is called a mineral production
sharing agreement.

In co-production and joint venture agreements, where the State contributes equity in addition to
the mineral resources, the first paragraph of Section 81 expressly requires that "the share of
the government x x x shall be negotiated by the Government and the
contractor." However, in FTAAs where the State contributes only its mineral resources, the
second paragraph of Section 81 states –
 The Government share in financial or technical assistance agreement shall consist of,
among other things, the contractor's corporate income tax, excise tax, special allowance,
withholding tax due from the contractor's foreign stockholders arising from dividend or
interest payments to the said foreign stockholder in case of a foreign national and all
such other taxes, duties and fees as provided for under existing laws.

All the items enumerated in the second paragraph of Section 81 as comprising the "Government
share" refer totaxes, duties and fees. The phrase "all such other taxes, duties and fees as
provided for under existing laws" makes this clear.

Section 112 places "all valid and existing mining" agreements "at the date of effectivity" of
RA 7942 under the fiscal regime prescribed in Section 80. Section 112 expressly states that
the "government share in mineral production sharing agreement x x x shall immediately
govern and apply to a mining lessee or contractor."Section 112 provides:

Section 112. Non-impairment of Existing Mining/Quarrying Rights. — All valid and

existing mining lease contracts, permits/licenses, leases pending renewal, mineral
production-sharing agreements granted under Executive Order No. 279, at the date of
effectivity of this Act, shall remain valid, shall not be impaired, and shall be recognized
by the Government: Provided, That the provisions of Chapter XIV on government
share in mineral production-sharing agreement and of Chapter XVI on incentives
of this Act shall immediately govern and apply to a mining lessee or
contractor unless the mining lessee or contractor indicates his intention to the
secretary, in writing, not to avail of said provisions: Provided, further, That no renewal of
mining lease contracts shall be made after the expiration of its term: Provided, finally,
That such leases, production-sharing agreements, financial or technical assistance
agreements shall comply with the applicable provisions of this Act and its implementing
rules and regulations. (Emphasis supplied)

Thus, Section 112 requires "all" FTAAs and MPSAs, as of the date of effectivity of RA 7942, to
pay only the excise tax - 2% on metallic and non-metallic minerals and 3% on petroleum58 -
instead of the stipulated mining income sharing, if any, in their respective FTAAs or MPSAs.

This means that Section 112 applies even to the Occidental-Shell FTAA, which was
executed before the enactment of RA 7942. This reduces the State's share in the
Malampaya gas extraction from 60% of net proceeds to 3% of the market price of the gas
as provided in Section 80 of RA 7942 in relation to Section 151 of the National Internal
Revenue Code. This is disastrous to the national economy because Malampaya under
the original Occidental-Shell FTAA generates annually some US$0.5 billion to the
National Treasury.

Section 112 applies to all agreements executed "under Executive Order No. 279." The
WMCP FTAA expressly states in its Section 1.1, "This Agreement is a Financial & Technical
Assistance Agreement entered into pursuant to Executive Order No. 279." Thus, Section
112 applies to the WMCP FTAA.

Section 39 of RA 7942 grants the FTAA contractor the "option to convert" the FTAA into an
MPSA "at any time during the term" of the FTAA if the contract areas are not economically
viable for large-scale mining. Once the contractor reduces its foreign equity to not more than
40%, the Secretary "shall approve the conversion and execute the mineral production
sharing agreement. Thus, Section 39 provides:

Section 39. Option to Convert into a Mineral Agreement. — The contractor has the
option to convert the financial or technical assistance agreement to a mineral
agreement at any time during the term of the agreement, if the economic viability of
the contract area is found to be inadequate to justify large-scale mining operations, after
proper notice to the Secretary as provided for under the implementing rules and
regulations: Provided, That the mineral agreement shall only be for the remaining period
of the original agreement.
In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the
corporation, partnership, association, or cooperative. Upon compliance with this
requirement by the contractor, the Secretary shall approve the conversion and execute
the mineral production-sharing agreement. (Emphasis supplied)

The only requirement in the second paragraph of Section 39 is that the FTAA contractor shall
reduce its foreign equity to 40%. The second paragraph states, "Upon compliance with this
requirement, the Secretary shall approve the conversion and execute the mineral
production sharing agreement." The determination of the economic viability of the contract
area for large-scale mining, which is left to the foreign contractor with "proper notice" only to the
DENR Secretary, is not even made a condition for the conversion.

Under Section 3(aq) of RA 7942, the foreign contractor holds the exploration permit and
conducts the physical exploration. The foreign contractor controls the release of the technical
data on the mineral resources. The foreign contractor can easily justify the non-viability of the
contract area for large-scale mining. The Philippine Government will have to depend on the
foreign contractor for technical data on whether the contract area is viable for large-scale
mining. Obviously, such a situation gives the foreign contractor actual control in determining
whether the contract area is viable for large-scale mining.

The conversion from an FTAA into an MPSA is solely at the will of the foreign contractor
because the contractor can choose at any time to sell 60% of its equity to a Philippine citizen.
The price or consideration for the sale of the contractor's 60% equity does not go to the State
but to the foreign stockholders of the contractor. Under Section 80 of RA 7942, once the FTAA
is converted into an MPSA the only share of the State is the 2% excise tax on mineral
products. Thus, under RA 7942 the FTAA contractor has the absolute option to pay the
State only the 2% excise tax, despite any other stipulated consideration in the FTAA.

Clearly, Sections 3(aq), 39, 80, 81, 84 and 112 are tightly integrated under a single intent, plan
and structure: unless the State contributes equity in addition to the mineral resources, the State
shall receive only taxes, duties and fees. The State's contribution of mineral resources is not
sufficient to entitle the State to receive any income from the mining operations separate from
taxes, duties and fees.

b. The Meaning of the Phrase "Among Other Things"

As far as the State and the Filipino people are concerned, the most important part of an FTAA is
the consideration: how much will the State receive from the exploitation of its non-
renewable and exhaustible mineral resources?

Section 81 of RA 7942 does not require the foreign FTAA contractor to pay the State any share
from the mining income apart from taxes, duties and fees. The second paragraph of Section 81,
just like Section 80, only allows the State to collect taxes, duties and fees as the State's share
from the mining operations. The intent of RA 7942 is that the State cannot share in the income
from mining operations, separate from taxes, duties and fees, based only on the mineral
resources that the State contributes to the mining operations.

This is also the position of the Solicitor General – that the State's share under Section 81 refers
only to direct and indirect taxes. Thus, the Solicitor General agrees that Section 81 does
not allow the State to collect any share from the mining income separate from taxes,
duties and fees. The majority opinion agrees that Section 81 is unconstitutional if it does not
require the foreign FTAA contractor to pay the State any share of the net mining income apart
from taxes, duties and fees.

However, the majority opinion says that the phrase "among other things" in Section 81 is the
authority to require the FTAA contractor to pay a consideration separate from taxes, duties and
fees. The majority opinion cites the phrase "among other things" as the source of power of
the DENR Secretary to adopt DAO 56-9959prescribing the formulae on the State's share
from mining operations separate from taxes, duties and fees.
In short, the majority opinion says that the phrase "among other things" is a delegation of
legislative power to the DENR Secretary to adopt the formulae on the share of the State from
mining operations. The issue now is whether the phrase "among other things" in the
second paragraph of Section 81 is intended as a delegation of legislative power to the
DENR Secretary. If so, the issue turns on whether it is a valid delegation of legislative
power. I reproduce again the second paragraph of Section 81 for easy reference:

The Government share in financial or technical assistance agreement shall consist

of, among other things,the contractor's corporate income tax, excise tax, special
allowance, withholding tax due from the contractor's foreign stockholders arising from
dividend or interest payments to the said foreign stockholder in case of a foreign national
and all such other taxes, duties and fees as provided for under existing laws.
(Emphasis supplied)

Section 81 of RA 7942 does not delegate any legislative power to the DENR Secretary to adopt
the formulae in determining the share of the State. There is absolutely no language in the
second paragraph of Section 81 granting the DENR Secretary any delegated legislative
power. Thus, the DENR Secretary acted without authority or jurisdiction in issuing DAO 56-99
based on a supposed delegated power in the second paragraph of Section 81. This makes DAO
56-99 void.

Even assuming, for the sake of argument, that there is language in Section 81 delegating
legislative power to the DENR Secretary to adopt the formulae in DAO 56-99, such delegation
is void. Section 81 has no standards by which the delegated power shall be exercised. There is
no specification on the minimum or maximum share that the State must receive from mining
operations under FTAAs. No parameters on the extent of the delegated power to the DENR
Secretary are found in Section 81. Neither were such parameters ever discussed even remotely
by Congress when it enacted RA 7942.

In sharp contrast, the first paragraph of the same Section 81, in prescribing the State's share
in co-production and joint venture agreements, expressly specifies the standards in
determining the State's share as follows: "(a) capital investment of the project, (b) risks involved,
(c) contribution of the project to the economy, and (d) other factors that will provide for a fair and
equitable sharing between the Government and the contractor." The reason for the absence of
similar standards in the succeeding paragraph of Section 81 in determining the State's share in
FTAAs is obvious - the State's share in FTAAs is limited solely to taxes, duties and fees. Thus,
such standards are inapplicable and irrelevant.

The majority opinion now makes the formulae in DAO 56-99 the heart and soul of RA 7942
because the formulae supposedly determine the consideration of the FTAA. The consideration
is the most important part of the FTAA as far as the State and Filipino people are concerned.
The formulae in DAO 56-99 derive life solely from the phrase "among other things." DAO 56-
99 itself states that it is issued "[P]ursuant to Section 81 and other pertinent provisions of
Republic Act No. 7942." Without the phrase "among other things," the majority opinion could not
point to any other provision in RA 7942 to support the existence of the formulae in DAO 56-99.

Thus, the phrase "among other things" determines whether the FTAA has the third element of
a valid contract – the commercial value or consideration that the State will receive. The majority
opinion in effect says that Congress made the wealth and even the future prosperity of the
nation to depend on the phrase "among other things."

The DENR Secretary can change the formulae in DAO 56-99 any time even without the
approval of the President or Congress. The DENR Secretary is the sole authority to determine
the amount of consideration that the State shall receive in an FTAA. Section 5 of DAO 56-99
states:

x x x any amendment of an FTAA other than the provision on fiscal regime shall
require the negotiation with the Negotiation Panel and the recommendation of the
Secretary for approval of the President of the Republic of the Philippines. (Emphasis
supplied)
Under Section 5, if the amendment in the FTAA involves non-fiscal matters, the amendment
requires the approval of the President. However, if the amendment involves a change in the
fiscal regime –referring to the consideration of the FTAA - the DENR Secretary has the final
authority and approval of the President is not required. This makes the DENR Secretary more
powerful than the President.

Section 5 of DAO 56-99 violates paragraphs 4 and 5 of Section 2, Article XII of the 1987
Constitution mandating that the President shall approve all FTAAs and send copies of all
approved FTAAs to Congress. The consideration of the FTAA is the most important part of the
FTAA as far as the State and the Filipino people are concerned. The DENR Secretary, in
issuing DAO 56-99, has arrogated to himself the power to approve FTAAs, a power
vested by the Constitution solely in the President. By not even informing the President of
changes in the fiscal regime and thus preventing such changes from reaching Congress, DAO
56-99 even seeks to hide changes in the fiscal regime from Congress. By its provisions alone,
DAO 56-99 is clearly unconstitutional and void.

Section 5 of DAO 56-99 also states that "[A]ll FTAAs approved prior to the effectivity of this
Administrative Order shall remain valid and be recognized by the Government." This means
that the fiscal regime of an FTAA executed prior to the effectivity of DAO 56-99 "shall remain
valid and be recognized." If the earlier FTAA provides for a fiscal regime different from DAO 56-
99, then the fiscal regime in the earlier FTAA shall prevail. In effect, DAO 56-99 exempts an
FTAA approved prior to its effectivity from paying the State the share prescribed in the formulae
under DAO 56-99 if the earlier FTAA provides for a different fiscal regime. Such is the case of
the WMCP FTAA.

Based on the majority opinion's position that the 1987 Constitution requires payment in addition
to taxes, duties and fees, this makes DAO 56-99 unconstitutional and void. DAO 56-99 does not
require prior FTAAs to pay the State the share prescribed in the formulae under DAO 56-99
even if the consideration in the prior FTAAs is limited only to taxes, duties and fees. DAO 56-99
recognizes such payment of taxes, duties and fees as a "valid" consideration. Certainly, the
DENR Secretary has no authority to exempt foreign FTAA contractors from a constitutional
requirement. Not even Congress or the President can do so.

Ironically, DAO 56-99, the very authority the majority opinion cites to support its claim that the
WMCP FTAA has a consideration, does not apply to the WMCP FTAA. By its own express
terms, DAO 56-99 does not apply to FTAAs executed before the issuance of DAO 56-99,
like the WMCP FTAA. The majority opinion's position has no leg to stand on since even DAO
56-99, assuming it is valid, cannot save the WMCP FTAA from want of consideration.

The formulae prescribed in DAO 56-99 are totally alien to the phrase "among other things."
There is no relationship whatsoever between the phrase "among other things" and the highly
esoteric formulae prescribed in DAO 56-99. No one in this Court can assure the Filipino people
that the formulae in DAO 56-99 will guarantee the State 60%, or 30% or even 10% of the net
proceeds from the mining operations. And yet the majority opinion trumpets DAO 56-99 as the
savior of Section 81 from certain constitutional infirmity.

The majority opinion gives the stamp of approval and legitimacy on DAO 56-99. This assumes
that the majority understand fully the formulae in DAO 56-99. Can the majority tell the Court and
the Filipino people the minimum share that the State will receive under the formulae in DAO 56-
99? The formulae in DAO 56-99 are fuzzy since they do not guarantee the minimum share of
the State, unlike the clear and specific income sharing provisions in the Occidental-Shell FTAA
or in the case of Consolidated Mines, Inc. v. Court of Tax Appeals.60

The Solicitor General asserts that the phrase "among other things" refers to indirect taxes, an
interpretation that contradicts the DENR Secretary's interpretation under DAO 56-99. The
Solicitor General is correct. The ejusdem generis rule of statutory interpretation applies
squarely to the phrase "among other things."

In Philippine Bank of Communications v. Court of Appeals,61 the Court held:

 Under the rule of ejusdem generis, where a description of things of a particular class or
kind is 'accompanied by words of a generic character, the generic words will usually be
limited to things of a kindred nature with those particularly enumerated x x x.'

In Grapilon v. Municipal Council of Cigara,62 the Court construed the general word "absence"
in the phrase "absence, suspension or other temporary disability of the mayor" in Section 2195
of the Revised Administrative Code as "on the same level as 'suspension' and 'other forms of
temporary disability'." The Court quoted with approval the following Opinion of the Secretary of
Interior:

The phrase 'other temporary disability' found in section 2195 of the Code, follows the
words 'absence' and 'suspension' and is used as a modifier of the two preceding words,
under the principle of statutory construction known as ejusdem generis.

In City of Manila v. Entote,63 the Court ruled that broad expressions such as "and all
others" or "any others" or "other matters," when accompanied by an enumeration of items of
the same kind or class, "are usually to be restricted to persons or things of the same kind or
class with those specifically named" in the enumeration. Thus, the Court held:

In our jurisdiction, this Court in Ollada vs. Court of Tax Appeals, et al. applied the rule of
"ejusdem generis" to construe the purview of a general phrase "other
matters" appearing after an enumeration of specific cases decided by the Collector of
Internal Revenue and appealable to the Court of Tax Appeals found in section 7,
paragraph 1, of Republic Act No. 1125, and it held that in order that a matter may come
under said general clause, it is necessary that it belongs to the same kind or class of
cases therein specifically enumerated. (Emphasis supplied)

The four requisites of the ejusdem generis rule64 are present in the phrase "among other
things" as appearing in Section 81 of RA 7942. First, the general phrase "among other
things" is accompanied by an enumeration of specific items, namely, "the contractor's
corporate income tax, excise tax, special allowance, withholding tax due from the
contractor's foreign stockholders arising from dividend or interest payments to the said foreign
stockholder in case of a foreign national and all such other taxes, duties and fees as provided
for under existing laws." Second, all the items enumerated are of the same kind or class - they
are all taxes, duties and fees. Third, the enumeration of the specific items is not exhaustive
because "all such other taxes, duties and fees" are included. Thus, the enumeration of specific
items is merely illustrative. Fourth, there is no indication of legislative intent to give the general
phrase "among other things" a broader meaning. On the contrary, the legislative intent of RA
7942 is to limit the State's share from mining operations to taxes, duties and fees.

In short, the phrase "among other things" refers to taxes, duties and fees. The
phrase "among other things" is even followed at the end of the sentence by the phrase "and
all such other taxes, duties, and fees," reinforcing even more the restriction of the
phrase "among other things" to taxes, duties and fees. The function of the phrase "and such
other taxes, duties and fees" is to clarify that the taxes enumerated are not exhaustive but
merely illustrative.

c. Formulae in DAO 56-99 a Mere Creation of DENR

The majority opinion praises the DENR for "conceiving and developing" the formulae in DAO
56-99. Thus, the majority opinion states:

As can be seen from DAO 56-99, the agencies concerned did an admirable job
of conceiving and developing not just one formula, but three different formulas for
arriving at the additional government share. (Emphasis supplied)

Indeed, we credit the DENR for conceiving and developing on their own the formulae in DAO
56-99. The formulae are the creation of DENR, not of Congress.

The DENR conceived and developed the formulae to save Section 81 not only from
constitutional infirmity, but also from blatantly depriving the State and Filipino people from any
share in the income of mining companies. However, the DENR's admittedly "admirable job"
cannot amend Section 81 of RA 7942. The DENR has no legislative power to correct
constitutional infirmities in RA 7942. The DENR does not also possess the constitutional power
to prescribe the sharing of mining income between the State and mining companies, the act the
DENR attempts to do in adopting DAO 56-99.

d. DAO 56-99 is an Exercise in Futility

Even assuming arguendo the majority opinion is correct that the phrase "among other things"
constitutes sufficient legal basis to issue DAO 56-99, the FTAA contractor can still prevent the
State from collecting any share of the mining income. By invoking Section 39 of RA 7942 giving
the foreign FTAA contractor the option to convert the FTAA into an MPSA, the FTAA
contractor can easily place itself outside the scope of DAO 56-99 which expressly applies
only to FTAAs.

Also, by invoking Section 112, the foreign contractor need not even convert its FTAA into a
mineral production agreement to place its contract under Section 80 and outside of Section 81.
Section 112 automatically and immediately places all FTAAs under the fiscal regime applicable
to MPSAs, forcing the State to collect only the 2% excise tax. Thus, DAO 56-99 is an exercise in
futility. This now compels the Court to resolve the constitutionality of Sections 39 and 112 of RA
7942 in the present case.

e. Congress Prescribes the Terms and Conditions of FTAAs.

In a last-ditch attempt to justify the constitutionality of DAO 56-99, the majority opinion now
claims that the President has the prerogative to prescribe the terms and conditions of
FTAAs, including the fiscal regime of FTAAs. The majority opinion states:

x x x It is the President who is constitutionally mandated to enter into FTAAs with

foreign corporations, and in doing so, it is within the President's prerogative to specify
certain terms and conditions of the FTAAs, for example, the fiscal regime of FTAAs -
i.e., the sharing of the net revenues between the contractor and the State. (Emphasis in
the original; underscoring supplied)

The majority opinion is re-writing the 1987 Constitution and even RA 7942. Paragraph 4,
Section 2, Article XII of the 1987 Constitution expressly provides:

The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general
terms and conditions provided by law, x x x. (Emphasis supplied)

Clearly, the 1987 Constitution mandates that the President may enter into FTAAs
only "according to the general terms and conditions provided by law." There is no doubt
whatsoever that it is Congress that prescribes the terms and conditions of FTAAs, not the
President as the majority opinion claims. The 1987 Constitution mandates the President to
comply with the terms and conditions prescribed by Congress for FTAAs.

Indeed, RA 7942 stipulates the terms and conditions for FTAAs. Section 35 of RA 7942
provides that the "following terms, conditions, and warranties shall be incorporated in the
financial or technical assistance agreement to wit: x x x." Section 38 of RA 7942 expressly
limits an FTAA to a "term not exceeding twenty-five (25) years,"which is one of the issues in
the present case.

The majority opinion claims that the President has the power to prescribe "the fiscal regime of
FTAAs – i.e., the sharing of the net mining revenues between the contractor and the
State." This claim of the majority opinion renders the entire Chapter XIV of RA 7942 an act of
usurpation by Congress of Presidential power. Chapter XIV – entitled "Government Share" -
prescribes the fiscal regimes of MPSAs and FTAAs. The constitutionality of Sections 80 and
81 of Chapter XIV - whether the fiscal regimes prescribed in these sections of RA 7942 comply
with the 1987 Constitution - is the threshold issue in this case.
The majority opinion seeks to uphold the constitutionality of Section 81 of RA 7942, an act of
Congress prescribing the fiscal regime of FTAAs. If it is the President who has the constitutional
authority to prescribe the fiscal regime of FTAAs, then Section 81 is unconstitutional for being a
usurpation by Congress of a Presidential power. The majority opinion not only re-writes the
1987 Constitution, it also contradicts itself.

That is not all. By claiming that the President has the prerogative to prescribe the fiscal regime
of FTAAs, the majority opinion contradicts its basic theory that DAO 56-99 draws life from the
phrase "among other things" in Section 81 of RA 7942. Apparently, the majority opinion is no
longer confident of its position that DAO 56-99 draws life from the phrase "among other
things." The majority opinion now invokes a non-existent Presidential power that directly
collides with the express constitutional power of Congress to prescribe the "general terms and
conditions" of FTAAs.

f. Sections 80 and 84 of RA 7942 are Void on their Face

Definitely, Section 80 of RA 7942 is constitutionally infirm even based on the reasoning of the
majority opinion. The majority opinion agrees that the 1987 Constitution requires the mining
contractor to pay the State "more than just the usual taxes, duties and fees." Under Section
80, the excise tax – 2% for metallic and non-metallic minerals and 3% for petroleum - is the
only and total share of the State from mining operations. Section 80 provides:

Section 80. Government Share in Mineral Production Sharing Agreement. — The total
government share in a mineral production sharing agreement shall be the excise
tax on mineral products as provided in Republic Act No. 7729, amending Section
151(a) of the National Internal Revenue Code, as amended. (Emphasis supplied)

Section 80 has no ifs or buts. Section 84 even reiterates Section 80 that "with respect to a
mineral production sharing agreement, the excise tax on mineral products shall be the
government share under said agreement." There is no ejusdem generis phrase like "among
other things" in Section 80 that the majority opinion can cling on to save it from constitutional
infirmity. DAO 56-99, the magic wand of the majority opinion, expressly applies only to FTAAs
and not to MPSAs. By any legal yardstick, even by the arguments of the majority opinion,
Sections 80 and 84 are void and unconstitutional.

g. Necessity of Resolving Constitutionality of Sections 39, 80 and 84

The majority opinion states that the constitutionality of Sections 80 and 84 of RA 7942 is not in
issue in the present case. The majority opinion forgets that petitioners have assailed the
constitutionality of RA 7942 and the WMCP FTAA for violation of Section 2, Article XII of the
1987 Constitution. Petitioner specifically assails the "inequitable sharing of wealth" in the
WMCP FTAA, which petitioners assert is "contrary to Section 1, paragraph 1, and Section
2, paragraph 4, Article XII of the Constitution."

Section 9.1 of the WMCP FTAA grants WMCP the absolute option, by mere notice to the DENR
Secretary, to convert the FTAA into an MPSA under Section 80. The "sharing of wealth" in
Section 80 is "inequitable" and "contrary to x x x Section 2, paragraph 4, Article XII of the
Constitution" because the State will only collect the 2% excise tax in an MPSA. Such a pittance
of a sharing will not make any "real contributions to the economic growth and general welfare of
the country" as required in paragraph 4, Section 2, Article XII of the 1987 Constitution.

Section 39 of RA 7942 also grants foreign FTAA contractors the option, by mere notice to the
DENR Secretary, to convert their FTAAs into MPSAs under Section 80. Necessarily, the
constitutionality of the WMCP FTAA must be resolved in conjunction with Section 80 of RA
7942.

The WMCP FTAA is like a coin with two sides, one side is an FTAA, and the other an MPSA. By
mere notice to the DENR Secretary, WMCP can convert the contract from an FTAA to an
MPSA, a copy of which, complete with all terms and conditions, is annexed to the WMCP
FTAA.65 The DENR Secretary has no option but to sign the annexed MPSA. There are only two
conditions to WMCP's exercise of this option: the reduction of foreign equity in WMCP to 40%,
and notice to the DENR Secretary. The first condition is already fulfilled since all the equity of
WMCP is now owned by a corporation 60% Filipino owned. The notice to the DENR Secretary
is solely at the will of WMCP.

What this Court is staring at right now is a dual contract - an FTAA which, by mere notice to
the DENR Secretary, immediately becomes an MPSA. The majority opinion agrees that the
provisions of the WMCP FTAA, which grant a sham consideration to the State, are void. Since
the majority opinion agrees that the WMCP FTAA has a sham consideration, the WMCP
FTAA thus lacks the third element of a valid contract. The majority opinion should
declare the WMCP FTAA void for want of consideration unless the majority opinion treats
the contract as an MPSA under Section 80. Indeed, the only recourse of WMCP to save the
validity of its contract is to convert it into an MPSA.

Thus, with the absence of consideration in the WMCP FTAA, what is actually before this Court
is an MPSA. This squarely puts in issue whether an MPSA is constitutional if the only
consideration or payment to the State is the 2% excise tax as provided in Section 80 of RA
7942.

The basic constitutional infirmity of the WMCP FTAA is the absence of a fair consideration to
the State as owner of the mineral resources. Petitioners call this the "inequitable sharing of
wealth." The constitutionality of the consideration for the WMCP FTAA cannot be resolved
without determining the validity of both Sections 80 and 81 of RA 7942 because the
consideration for the WMCP FTAA is anchored on both Sections 80 and 81.

The majority opinion refuses to face the issue of whether the WMCP contract can validly rely on
Section 80 for its consideration. If this issue is not resolved now, then the WMCP FTAA has no
consideration. The majority opinion admits that the consideration in the WMCP FTAA granting
the State 60% share in the mining revenues is a sham and thus void ab initio.

Strangely, the majority opinion claims that the share of the State in the mining revenues is not
the principal consideration of the FTAA. The majority opinion claims that the principal
consideration of the FTAA is the "development" of the minerals by the foreign contractor. The
foreign contractor can bring equipment to the mine site, tunnel the mines, and construct
underground rails to bring the minerals to the surface - in short develop the mines. What will the
State and the Filipino people benefit from such activities unless they receive a share of the
mining proceeds? After the minerals are exhausted, those equipment, tunnels and rails would
be dilapidated and even obsolete. Besides, those equipment belong to the foreign contractor
even after the expiration of the FTAA.

Plainly, even a businessman with limited experience will not agree that the principal
consideration in an FTAA, as far as the State and Filipino people are concerned, is the
development of the mines. It is obvious why the majority opinion will not accept that the principal
consideration is the share of the State in the mining proceeds. Otherwise, the majority opinion
will have to admit that the WMCP FTAA lacks the third element of a valid contract - the
consideration. This will compel the majority opinion to admit that the WMCP FTAA is void ab
initio.

The only way for the majority opinion to save the WMCP FTAA from nullity is to treat it as an
MPSA and thus apply Section 80 of RA 7942. This puts in issue the constitutionality of Section
80. The majority opinion, however, refuses to treat the WMCP FTAA as an MPSA. Thus, the
WMCP FTAA still lacks a valid consideration. However, the majority opinion insists that the
WMCP FTAA is valid.

If the majority opinion puts the constitutionality of Section 80 in issue, the majority opinion will
have to declare Section 80 unconstitutional. The majority opinion agrees that the 1987
Constitution requires the State to collect "more than the usual taxes, duties and fees." Section
80 indisputably limits the State to collect only the excise tax and nothing more.

The equivocal stance of the majority opinion will not put an end to this litigation. Once WMCP
converts its FTAA into an MPSA to avoid paying "more than the usual taxes, duties and fees,"
petitioners will immediately question the validity of WMCP's MPSA as well as the
constitutionality of Section 80. The case will end up again in this Court on the same issue of
whether there is a valid consideration for such MPSA, which necessarily involves a
determination of the constitutionality of Section 80. Clearly, this Court has no recourse but to
decide now the constitutionality of Section 80.

As the Solicitor General reported in his Compliance dated 20 October 2004, the DENR has
signed five MPSAs with different parties.66 These five MPSAs uniformly contain the following
provision:

Share of the Government - The Government Share shall be the excise tax on
mineral products at the time of removal and at the rate provided for in Republic
Act No. 7729 amending Section 151(a) of the National Internal Revenue Code, as
amended, as well as other taxes, duties, and fees levied by existing
laws. (Emphasis supplied)

If the constitutionality of Section 80 is not resolved now, these five MPSAs, including the WMCP
FTAA once converted into an MPSA, will remain in limbo. There will be no implementation of
these MPSAs until the Court finally resolves this constitutional issue.

Even if evaded now, the constitutionality of Section 80 will certainly resurface, resulting in a
repeat of this litigation, most probably even between the same parties. To avoid unnecessary
delay, this Court must rule now on the constitutionality of Section 80 of RA 7942.

2. The Constitutional Term Limit Applies to FTAAs

Section 3.3 of the WMCP FTAA provides a fixed contract term of 50 years at the option of
WMCP. Thus, Section 3.3 provides:

This Agreement shall be renewed by the Government for a further period of twenty-
five (25) years under the same terms and conditions provided that the Contractor
lodges a request for a renewal with the Government not less than sixty (60) days prior
to the expiry of the initial term of this Agreement and provided that the Contractor is not
in breach of any of the requirements of this Agreement. (Emphasis supplied)

This provision grants WMCP the absolute right to extend the first 25-year term of the FTAA
to another 25-year term upon mere lodging of a request or notice to the Philippine
Government. WMCP has the absolute right to extend the term of the FTAA to 50 years and all
that the Government can do is to acquiesce to the wish of WMCP.

Section 3.3 of the WMCP FTAA is void because it violates Section 2, Article XII of the 1987
Constitution, the first paragraph of which provides:

All lands of the public domain, waters, 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. With the exception of agricultural lands,
all other natural resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision of the
State. The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centumof whose capital is owned by such
citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant. (Emphasis supplied)

The majority opinion, however, makes the startling assertion that FTAAs are not covered by the
term limit under Section 2, Article XII of the 1987 Constitution. The majority opinion states:

I believe that the constitutional term limits do not apply to FTAAs. The reason is
that the above provision is found within paragraph 1 of Section 2 of Article XII,
 which refers to mineral agreements – co-production agreements, joint venture
agreements and mineral production sharing agreements - which the government may
enter into with Filipino citizens and corporations, at least 60 percent owned by Filipino
citizens. (Emphasis supplied)

If the term limit does not apply to FTAAs because the term limit is found in the first paragraph of
Section 2, then the other limitations in the same first paragraph of Section 2 do not also apply to
FTAAs. These limitations are three: first, that the State owns the natural resources; second,
except for agricultural lands, natural resources shall not be alienated; third, the State shall
exercise full control and supervision in the exploitation of natural resources. Under the majority
opinion's interpretation, these three limitations will no longer apply to FTAAs, leading to
patently absurd results. The majority opinion will also contradict its own admission that even
in FTAAs the State must exercise full control and supervision in the exploitation of natural
resources.

Section 2, Article XII of the 1987 Constitution is a consolidation of Sections 8 and 9, Article XIV
of the 1973 Constitution, which state:

Section 8. All lands of public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources
of the Philippines belong to the State. With the exception of agricultural, industrial or
commercial, residential, or resettlement lands of the public domain, natural resources
shall not be alienated, and no license, concession, or lease for the exploration, or
utilization of any of the natural resources shall be granted for a period exceeding twenty-
five years, except as to water rights for irrigation, water supply, fisheries, or industrial
uses other than development of water power, in which cases, beneficial use may be the
measure and the limit of the grant.

Section 9. The disposition, exploration, development, exploitation, or utilization of any of

the natural resources of the Philippines shall be limited to citizens of the Philippines, or
to corporations or associations at least sixty per centum of the capital which is owned by
such citizens. The Batasang Pambansa, in the national interest, may allow such citizens,
corporations or associations to enter into service contracts for financial, technical,
management, or other forms of assistance with any foreign person or entity for the
exploration, or utilization of any of the natural resources. Existing valid and binding
service contracts for financial, technical, management, or other forms of assistance are
hereby recognized as such.

Section 9, Article XIV of the 1973 Constitution, a one-paragraph section, contained the
provision reserving the exploration, development and utilization of natural resources to
Philippine citizens or corporations 60% Filipino owned as well as the provision on
FTAAs. The provision on the 25-year term limit was found in the preceding Section 8 of Article
XIV. If the 25-year term limit under the 1973 Constitution did not apply to FTAAs, then it should
not also have applied to non-FTAA mining contracts, an interpretation that is obviously wrong.
Thus, the term limit in Section 8, Article XIV of the 1973 Constitution necessarily applied to both
non-FTAA mining contracts and FTAAs in Section 9.

What the framers of the 1987 Constitution did was to consolidate Sections 8 and 9, Article XIV
of the 1973 Constitution into one section, the present Section 2, Article XII of the 1987
Constitution. The consolidation necessitated re-arranging the sentences and paragraphs without
any intention of destroying their unity and coherence. Certainly, the consolidation did not mean
that the FTAAs are no longer subject to the 25-year term limit. If anything, the consolidation
merely strengthened the need, following the rules of statutory construction, to read and interpret
together all the paragraphs, and even the sentences, of Section 2, Article XII of the 1987
Constitution.

In his book The 1987 Constitution of the Republic of the Philippines: A

Commentary, Father Joaquin G. Bernas, S.J., who was a leading member of the 1986
Constitutional Commission, discussed the limitations on the exploitation of natural
resources. Father Bernas states:
 4. Other limitations

Agreements for the exploitation of the natural resources can have a life of only
twenty-five years. This twenty-five year limit dates back to the 1935 Constitution and is
considered to be a "reasonable time to attract capital, local and foreign, and to enable
them to recover their investment and make a profit. The twenty-five year limit on the
exploitation of natural resources is not applicable to "water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power." In these
cases, "beneficial use may be the measure and the limit of the grant." But in the case of
water rights for water power, the twenty-five year limit is applicable."67 (Emphasis
supplied)

The 1935, 1973 and 1987 Constitutions all limit the exploitation of natural resources to 25-year
terms. They also limit franchises for public utilities, leases of alienable lands of public domain,
and water rights for power development to 25-year terms. If a different term is intended, the
Constitution expressly says so as in water rights for uses other than power development. Under
the 1973 and 1987 Constitutions, there is no separate term for FTAAs other than the 25-year
term for the exploitation of natural resources.

The WMCP FTAA draws life from Executive Order No. 279 issued on 25 July 1987 by then
President Corazon C. Aquino when she still exercised legislative powers. Section 1.1 of the
WMCP FTAA expressly states, "This Agreement is a Financial & Technical Assistance
Agreement entered into pursuant to Executive Order No. 279." Section 7 of Executive Order
No. 279 provides:

Section 7. All provisions of Presidential Decree No. 463, as amended, other existing
mining laws, and their implementing rules and regulations, or parts thereof, which are
not inconsistent with the provisions of this Executive Order, shall continue in force and
effect. (Emphasis supplied)

Section 40 of Presidential Decree No. 463 ("PD 463"), as amended by Presidential Decree No.
1385, provides:

Section 40. Issuance of Mining Lease Contracts - x x x After the mining claim has been
verified as to its mineral contents and its actual location on the ground as determined
through reports submitted to the Director, the Secretary shall approve and issue the
corresponding mining lease contract, which shall be for a period not exceeding
twenty-five (25) years, renewable upon the expiration thereof for another period
not exceeding twenty-five (25) years under such terms and conditions as provided
by law. (Emphasis supplied)

Thus, at the time of execution of the WMCP FTAA, statutory law limited the term of all mining
contracts to 25-year terms. PD 463 merely implemented the mandate of the 1973 Constitution
on the 25-year term limit, which is the same 25-year term limit in the 1987 Constitution. Under
Section 7 of Executive Order No. 279, Section 40 of PD 463 limiting mining contracts to a
25-year term applies to the WMCP FTAA. Therefore, Section 3.3 of the WMCP FTAA
providing for a 50-year term is void.

Then President Aquino also issued Executive Order No. 211 on 10 July 1987, a bare 17 days
before issuing Executive Order No. 279. Section 3 of Executive Order No. 211 states:

Section 3. The processing, evaluation and approval of all mining applications,

declarations of locations, operating agreements and service contracts as provided for in
Section 2 above, shall be governed by Presidential Decree No. 463, as amended, other
existing mining laws, and their implementing rules and regulations: Provided, However,
that the privileges granted as well as the terms and conditions thereof shall be
subject to any and all modifications or alterations which Congress may adopt
pursuant to Section 2, Article XII of the 1987 Constitution. (Emphasis supplied)

Section 3 of Executive Order No. 211 applies to the WMCP FTAA which was executed on 22
March 1995, more than seven years after the issuance of Executive Order No. 211.
Subsequently, Congress enacted RA 7942 to prescribe new terms and conditions for all mineral
agreements. RA 7942 took effect on 9 April 1995.

RA 7942 governs the WMCP FTAA because Executive Order No. 211 expressly makes mining
agreements like the WMCP FTAA subject to "any and all modifications or alterations which
Congress may adopt pursuant to Section 2, Article XII of the 1987 Constitution." Section
38 of RA 7942 provides for a 25-year term limit specifically for FTAAs, thus:

Section 38. Term of Financial or Technical Assistance Agreement. — A financial or

technical assistance agreement shall have a term not exceeding twenty-five (25)
years to start from the execution thereof, renewable for not more than twenty-five
(25) years under such terms and conditions as may be provided by law. (Emphasis
supplied)

Thus, the 25-year term limit specifically for FTAAs in Section 38 of RA 7942 applies to the
WMCP FTAA. Again, Section 3.3 of the WMCP FTAA providing for a 50-year term is void.

What is clear from the foregoing is that the 25-year statutory term limit on mining contracts is
merely an implementation of the 25-year constitutional term limit, whether under the 1935, 1973
or 1987 Constitutions. The majority opinion's assertion that the 25-year term in the first
paragraph of Section 2, Article XII of the 1987 Constitutions does not apply to FTAAs is
obviously wrong.

3. Section 112 of RA 7942 Applies to the WMCP FTAA

The majority opinion insists that Section 112 of RA 7942 does not apply to the WMCP FTAA.
Section 112 provides:

Section 112. Non-impairment of Existing Mining/Quarrying Rights. — All valid and

existing mining lease contracts, permits/licenses, leases pending renewal, mineral
production-sharing agreements granted under Executive Order No. 279, at the date
of effectivity of this Act, shall remain valid, shall not be impaired, and shall be
recognized by the Government: Provided, That the provisions of Chapter XIV
on government share in mineral production-sharing agreement and of Chapter XVI
on incentives of this Act shall immediately govern and apply to a mining lessee or
contractor unless the mining lessee or contractor indicates his intention to the
secretary, in writing, not to avail of said provisions: Provided, further, That no renewal of
mining lease contracts shall be made after the expiration of its term: Provided, finally,
That such leases, production-sharing agreements, financial or technical assistance
agreements shall comply with the applicable provisions of this Act and its implementing
rules and regulations. (Emphasis supplied)

Section 112 "immediately" applies the fiscal regime under Section 80 on "mineral production
sharing agreement" to "all valid and existing mining" contracts, including those "granted under
Executive Order No. 279." If Section 112 applies to the WMCP FTAA, then the WMCP FTAA
is subject only to the 2% excise tax under Section 80 as the "total share" of the
Philippine Government.

The majority opinion states, "Whether Section 112 may properly apply to co-production or
joint venture agreements, the fact of the matter is that it cannot be made to apply to
FTAAs." This position of the majority opinion is understandable. If Section 112 applies to
FTAAs, the majority opinion would have to rule on the constitutionality of Section 80 of RA 7942.
The majority opinion already agrees that the 1987 Constitution requires the FTAA contractor to
pay the State "more than the usual taxes, duties and fees." If Section 112 applies to FTAAs, the
majority opinion would have no choice but declare unconstitutional Section 80.

Thus, the majority opinion insists that Section 112 "cannot be made to apply to FTAAs." This
insistence of the majority opinion collides with the very clear and plain language of
Section 112 of RA 7942 and Section 1.1 of the WMCP FTAA. This insistence of the majority
opinion will lead to absurd results.
First, Section 112 of RA 7942 speaks of "all valid and existing mining" contracts. The
phrase "all valid and existing mining" contracts means the entire or total mining contracts in
existence "at the date of effectivity" of RA 7942 without exception. The word "all" negates
any exception. This certainly includes the WMCP FTAA, unless the majority opinion concedes
that the WMCP FTAA is not a mining contract, or if it is, that it is not a valid contract.

Second, the last proviso of Section 112 itself expressly states that "financial or technical
assistance agreementsshall comply with the applicable provisions of this Act and its
implementing rules and regulations." There is no shadow of doubt whatsoever that Section
112, by its own plain, clear and indisputable language, commands that FTAAs shall comply
with RA 7942. I truly cannot fathom how the majority opinion can assert that Section 112 cannot
apply to FTAAs.

Third, Section 112 expressly refers to Chapters XIV and XVI of RA 7942. Chapter XIV refers to
the "Government Share" and covers Sections 80, 81 and 82 of RA 7942. Section 81, as the
majority opinion concedes, applies to FTAAs. Chapter XVI refers to "Incentives" and covers
Section 90 to 94 of RA 7942. Section 90 states that the "contractors in mineral agreements,
and financial technical and assistance agreements shall be entitled to the fiscal and non-
fiscal incentives as provided under Executive Order No. 226 x x x." Clearly, Section 112 applies
to FTAAs.

Fourth, Section 1.1 of the WMCP FTAA expressly states, "This Agreement is a Financial &
Technical Assistance Agreement entered into pursuant to Executive Order No.
279." Section 112 states in unequivocal language that "all valid and existing" agreements
"granted under Executive Order No. 279" are immediately placed under the fiscal regime of
MPSAs. In short, mining agreements granted under Executive Order No. 279 are expressly
among the agreements included in Section 112 and placed under the fiscal regime
prescribed in Section 80. There is no doubt whatsoever that Section 112 applies to the WMCP
FTAA which was "entered into pursuant to Executive Order No. 279."

Fifth, Section 3 of Executive Order No. 211 expressly subjects all mining contracts executed by
the Executive Department to the terms and conditions of new mining laws that Congress might
enact in the future. Thus, Section 3 of Executive Order No. 211 states:

Section 3. The processing, evaluation and approval of all mining applications,

declarations of locations, operating agreements and service contracts as provided for in
Section 2 above, shall be governed by Presidential Decree No. 463, as amended, other
existing mining laws, and their implementing rules and regulations: Provided, However,
that the privileges granted as well as the terms and conditions thereof shall be
subject to any and all modifications or alterations which Congress may adopt
pursuant to Section 2, Article XII of the 1987 Constitution. (Emphasis supplied)

There is no dispute that Executive Order No. 211, issued prior to the execution of the WMCP
FTAA, applies to the WMCP FTAA. There is also no dispute that RA 7942 took effect after the
issuance of Executive Order No. 211 and after the execution of the WMCP FTAA. Therefore,
Section 112 of RA 7942 applies specifically to the WMCP FTAA.

Indeed, it is plain to see why Section 112 of RA 7942 applies to FTAAs, like the WMCP FTAA,
that were executed prior to the enactment of RA 7942. Section 112 is found in Chapter XX of
RA 7942 on "Transitory and Miscellaneous Provisions." The title of Section 112 refers to the
"[N]on-impairment of Existing Mining Quarrying Rights." RA 7942 is the general law governing
all kinds of mineral agreements, including FTAAs. In fact, Chapter VI of RA 7942, covering
nine sections, deals exclusively on FTAAs. The fiscal regime in FTAAs executed prior to the
enactment of RA 7942 may differ from the fiscal regime prescribed in RA 7942. Hence, Section
112 provides the transitory provisions to resolve differences in the fiscal regimes, ostensibly to
avoid impairment of contract obligations. Clearly, Section 112 applies to FTAAs.

There are no ifs or buts in Section 112. The plain, simple and clear language of Section 112
makes FTAAs, like the WMCP FTAA, subject to Section 112. We repeat the express words of
Section 112 -
 (1) "All valid and existing mining lease contracts x x x mineral production-sharing
agreements granted under Executive Order No. 279, at the date of effectivity of
this Act x x x."

(2) the "x x x government share in mineral production- sharing agreement x x x

shall immediately govern and apply to a mining lessee or contractor x x x."

(3) "financial or technical assistance agreements shall comply with the applicable
provisions of this Act and its implementing rules and regulations."

With such clear and unequivocal language, how can the majority opinion blithely state that
Section 112 "cannot be made to apply to FTAAs"? It defies common sense, simple logic and
plain English to assert that Section 112 does not apply to FTAAs. It defies the fundamental rule
of statutory construction as repeated again and again in jurisprudence:

Time and time again, it has been repeatedly declared by this Court that where the law
speaks in clear and categorical language, there is no room for interpretation. There is
only room for application.68

For nothing is better settled than that the first and fundamental duty of courts is to apply
the law as they find it, not as they like it to be. Fidelity to such a task precludes
construction or interpretation, unless application is impossible or inadequate without it.69

Where the law is clear and unambiguous, it must be taken to mean exactly what it says
and the court has no choice but to see to it that its mandate is obeyed.70

If Section 112 of RA 7942 does not apply to FTAAs as the majority opinion asserts, what
will govern FTAAs executed before the enactment of RA 7942, like the WMCP
FTAA? Section 112 expressly addresses FTAAs executed before the enactment of RA 7942,
requiring these earlier FTAAs to comply with the provisions of RA 7942 and its implementing
rules. Executive Order No. 211, issued seven years before the execution of the WMCP FTAA,
requires all FTAAs subsequently executed to comply with the terms and conditions of any future
mining law that Congress may enact. That law is RA 7942 which took effect after the execution
of the WMCP FTAA.

The majority opinion allows the WMCP FTAA to become sui generis, an FTAA outside the
scope of RA 7942 which expressly governs "all" mining agreements, whether MPSAs or FTAAs.
This means that the WMCP FTAA is not even governed by Section 81 of RA 7942 and its
phrase "among other things," which the majority opinion claims is the authority to subject the
WMCP FTAA to the payment of consideration that is "more than the usual taxes, duties and
fees."

This makes the majority opinion's position self-contradictory and inutile. The majority opinion
claims that the WMCP FTAA is subject to the phrase "among other things" in Section 81. At the
same time, the majority opinion asserts that Section 112, which requires earlier FTAAs to
comply with Section 81 and other provisions of RA 7942, does not apply to the WMCP FTAA.
The majority opinion is caught in a web of self-contradictions.

This exemption by the majority opinion of the WMCP FTAA from Section 112 is judicial
class legislation.Why is the WMCP FTAA so special that the majority opinion wants it
exempted from Section 112 of RA 7942? Why are only "all" other FTAAs subject to the terms
and conditions of RA 7942 and not the WMCP FTAA?

4. Foreign Corporations and Contractors Cannot Hold Exploration Permits

The majority opinion states that "there is no prohibition at all against foreign or local
corporations or contractors holding exploration permits." This is another assertion of the
majority opinion that directly collides with the plain language of the 1987 Constitution.
Section 2, Article XII of the 1987 Constitution expressly reserves to Philippine citizens and
corporations 60% Filipino owned the "exploration, development and utilization of natural
resources." The majority opinion rationalizes its assertion in this manner:

Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a

qualified person the right to conduct exploration for minerals in specified
areas. Such a permit does not amount to an authorization to extract and carry off
the mineral resources that may be discovered. x x x. (Italics in original)

The issue is not whether an exploration permit allows a foreign contractor or corporation to
extract mineral resources, for apparently by its language alone a mere exploration permit does
not. There is no dispute that an exploration permit merely means authority to explore, not to
extract. The issue is whether the issuance of an exploration permit to a foreign contractor
violates the constitutional limitation that only Philippine citizens or corporations 60% Filipino
owned can engage in the "exploration x x x of natural resources."

The plain language of Section 2, Article XII of the 1987 Constitution clearly limits to Philippine
citizens or to corporations 60% Filipino owned the right to engage in the "exploration x x x of
natural resources." To engage in "exploration" is simply to explore, not to develop,
utilize or extract. To engage in exploration one must secure an exploration permit. The mere
issuance of the exploration permit is the authority to engage in the exploration of natural
resources.

This activity of exploration, which requires an exploration permit, is a reserved activity not
allowed to foreign contractors or foreign corporations. Foreign contractors and foreign
corporations cannot secure exploration permits because they cannot engage in the exploration
of natural resources. If, as the majority opinion asserts, foreign contractors or foreign
corporations can secure and hold exploration permits, then they can engage in the "exploration
x x x of natural resources." This violates Section 2, Article XII of the 1987 Constitution.

Consequently, Section 3(aq) of RA 7942, which provides that "a legally organized foreign-
owned corporation shall be deemed a qualified person for purposes of granting an exploration
permit," is void and unconstitutional.

However, the State may directly undertake to explore, develop and utilize the natural
resources. To do this the State may contract a foreign corporation to conduct the physical act
of exploration in the State's behalf, as in an FTAA. In such a case, the foreign FTAA contractor
is merely an agent of the State which holds the right to explore. No exploration permit is given to
the foreign contractor because it is the State that is directly undertaking the exploration,
development and utilization of the natural resources.

The requirement reserving "exploration x x x of natural resources" to Philippine citizens or to

corporations 60% Filipino owned is not a matter of constitutional whim. The State cannot allow
foreign corporations, except as contractual agents under the full control and supervision of the
State, to explore our natural resources because information derived from such exploration may
have national security implications.

If a Chinese company from the People's Republic of China is allowed to explore for oil and gas
in the Spratlys, the technical information obtained by the Chinese company may only bolster the
resolve of the Chinese Government to hold on to their occupied reefs in the Spratlys despite
these reefs being within the Exclusive Economic Zone of the Philippines. Certainly, we cannot
expect the Chinese company to disclose to the Philippine Government the important technical
data obtained from such exploration.

In Africa, foreign mining companies who have explored the mineral resources of certain
countries shift their support back and forth between government and rebel forces depending on
who can give them better terms in exploiting the mineral resources. Technical data obtained
from mineral exploration have triggered or fueled wars and rebellions in many countries. The
right to explore mineral resources is not a trivial matter as the majority opinion would want us to
believe.
Even if the foreign companies come from countries with no territorial dispute with the
Philippines, can we expect them to disclose fully to the Philippine Government all the technical
data they obtain on our mineral resources? These foreign companies know that the Philippine
Government will use the very same data in negotiating from them a higher share of the mining
revenues. Why will the foreign companies give to the Philippine Government technical data
justifying a higher share for the Philippine Government and a lower share for the foreign
companies? The framers of the 1935, 1973 and 1986 Constitutions were acutely aware of this
problem. That is why the 1987 Constitution not only reserves the "exploration x x x of natural
resources" to Philippine citizens and to corporations 60% Filipino owned, it also now requires
the State to exercise "full control and supervision" over the "exploration x xx of natural
resources."

5. The State is Entitled to 60% Share in the Net Mining Revenues

The majority opinion claims that the Constitution does not require that the State's share in
FTAAs or other mineral agreements should be at least 60% of the net mining revenues. Thus,
the majority opinion states that "the Charter did not intend to fix an iron-clad rule on the 60
percent share, applicable to all situations at all times and in all circumstances."

The majority opinion makes this claim despite the express admission by intervenor CMP and
respondent WMCP that the State, as owner of the natural resources, is entitled to 60% of the
net mining revenues. The intervenor CMP admits that under an FTAA, the Philippine
Government "stands in the place of the 60% Filipino owned company" and hence must
retain 60% of the net income. Thus, intervenor CMP concedes that:

x x x In other words, in the FTAA situation, the Government stands in the place of
the 60% Filipino-owned company, and the 100% foreign-owned contractor company
takes all the risks of failure to find a commercially viable large-scale ore body or oil
deposit, for which the contractor will get 40% of the financial benefits.71 (Emphasis
supplied)

As applied to the WMCP FTAA, intervenor CMP asserts that the "contractor's stipulated
share under the WMCP FTAA is limited to a maximum of 40% of the net
production."72 Intervenor CMP further insists that "60% of its (contractor's) net returns from
mining, if any, will go to the Government under the WMCP FTAA."73

Like intervenor CMP, respondent WMCP also maintains that under an FTAA, the State
is "guaranteed" a 60% share of the foreign contractor's Net Mining Revenues. Respondent
WMCP admits that:

In other words, the State is guaranteed a sixty per centum (60%) share of the
Mining Revenues, or 60% of the actual fruits of the endeavor. This is in line with
the intent behind Section 2 of Article XII that the Filipino people, as represented by
the State, benefit primarily from the exploration, development, and utilization of
the Philippines' natural resources.

Incidentally, this sharing ratio between the Philippine Government and the
Contractor is also in accordance with the 60%-40% equity requirement for Filipino-
owned corporations in Paragraph 1 of Section 2 of Article XII.74 (Emphasis supplied)

In short, the entire mining industry, as represented by intervenor CMP, is willing to pay the
State a share equivalent to 60% of the net mining revenues. Even the foreign contractor WMCP
agrees to pay the State 60% of its net mining revenues, albeit dishonestly.

However, the majority opinion refuses to accept that the State is entitled to what the entire
mining industry is willing to pay the State. Incredibly, the majority opinion claims that "there is
no independent showing that the taking of at least 60 percent share in the after-tax
income of a mining company operated by a foreign contractor is fair and reasonable
under most if not all circumstances." Despite the willingness of the entire mining industry to
pay the State a 60% share without exception, the majority opinion insists that such sharing is
not fair and reasonable to the mining industry "under most if not all circumstances." What is
the basis of the majority opinion in saying this when the entire mining industry already admits,
concedes and accepts that the State is entitled, without exception, to 60% of the net mining
revenues?

Oddly, the majority opinion cites only the personal experience of the ponente, who had
previously "been engaged in private business for many years." The majority opinion even
states, in insisting that the State should receive less than 60% share, that "[F]airness is a
credo not only in law, but also in business." The majority opinion cannot be more popish
than the Pope. The majority opinion ponente's business judgment cannot supplant the
unanimous business judgment of the entire mining industry, as manifested by intervenor CMP
before this Court. What is obvious is that it is not fair to deprive the Filipino people, many of
whom live in hand to mouth existence, of what is legally their share of the national patrimony, in
light of the willingness of the entire mining industry to pay the Filipino people their rightful share.

The majority opinion gives a "simplified illustration" to show that the State does not deserve a
60% share of the net proceeds from mining revenues. The majority opinion states:

x x x Let us base it on gross revenues of, say, P500. After deducting operating
expenses, but prior to income tax, suppose a mining makes a taxable income of P100. A
corporate income tax of 32 percent results in P32 of taxable income going to the
government, leaving the mining firm with P68. Government then takes 60 percent
thereof, equivalent to P40.80, leaving only P27.20 for the mining firm.

The majority opinion's "simplified illustration" is indeed too simplified because it does not even
consider the exploration, development and capital expenses. The majority opinion's "simplified
illustration" deducts from gross revenues only "operating expenses." This is an egregious error
that makes this "simplified illustration" misleading. Exploration, development and other capital
expenses constitute a huge part of the deductions from gross revenues. In the early years of
commercial production, the exploration, development and capital expenses, if not subject to a
cap or limitation, can wipe out the gross revenues.

The majority opinion's operating expenses are not even taken from mining industry rates. One
can even zero out the taxable income by simply jacking up the operating expenses. A "simplified
illustration" of an income statement of an operating mining company, omitting the deduction of
amortized capital expenses, serves no purpose whatsoever. What is important is the return on
the investment of the foreign contractor. The absolute amount that goes to the contractor may
be smaller than what goes to the State. However, the amount that goes to the contractor may
be a hundred times its investment. This can only be determined if the capital expenditures of the
contractor are taken into account.

Under an FTAA, the State is directly undertaking the exploitation of mineral resources. The net
proceeds are not subject to income tax since there is no separate taxable entity. The State is an
entity but not a taxable corporate entity. The State does not pay income tax to itself, and even if
it does, it is just a book entry since it is the payor and payee at the same time. Only the 40%
share of the FTAA contractor is subject to the 32% corporate income tax. On this score alone,
the majority opinion's "simplified illustration" is wrong.

Intervenor CMP and respondent WMCP are correct in anchoring on Section 2, Article XII of the
1987 Constitution their admission that the State is entitled to 60% of the net mining revenues.
Their common position is based on the Constitution, existing laws and industry practice.

First, the State owns the mineral resources. To the owner of the mineral resources belongs the
income from any exploitation of the mineral resources. The owner may share its income with the
contractor as compensation to the contractor, which is an agent of the owner. The industry
practice is the owner receives an equal or larger share of the income as against the share of the
contractor or agent.

In the Occidental-Shell FTAA covering Malampaya, where the contractor contributed all the
capital and technology, the State receives 60% of the net proceeds. In addition, Occidental-
Shell's 40% share is subject to the 32% Philippine income tax. Occidental-Shell's US$2 billion
investment75 in Malampaya is by far the single biggest foreign investment in the Philippines. The
offshore Malampaya gas extraction is also by far more capital intensive and riskier than land-
based mineral extraction. Over the 20-year life of the natural gas reserves, the State will receive
US$8-10 billion76 from its share in the Occidental-Shell FTAA.

In Consolidated Mines, Inc. v. Court of Tax Appeals,77 a case decided under the 1973
Constitution, Consolidated Mines, the concessionaire of the mines, shared equally the net
mining income with Benguet Consolidated Mines, the mining operator or contractor. Thus, as
quoted in Consolidated Mines, the agreement between the concessionaire and operator stated:

X. After Benguet has been fully reimbursed for its expenditures, advances and
disbursements as aforesaid the net profits from the operation shall be divided between
Benguet and Consolidated share and share alike, it being understood however, that the
net profits as the term is used in this agreement shall be computed by deducting from
gross income all operating expenses and all disbursements of any nature whatsoever as
may be made in order to carry out the terms of this agreement. (Emphasis supplied)

Incidentally, in Consolidated Mines the State did not receive any share in the net mining
income because of the "license, concession or lease" system under the 1935 and 1973
Constitutions. The State and the Filipino people received only taxes, duties and fees.

Second, the State exercises "full control and supervision" over the exploitation of mineral
resources. "Full control" as used in the Constitution means more than ordinary majority control.
In corporate practice, ordinary control of a corporation means a simple majority control, or at
least 50% plus one of the total voting stock. In contrast, full or total control means two-thirds
of the voting stock, which enables the owner of the two-thirds equity to amend any provision in
the charter of the corporation. However, since foreigners can own up to 40% of the equity of
mining companies, "full control" cannot exceed the control corresponding to the State's 60%
equity. Thus, the State's share in the net proceeds of mining companies should correspond to
its 60% interest and control in mining companies.

Third, Section 2, Article XII of the 1987 Constitution requires that the FTAA must make "real
contributions to the economic growth and general welfare of the country." As respondent
WMCP aptly admits, "the intent behind Section 2 of Article XII (is) that the Filipino people,
as represented by the State, (shall) benefit primarily from the exploration, development,
and utilization of the Philippines' natural resources." For the Filipino people to
benefit primarily from the exploitation of natural resources, and for FTAAs to make real
contributions to the national economy, the majority of the net proceeds from mining
operations must accrue to the State.

Fourth, the 1987 Constitution ordains the State to "conserve and develop our patrimony."
The nation's mineral resources are part of our national patrimony. The State
can "conserve" our mineral resources only if the majority of the net proceeds from the
exploitation of mineral resources accrue to the State.

In sum, only the majority opinion refuses to accept that the State has a right to receive at least
60% of the net proceeds from mining operations. The principal parties involved in this case do
not object that the State shall receive such share. The entire mining industry and respondent
WMCP admit that the State is entitled to a 60% share of the net proceeds. The State,
represented by the Government, will certainly not object to such share.

More than anything else, the intent and language of the 1987 Constitution require that the State
receive the bulk of the income from mining operations. Only Congress, through a law, may allow
a share lesser than 60% if certain compelling conditions are present. Congress may authorize
the President to make such determination subject to standards and limitations that Congress
shall prescribe.

The majority opinion wants to give the President the absolute discretion to determine the State's
share from mining revenues. The President will be hard put accepting anything less than 60% of
the net proceeds. If the President accepts less than 60%, the President is open to a charge of
entering into a manifestly and grossly disadvantageous contract to the Government because the
entire mining industry, including WMCP, has already agreed to pay 60% of the net proceeds to
the State. The only way to avoid this is for Congress to enact a law providing for the conditions
when the State may receive less than 60% of the net proceeds.

Conclusion

Let us assume that one of the Justices of this Court is the owner of mineral resources – say
gold reserves. A foreigner offers to extract the gold and pay for all development, capital and
operating expenses. How much will the good Justice demand as his or her share of the gold
extracted by the foreigner? If the Justice follows the Malampaya precedent, he or she will
demand a 60% share of the net proceeds. If the Justice follows the manifestation of intervenor
CMP and respondent WMCP before this Court, he or she will also demand a 60% share in the
net proceeds. If the Justice follows the Consolidated Mines precedent, he or she will demand
no less than 50% of the net proceeds. In either case, the 2% excise tax on the gold extracted is
part of the operating expenses to be paid by the foreigner but deducted from the gross
proceeds.

Now, under the Regalian doctrine the State, not the Justice, owns the gold reserves. How much
should the State demand from the foreigner as the State's share of the gold that is extracted? If
we follow Sections 39, 80, 81, 84 and 112 of RA 7942, the State will receive only 2%
excise tax as its "total share" from the gold that is extracted.

Is this fair to the State and the Filipino people, many of whom live below the poverty line? Is this
what the 1987 Constitution mandates when it says that (a) the State must conserve and develop
the nation's patrimony, (b) the State owns all the natural resources, (c) the State must exercise
full control and supervision over the exploitation of its natural resources, and (d) FTAAs must
make real contributions to the national economy and the general welfare?

How this Court decides the present case will determine largely whether our country will remain
poor, or whether we can progress as a nation. Based on NEDA's estimates, the total mineral
wealth of the nation is P47 trillion, or US$840 billion. This is 15 times more than our US$56
billion foreign debt. Can this Court in conscience agree that the State will receive only 2%
of the P47 trillion mineral wealth of the nation?

In Miners Association, this Court ruled that the 1987 Constitution has abandoned the old
system of "license, concession or lease" and instead installed full State control and supervision
over the exploitation of natural resources. No amount of dire warnings or media publicity should
intimidate this Court into resurrecting the old and discredited system that has caused the
denudation of almost all of the nation's virgin forests without any visible benefit to the Filipino
people.

The framers of the 1987 Constitution have wisely instituted the new system to prevent a repeat
of the denudation of our forestlands that did not even make any real contribution to the
economic growth of the nation. This Court must do its solemn duty to uphold the intent and letter
of the Constitution and, in the words of the Preamble of the 1987 Constitution, "conserve and
develop our patrimony" for the benefit of the Filipino people.

This Court cannot trivialize the Filipino people's right to be the primary beneficiary of the nation's
mineral resources by ruling that the phrase "among other things" is sufficient to insure that
FTAAs will "make real contributions to the economic growth and general welfare of the
country." This Court cannot tell the Filipino people that the phrase "among other things" is
sufficient to "preserve and develop the national patrimony." This Court cannot tell the Filipino
people that the phrase "among other things" means that they will receive the bulk of mining
revenues.

This Court cannot tell the Filipino people that Congress deliberately used the phrase "among
other things" to guarantee that the Filipino people will receive their equitable share from mining
revenues of foreign contractors. This Court cannot tell the Filipino people that with the phrase
"among other things," this Court has protected the national interest as mandated by the 1987
Constitution.
I therefore vote to deny the motions for reconsideration. I vote to declare unconstitutional
Section 3(aq), Section 39, Section 80, the second paragraph of Section 81, the proviso in
Section 84, and the first proviso in Section 112 of RA 7942 for violation of Section 2, Article XII
of the 1987 Constitution. In issuing the rules to implement these void provisions of RA 7942,
DENR Secretary Victor O. Ramos gravely abused his discretion amounting to lack or excess of
jurisdiction.

I also vote to declare unconstitutional the present WMCP FTAA for violation of the same Section
2, Article XII of the 1987 Constitution. However, WMCP may negotiate with the Philippine
Government for a new mineral agreement covering the same area consistent with this Decision.

DISSENTING OPINION

CARPIO MORALES, J.:

Regrettably, a majority of the members of this Court has voted to reverse its January 27, 2004
Decision in La Bugal-B'Laan Tribal Association, Inc. v. Ramos1 by which it declared certain
provisions2 of the Mining Act of 19953 on Financial or Technical Assistance Agreements
(FTAAs), the related provisions of Department of Environment and Natural Resources
Administrative Order 96-40 (DAO No. 96-40), and the March 22, 1995 Financial and Technical
Assistance Agreement (FTAA) executed between the Government of the Republic of the
Philippines and WMC Philippines, Inc. (WMCP) in violation of Section 2, Article XII of the
Constitution.

Because I find that: (1) the "agreements … involving either technical or financial assistance"
contemplated by the fourth paragraph of Section 2, Article XII of the 1987 Constitution are
distinct and dissimilar from the "service contracts" under the 1973 Constitution; and (2) these
certain provisions of the Mining Act, its implementing rules, and the WMCP FTAA
unconstitutionally convey beneficial ownership and control over Philippine mineral and
petroleum resources to foreign contractors, I most respectfully dissent.

Antecedents

By motion, private respondent WMCP seeks a reconsideration of this Court's Decision, it

arguing essentially that FTAAs are the same as service contracts which were sanctioned under
the 1973 Constitution.

By Resolution of June 22, 2004, this Court, upon motion,4 impleaded Philippine Chamber of
Mines (PCM), as respondent-in-intervention. Intervenor PCM argues that the "agreements"
referred to in paragraph 4 of Section 2, Article XII of the Constitution were intended to involve or
include the "service contracts" provided for in the 1973 Constitution.

The parties were, on June 29, 2004, heard on oral arguments during which two major issues
were tackled: first, the proper interpretation of the phrase "agreements… involving either
technical or financial assistance" in Section 2, Article XII of the Constitution, and second,
mootness.

Thereafter, the parties submitted their respective memoranda, as required by Resolution of this
Court. However, despite the verbal request of Associate Justice Artemio V. Panganiban during
the oral arguments,5 intervenor PCM failed to submit along with its memorandum any
documents to establish international mining practices, particularly in developing countries.

Issues for Resolution

The majority opinion holds that the resolution of the Motions for Reconsideration in this case
should be confined to the issues taken up during the oral arguments on June 29, 2004. These
were: (1) the proper interpretation of the phrase "agreements… involving either technical or
financial assistance" in Section 2, Article XII of the Constitution, and (2) mootness.
It further holds that the issue of whether the Mining Act and the WMCP FTAA are manifestly
disadvantageous to the government could not be passed upon because the same was
supposedly not raised in the original petition.

These rulings, while well intentioned, cannot be accepted.

First, there is no rule of procedure, whether in Rule 52 or elsewhere, which restricts the
resolution of a case to the issues taken up in the oral arguments. The reason is obvious. The
issues for resolution in any given case are determined by the conflicting arguments of the
parties as set forth in their pleadings. On the other hand, the matters to be taken up in an oral
argument may be limited, by order of the court, to only such points as the court may deem
necessary. Thus, Section 1 of Rule 49 provides:

Section 1. When allowed. – At its own instance or upon motion of a party, the court may
hear the parties in oral argument on the merits of a case, or on any material incident
in connection therewith.

The oral argument shall be limited to such matters as the court may specify in its
order or resolution(Emphasis supplied)

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
imposing on the time of the Court. However, unlike a pre-trial order,6 the delimitation does not
control or limit the issues to be resolved. These issues may be subject matter of the parties'
memoranda, as in this case.

Second, as noted in the Decision,7 the issue of whether the Mining Act and the WMCP FTAA
afford the State a just share in the proceeds of its natural resources was in fact raised by the
petitioners, viz:

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing

Republic Act No. 7942, the latter being unconstitutional in that it allows fully foreign
owned corporations to explore, develop, utilize and exploit mineral resources in a
manner contrary to Section 2, paragraph 4, Article XII of the Constitution;

II

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing

Republic Act No. 7942, the latter being unconstitutional in that it allows the taking of
private property without the determination of public use and for just compensation;

III

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing

Republic Act No. 7942, the latter being unconstitutional in that it violates Sec. 1, Art. III of
the Constitution;

IV

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing

Republic Act No. 7942, the latter being unconstitutional in that it allows enjoyment by
foreign citizens as well as fully foreign owned corporations of the nation's marine wealth
contrary to Section 2, paragraph 2 of Article XII of the Constitution;

V
 x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being unconstitutional in that it allows priority to foreign
and fully foreign owned corporations in the exploration, development and utilization of
mineral resources contrary to Article XII of the Constitution;

VI

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it
allows the inequitable sharing of wealth contrary to Sections [sic] 1, paragraph 1,
and Section 2, paragraph 4[,] [Article XII] of the Constitution;

VII

x x x in recommending approval of and implementing the Financial and Technical

Assistance Agreement between the President of the Republic of the Philippines and
Western Mining Corporation Philippines Inc. because the same is illegal and
unconstitutional.8 (Emphasis and underscoring supplied)

Indeed, this Court expressly passed upon this issue in the Decision when it held that:

With the foregoing discussion in mind, this 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.9 (Emphasis and
underscoring supplied)

Moreover, the issue of whether the State is deprived of its just share in the proceeds from
mining was touched upon by the parties in their memoranda. Thus, respondent WMCP argues
that:

Section 10.2 (a) of the COLUMBIO FTAA does not prohibit the State from partaking of the
fruits of the exploration. In fact, Section 7.7 of the COLUMBIO FTAA provides:

"7.7 Government Share

From the Commencement of Commercial Production, the Contractor shall pay a

government share of sixty per centum (60%) of Net Mining Revenues, calculated
in accordance with the following provisions (the "Government Share"). The
Contractor shall be entitled to retain the balance of all revenues from the Mining
Operations."

In other words, the State is guaranteed a sixty per centum (60%) share of the Net Mining
Revenues, or 60% of the actual fruits of the endeavor. This is in line with the intent
behind Section 2 of Article XII that the Filipino people, as represented by the
State, benefit primarily from the exploration, development, and utilization of the
Philippines' natural resources. 10 (Emphasis and underscoring supplied)

while the petitioners, for their part, claim:

For instance, government share is computed on the basis of net mining revenue. Net
mining revenue is gross mining revenue less, among others, deductible
expenses. Some of the allowable deductions from the base amount to be used to
compute government share are suspicious. The WMCP FTAA contract, for instance,
allows expenditures for development "outside the Contract Area," consulting fees for
work done "outside the Philippines," and the "establishment and administration of field
offices including administrative overheads incurred within and outside the Philippines."

xxx
 One mischief inherent in past service contracts was the practice of transfer pricing.
UNCTAD defines this as the "pricing of transfers of goods, services and other assets
within a TNC network." If government does not control the exploration,
development and utilization of natural resources, then the intra-transnational
corporation pricing of expenditures may not become transparent. 11 (Emphasis
supplied; footnotes omitted)

In fine, the majority opinion skirts an issue raised in the original Petition for Prohibition and
Mandamus, passed upon in its Decision of January 27, 2004 and argued by the parties in the
present Motion for Reconsideration.

Instead, I find that the myriad arguments raised by the parties may be grouped according to two
broad categories: first, the arguments pertaining to the constitutionality of FTAA provisions of
the Mining Act; and second, those pertaining to the validity of the WMCP FTAA. Within these
categories, the following issues are submitted for resolution: (1) whether in invalidating certain
provisions of the Mining Act a non-justiciable political question is passed upon; (2) whether the
FTAAs contemplated in Section 2, Article XII of the 1987 Constitution are identical to, or
inclusive of, the "service contracts" provided for in the 1973 Constitution; (3) whether the
declaration of the unconstitutionality of certain provisions of the Mining Act should be
reconsidered; (4) whether the question of validity of the WMCP FTAA was rendered moot
before the promulgation of the Decision; and (5) whether the decision to declare the WMCP
FTAA unconstitutional and void should be reconsidered.

Following the foregoing framework of analysis, I now proceed to resolve the issues raised in the
motion for reconsideration.

Constitutionality of the Philippine Mining Act of 1995

The issues presented constitute

justiciable questions.

Contrary to the posture of respondent WMCP, this Court did not tread on a political question in
rendering its Decision of January 27, 2004.

The Constitution delineates the parameters of the powers of the legislative, the executive and
the judiciary.12Whether the first and second great departments of government exceeded those
parameters is the function of the third.13 Thus, the Constitution defines judicial power to include
"the duty… to determine whether or not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government."14

Judicial power does not extend to political questions, which are concerned with issues
dependent upon the wisdom, not the legality, of a particular measure. 15 The reason is that,
under our system of government, policy issues are within the domain of the political branches of
government and of the people themselves as the repository of all state power.16 In short, the
judiciary does not settle policy issues.17

The distinction between a truly political question and an ostensible one lies in the answer to the
question of whether there are constitutionally imposed limits on powers or functions conferred
upon political bodies.18 If there are constitutionally imposed limits, then the issue is justiciable,
and a court is duty-bound to examine whether the branch or instrumentality of the government
properly acted within those limits.19

Respondent WMCP argues that the "exploration, development, and utilization of natural
resources are matters of policy, in other words, political matters or questions," over which this
Court has no jurisdiction.

Respondent is mistaken. The questions involved in this case are not political. The provisions of
paragraph 4, Section 2 of Article XII of the Constitution, including the phrase "agreements…
involving either technical or financial assistance," incorporate limitations20 on the scope of such
agreements or FTAAs. Consequently, they constitute limitations on the powers of the legislative
to determine their terms, as well as the powers of the Executive to enter into them. In its
Decision, this Court found that, by enacting the objectionable portions of the Mining Act and in
entering into the subject FTAA, the Congress and the President went beyond the constitutionally
delimited scope of such agreements and thereby transgressed the boundaries of their
constitutional powers.

The "agreements" contemplated in paragraph 4, Section 2,

Article XII of the Constitution are distinct and dissimilar from the old "service contracts."

The majority and respondents share a common thesis: that the fourth paragraph of Sec. 2,
Article XII contemplates not only financial or technical assistance but, just like the service
contracts which were allowed under the 1973 Constitution, management assistance as well.

The constitutional provision in dispute reads:

Art. XII

National Economy and Patrimony

xxx

Sec. 2. All lands of the public domain, waters, 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. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under
the full control and supervisionof the State. The State may directly undertake such
activities or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not more than twenty-five years,
and under such terms and conditions as may be provided by law. In cases of water
rights for irrigation, water supply, fisheries, or industrial uses other than the development
of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fish workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned

corporations involving either technical or financial assistance for large-scale
exploration, development, and utilization of minerals, petroleum, and other
mineral oils according to the general terms and conditions provided by law, based
on real contributions to the economic growth and general welfare of the country.
In such agreements, the State shall promote the development and use of local
scientific and technical resources.

The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution. (Emphasis
and underscoring supplied)

Its counterpart provision in Article XIV of the 1973 Constitution authorized "service contracts" as
follows:
 Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of the
natural resources of the Philippines shall be limited to citizens, or to corporations or
associations at least sixty per centum of which is owned by such citizens. The Batasang
Pambansa, in the national interest, may allow such citizens, corporations or
associations to enter into service contracts for financial, technical, management,
or other forms of assistance with any person or entity for the exploration,
development, exploration, or utilization of any of the natural resources. Existing
valid and binding service contracts for financial, technical, management, or other forms
of assistance are hereby recognized as such. (Emphasis and underscoring supplied)

Respondent WMCP contends that the fourth paragraph of Section 2 is an exception to the rule
that participation in the country's natural resources is reserved to Filipinos.21 It hastens to add,
however, that the word "may" therein is permissive not restrictive;22 and that consistent with the
provision's permissive nature, the word "involving" therein should be construed to mean "to
include," such that the assistance by foreign corporations should not be confined to technical or
financial, but also to management forms.23 And it notes that the Constitution used "involving"
instead of such restrictive terms as "solely," "only," or "limited to."24

To the Office of the Solicitor General (OSG), the intent behind the fourth paragraph is to prevent
the practice under the 1973 Constitution of allowing foreigners to circumvent the capitalization
requirement,25 as well as to address the absence of a governing law that led to the abuse of
service contracts.26 The phrase "technical or financial" is merely for emphasis, the OSG adds,
that it is descriptive, not definitive, of the forms of assistance that the State needs and which
foreign corporations may provide in the large-scale exploration, development and utilization of
the specified resources.27 Furthermore, the OSG contends that the denomination of the subject
FTAA as a "financial and technical assistance agreement" is a misnomer and should more
properly be called "agreements for large-scale exploration, development, and utilization of
minerals, petroleum, and other mineral oils."28 It argues that the President has broad discretion
to enter into any agreement, regardless of the scope of assistance, with foreign
corporations.29 Driving its point, the OSG poses: If the framers of the Constitution intended to
limit the service of foreign corporations to "passive assistance," such as simple loan
agreements, why confine them to large-scale ventures?30 Why does the Constitution require
that such agreements be based on real contributions to economic growth and general welfare of
the country?31 Why the condition in the last paragraph of Section 2 that the President report to
Congress?32 Finally, the OSG asserts that these requirements would be superfluous if the
assistance to be rendered were merely technical or financial.33 And that it would make more
sense if the phrase "agreements… involving technical or financial assistance" were construed to
mean the same concept as the service contracts under the 1973 Constitution.

The OSG's contentions are complemented by intervenor PCM which maintains that the FTAA
"is an agreement for [the] rendition of a whole range of services of an integrated and
comprehensive character, ranging from discovery through development and utilization and
production of minerals or petroleum by the foreign-owned corporation."34 In fine, intervenor
posits that the change in phraseology in the 1987 Constitution does not relate to the substance
of the agreement,35 otherwise, the State itself would be compelled to conduct the exploration,
development and utilization of natural resources, ventures that it is ill-equipped to undertake.36

Primary Concepts in Article XII of the Constitution

Before passing upon the foregoing arguments and for better clarity, it may be helpful to first
examine the concepts of (a) "beneficial ownership," (b) "full control and supervision," and (c)
"real contributions to the economic growth and general welfare of the country" which are at the
heart of Section 2, Article XII of the Constitution.

Beneficial Ownership

Beneficial ownership, as the plain meaning of the words implies, refers to the right to the gains,
rewards and advantages generated by the property.37

The concept is not new, but in fact is well entrenched in the law of trusts.38 Thus, while the
trustee holds the legal title to or ownership of the property entrusted to him, he is nevertheless
not the beneficial owner. Rather, he holds and administers the property for the benefit of
another, called the beneficiary or the cestui que trust. Hence, the profits realized from the
administration and management of the property by the trustee, who is the "naked owner," less
any lawful fees due to the latter, accrue to the cestui que trust, who is the "beneficial" or
"equitable" owner.39

The foregoing concepts are directly applicable to the statement in Section 2, Article XII of the
Constitution that "[a]ll lands of the public domain, waters, 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 words "owned" and "State" should both be understood on two levels. "Owned" or
"ownership" refers to both the legal title to and the beneficial ownership of the natural resources.
Similarly, "State" should be understood as denoting both the body politic making up the
Republic of the Philippines, i.e., the Filipino people, as well as the Government which
represents them and acts on their behalf.

Thus, the phrase "natural resources are owned by the State" simultaneously vests the legal title
to the nation's natural resources in the Government, and the beneficial ownership of these
resources in the sovereign Filipino people, from whom all governmental authority emanates.40

On this point, petitioners and respondent WMCP appear to be in rare agreement. Thus,
petitioners, in their Memorandum state:

xxx With respect to exploration, development and utilization of mineral resources, the
State should not merely be concerned about passing laws. It is expected that it holds
these natural resources covered in Article XII, Section 2 in dominium and in trust
for [the] Filipino people.41 (Emphasis and underscoring supplied; italics in the original)

Respondent WMCP is even more emphatic:

The Regalian Doctrine, as embodied under the Constitution, is a recognition that

sovereignty resides in the Filipino people, and the prime duty of government or the State
is to serve and protect the people. Thus, the ownership of natural resources by the
State under Section 2, Article XII of the Constitution is actually a beneficial trust in
favor of the Filipino people.

Stated differently, it is the Filipino people who own the nation's natural resources,
and the State is merely the guardian-in-trust therof.42 (Emphasis and underscoring
supplied; italics in the original; citations omitted)

Clearly, in the exploration, development and utilization of the nation's natural resources, the
Government is in a position analogous to a trustee, holding title to and managing these
resources for the benefit of the Filipino people, including future generations.43 As the trustee of
the sovereign, the Government has a fiduciary duty to ensure that the gains, rewards and
advantages generated by the Philippines' natural resources accrue to the benefit of the Filipino
people. Corollary to this, the Government cannot, without violating its sacred trust, enter into
any agreement or arrangement which effectively deprives the Filipino people of their beneficial
ownership of these resources – e.g., when it enters into an agreement whereby the vast
majority of the resources, or the profit generated from the resources, is bargained away in favor
of a foreign entity.

Full Control and Supervision

In the context of its role as trustee, the Government's "full control and supervision" over the
exploration, development and utilization of the nation's natural resources, in its most basic and
fundamental sense, is accomplished by maintaining a position whereby it can carry out its
fiduciary duty to protect the beneficial interest of its cestui que trust in these resources.

Significantly, Section 2, Article XII of the Constitution provides that the Government may
undertake the exploration, development and utilization of these resources by itself or together
with a third party.44 In the first case, where no third party is involved, the Government's "full
control and supervision" over the resources is easily achieved. In the second case, where the
third party may naturally be expected to seek participation in the operation of the venture and
ask for compensation in proportion to its contribution(s), the Government must still maintain a
position vis-à-vis its third party partner whereby it can adequately protect the interest of the
Filipino people, who are the beneficial owners of the resources.

By way of concrete example, the Government may enter into a joint venture agreement45 with a
third party to explore, develop or utilize certain natural resources through a jointly owned
corporation, wherein the government has the controlling interest. Under this arrangement, the
Government would clearly be in a position to protect the interest of the beneficial owners of the
natural resources.

In the alternative, as suggested by the OSG,46 the Government may be allowed one or more
directors (holding nominal shares) on the governing board and executive committee(s) of the
private corporation contracted to undertake mining activities in behalf of the government.
Depending on the by-laws of the private corporation, strategic representation of the Government
in its governing board and executive committee(s) may afford sufficient protection to the interest
of the people.

However, Section 2, Article XII of the Constitution does not limit the options available to the
Government, when dealing with prospective mining partners, to joint ventures or representation
in the contractor's board of directors. To be sure, the provision states that the Government may
enter into "co-production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations," or, for large scale exploration, development and utilization,
"agreements with foreign-owned corporations involving either technical or financial assistance."
But whatever form the agreement entered into by the Government and its third party partner(s)
may take, the same must contain, as an absolute minimum, provisions that ensure that the
Government can effectively perform its fiduciary duty to safeguard the beneficial interest of the
Filipino people in their natural resources, as mandated by the Constitution.

Real Contributions to the Economy

and the General Welfare of the Country

Section 2, Article XII likewise requires that "agreements … involving financial or technical
assistance" be "based on real contributions to the economic growth and general welfare of
the country." This provision articulates the value which the Constitution places on natural
resources, and recognizes their potential benefits. It likewise acknowledges the fact that the
impact of mining operations is not confined to the economy but, perhaps to a greater extent,
affects Philippine society as a whole as well.

"Minerals, petroleum and other mineral oils," are part of the non-renewable wealth of the Filipino
people. By pursuing large scale exploration, development and utilization of these resources, the
State would be allowing the consumption or exhaustion of these resources, and thus deprive
future Filipino generations the enjoyment thereof. Mining – especially large-scale mining – often
results in the displacement of local residents. Its negative effects on the environment are well-
documented.47

Thus, for benefits from the exploration, development and utilization of these resources to
be real, they must yield profits over and above 1) the capital and operating costs incurred, 2)
the resulting damage to the environment, and 3) the social costs to the people who are
immediately and adversely affected thereby.

Moreover, the State must ensure that the real benefits from the utilization of these resources
are sufficient to offset the corresponding loss of these resources to future generations. Real
benefits are intergenerational benefits because the motherland's natural resources are the
birthright not only of the present generation of Filipinos but of future generations as well.48

The requirement of real benefit is applicable even when the exploration, development and
utilization are being undertaken directly by the Government or with the aid of Filipinos or Filipino
corporations. But it takes on greater significance when a foreign entity is involved. In the latter
instance, the foreign entity would naturally expect to be compensated for its assistance. In that
event, it is inescapable that a foreigner would be benefiting from an activity (i.e. mining) which
also results in numerous, serious and long term harmful consequences to the environment and
to Philippine society.

Moreover, as recognized by the 1935 Constitutional Convention, foreign involvement in the

exploitation of Philippine natural resources has serious implications on national security. As
recounted by delegate Jose Aruego:

The nationalization of the natural resources was also intended as an instrument of

national defense. The Convention felt that to permit foreigners to own or control
the natural resources would be to weaken the national defense. It would be
making possible the gradual extension of foreign influence into our politics,
thereby increasing the possibility of foreign control. xxx

Not only these. The nationalization of the natural resources, it was believed, would
prevent making the Philippines a source of international conflicts with the
consequent danger to its internal security and independence. For unless the natural
resources were nationalized, with the nationals of foreign countries having the
opportunity to own or control them, conflicts of interest among them might arise inviting
danger to the safety and independence of the nation.49 (Emphasis supplied)

Significantly, and contrary to the posture of the OSG, it is immaterial whether the foreign
involvement takes the form of "active" participation in the mining concern or "passive"
assistance such as a foreign mining loan or the licensing of mining technology. Whether the
foreign involvement is passive or active, the fact remains that the foreigner will expect to be
compensated and, as a necessary consequence, a fraction of the gains, rewards and
advantages generated by Philippine natural resources will be diverted to foreign hands even as
the long term pernicious "side effects" of the mining activity will be borne solely by the Filipino
people.

Under such circumstances, the Executive, in determining whether or not to avail of the
assistance of a foreign corporation in the large scale exploration, development and utilization of
Philippine natural resources, must carefully weigh the costs and benefits if it is to faithfully
discharge its fiduciary duty to protect the beneficial interest of the Filipino people in these
resources.

These same considerations likewise explain why the last paragraph of Section 2 mandates that
the President "notify the Congress of every contract entered into in accordance with this
provision, within thirty days from its execution." The Constitution requires that the Legislative
branch, which is perceived to be more broadly representative of the people and therefore more
immediately sensitive to their concerns, be given a timely opportunity to scrutinize and evaluate
the Executive's decision.

With these concepts in mind, I now turn to what I believe to be the proper interpretation of
"agreements… involving either technical or financial assistance" in paragraph 4 of Section 2,
Article XII of the Constitution.

Construction of paragraph 4, Section 2,

Article XII of the Constitution

The suggestion that the avoidance of the term "service contracts" in the fourth paragraph is to
prevent the circumvention, prevalent under the 1973 Constitution, of the 60-40 capital
requirement does not persuade, it being too narrow an interpretation of that provision. If that
were the only purpose in the change of phraseology, this Court reiterates, there would have
been no need to replace the term "service contracts" with "agreements… involving either
technical or financial assistance."

The loophole in the 1973 Constitution that sanctioned dummyism is easily plugged by the
provision in the present Constitution that the President, not Congress or the Batasan
Pambansa (under the 1973 Constitution), may enter into either technical or financial
agreements with foreign corporations. The framers then could have easily employed the more
traditional term "service contracts" in designating the agreements contemplated, and thus
obviated confusion, especially since the term was employed by the legal system then
prevailing50 and had a settled acceptation.

The other proffered raison d'être of the fourth paragraph, i.e. to address the absence of a
governing law that led to the abuse of service contracts, is equally unpersuasive. In truth, there
were a host of laws governing service contracts pertaining to various natural resources, as this
Court noted when it traced the history of Section 2, Article XII in its Decision.51

Respondent WMCP nevertheless correctly states that the fourth paragraph establishes an
exception to the rule limiting the exploration, development and utilization of the nation's natural
resources to Filipinos. As an exception, however, it is illogical to deduce that the provision
should be interpreted liberally, not restrictively. It bears repeating that the provision, being
an exception, should be strictly construed against foreign participation.

In any case, the constitutional provision allowing the President to enter into FTAAs with
foreign-owned corporations is an exception to the rule that participation in the nation's
natural resources is reserved exclusively to Filipinos. Accordingly, such provision must
be construed strictly against their enjoyment by non-Filipinos. As Commissioner
Villegas emphasized, the provision is "very restrictive." Commissioner Nolledo
also remarked that "entering into service contracts is an exception to the rule on
protection of natural resources for the interest of the nation and, therefore, being
an exception, it should be subject, whenever possible, to stringent rules." Indeed,
exceptions should be strictly but reasonably construed; they extend only so far as their
language fairly warrants and all doubts should be resolved in favor of the general
provision rather than the exception.52 (Emphasis and underscoring supplied; citations
omitted).

That the fourth paragraph employs the word "may" does not make it non-restrictive. Indeed,
"may" does make the provision permissive, but only as opposed to mandatory,53 and operates
to confer discretion upon a party.54 Thus, as used in the fourth paragraph, "may" provides the
President with the option to enter into FTAAs. It is, however, not incumbent upon the President
to do so for, as owner of the natural resources, the "State [itself] may directly undertake such
activities."55 If the President opts to exercise the prerogative to enter into FTAAs, the agreement
must conform to the restrictions laid down by Section 2, including the scope of the assistance,
which must be limited to financial or technical forms.

"May" in the fourth paragraph, therefore, should be understood in the same sense as it is used
in the first paragraph, that is, that the State "may enter into… agreements with Filipino citizens,
or corporations or association at least sixty per centum of whose capital is owned by such
citizens."

The majority, however, opines that the "agreements involving either technical or financial
assistance" referred to in paragraph 4 of Section 2 of Article XII of the 1987 Constitution are
indeed service contracts. In support of this conclusion, the majority maintains that the use of the
phrase "agreements… involving either technical or financial assistance" does not indicate the
intent to exclude other modes of assistance because the use of the word "involving" signifies the
possibility of the inclusion of other forms of assistance or activities. And it proffers that the word
"involving" has three connotations that can be differentiated as follows: (1) the sense of
concerning, having to do with, or affecting; (2) entailing, requiring, implying or necessitating; (3)
including, containing or comprising. None of these three connotations, it is contended, convey a
sense of exclusivity. Thus, it concludes that had the framers intended to exclude other forms of
assistance, they would have simply said "agreements for technical or financial assistance" as
opposed to "agreements including technical or financial assistance."

To interpret the term "involving" in the fourth paragraph to mean "including," as the majority
contends, would run counter to the restrictive spirit of the provision. Notably, the 1987
Constitution uses "involving" not "including." As admitted in the majority opinion, the word
"involve" may also mean concerning, having to do with or affecting. Following the majority
opinion's own methodology of substitution, "agreements… involving either technical or financial
assistance" means "agreements…concerning either technical or financial assistance." And the
word "concerning" according to Webster's Third New International Dictionary means
"regarding", "respecting" or "about." To reiterate, these terms indicate exclusivity. More tellingly,
the 1987 Constitution not only deleted the term "management" in the 1973 Constitution, but
also the catch-all phrase "or other forms of assistance,"56 thus reinforcing the exclusivity of
"either technical or financial assistance."

That the fourth paragraph does not employ the terms "solely," "only," or "limited to" to qualify
"either technical or financial assistance" does not detract from the provision's restrictive nature.
Moreover, the majority opinion's illustration conveniently omits "either… or." As Senior
Associate Justice Reynato S. Puno pointed out during the oral arguments, the use of the
disjunctive "either… or" denotes restriction.57

According to the Penguin Dictionary, the word "either" may be used as (1) an adjective or (2) a
pronoun or (3) a conjunction or (4) an adverb. As an adjective, the word "either" means (1) any
one of two; one or the other; or (2) one and the other; each. As a pronoun, the word "either"
means the one or the other. As a conjunction, the word "either" is used before two or more
sentence elements of the same class or function joined usually by "or" to indicate what
immediately follows is the first of two or more alternatives. Lastly, as an adverb, "either" is
used for emphasis after a negative or implied negation (i.e. for that matter or likewise). The
traditional rule holds that "either" should be used only to refer to one of two items and that "any"
is required when more than two items are involved.58 However, modern English usage has
relaxed this rule when "either" is used as a conjunction.59 Thus, the word "either" may indicate
the choice between two or more possibilities.

"Either" in paragraph 4, section 2, Article XII, is clearly used as a conjunction, joining two (and
only two) concepts – financial and technical. The use of the word "either" clearly limits the
President to only two possibilities, financial and technical assistance. Other forms of assistance
are plainly not allowed, since only the words "financial and technical" follow the word "either."

In accordance with the intent of the provision, "agreements… involving either technical or
financial" is deemed restrictive and not just descriptive. It is a condition, a limitation, not a mere
description.

The OSG's suggestion that the President may enter into "any" agreement, the scope of which
may go beyond technical or financial assistance, with a foreign-owned corporation, does not
impress. The first paragraph of Section 2 limits contracts with Filipino citizens or corporations to
co-production, joint venture or production-sharing agreements. To subscribe to the OSG's
theory would allow foreign-owned corporations participation in the country's natural resources
equal to, perhaps even greater than, that of Filipino citizens or corporations.

The OSG cites the Separate Opinion of Justice Jose C. Vitug, now retired, who proposed that,
on the premise that the State itself may undertake the exploration, development and utilization
of natural resources, a foreign-owned corporation may engage in such activities in behalf of the
State:

The Constitution has not prohibited the State from itself exploring, developing, or utilizing
the country's natural resources, and, for this purpose, it may, I submit, enter into the
necessary agreements with individuals or entities in the pursuit of a feasible operation.

The fundamental law is deemed written in every contract. The FTAA entered into by the
government and WMCP recognizes this vital principle. Thus, two of the agreement's
clauses provide:

"WHEREAS, the 1987 Constitution of the Republic of the Philippines provides in

Article XII, Section 2 that all lands of the public domain, waters, minerals, coal,
petroleum, and other natural resources are owned by the State, and that the
exploration, development and utilization of natural resources shall be under the
full control and supervision of the State; and
 "WHEREAS, the Constitution further provides that the Government may enter
into agreements with foreign-owned corporations involving either technical or
financial assistance for large scale exploration, development and utilization of
minerals."

The assailed contract or its provisions must then be read in conformity with
abovementioned constitutional mandate. Hence, Section 10.2(a) of the FTAA, for
instance, which states that "the Contractor shall have the exclusive right to explore for,
exploit, utilize, process, market, export and dispose of all minerals and products and by-
products thereof that may be derived or produced from the Contract Area and to
otherwise conduct Mining Operations in the Contract Area in accordance with the terms
and conditions hereof," must be taken to mean that the foregoing rights are to be
exercised by WMCP for and in behalf of the State and that WMCP, as the Contractor,
would be bound to carry out the terms and conditions of the agreement acting for and in
behalf of the State. In exchange for the financial and technical assistance, inclusive of its
services, the Contractor enjoys an exclusivity of the contract and a corresponding
compensation therefor.60 (Underscoring supplied).

This proposition must be rejected since it sanctions the circumvention, if not outright violation, of
the fourth paragraph by allowing foreign corporations to render more than technical or financial
assistance on the pretext that it is an agent of the State. Quando aliquid prohibitur ex directo,
prohibitur et per obliquum. What is prohibited directly is prohibited indirectly.61 Further, the
proposition lends itself to mischievous consequences. If followed to its logical conclusion,
nothing would stop the State from engaging the services of a foreign corporation to undertake in
its behalf the 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."

The present Constitution restricts foreign involvement to large-scale activities because the idea
is to limit the participation of foreign corporations only to areas where they are needed.

MS. QUESADA. Going back to Section 3, the section suggests that:

The exploration, development, and utilization of natural resources … may be directly

undertaken by the State, or it may enter into co-production, joint venture or production-
sharing agreement with … corporations or associations at least sixty percent of whose
voting stock or controlling interest is owned by such citizens.

Lines 25 to 30 on the other hand, suggest that in the large-scale exploration,

development and utilization of natural resources, the President with the concurrence of
Congress may enter into agreements with foreign-owned corporations even for technical
or financial assistance.

I wonder if this first part of Section 3 contradicts the second part. I am raising this
point for fear that foreign investors will use their enormous capital resources to
facilitate the actual exploitation or exploration, development and effective
disposition of our natural resources to the detriment of Filipino investors. I am not
saying that we should not consider borrowing money from foreign sources. What I
refer to is that foreign interest should be allowed to participate only to the extent
that they lend us money and give us technical assistance with the appropriate
government permit. In this way, we can insure the enjoyment of our natural
resources by out people.

MR. VILLEGAS. Actually, the second provision about the President does not
permit foreign investors to participate. It is only technical or financial assistance –
they do not own anything – but on conditions that have to be determined by law with
the concurrence of Congress. So, it is very restrictive.

If the Commissioner will remember, this removes the possibility for service
contracts which we said yesterday were avenues used in the previous regime to
go around the 60-40 requirement.62 (Emphasis and underscoring supplied)
 The intent is to allow Filipinos to benefit from Filipino resources.

MR. DAVIDE. May I be allowed to explain the proposal?

MR. MAAMBONG. Subject to the three-minute rule, Madam President.

MR. DAVIDE. It will not take me three minutes.

The Commission had just approved the Preamble. In the Preamble we clearly sated
there that the Filipino people are sovereign and that one of the objectives for the creation
or establishment of a government is to conserve and develop the national
patrimony. The implication is that the national patrimony or our natural resources
are exclusively reserved for the Filipino people. No alien must be allowed to enjoy,
exploit and develop our natural resources. As a matter of fact, that principle
proceeds from the fact that our natural resources are gifts from God to the Filipino
people and it would be a breach of that special blessing from God if we will allow
aliens to exploit our natural resources.

I voted in favor of the Jamir proposal because it is not really exploitation that we g
ranted to the aliencorporations but only for them to render financial or technical a
ssistance. It is not for them to enjoyour natural resources. Madam President, our
natural resources are depleting; our population is increasing by leaps and bounds. Fifty
years from now, if we will allow these aliens to exploit our natural resources, there will be
no more natural resources for the next generations of Filipinos. It may last long if we will
begin now. Since 1935 the aliens have been allowed to enjoy to a certain extent the
exploitation of our natural resources, and we became victims of foreign dominance and
control. The aliens are interested in coming to the Philippines because they would like to
enjoy the bounty of nature exclusively intended for the Filipinos by God.

And so I appeal to all, for the sake of the future generations, that if we have to pray in
the Preamble "to preserve and develop the national patrimony for the sovereign Filipino
people and for the generations to come," we must at this time decide once and for all
that our natural resources must be reserved only to Filipino citizens.

Thank you.63 (Emphasis and underscoring supplied)

The intent loses all significance if foreign-owned corporations are likewise allowed to participate
even in small or medium-scale ventures.

Thus, in keeping with the clear intent and rationale of the Constitution, financial or technical
assistance by foreign corporations are allowable only where there is no Filipino or Filipino-
owned corporation (including corporations at least 60% of the capital of which are owned by
Filipinos) which can provide the same or similar assistance.

To reiterate, the over-arching letter and intent of the Constitution is to reserve the exploration,
development and utilization of natural resources to Filipinos.

The justification for foreign involvement in the exploration, development and utilization of natural
resources was that Filipino nationals or corporations may not possess the necessary capital,
technical knowledge or technology to mount a large scale undertaking. In the words of the "Draft
of the 1986 U.P. Law Constitution Project" (U.P. Law Draft) which was taken into consideration
during the deliberation of the CONCOM:64

Under the proposed provision, 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 resources65 x x x (Emphasis and
underscoring supplied)
Thus, the contention that Section 2, Article XII allows for any agreement for assistance by a
foreign corporation "so long as such assistance requires specialized knowledge or skills, and
are related to the exploration, development and utilization of mineral resources" is erroneous.66

Where a foreign corporation does not offer financial or technological assistance beyond the
capabilities of its Philippine counterparts, an FTAA with such a corporation would be highly
questionable. Similarly, where the scope of the undertaking does not qualify as "large scale," an
FTAA with a foreign corporation is equally suspect.

"Agreements" in Section 2, Article XII

do not include "service contracts."

This Court's ruling in the Decision under reconsideration that the agreements involving either
technical or financial assistance contemplated by the 1987 Constitution are different and
dissimilar from the service contracts under the 1973 Constitution must thus be affirmed. That
there is this difference, as noted in the Decision, is gathered from the change in
phraseology.67 There was no need to employ strongly prohibitory language, like that found in the
Bill of Rights.68 For the framers to expressly prohibit "management and other forms of
assistance" would be redundant inasmuch as the elimination of such phrase serves the same
purpose. The deletion is simply too significant to ignore and speaks just as profoundly – it is an
outright rejection.

It bears noting that the fourth paragraph does not employ the same language adopted in the first
paragraph, which specifically denominates the agreements that the State may enter into with
Filipinos or Filipino-owned corporations. The fourth paragraph does not state "The President
may also enter into co-production, joint venture, or production-sharing agreements with
foreign-owned corporations for large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils…." On the other hand, the fourth paragraph cannot be
construed as a grant of boundless discretion to the President to enter into any agreement
regardless of the scope of assistance because it would result in a bias against Filipino citizens
and corporations.

On this point, the following observations from the U.P. Law Draft on the odious and
objectionable features of service contracts bear restating:

5. The last paragraph is a modification of the service contract provision found in Section
9, Article XIV of the 1973 Constitution as amended. This 1973 provision shattered the
framework of nationalism in our fundamental law (see Magallona, "Nationalism and its
Subversion in the Constitution"). Through the service contract, the 1973 Constitution
had legitimized that which was prohibited under the 1935 constitution—the
exploitation of the country's natural resources by foreign nationals. Through the
service contract, acts prohibited by the Anti-Dummy Law were recognized as legitimate
arrangements. Service contracts lodge exclusive management and control of the
enterprise to the service contractor, not unlike the old concession regime where
the concessionaire had complete control over the country's natural resources,
having been given exclusive and plenary rights to exploit a particular resource
and, in effect, having been assured of ownership of that resource at the point of
extraction (see Agabin, "Service Contracts: Old Wine in New Bottles"). Service
contracts, hence, are antithetical to the principle of sovereignty over our natural
resources, as well as the constitutional provision on nationalization or Filipinization of the
exploitation of our natural resources.69 (Emphasis supplied)

Furthermore, Professor Pacifico A. Agabin, a member of the working group of the U.P. Law
Constitution Project and now counsel for intervenor PCM, stated in his position paper:

Recognizing the service contract for what it

is, we have to expunge it from the Constitution and reaffirm ownership over our natural
resources. That is the only way we can exercise effective control over ournatural resou
rces.
 This should not mean complete isolation of the country's natural resources from foreign
investment. Other contract forms which
are less derogatory to our sovereignty and control over natural resources – like
technical assistance agreements, financial assistance [agreements], co-production
agreements, joint ventures, production-sharing [agreements] – could still be utilized and
adopted without violating constitutional provisions. In other words, we can adopt contract
forms which recognize and assert our sovereignty and ownership over natural
resources, and where the entity is just a pure contractor instead of the beneficial owner
of our economic resources.70 (Emphasis & underscoring supplied),

indicating that the proposed financial or technical assistance agreements are contract
forms different from the 1973 Constitution service contracts.

Thus the phrase "agreements with foreign-owned corporations involving either technical or
financial assistance" in Section 2, Article XII of the Constitution must be interpreted as restricting
foreign involvement in the exploration, development and utilization of natural resources to large
scale undertakings requiring foreign financial or technicalassistance and not, as alleged by
respondents, inclusive of any possible agreement under the sun.

The majority however argues that the deletion or omission from the 1987 Constitution of the
term "service contracts" found in the 1973 Constitution does not sufficiently prove the drafters'
intent to exclude foreigners from management since such intent cannot be definitively and
conclusively established. This argument overlooks three basic principles of statutory
construction.

First, casus omisus pro omisso habendus est.71 As recently as 2001 in Commission on Audit of
the Province of Cebu v. Province of Cebu,72 this Court held that a person, object or thing
omitted from an enumeration must be held to have been omitted intentionally.73 That there is a
difference between technical or financial assistance contemplated by the 1987 Constitution and
the service contracts under the 1973 Constitution is gathered from the omission of the phrase
"management or other forms of assistance."

As earlier noted, the phrase "service contracts" has been deleted in the 1987
Constitution's Article on National Economy and Patrimony. If the CONCOM intended to
retain the concept of service contracts under the 1973 Constitution, it would have simply
adopted the old terminology ("service contracts") instead of employing new and
unfamiliar terms ("agreements…involving either technical or financial assistance.") Such
a difference between the language of a provision in a revised constitution and that
of a similar provision in the preceding constitution is viewed as indicative of a
difference in purpose. If, as respondents suggest, the concept of "technical or financial
assistance" agreements is identical to that of "service contracts," the CONCOM would
not have bothered to fit the same dog with a new collar. To uphold respondents' theory
would reduce the first to a mere euphemism for the second render the change in
phraseology meaningless.74 (Emphasis and underscoring supplied; citation omitted)

Second, expressio unius est exclusion alterius.75 The express mention of one person, thing, act,
or consequence excludes all others.76

Third and lastly, expressium facit cessare tacitum.77 What is expressed puts an end to that
which is implied.78 Since the constitutional provision, by its terms, is expressly limited to financial
or technical agreements, it may not, by interpretation or construction, be extended to other
forms of assistance.

These three principles of statutory construction, derived from the well-settled principle of verba
legis, proceed from the premise that the Constitutional Commission would not have made
specific enumerations in the provision if it had the intention not to restrict its meaning and
confine its terms to those expressly mentioned. And this Court may not, in the guise of
interpretation, enlarge the scope of a constitutional provision and include therein situations not
provided nor intended by the framers. To do so would be to do violence to the very language of
the Constitution, the same Constitution which this Court has sworn to uphold.
The majority counters, however, that service contracts were not de-constitutionalized since the
deliberations of the members of the Constitutional Commission conclusively show that they
discussed agreements involving either technical or financial assistance in the same breath as
service contracts and used the terms interchangeably. This argument merely echoes that of
private respondent WMCP which had already been addressed in this Court's Decision of
January 27, 2004, (the Decision) viz:

While certain commissioners may have mentioned the term "service contracts" during
the CONCOM deliberations, they may not have been necessarily referring to the concept
of service contracts under the 1973 Constitution. As noted earlier "service contracts"
is a term that assumes different meanings to different people. The commissioners
may have been using the term loosely, and not in its technical and legal sense, to
refer, in general, to agreements concerning natural resources entered into by the
Government with foreign corporations. These loose statements do not necessarily
translate to the adoption of the 1973 Constitution provision allowing service contracts.

It is true that, as shown in the earlier quoted portions of the proceedings in [the]
CONCOM, in response to Sr. Tan's question, Commissioner Villegas commented that,
other than congressional notification, the only difference between "future" and "past"
"service contracts" is the requirement of a general law as there were no laws previously
authorizing the same.79 However, such remark is far outweighed by his more
categorical statement in his exchange with Commissioner Quesada that the draft
article "does not permit foreign investors to participate" in the nation's natural
resources – which was exactly what service contracts did – except to provide
"technical or financial assistance."

In the case of the other commissioners, Commissioner Nolledo himself clarified in his
work that the present charter prohibits service contracts. Commissioner Gascon was not
totally averse to foreign participation, but favored stricter restrictions in the form of
majority congressional concurrence. On the other hand, Commissioners Garcia and
Tadeo may have veered to the extreme side of the spectrum and their objections may be
interpreted as votes against any foreign participation in our natural resources
whatsoever.80(Emphasis and underscoring supplied; citations omitted)

In fact, the opinion of Commissioner Nolledo in his textbook which is cited in this Court's
January 27, 2004 Decision should leave no doubt as to the intention of the framers to eliminate
service contracts altogether.

Are service contracts allowed under the new Constitution? No. Under the new
Constitution, foreign investors (fully alien-owned) can NOT participate in Filipino
enterprises except to provide: (1) Technical Assistance for highly technical enterprises;
and (2) Financial Assistance for large-scale enterprises.

The intention of this provision, as well as other provisions on foreign investments, is to

prevent the practice (prevalent in the Marcos government) of skirting the 60/40 equation
using the cover of service contracts.81

Next, the majority opinion asserts that if the framers had meant to ban service contracts
altogether, they would have provided for the termination or pre-termination of the existing
service contracts.

There was no need for a constitutional provision to govern the termination or pre-termination of
existing service contracts since the intention of the framers was to apply the rule banning
service contracts prospectively.

MR. DAVIDE. Under the proposal, I notice that except for the lands of the public domain,
all other natural resources cannot be alienated and in respect to lands of the public
domain, private corporations with the required ownership by Filipino citizens can only
lease the same. Necessarily, insofar as other natural resources are concerned, it would
only be the State which can exploit, develop, explore and utilize the same. However, the
 State may enter into a joint venture, coproduction (sic) or production-sharing. Is that not
correct?

MR. VILLEGAS. Yes.

MR. DAVIDE. Consequently, henceforth upon the approval of this Constitution, no

timber or forest concessions, permits or authorization can be exclusively granted to any
citizen of the Philippines nor to any corporation qualified to acquire lands of the public
domain?

MR. VILLEGAS. Would Commissioner Monsod like to comment on that? I think his
answer is "yes."

MR. DAVIDE. So, what will happen now to licenses or concessions earlier granted by
the Philippine government to private corporations or to Filipino citizens? Would they be
deemed repealed?

MR. VILLEGAS. This is not applied retroactively. They will be respected.

MR. DAVIDE. In effect, they will be deemed repealed?

MR. VILLEGAS. No.82 (Emphasis and underscoring supplied)

Besides, a service contract is only a license or privilege, not a contract or property right which
merits protection by the due process clause of the Constitution. Thus in the landmark case
of Oposa v. Factoran, Jr,83 this Court held:

xx
x Needless to say, all licenses may thus be revoked or rescinded by executive acti
on. It is not acontract, property or a property right protected by the due process cl
ause of the Constitution. In Tan vs. Director of Forestry, this Court held:

"x x x A timber license is an instrument by which the State regulates the utilization and
disposition of forest resources to the end that public welfare is promoted. A timber
license is not a contract within the purview of the due process clause; it is only a
license or privilege, which can be validly withdrawn whenever dictated by public
interest or public welfare as in this case.

'A license is merely a permit or privilege to do what otherwise would be unlawful,

and is not a contract between the authority, federal, state, or municipal, granting
it and the person to whom it is granted; neither is it property or a property
right, nor does it create a vested right; nor is it taxation' Thus, this Court
held that the granting of license does not create irrevocable rights, neither
is it property or property rights."

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co, Inc. vs. Deputy Executive
Secretary:

"x x x Timber licenses, permits and license agreements are the principal instruments by
which the State regulates the utilization and disposition of forest resources to the end
that public welfare is promoted. And it can hardly be gainsaid that they merely evidence
a privilege granted by the State to qualified entities, and do not vest in the latter a
permanent or irrevocable right to the particular concession area and the forest products
therein. They may be validly amended, modified, replaced or rescinded by the
Chief Executive when national interests so require. Thus, they are not deemed
contracts within the purview of the due process clause."

Since timber licenses are not contracts, the non-impairment clause which reads:

"SEC 10. No law impairing, the obligation of contracts shall be passed."

cannot be invoked.

In the second place, even if it is to be assumed that the same are contracts, the instant case
does not involve a law or even an executive issuance declaring the cancellation or modification
of existing timber licenses. Hence, the non-impairment clause cannot as yet be invoked.
Nevertheless, granting further that a law has actually been passed mandating cancellations or
modifications, the same cannot still be stigmatized as a violation of the non-impairment clause.
This is because by its very nature and purpose, such a law could have only been passed in the
exercise of the police power of the state for the purpose of advancing the right of the people to a
balanced and healthful ecology, promoting their health and enhancing the general welfare.
In Abe vs. Foster Wheeler Corp., this Court stated:

"The freedom of contract, under our system of government, is not meant to be absolute.
The same is understood to be subject to reasonable legislative regulation aimed at the
promotion of public health, moral, safety and welfare. In other words, the
constitutional guaranty of non-impairment of obligations of contract is limited by
the exercise of the police power of the State, in the interest of public health,
safety, moral and general welfare."

The reason for this is emphatically set forth in Nebia vs. New York quoted in Philippine
American Life Insurance Co. vs. Auditor General, to wit:

"Under our form of government the use of property and the making of contracts are
normally matters of private and not of public concern. The general rule is that both shall
be free of governmental interference. But neither property rights nor contract rights are
absolute; for government cannot exist if the citizen may at will use his property to the
detriment of his fellows, or exercise his freedom of contract to work them harm. Equally
fundamental with the private right is that of the public to regulate it in the common
interest."

In short, the non-

impairment clause must yield to the police power of the state.84 (Emphasis and
underscoring supplied; citations omitted)

The majority however argues that Oposa is not applicable since the investment in a logging
concession is not as substantial an investment as that of a large scale mining contractor. Such a
contention is patently absurd. Taken to its logical conclusion, the majority would have this Court
exempt firms in highly capital intensive industries from the exercise of police power simply to
protect their investment. That would mean that the legislature would, for example, be powerless
to revoke or amend legislative franchises of public utilities, such as power and
telecommunications firms, which no doubt require huge sums of capital.

The majority opinion then proffers that the framers of the Constitution were pragmatic enough to
know that foreign entities would not enter into such agreements without requiring arrangements
for the protection of their investments, gains, and benefits or other forms of conditionalities. It
goes on to argue that "by specifying such 'agreements involving assistance,' the framers of the
Constitution necessarily gave implied assent to everything that these agreements necessarily
entailed; or that could reasonably be deemed necessary to make them tenable and effective,
including management authority with respect to the day-to-day operations of the enterprise and
measures for the protection of the interests of the foreign corporation."

The deliberations of the Constitutional Commission, however, do not support the immediately
foregoing contentions.

MR. TINGSON. Within the purview of what the Gentleman is saying, would he welcome
friendly foreigners to lend us their technical expertise in helping develop our country?

MR. GARCIA. Part 2 of this proposal, Filipino control of the economy, in fact, says that
the entry of foreign capital, technology and business enterprises into the national
economy shall be effectively regulated to ensure the protection of the interest of our
people.
 In other words, we welcome them but on our own terms. This is very similar to our
position on loans. We welcome loans as long as they are paid on our own terms,
on our ability to pay, not on their terms.For example, the case of Peru is instructive.
They decided first to develop and grow, and were willing to pay only 10 percent of their
foreign exchange earnings. That, I think, is a very commendable position given the
economic situation of a country such as Peru. The Philippines is a similar case,
especially when we realize that the foreign debt was made by a government that was
bankrupt in its desire to serve the people.

MR. MONSOD. Mr. Vice-President, I think we have to make a distinction that it is not
really realistic to say that we will borrow on our own terms. Maybe we can say that we
inherited unjust loans, and we would like to repay these on terms that are not prejudicial
to our own growth. But the general statement that we should only borrow on our own
terms is a bit unrealistic.

MR. GARCIA. Excuse me. The point I am trying to make is that we do not have to
borrow. If we have to borrow, it must be on our terms. In other words, banks do
not lend out of the goodness of their hearts. Banks lend to make a profit.

MR. TINGSON. Mr. Vice-President, I think the trouble in our country is that we have
forgotten the scriptural injunction that the borrower becomes a slave to the
lender. That is the trouble with our country; we have borrowed and borrowed but
we forget that we become slaves to those who lend us.85 (Emphasis and
underscoring supplied)

By public respondent's information, "[t]he potential mining wealth in the Philippines is estimated
at $840 billion or P47 trillion or 10 times our annual GDP, and 15 times our total foreign debt of
$56 billion. Globally, the Philippines ranks third in gold, fourth in copper, fifth in nickel and sixth
in chromite."86 With such high concentration of valuable minerals coupled with the Filipino
people's willingness to protect and preserve ownership of their natural resources at the expense
of retarding or postponing the exploration, development, and utilization of these resources, the
Philippines clearly has the superior bargaining position and should be able to dictate its terms.
No foreign entity should be able to bully the Philippines and intimidate the Government into
conceding to certain conditions incompatible with the Constitution.

Extent of foreign corporation's

participation in the management of an FTAA

Foreign-owned corporations, however, are not precluded from a limited participation in the
management of the exploration, development and utilization of natural resources.

Some degree of participation by the contractor in management, to assure the proper application
of its investment and/or to facilitate the technical assistance and transfer of technology may be
unavoidable and not necessarily undesirable. Thus, there is merit in respondent WMCP's
contention, to which even petitioners conceded during the oral arguments, that a foreign-owned
corporation is not prevented from having limited participation in the management assistance or
participation so long as it is incidental to the financial or technical assistance being
rendered:

JUSTICE PANGANIBAN:

Alright. Going back to verba legis, you say that the FTAA's are limited to financial
or technical assistance only.

ATTY. LEONEN:

Either financial or technical assistance, yes your Honor.

ATTY. LEONEN:

Full management, your Honor.

JUSTICE PANGANIBAN:

Full management is excluded.

ATTY. LEONEN:

Yes your Honor.

JUSTICE PANGANIBAN:

But incidental management to protect the financial or technical assistance

should be allowed.

ATTY. LEONEN:

If a mining company would get the technical expertise to bring in drilling rig
your Honor, and that is the sole contract, then we cannot imagine a
situation were it is not the technicians that we will do the actual drilling
your Honor, but for the entire contract area your Honor as it is now in the
FTAA then I think that would be different.

JUSTICE PANGANIBAN:

Yes I agree. In other words, the words financial or technical may include
parts of management, isn't it? Its reasonable in other words if I may re state
it, it's reasonable to expect that entities,foreign entities who don't know
anything about this country, well that is an exaggeration, who know not too much
about this country, would not just extend money, period. They would want to
have a say a little bit of say management and sometimes even in auditing
of the company, isn't it reasonable to expect.

ATTY. LEONEN:

I would qualify my answer your Honor with management of what your Honor. It
means if it's for development and utilization of the minerals.

JUSTICE PANGANIBAN:

No.

ATTY. LEONEN:

Yes your Honor, but if it's management of sub-contracted activity like a

symposium then that would be all right your Honor. Mining companies do
symposiums also.

JUSTICE PANGANIBAN:

Management to protect their own investments, whether it be technical or

financial.

ATTY. LEONEN:

Their investment, your Honor, which cannot be the entire mining

operation from my perspective, your Honor.

JUSTICE PANGANIBAN:

Yes I agree because there is the Constitutional provision of control and

supervision, full control and supervision to the State.
ATTY. LEONEN:

And Filipino corporations your Honor.

JUSTICE PANGANIBAN:

Or even Filipino corporation, the full control and supervision is still with the State.

ATTY. LEONEN:

Yes your Honor.

JUSTICE PANGANIBAN:

Even with Filipino citizens being the contractors, full control and supervision is
still with the State.

ATTY. LEONEN:

Yes, your Honor.

JUSTICE PANGANIBAN:

In all these contract full control and supervision is with the State.

ATTY. LEONEN:

Yes your Honor and we can only hope that the State is responsive to the people
we represent.

xxx

JUSTICE PANGANIBAN:

Yes, yes. Can it also not be said reading that the Constitution that the safeguards
on contracts with foreigners was left by the Constitutional Commission or by
Constitution itself to Congress to craft out.

ATTY. LEONEN:

I can accept your Honor that there was a province of power that was given to
Congress, but it was delimited by the fact, that they removed the word
management and other arrangement and put the words either financial and
technical.

JUSTICE PANGANIBAN:

Yes but you just admitted earlier that these two words would also include
some form of management or other things to protect the investment or the
technology being put by the foreign company.

ATTY. LEONEN:

Yes your Honor for so long as it's not the entire.

JUSTICE PANGANIBAN:

Yes, yes provided the State does not lose control and supervision, isn't it?
 ATTY. LEONEN:

Yes your Honor.87 (Emphasis and underscoring supplied)

Thus, the degree of the foreign corporation's participation in the management of the mining
concern is co-extensive with and strictly limited to the degree of financial or technical assistance
extended. The scope of the assistance defines the limits of the participation in management.

However, to whatever extent the foreign corporation's incidental participation in the

management of the mining concern may be, full control and supervision, sufficient to
protect the interest of the Filipino people, over all aspects of mining operations must be
retained by the Government. While this does not necessarily mean that the Government must
assume the role of a back seat driver, actively second guessing every decision made by the
foreign corporation, it does mean that sufficient safeguards must be incorporated into the FTAA
to insure that the people's beneficial interest in their natural resources are protected at all times.

Moreover, the foreign contractor's limited participation in management, as the Court held in its
Decision, should not effectively grant foreign-owned corporations beneficial
ownership over the natural resources.

The opinion, submitted by the OSG, of Bernardo M. Villegas, who was a Member of the
Constitutional Commission and Chair of its Committee on National Economy and Patrimony, is
not inconsistent with the foregoing conclusion. Commissioner Villegas opined:

The phrase "service contracts" contained in the 1973 Constitution was deleted in the
1987 Constitution because there was the general perception among the Concom
members that it was used during the Marcos regime as an instrument to circumvent the
60-40 limit in favor of Filipino ownership. There was also the impression that the
inclusion of the word "management" in the description of the service contract concept in
the 1973 Constitution was tantamount to ownership by the foreign partner.

The majority of the Concom members, however, recognized the vital need of the
Philippine economy for foreign capital and technology in the exploitation of natural
resources to benefit Filipinos, especially the poor in the countryside where the mining
sites are located. For this reason, the majority voted for "agreements involving financial
or technical assistance" or FTAA.

I maintain that the majority who voted Yes to this FTAA provision realized that an FTAA
involved more than borrowing money and/or buying technology from foreigners. If an
FTAA involved only a loan and/or purchase of technology, there would not have been a
need for a constitutional provision because existing laws in the Philippines more than
adequately regulate these transactions.

It can be deducted from the various comments of both those who voted Yes and No to
the FTAA provision that an FTAA also involves the participation in management of the
foreign partner. What was then assumed in 1986 is now even clearer in the way
business organizations have evolved in the last decade or so under the modern concept
of good governance. There are numerous stakeholders in a business other than the
stockholders or equity owners who participate actively in the management of a business
enterprise. Not only do creditors and suppliers demand representation in boards of
directors. There are also other so-called independent directors who actively participate in
management.

In summary, the word "management" was deleted from the description of the FTAA
because some CONCOM delegates identified management with beneficial
ownership. In order not to prolong the debate, those in favor of the FTAA provision
agreed not to include the word management. But from what has been discussed above,
it was clear in the minds of those who voted YES that the FTAA included more than
just a loan and/or purchase of technology from foreigners but necessarily allowed
the active participation of the foreign partners in the management of the
enterprise engaged in the exploitation of natural resources.88 (Emphasis supplied).
Under no circumstances should the execution of an FTAA be tantamount to the grant of a roving
commission whereby a foreign contractor is given blanket and unfettered discretion to do
whatever it deems necessary – denude watersheds, divert sources of water, drive communities
from their homes – in pursuit of its pecuniary goals.

Nor should the scope of an FTAA be broadened to include "managerial assistance." As

discussed extensively in the Decision,89 "managerial assistance" – a euphemism by which full
control and beneficial ownership of natural resources were vested in foreigners – is part and
parcel of the martial law era "service contracts" and the old "concession regime" which the 1987
Constitution has consigned to the dust bin of history.

The elimination of the phrase "service contracts" effectuates another purpose. Intervenor PCM
agrees that the Constitution tries to veer away from the old concession system,90 which vested
foreign-owned corporations control and beneficial ownership over Philippine natural resources.
Hence, the 1987 Constitution also deleted 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.91

Prof. Agabin had no flattering words for the concession system, which he described in his
position paper as follows:

Under the concession system, the concessionaire makes a direct equity investment for
the purpose of exploiting a particular natural resource within a given area. Thus, the
concession amounts to a complete control by the concessionaire over the
country's natural resource, for it is given exclusive and plenary rights to exploit a
particular resource and is in effect assured ownership of that resource at the point
of extraction. In consideration for the right to exploit a natural resource, the
concessionaire either pays rent or royalty which is a fixed percentage of the gross
proceeds. But looking beyond the legal significance of the concession regime, we can
see that there are functional implications which give the concessionaire great
economic power arising from its exclusive equity holding. This includes, first,
appropriation of the returns of the undertaking, subject to a modest royalty;
second, exclusive management of the project; third, control of production of the
natural resource, such as volume of production, expansion, research and
development; and fourth, exclusive responsibility for downstream operations, like
processing, marketing, and distribution. In short, even if nominally, the state is the
sovereign and owner of the natural resource being exploited, it has been shorn of
all elements of control over such natural resource because of the exclusive nature
of the contractual regime of the concession. The concession system, investing as it
does ownership of natural resources, constitutes a consistent inconsistency with the
principle embodied in our Constitution that natural resources belong to the State and
shall not be alienated, not to mention the fact that the concession was the bedrock of the
colonial system in the exploitation of natural resources.92 (Underscoring in the original)

Vestiges of the concession system endured in the service contract regime, including the vesting
on the contractor of the management of the enterprise, as well as the control of production and
other matters, such as expansion and development. 93 Also, while title to the resource
discovered was nominally in the name of the government, the contractor had almost unfettered
control over its disposition and sale.94

The salutary intent of the 1987 Constitution notwithstanding, these stubborn features of the
concession system persist in the Mining Act of 1995. The statute allows a foreign-owned
corporation to carry out mining operations,95which includes the conduct of
exploration,96 development97 and utilization98 of the resources.99 The same law grants foreign
contractors auxiliary mining rights, i.e., timber rights,100 water rights,101 the right to possess
explosives,102 easement rights,103 and entry into private lands and concession areas.104 These
are the very same rights granted under the old concession and service contract systems.

The majority opinion proposes two alternative standards of Government control over FTAA
operations. Thus, in the opening paragraphs it states:
 Full control is not anathema to day-to-day management by the contractor, provided that
the State retains the power to direct overall strategy; and to set aside, reverse, or
modify plans and actions of the contractor. The idea of full control is similar to
that which is exercised by the board of directors of a private corporation x x x
(Emphasis and underscoring supplied)

However, the majority opinion subsequently substantially reduces the scope of its definition of
"control" in this wise:

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. (Emphasis
and underscoring supplied; citations omitted; italics in the original)

This second definition is apparently analogous to regulatory control which the Government is
automatically presumed to exercise over all business activities by virtue of the Police Power.
This definition of the "full control and supervision" mandated by Section 2, Article XII of the
Constitution strikes a discordant and unconvincing chord as it gives no effect to the mandated
"full" character of the State's control but merely places it at par with any other business activity
or industry regulated by the Government.

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.

To be sure, the majority opinion cites a litany of documents, plans, reports and records which
the foreign FTAA contractor is obliged to submit or make available under the Mining Act and
DAO 96-40. However, the mere fact that the Act requires the submission of work programs and
minimum expenditure commitments105 does not provide adequate protection. These were also
required under the old concession106 and service contract107 systems, but did not serve to place
full control and supervision of the country's natural resources in the hands of the Government.

Conspicuously absent from the Mining Act are effective means by which the Government can
protect the beneficial interest of the Filipino people in the exploration, development and
utilization of their resources. It appears from the provisions of the Mining Act that the
Government, once it has determined that a foreign corporation is eligible for an FTAA and
enters into such an agreement, has very little say in the corporation's actual operations.

Thus, when pressed to identify the mechanism by which the Government can administratively
compel compliance with the foregoing requirements as well as the other terms and conditions of
the Mining Act, DAO 96-40 and DAO 99-56, the majority can only point to the cancellation of the
agreement(s) and/or the incentives concerned under Section 95 to 99 of the Mining Act:108

CHAPTER XVII

Ground for Cancellation, Revocation, and Termination

SECTION 95. Late or Non-filing of Requirements. — Failure of the permittee or

contractor to comply with any of the requirements provided in this Act or in its
implementing rules and regulations, without a valid reason, shall be sufficient ground for
the suspension of any permit or agreement provided under this Act.

SECTION 96. Violation of the Terms and Conditions of Permit or Agreements. —

Violation of the terms and conditions of the permits or agreements shall be a sufficient
ground for cancellation of the same.

SECTION 97. Non-payment of Taxes and Fees. — Failure to pay taxes and fees due the
Government for two (2) consecutive years shall cause the cancellation of the exploration
 permit, mineral agreement, financial or technical assistance agreement and other
agreements and the re-opening of the area subject thereof to new applicants.

SECTION 98. Suspension or Cancellation of Tax Incentives and Credits. — Failure to

abide by the terms and conditions of tax incentives and credits shall cause the
suspension or cancellation of said incentives and credits.

SECTION 99. Falsehood or Omission of Facts in the Statement — All statements made
in the exploration permit, mining agreement and financial or technical assistance
agreement shall be considered as conditions and essential parts thereof and any
falsehood in said statements or omission of facts therein which may alter, change or
affect substantially the facts set forth in said statements may cause the revocation and
termination of the exploration permit, mining agreement and financial or technical
assistance agreement.

An examination of the foregoing fails to impress. For instance, how does cancellation of the
FTAA under Section 97 for nonpayment of taxes and fees (comprising the "basic share" of the
government) for two consecutive years facilitate the collection of the unpaid taxes and fees?
How does it preserve and protect the beneficial interest of the Filipino people? For that matter,
how does the DENR administratively compel compliance with the anti-pollution and other
requirements?109 If minerals are found to have been sold overseas at less than the most
advantageous market prices, how does the DENR obtain satisfaction from the offending foreign
FTAA contractor for the difference?

In sum, the enforcement provisions of the Mining Act and its Implementing Rules are scarcely
effective, and, worse, perceptibly less than the analogous provisions of other Government
Regulatory Agencies.

For instance, the Bangko Sentral Ng Pilipinas, the Central Monetary Authority mandated by the
Constitution to exercise supervision (but not full control and supervision) over banks,110 is
empowered to (1) appoint a conservator with such powers as shall be deemed necessary to
take charge of the assets, liabilities and management of a bank or quasi-bank;111 (2) under
certain well defined conditions, summarily and without need for prior hearing forbid a bank from
doing business in the Philippines and appoint the Philippine Deposit Insurance Corporation as
receiver;112 and (3) impose a number of administrative sanctions such as (a) fines not to exceed
P30,000 per day for each violation, (b) suspension of a bank's rediscounting privileges, (c)
suspension of lending or foreign exchange operations or authority to accept new deposits or
make new investments, (d) suspension of interbank clearing privileges, and (e) revocation of
quasi-banking license.113

Similarly, to give effect to the Constitutional mandate to afford full protection to labor, 114 the
Labor Code115 grants the Secretary of Labor the power to (1) issue compliance orders to give
effect to the labor standards provisions of the Code;116 and (2) enjoin an intended or impending
strike or lockout by assuming jurisdiction over a labor dispute in an industry determined to be
indispensable to the national interest.117

Under the Tax Code, the Commissioner of Internal Revenue has the power to (1) temporarily
suspend the business operations of a taxpayer found to have committed certain specified
violations;118 (2) order the constructive distraint of the property of a taxpayer; 119 and (3) impose
the summary remedies of distraint of personal property and or levy on real property for
nonpayment of taxes.120

In comparison, the Mining Act and its Implementing Rules conspicuously fail to provide the
DENR with anything remotely analogous to the foregoing regulatory and enforcement powers of
other government agencies.

In fine, the provisions of the Mining Act and its Implementing Rules give scarcely more
than lip service to the constitutional mandate for the State to exercise full control and
supervision over the exploration, development and utilization of Philippine Natural
Resources. Evaluated as a whole and in comparison with other government agencies,
the provisions of the Mining Act and its Implementing Rules fail to meet even the
reduced standard of effective regulatory control over mining operations. In effect, they
abdicate control over mining operations in favor of the foreign FTAA contractor. For this
reason, the provisions of the Mining Act, insofar as they pertain to FTAA contracts, must
be declared unconstitutional and void.

The majority opinion vigorously asserts that it is the Chief Executive who exercises the power of
control on behalf of the State.

This only begs the question. How does President effectively enforce the terms and conditions of
an FTAA? What specific powers are subsumed within the constitutionally mandated "power of
control?" On these particular matters the majority opinion, like the Mining Act, is silent.

Provisions of the Mining Act pertaining to FTAAs

void for conveying beneficial ownership of
Philippine mineral resources to foreign contractors

An examination of the Mining Act reveals that the law grants the lion's share of the proceeds of
the mining operation to the foreign corporation. Thus the second and third paragraphs of
Section 81 of the law provide:

SECTION 81. Government Share in Other Mineral Agreements. — x x x

The Government share in financial or technical assistance agreement shall consist of,
among other things, the contractor's corporate income tax, excise tax, special
allowance, withholding tax due from the contractor's foreign stockholders arising from
dividend or interest payments to the said foreign stockholder in case of a foreign
national and all such other taxes, duties and fees as provided for under existing
laws.

The collection of Government share in financial or technical assistance

agreement shall commence after the financial or technical assistance agreement
contractor has fully recovered its pre-operating expenses, exploration, and
development expenditures, inclusive. (Emphasis supplied)

Under the foregoing provisions, the Government does not receive a share in the proceeds
of the mining operation. All it receives are taxes and fees from the foreign corporation, just as
in the old concession121 and service contract122 regimes. The collection of taxes and fees cannot
be considered a return on the resources mined corresponding to beneficial ownership of the
Filipino people. Taxes are collected under the State's power to generate funds to finance the
needs of the citizenry and to advance the common weal.123 They are not a return on investment
or property. Similarly, fees are imposed under the police power primarily for purposes of
regulation.124Again, they do not correspond to a return on investment or property.

Even more galling is the stipulation in the above-quoted third paragraph that the Government's
share (composed only of taxes and fees) shall not be collected until after the foreign corporation
has "fully recovered its pre-operating expenses, exploration, and development expenditures,
inclusive." In one breath this provision virtually guarantees the foreigner a return on his
investment while simultaneously leaving the Government's (and People's) share to chance.

It is, therefore, clearly evident that the foregoing provisions of the Mining Act effectively transfer
the beneficial ownership over the resources covered by the agreement to a foreigner, in
contravention of the letter and spirit of the Constitution.

Consequently, the assailed Decision inescapably concluded that:

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.125

The Mining Act gives the foreign-owned corporation virtually complete control, not mere
"incidental" participation in management, over the entire operations.
The law is thus at its core a retention of the concession system. It still grants beneficial
ownership of the natural resources to the foreign contractor and does little to affirm the
State's ownership over them, and its supervision and control over their exploration,
development and utilization.

While agreeing that the Constitution vests the beneficial ownership of Philippine minerals with
the Filipino people, entitling them to gains, rewards and advantages generated by these
minerals, the majority opinion nevertheless maintains that the Mining Act, as implemented by
DENR Administrative Order 99-56126 (DAO 99-56), is constitutional as, so it claims, it does not
"convey beneficial ownership of any mineral resource or product to any foreign FTAA
contractor." The majority opinion adds that the State's share, as expounded by DAO 99-56,
amounts to "real contributions to the economic growth and general welfare of the country," at
the same time allowing the contractor to recover "a reasonable return on its investments in the
project."

Under DAO 99-56, the "government's share" in an FTAA is divided into (1) a "basic government
share" composed of a number of taxes and fees127 and (2) an "additional government
share"128 computed according to one of three possible methods – (a) a 50-50 sharing in the
cumulative present value of cash flows,129 (b) a profit related additional government share130 or
(c) an additional share based on the cumulative net mining revenue131 – at the option of the
contractor.

Thus, the majority opinion claims that the total government share, equal to the sum of the "basic
government share" and the "additional government share," will achieve "a fifty-fifty sharing –
between the government and the contractor – of net benefits from mining."

This claim is misleading and meaningless for two reasons:

First, as priorly discussed, the taxes and fees which make up the government's "basic
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.

Second, and more importantly, the provisions of the Mining Act effectively allow the foreign
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 TWO percent (2%) of the value of the minerals mined.

The foreign contractor can do this because Section 39 of the Mining Act allows it to convert its
FTAA into a Mineral Production-Sharing Agreement (MPSA) by the simple expedient of
reducing its equity in the corporation undertaking the FTAA to 40%:

SECTION 39. Option to Convert into a Mineral Agreement. — The contractor has the
option to convert the financial or technical assistance agreement to a mineral
agreement at any time during the term of the agreement, if the economic viability of
the contract area is found to be inadequate to justify large-scale mining operations, after
proper notice to the Secretary as provided for under the implementing rules and
regulations: Provided, That the mineral agreement shall only be for the remaining period
of the original agreement.

In the case of a foreign contractor, it shall reduce its equity to forty percent (40%)
in the corporation, partnership, association, or cooperative. Upon compliance with
this requirement by the contractor, the Secretary shall approve the conversion and
execute the mineral production-sharing agreement.(Emphasis and underscoring
supplied)

And under Section 80 of the Mining Act, in connection with Section 151(a) of the National
Internal Revenue Code132(Tax Code), the TOTAL GOVERNMENT SHARE in an MPSA is ONLY
TWO PERCENT (2%) of the value of the minerals. Section 80 of the Mining Act provides:
 SECTION 80. Government Share in Mineral Production Sharing Agreement. — The
total government share in a mineral production sharing agreement shall be the
excise tax on mineral products as provided inRepublic Act No. 7729,
amending Section 151(a) of the National Internal Revenue Code, as amended.
(Emphasis supplied)

While Section 151(a) of the Tax Code reads:

Sec. 151. Mineral Products. — (a) Rates of Tax. — There shall be levied, assessed
and collected on mineral, mineral products and quarry resources, excise tax as
follows:

(1) On coal and coke, a tax of ten pesos (P10.00) per metric ton.

(2) On non-metallic minerals and quarry resources, a tax of two percent

(2%) based on the actual market value of the annual gross output thereof at the time of
removal, in the case of those locally extracted or produced; or the value used by the
Bureau of Customs in determining tariff and customs duties, net of excise tax and value-
added tax, in the case of importation.

(3) On all metallic minerals, a tax based on the actual market value of the gross output
thereof at the time of removal, in the case of those locally extracted or produced; or the
value used by the Bureau of Customs in determining tariff and customs duties, net of
excise tax and value-added tax, in the case of importation, in accordance with the
following schedule:

(a) Copper and other metallic minerals:

(i) On the first three (3) years upon the effectivity of this Act, one percent
(1%);

(ii) On the fourth and fifth year, one and a half percent (1 1/2%); and

(iii) On the sixth year and thereafter, two percent (2%)

(b) Gold and chromite, two percent (2%)

(4) On indigenous petroleum, a tax of fifteen percent (15%) of the fair international
market price thereof, on the first taxable sale, such tax to be paid by the buyer or
purchaser within 15 days from the date of actual or constructive delivery to the said
buyer or purchaser. The phrase 'first taxable sale, barter, exchange or similar
transaction' means the transfer of indigenous petroleum in its original state to a first
taxable transferee. The fair international market price shall be determined in consultation
with an appropriate government agency.

For the purpose of this subsection, 'indigenous petroleum' shall include locally extracted
mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all other similar or
naturally associated substances with the exception of coal, peat, bituminous shale
and/or stratified mineral deposits. (Emphasis supplied)

By taking advantage of the foregoing provisions and selling 60% of its equity to a Filipino
corporation (such as any of the members of respondent-in-intervention Philippine Chamber of
Mines) a foreign contractor can easily reduce the total government's share (held in trust for the
benefit of the Filipino People) in the minerals mined to a paltry 2% while maintaining a 40%
beneficial interest in the same.

What is more, if the Filipino corporation acquiring the foreign contractor's stake is itself 60%
Filipino-owned and 40% foreign-owned (a "60-40" Filipino corporation such as Sagittarius
Mines, the putative purchaser of WMC's 100% equity in WMCP), then the total beneficial
interest of foreigners in the mineral output of the mining concern would constitute a majority of
64%133 while the beneficial ownership of Filipinos would, at most,134 amount to 36% – 34% for
the Filipino stockholders of the 60-40 Filipino corporation and 2% for the Government (in trust
for the Filipino People).

The foregoing scheme, provided for in the Mining Act itself, is no different and indeed is
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 violative of public policy:"

x x x While Section 7.7 gives the government a 60 percent share in the net mining
revenues of WMCP from the commencement of commercial production; Section 7.9
deprives the government of part or all of the said 60 percent. Under the latter
provision, should WMCP's foreign shareholders – who originally owned 100 percent of
the equity – sell 60 percent or more of its outstanding capital stock to a Filipino citizen or
corporation, the State loses its right to receive its 60 percent share in net mining
revenues under Section 7.7.

Section 7.9 provides

The percentage of Net Mining Revenues payable to the Government pursuant to Clause
7.7 shall be reduced by 1percent of Net Mining Revenues for every 1percent ownership
interest in the Contractor (i.e., WMCP) held by a Qualified Entity.

Evidently, what Section 7.7 grants to the State is taken away in the next breath by
Section 7.9 without any offsetting compensation to the State. Thus, in reality, the State
has no vested right to receive any income from the FTAA for the exploration of its
mineral resources. Worse, it would seem that what is given to the State in Section
7.7 is by mere tolerance of WMCP's foreign stockholders, who can at any time cut
off the government's entire 60 percent share. They can do so by simply selling 60
percent of WMCP's outstanding stock to a Philippine citizen or corporation.
Moreover, the proceeds of such sale will of course accrue to the foreign
stockholders of WMCP, not to the State.

The sale of 60 percent of WMCP's outstanding equity to a corporation that is 60 percent

Filipino-owned and 40 percent foreign-owned will still trigger the operation of Section
7.9. Effectively, the State will lose its right to receive all 60 percent of the net
mining revenues of WMCP; and foreign stockholders will own beneficially up to 64
percent of WMCP, consisting of the remaining 40percent foreign equity therein,
plus the 24 percent pro-rata share in the buyer-corporation.

xxx

At bottom, Section 7.9 has the effect of depriving the State of its 60 percent share in the
net mining revenues of WMCP without any offset or compensation whatsoever. It is
possible that the inclusion of the offending provision was initially prompted by the
desire to provide some form of incentive for the principal foreign stockholder in
WMCP to eventually reduce its equity position and ultimately divest itself thereof
in favor of Filipino citizens and corporations. However, as finally structured,
Section 7.9 has the deleterious effect of depriving government of the entire 60
percent share in WMCP's net mining revenues, without any form of compensation
whatsoever. Such an outcome is completely unacceptable.

The whole point of developing the nation's natural resources is to benefit the Filipino
people, future generations included. And the State as sovereign and custodian of the
nation's natural wealth is mandated to protect, conserve, preserve and develop that part
of the national patrimony for their benefit. Hence, the Charter lays great emphasis on
"real contributions to the economic growth and general welfare of the country" [Footnote
75 of the Dissent omitted] as essential guiding principles to be kept in mind when
negotiating the terms and conditions of FTAAs.

xxx
 Section 7.9 of the WMCP FTAA effectively gives away the State's share of net
mining revenues (provided for in Section 7.7) without anything in exchange. Moreover,
this outcome constitutes unjust enrichment on the part of local and foreign
stockholders of WMCP. By their mere divestment of up to 60 percent equity in WMCP
in favor of Filipino citizens and/or corporations, the local and foreign stockholders get a
windfall. Their share in the net mining revenues of WMCP is automatically increased,
without their having to pay the government anything for it. In short, the provision in
question is without a doubt grossly disadvantageous to the government,
detrimental to the interests of the Filipino people, and violative of public
policy. (Emphasis supplied; italics and underscoring in the original; footnotes omitted)

The foregoing disquisition is directly applicable to the provisions of the Mining Act. By selling
60% of its outstanding equity to a 60% Filipino-owned and 40% foreign-owned corporation, the
foreign contractor can readily convert its FTAA into an MPSA. Effectively, the State's share in
the net benefits from mining will be automatically and drastically reduced from the
theoretical 50% anticipated under DAO 99-56 to merely 2%. What is given to the State by
Section 81 and DAO 99-56 is all but eliminated by Sections 39 and 80. At the same time,
foreign stockholders will beneficially own up to 64% of the mining concern, consisting of
the remaining 40% foreign equity therein plus the 24% pro-rata share in the buyer-
corporation.

It is possible that, like Section 7.9 of the WMCP FTAA, Section 39 of the Mining Act was
intended to provide some form of incentive for the foreign FTAA contractor to eventually reduce
its equity position and ultimately divest itself thereof in favor of Filipino citizens and
corporations. However, the net effect is to allow the Filipino people to be robbed of their
just share in Philippine mineral resources. Such an outcome is completely unacceptable
and cannot be sanctioned by this Court.

By this simple conversion, which may be availed of at any time, the local and foreign
stockholders will obtain a windfall at the expense of the Government, which is the trustee of the
Filipino people. The share of these stockholders in the net mining revenues from Philippine
resources will be automatically increased without their having to pay the government anything in
exchange.

On this basis alone, and despite whatever other differences of opinion might exist, the majority
must concede that the provisions of the Mining Act are grossly disadvantageous to the
government, detrimental to the interests of the Filipino people, and violative of Section 2,
Article XII of the Constitution.

En passant, it is significant to note that Section 39 of the Mining Act allows an FTAA holder to
covert its agreement to an MPSA "at any time during the term of the agreement."

As any reasonable person with a modicum of business experience can readily determine,
the optimal time for the foreign contractor to convert its FTAA into an MPSA is after the
completion of the exploration phase and just before undertaking the development, construction
and utilization phase. This is because under Section 56 (a) of DAO 40-96, the requirement for a
minimum investment of Fifty Million U.S. Dollars (US$ 50,000,000.00)135 is only applicable
during the development, construction and utilization phase and NOT during the exploration
phase where the foreign contractor need only comply with the stipulated minimum ground
expenditures:

SECTION 56. Terms and Conditions of an FTAA. — The following terms, conditions and
warranties shall be incorporated in the FTAA, namely:

a. A firm commitment, in the form of a sworn statement during the existence of the
Agreement, that the Contractor shall comply with minimum ground expenditures
during the exploration and pre-feasibility periods as follows:

Year US $/Hectare

12
 22

38

48

5 18

6 23

and a minimum investment of Fifty Million US Dollars ($50,000,000.00) or its

Philippine Peso equivalent in the case of Filipino Contractor for infrastructure and
development in the contract area. If a Temporary/Special Exploration Permit has been
issued prior to the approval of an FTAA, the exploration expenditures incurred shall form
part of the expenditures during the first year of the exploration period of the FTAA.

In the event that the Contractor exceeds the minimum expenditure requirement in any
one (1) year, the amount in excess may be carried forward and deducted from the
minimum expenditure required in the subsequent year. In case the minimum ground
expenditure commitment for a given year is not met for justifiable reasons as determined
by the Bureau/concerned Regional Office, the unexpended amount may be spent on the
subsequent year(s) of the exploration period. (Emphasis supplied)

By converting its FTAA to an MPSA just before undertaking development, construction and
utilization activities, a foreign contractor further maximizes its profits by avoiding its obligation to
make a minimum investment of US$ 50,000,000.00. Assuming an exploration term of 6 years, it
will have paid out only a little over US$ 2.4 million136 in minimum ground expenditures.

Clearly, under the terms and provisions of the Mining Act, even the promised influx of
tens of millions of dollars in direct foreign investments is merely hypothetical and
ultimately illusory.

Grant of Exploration Permits to Foreign

Corporations is Unconstitutional

The majority is also convinced that Section 3(aq) of the Mining Act, defining foreign corporations
as a qualified entity for the purposes of granting exploration permits, is "not unconstitutional."

The questioned provision reads:

SECTION 3. Definition of Terms. — As used in and for purposes of this Act, the
following terms, whether in singular or plural, shall mean:

xxx

(aq) "Qualified person" means any citizen of the Philippines with capacity to contract, or
a corporation, partnership, association, or cooperative organized or authorized for the
purpose of engaging in mining, with technical and financial capability to undertake
mineral resources development and duly registered in accordance with law at least sixty
per centum (60%) of the capital of which is owned by citizens of the
Philippines: Provided, That a legally organized foreign-owned corporation shall be
deemed a qualified person for purposes of granting an exploration permit, financial
or technical assistance agreement or mineral processing permit. (Emphasis supplied)

In support of its contention that the above-quoted provision does not offend against the
Constitution, the majority opinion states that: (1) "there is no prohibition at all against foreign or
local corporations or contractors holding exploration permits;" and (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 spending heavily on
exploration works, without yet being able to earn revenues x x x."
The majority opinion also characterizes an exploration permit as "an authorization for the
grantee to spend its funds on exploration programs that are pre-approved by the government."
And it comments that "[t]he State risks nothing and loses nothing by granting these permits" to
foreign firms.

These contentions fail for two obvious reasons.

First, setting aside for the moment all disagreements pertaining to the construction of Section 2,
Article XII of the Constitution, the following, at the very least, may be said to have been
conclusively determined by this Court: (1) the only constitutionally sanctioned method by which
a foreign entity may participate in the natural resources of the Philippines is by virtue
of paragraph 4 of Section 2, Article XII of the Constitution; (2) said provision requires that
an agreement be entered into (3) between the President and the foreign corporation (4) for
the large-scale exploration, development, and utilization of minerals, petroleum, and other
mineral oils (5) according to the general terms and conditions provided by law, (6) based on real
contributions to the economic growth and general welfare of the country; (7) such agreements
will promote the development and use of local scientific and technical resources; and (8) the
President shall notify the Congress of every contract entered into in accordance with this
provision, within thirty days from its execution.

However, by the majority opinion's express admission, the grant of an exploration permit does
not even contemplate the entry into an agreement between the State and the applicant foreign
corporation since "prior to the issuance of such FTAA or mineral agreement, the exploration
permit grantee (or prospective contractor) cannot yet be deemed to have entered into any
contract or agreement with the State."

Consequently, the grant of an exploration permit – which is not an agreement – cannot possibly
be construed as being favorably sanctioned by paragraph 4 of Section 2, Article XII of the
Constitution which refers to "agreements … involving either financial or technical assistance."
Not falling within the exception embodied in paragraph 4 of Section 2, Article XII of the
Constitution, the grant of such a permit to a foreign corporation is prohibited and the proviso
providing for such grant in Section 3 (aq) of the Mining Act is void for being unconstitutional.

Second, given the foregoing discussion on the circumvention of the State's share in an FTAA, it
is clearly evident that to allow the grant of exploration permits to foreign corporations is to allow
the whole-sale circumvention of the entire system of FTAAs mandated by the Constitution.

For Chapter IV of the Mining Act on Exploration Permits grants to the permit holder, including
foreign corporations, the principal rights conferred on an FTAA contractor during the exploration
phase, including (1) the right to enter, occupy and explore the permit area under Section
23,137 and (2) the exclusive right to an MPSA or other mineral agreements or FTAAs upon the
filing of a Declaration of Mining Project Feasibility under Sections 23 and 24;138 but
requires none of the obligations of an FTAA – not even the obligation under Section 56 of DAO
40-96 to pay the minimum ground expenditures during the exploration and feasibility period.139

Thus, all that a foreign mining company need do to further maximize its profits and further
reduce the Government's revenue from mining operations is to apply for an exploration permit
and content itself with the "smaller" permit area of 400 meridional blocks onshore (which itself is
not small considering that it is equivalent to 32,400 hectares or 324,000,000 square
meters).140 It is not obligated to pay any minimum ground expenditures during the exploration
period.

Should it discover minerals in commercial quantities, it can circumvent the Fiscal Regime in
DAO 99-56 by divesting 60% of its equity in favor of a Philippine corporation and opting to enter
into an MPSA. By doing so it automatically reduces the Government's TOTAL SHARE to merely
2% of value of the minerals mined by operation of Section 81.

And if the Philippine corporation to which it divested its 60% foreign equity is itself a 60-40
Philippine Corporation, then the beneficial interest of foreigners in the minerals mined would be
a minimum of 64%.
In light of the foregoing, Section 3 (aq), in so far as it allows the granting of exploration permits
to foreign corporations, is patently unconstitutional, hence, null and void.

II

Invalidity of the WMCP FTAA Sale of foreign

interest in WMCP to a Filipino corporation
did not render the case moot and academic.

Respondent WMCP, now renamed Tampakan Mineral Resources Corporation, submits that the
case has been rendered moot since "[e]xcept for the nominal shares of directors, 100% of
TMRC's share are now owned by Sagittarius Mines, which is a Filipino-owned corporation. More
than 60% of the equity of Sagittarius is owned by Filipinos or Filipino-owned
corporations."141 This Court initially reserved judgment on this issue.142

Petitioner invokes by analogy the rule that where land is invalidly transferred to an alien who
subsequently becomes a Filipino citizen or transfers it to one, the infirmity in the original
transaction is considered cured and the title of the transferee is rendered valid, citing Halili v.
Court of Appeals.143 The rationale for this rule is that if the ban on aliens from acquiring lands is
to preserve the nation's lands for future generations of Filipinos, that aim or purpose would not
be thwarted but achieved by making lawful the acquisition of real estate by Filipino citizens.144

Respondent WMCP's analogy is fallacious. Whether the legal title to the corporate vehicle
holding the FTAA has been transferred from a foreigner to a Filipino is irrelevant. What is
relevant is whether a foreigner has improperly and illegally obtained an FTAA and has therefore
benefited from the exploration, development or utilization of Philippine natural resources in a
manner contrary to the provisions of the Constitution.

As above-stated the doctrine enunciated in Halili is based on the premise that the purpose of
the Constitution in prohibiting alien ownership of agricultural land is to retain the ownership
or legal title of the land in the hands of Filipinos. This purpose is not identical or even
analogous to that in Section 2, Article XII of the Constitution. As priorly discussed, the primary
purpose of the provisions on National Patrimony is to preserve to the Filipino people
the beneficial ownership of their natural resources – i.e. the right to the gains, rewards and
advantages generated by their natural resources. Except under the terms of Section 2, Article
XII, foreigners are prohibited from involving themselves in the exploration, development or
utilization of these resources, much less from profiting from them.

Divestment by a foreigner of an illegally acquired right to mine Philippine resources does not
alter the illegal character of the right being divested or sold. Indeed, such divestment or sale is
obviously a method by which the foreigner may derive pecuniary benefit from his unlawful act
since he receives payment for his illegally acquired interest in the country's natural resources.

To rule otherwise would be to condone, even to invite, foreign entities to obtain Philippine
mining interests in violation of the Constitution with the assurance that they can escape liability
and at the same time make a tidy sum by later selling these interests to Filipinos. This is nothing
less than allowing foreign speculation in Philippine natural resources. Worse, there is the very
real possibility that these foreign entities may intentionally inflate the value of their illegally–
acquired mineral rights to the detriment of their Filipino purchasers as the past Bre-X
scandal145 and recent Shell oil reserve controversy146 vividly illustrate.

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 plunder of the nation's natural resources by unscrupulous neo-colonial
entities. It thwarts, rather than achieves, the purpose of the fundamental law.

As applied to the facts of this case, respondent WMCP, in essence, claims that now that the
operation and management of the WMCP FTAA is in the hands of a Filipino company, no
serious question as to the FTAA's validity need arise.
On the contrary, this very fact – that WMC has sold its 100% interest in WMCP to a Filipino
company for US$10,000,000.00 – directly leads to some very serious questions concerning the
WMCP FTAA and its validity. First, if a Filipino corporation is capable of undertaking the terms
of the FTAA, why was an agreement with a foreign owned corporation entered into in the first
place? Second, does not the fact that, as alleged by petitioners147 and admitted by respondent
WMCP,148 Sagittarius, WMCP's putative new owner, is capitalized at less than half the purchase
price149 of WMC's shares in WMCP, a strong indication that Sagittarius is merely acting as the
dummy of WMC? Third, if indeed WMCP has, to date, spent US$40,000,000.00 in the
implementation of the FTAA, as it claims,150 why did WMC sell 100% of its shares in WMCP for
only US$10,000,000.00? Finally, considering that, as emphasized by WMCP,151 "payment of the
purchase price by Sagittarius to WMC will come only after the commencement of commercial
production," hasn't WMC effectively acquired a beneficial interest in any minerals mined in the
FTAA area to the extent of US$10,000,000.00? If so, is the acquisition of such a beneficial
interest by a foreign corporation permitted under our Constitution?

Succinctly put, the question remains: What is the validity of the FTAA by which WMC, a fully
foreign owned corporation, has acquired a more than half billion peso152 interest in
Philippine mineral resources located in a contract area of 99,387 (alleged to have later been
reduced to 30,000)153 hectares of land spread across the four provinces of South Cotabato,
Sultan Kudarat, Davao del Sur and North Cotabato?

Clearly then, the issues of this case have not been rendered moot by the sale of WMC's 100%
interest in WMCP to a Filipino corporation, whether the latter be Sagittarius or Lepanto. If the
FTAA is held to be valid under the Constitution, then the sale is valid and, more importantly,
WMC's US$10,000,000.00 interest in Philippine mineral deposit, arising as it did from the sale
and its 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
foreigner may profit from the natural resources of the Republic of the Philippines in a
manner contrary to the terms of the Philippine Constitution. If held unconstitutional, the
WMCP FTAA is void ab initio for being contrary to the fundamental law and no rights may arise
from it, either in favor of WMC or its Filipino transferee.

Evidently, 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,
now presently engaged in a dispute over said shares,154 did not "cure" the FTAA nor moot the
petition at bar. On the contrary, it is the Decision in this case that rendered those pending cases
moot for the invalidation of the FTAA leaves Sagittarius and Lepanto with nothing to dispute.

Terms of the WMCP FTAA are

contrary to the Constitution and
render said FTAA null and void.

The WMCP FTAA is clearly contrary to the agreements provided for in Section 2, Article XII of
the Constitution. In the Decision under reconsideration, this Court observed:

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." 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 utilized 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 lands 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;

x x x.

All materials, equipment, plant and other installations erected or placed on the Contract
Area remain the property of WMCP, which has the right to deal with and remove such
items within twelve months from the termination of the FTAA.

Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing, technology,
management and personnel necessary for the Mining Operations." The mining company
binds itself to "perform all Mining Operations . . . providing all necessary services,
technology and financing in connection therewith," and to "furnish all materials, labour,
equipment and other installations that may be required for carrying on all Mining
Operations." WMCP may make expansions, improvements and replacements of the
mining facilities and may add such new facilities as it considers necessary for the mining
operations.

These contractual stipulations, 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.155 (Citations
omitted)

Indeed, save for the fact that the contract covers a larger area, the subject FTAA is actually a
mineral production sharing agreement. Respondent WMCP admitted as much in its
Memorandum.156 The first paragraph of Section 2, Article XII of the Constitution, however,
allows this type of agreement only with Filipino citizens or corporations.

That the subject FTAA is void for having an unlawful cause bears reaffirmation. In onerous
contracts the cause is understood to be, for each contracting party, the prestation or promise of
a thing or service by the other.157 On the part of WMCP, a foreign-owned corporation, the cause
was to extend not only technical or financial assistance but management assistance as well.
The management prerogatives contemplated by the FTAA are not merely incidental to the two
other forms of assistance, but virtually grant WMCP full control over its mining operations. Thus,
in Section 8.3158 of the FTAA, in case of a dispute between the DENR and WMCP, it is WMCP's
decision which will prevail.

The questioned FTAA also grants beneficial ownership over Philippine natural resources to
WMCP, which is prohibited from entering into such contracts not only by the fourth paragraph of
Section 2, Article XII of the Constitution, but also by the first paragraph, the FTAA practically
being a production-sharing agreement reserved to Filipinos.

Contracts whose cause is contrary to law or public policy are inexistent and void from the
beginning.159 They produce no effect whatsoever.160 They cannot be ratified,161 and so cannot
the WMCP FTAA.

The terms of the WMCP FTAA effectively give away

the Beneficial Ownership of Philippine minerals

As previously observed, the majority opinion finds Section 7.9. of the WMCP FTAA to be
"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 in exchange."

It likewise finds Section 7.8(e) of the WMCP FTAA to be invalid. Said provision states:

7.8 The Government Share shall be deemed to include all of the following sums:

xxx

(e) an amount equivalent to whatever benefits that may be extended in the

future by the Government to the Contractor or to financial or technical
assistance agreement contractors in general. (Emphasis supplied)

And in its own estimation:

Section 7.8(e) is out of place in the FTAA. This provision does not make any sense why,
for instance, money spent by the government for the benefit of the contractor in building
roads leading to the mine site should still be deductible from the State's share in net
mining revenues. Allowing this deduction results in benefiting the contractor twice
over. To do so would constitute unjust enrichment on the part of the contractor at
the expense of the government, since the latter is effectively being made to pay
twice for the same item. For being grossly disadvantageous and prejudicial to the
government and contrary to public policy, Section 7.8(e) is undoubtedly invalid
and must be declared to be without effect. xxx (Emphasis supplied; citations omitted;
underscore in the original)

The foregoing estimation notwithstanding, the majority opinion declines to invalidate the WMCP
FTAA on the theory that Section 7.9 and 7.8 are separable from the rest of the agreement,
which may supposedly be given effect without the offending provisions.

As previously discussed, the same deleterious results are easily achieved by the foreign
contractor's conversion of its FTAA into an MPSA under the provisions of the Mining Act.
Hence, merely striking out Sections 7.9 and 7.8(e) of the WMCP FTAA will not suffice; the
provisions pertaining to FTAAs in the Mining Act must be stricken out for being unconstitutional
as well.

Moreover, Section 7.8 (e) and 7.9 are not the only provisions of the WMCP FTAA which convey
beneficial ownership of mineral resources to a foreign corporation.

Under Section 10.2 (l) of the WMCP FTAA, the foreign FTAA contractor shall have the right to
mortgage and encumber, not only its rights and interests in the FTAA, but the very minerals
themselves:

10.2 Rights of Contractor

The Government agrees that the Contractor shall:-

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; (Emphasis supplied)

Although respondents did not proffer their own explanation, the majority opinion theorizes that
the foregoing provision is necessitated by the conditions that may be imposed by creditor-banks
on the FTAA contractor:

xxx I believe that this provision may have to do with the conditions imposed by the
creditor-banks of the then foreign contractor WMCP to secure the lendings made to the
latter. Ordinarily, banks lend not only on the security of mortgages on fixed assets, but
also on encumbrances of goods produced that can easily be sold and converted into
cash that can be applied to the repayment of loans. Banks even lend on the security
of accounts receivable that are collectible within 90 days. (Citations omitted; underscore
in the original)

It, however, overlooks the provision of Art. 2085 of the Civil Code which enumerates the
essential requisites of a contract of mortgage:

Art. 2085. The following requisites are essential to the contracts of pledge
and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property. (Emphasis and underscoring supplied)

From the foregoing provision of law, it is abundantly clear

that only the absolute owner of the minerals has theright to mortgage the same, and unde
r Section 2, Article XII of the Constitution the absolute owner of theminerals is none other
than the State. While the foreign FTAA contractor may have an interest in the proceeds of the
minerals, it does not acquire ownership over the minerals themselves.

Put differently, the act of mortgaging the minerals is an act of ownership, which, 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 FTAA clearly runs afoul of the Constitution.

Moreover, it bears noting that to encumber natural resources of the State to secure a foreign
FTAA contractor's obligations is anomalous since Section 1.2 of the WMCP FTAA provides that
"[a]ll financing, technology, management and personnel necessary for the Mining Operations
shall be provided by the Contractor."

Indeed, even the provisions of the Mining Act, irredeemably flawed though they may be, require
that the FTAA contractor have the financial capability to undertake the large-scale exploration,
development and utilization of mineral resources in the Philippines;162 and, specifically, that the
contractor warrant that it has or has access to all the financing required to promptly and
effectively carry out the objectives of the FTAA.163

Under Section 10.2 (e) of the WMCP FTAA, the foreign FTAA Contractor has the power to
require the Government to acquire surface rights in its behalf at such price and terms
acceptable to it:

10.2 Rights of Contractor

The Government agrees that the Contractor shall:-

 xxx

(e) have the right to require the Government at the Contractor's own cost, to
purchase or acquire surface areas for and on behalf of the Contractor at such
price and terms as may be acceptable to the Contractor. At the termination of this
Agreement such areas shall be sold by public auction or tender and the Contractor
shall be entitled to reimbursement of the costs of acquisition and maintenance,
adjusted for inflation, from the proceeds of sale; (Emphasis supplied)

Petitioners, in their Memorandum, point out that pursuant to the foregoing, the foreign FTAA
contractor may compel the Government to exercise its power of eminent domain to acquire the
title to the land under which the minerals are located for and in its behalf.

The majority opinion, however, readily accepts the explanation proffered by respondent WMCP,
thus:

Section 10.2 (e) sets forth the mechanism whereby the foreign-owned contractor,
disqualified to own land, identifies to the government the specific surface areas within
the FTAA contract area to be acquired for the mine infrastructure. The government then
acquires ownership of the surface land areas on behalf of the contractor, in order to
enable the latter to proceed to fully implement the FTAA.

The contractor, of course, shoulders the purchase price of the land. Hence, the provision
allows it, after the termination of the FTAA to be reimbursed from proceeds of the sale of
the surface areas, which the government will dispose of through public bidding.

And it concludes that "the provision does not call for the exercise of the power of eminent
domain" and the determination of just compensation.

The foregoing arguments are specious.

First, the provision in question clearly contemplates a situation 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.

Second, the logical solution in that situation is not, as asserted by respondent WMCP, to have
the Government purchase or acquire the land, but for the foreign FTAA contractor to negotiate a
lease over the property with the private owner.

Third, it is plain that the foreign FTAA contractor would only avail of Section 10.2 (e) if, for some
reason or another, it is unable to lease the land in question at the price it is willing to pay. In that
situation, it would have the power under Section 10.2 (e) to compel the State, as the only entity
which can legally compel the landowner to involuntarily part with his property, to acquire the
land at a price dictated by the foreign FTAA contractor.

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 relinquishment, hold
up to 5,000 hectares of land in this manner.

More. While the foreign FTAA contractor advances the purchase price for the property, in reality
it acquires the "surface right" for free since under the same provision of the WMCP FTAA it is
entitled to reimbursement of the costs of acquisition and maintenance, adjusted for inflation.
And as if the foregoing were not enough, when read together with Section 3.3,164 the foreign
FTAA contractor would have the right to hold the "surface area" for a maximum of 50 years, at
its option.

In sum, by virtue of Sections 10.2 (e) and 3.3. of the WMCP

FTAA, the foreign FTAA contractor is given thepower to hold inalienable mineral land of u
p to 5,000 hectares, with the assistance of the State's power ofeminent domain, free of ch
arge, for a period of up to 50 years in contravention of Section 3, Article XII of theConstit
ution:

Section 3. Lands of the public domain are classified into agricultural, forest or timber,
mineral lands, and national parks. Agricultural lands of the public domain may be further
classified by law according to the uses which they may be devoted. Alienable lands of
the public domain shall be limited to agricultural lands. Private corporations or
associations may not hold such alienable lands of the public domain except by
lease, for a period not exceeding twenty-five years, renewable for not more than
twenty-five years, and not to exceed one thousand hectares in area. Citizens of the
Philippines may lease not more than five hundred hectares, or acquire not more than
twelve hectares thereof by purchase, homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and
subject to the requirements of agrarian reform, the Congress shall determine, by law, the
size of lands of the public domain which may be acquired, developed, held, or leased
and the conditions therefor. (Emphasis supplied)

Taken together, the foregoing provisions of the WMCP 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.

The majority opinion posits that "[t]he acquisition by the State of land for the contractor is just to
enable the contractor to establish its mine site, build its facilities, establish a tailings pond, set
up its machinery and equipment, and dig mine shafts and tunnels, etc." It thus concludes that
"5,000 hectares is way too much for the needs of a mining operator."

Evidently, the majority opinion does not take into account open pit mining. Open pit or opencut
mining, as differentiated from methods that require tunneling into the earth, is a method of
extracting minerals by their removal from an open pit or borrow;165 it is a mine working in
which excavation is performed from the surface.166 It entails a surface mining operation in which
blocks of earth are dug from the surface to extract the ore contained in them. During the mining
process, the surface of the land is excavated forming a deeper and deeper pit until the end of
mining operations.167 It is used extensively in mining metal ores, copper, gold, iron,
aluminum168 – the very minerals which the Philippines is believed to possess in vast quantities;
and is considered the most cost-effective mining method.169

Furthermore, considering that FTAAs deal with large scale exploration, development and
utilization of mineral resources and that the original contract area of the WMCP FTAA was
99,387 hectares, an open pit mining operation covering a total of 5,000 hectares is not outside
the realm of possibility.

In any event, regardless of what the majority opinion considers "way too much" (or too little), it is
undisputed that 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.

The majority opinion also argues that, although entitled to reimbursement of its acquisition cost
at the end of the contract term, the FTAA contractor does not acquire its surface rights for free
since "the contractor will have been cash-out for the entire duration of the term of the contract –
25 to 50 years, depending," thereby foregoing any interest income he might have earned. This
is the "opportunity cost" of the contractor's decision to use its money to acquire the surface
rights instead of leaving it in the bank.

The majority opinion does not consider the fact that "opportunity cost" is more theoretical rather
than actual and, for that reason, is not an allowable deduction from gross income in an income
statement. In layman's terms it is equivalent to "the value of the chickens that might have been
hatched if only the cook had not scrambled the eggs." Neither does it consider the fact that the
contractor's foregone interest income does not find its way to the pockets of either the previous
land owner (in this case, the Bugal B'Laans) or the State.
But even if the contractor does incur some opportunity cost in holding the surface rights for 35 to
50 years. The fact remains that, 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 a period of up to 50 years in contravention of
Section 3, Article XII of the Constitution.

Clearly, Section 3 and 10.2 (e) of the WMCP FTAA in conjunction with Section 60 of DAO 40-
96, amount to a conveyance to a foreign corporation of the beneficial ownership of both the
minerals and the surface rights over the same, in contravention of the clear provisions of the
Constitution.

The terms of the WMCP FTAA abdicate all control over the
mining operation in favor of the foreign FTAA contractor

The majority opinion's defense of the constitutionality of Section 8.1, 8.2, 8.3 of the WMCP
FTAA is similarly unpersuasive. These Sections provide:

8.1 The Secretary shall be deemed to have approved any Work Programme or
Budget or variation thereof submitted by the Contractor unless within sixty (60)
days after submission by the Contractor the Secretary gives notice declining such
approval or proposing a revision of certain features and specifying its reasons
therefore ("the Rejection Notice").

8.2 If the Secretary gives a Rejection Notice the Parties shall promptly meet and
endeavour to agree on amendments to the Work Programme or budget. If the
Secretary and the Contractor fail to agree on the proposed revision within 30 days
from delivery of the Rejection Notice then the Work Programme or Budget or
variation thereof proposed by the Contractor shall be deemed approved so as not
to unnecessarily delay the performance of this Agreement.

Even measured against the majority opinion's standards of control – i.e. either (1) the power to
set aside, reverse, or modify plans and actions of the contractor; or (2) regulatory control – the
foregoing provisions cannot pass muster. This is because, by virtue of the foregoing provisions,
the foreign FTAA contractor has unfettered discretion to countermand the orders of its putative
regulator, the DENR.

Contrary to the majority's assertions, the foregoing provisions do not provide merely temporary
or stop-gap solutions. The determination of the FTAA contractor permanently reverses the
"Rejection Notice" of the DENRsince, by the majority opinion's own admission, there is no
available remedy for the DENR under the agreement except to seek the cancellation of the
same.

Indeed, the justification for the foregoing provisions is revealing:

xxx First, avoidance of long delays in these situations will undoubtedly redound to the
benefit of the State as well as to the contractor. Second, who is to say that the work
program or budget proposed by the contractor and deemed approved under
Clause 8.3 would not be the better or more reasonable or more effective
alternative? The contractor, being the "insider," as it were, may be said to be in a
better position than the State – an outsider looking in – to determine what work
program or budget would be appropriate, more effective, or more suitable under
the circumstances. (Emphasis and underscoring supplied)

Both reasons tacitly rely on the unstated assumption that the interest of the foreign FTAA
contractor and that of the Government are identical. They are not.

Private businesses, including large foreign-owned corporations brimming with capital and
technical expertise, are primarily concerned with maximizing the pecuniary returns to their
owners or shareholders. To this extent, they can be relied upon to pursue the most efficient
courses of action which maximize their profits at the lowest possible cost.
The Government, on the other hand, is mandated to concern itself with more than just narrow
self-interest. With respect to the nation's natural wealth, as the majority opinion points out, the
Government is mandated to preserve, protect and even maximize the beneficial interest of the
Filipino people in their natural resources. Moreover, it is directed to ensure that the large-scale
exploration, development and utilization of these resources results in real contributions to the
economic growth and general welfare of the nation. To achieve these broader goals, the
Constitution mandates that the State exercise full control and supervision over the exploration,
development and utilization of the country's natural resources.

However, taking the majority opinion's reasoning to its logical conclusion, the business "insider's
opinion" would always be superior to the Government's administrative or regulatory
determination with respect to mining operations. Consequently, it is the foreign contractor's
opinion that should always prevail. Ultimately, this means that, at least for the majority, foreign
private business interests outweigh those of the State – at least with respect to the conduct of
mining operations.

Indeed, in what other industry can the person regulated permanently overrule the administrative
determinations of the regulatory agency?

To any reasonable mind, the absence of an effective means to 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, Article XII of the Constitution.

Verily, viewed in its entirety, the WMCP FTAA cannot withstand a rigid constitutional
scrutiny since, by its provisions, it conveys both the beneficial ownership of Philippine
minerals and control over their exploration, development and utilization to a foreign
corporation. Being contrary to both the letter and intent of Section 2, Article XII of the
Constitution, the WMCP FTAA must be declared void and of no effect whatsoever.

A Final Note

For over 350 years, the natural resources of this nation have been under the control and
domination of foreign powers – whether political or corporate. Philippine mineral wealth,
viciously wrenched from the bosom of the motherland, has enriched foreign shores while the
Filipino people, to whom such wealth justly belongs, have remained impoverished and
unrecompensed.

Time and time again the Filipino people have sought an end to this intolerable situation. From
1935 they have struggled to assert their legal control and ownership over their patrimony only to
have their efforts repeatedly subverted – first, by the parity amendment to the 1935 Constitution
and subsequently by the service contract provision in the 1973 Constitution.

It is not surprising that an industry, overly dependent on foreign support and now in decline,
should implore this Court to reverse itself if only to perpetuate its otherwise economically
unsustainable conduct. It is even understandable, however regrettable, that a government,
strapped for cash and in the midst of a self-proclaimed fiscal crisis, would be inclined to turn a
blind eye to the consequences of unconstitutional legislation in the hope, however false or
empty, of obtaining fabulous amounts of hard currency.

But these considerations should not outweigh the Constitution.

As always, the one overriding consideration of this Court should be the will of the sovereign
Filipino people as embodied in their Constitution. The Constitution which gives life to and
empowers this Court. The same Constitution to which the members of this Court have sworn
their unshakable loyalty and their unwavering fidelity.

Now, the unmistakable letter and intent of the 1987 Constitution notwithstanding, the majority of
this Court has chosen to reverse its earlier Decision which, to me, would once again open the
doors to foreign control and ownership of Philippine natural resources. The task of reclaiming
Filipino control over Philippine natural resources now belongs to another generation.
ACCORDINGLY, I vote to deny respondents' Motions for Reconsideration.

SEPARATE OPINION

TINGA, J.:

The Constitution was crafted by men and women of divergent backgrounds and varying
ideologies. Understandably, the resultant document is accommodative of these distinct, at times
competing philosophies. Untidy as any mélange would seem, our fundamental law nevertheless
hearkens to the core democratic ethos over and above the obvious inconveniences it spawns.

However, when the task of judicial construction of the Constitution comes to fore, clarity is
demanded from this Court. In turn, there is a need to balance and reconcile the diverse views
that animate the provisions of the Constitution, so as to effectuate its true worth as an
instrument of national unity and progress.

The variances and consequent challenges are vividly reflected in Article XII of the Constitution
on National Patrimony, in a manner akin to Article II on Declaration of Principles and State
Policies. Some of the provisions impress as protectionist, yet there is also an undisguised
accommodation of liberal economic policies. Section 2, Article XII,1 the provision key to this
case, is one such Janus-faced creature. It seems to close the door on foreign handling of our
natural resources, but at the same time it leaves open a window for alien participation in some
aspects. The central question before us is how wide is the entry of opportunity created by the
provision.

My vote on the motions for reconsideration is hinged on a renewed exegesis of Section 22 of

Article XII in conjunction with the proper understanding of the nature of the power vested on the
President under Section 2. It has to be appreciated in relation to the inherent functions of the
executive branch of government.

The Contract-Making Power of the President

While all government authority emanates from the people, the breadth and depth of such
authority are not brought to bear by direct popular action, but through representative
government in accord with the principles of republicanism.3 By investiture of the Constitution,
the function of executive power is parceled solely to the duly elected President.4 The
Constitution contains several express manifestations of executive power, such as the provision
on control over all executive departments, bureaus and offices,5 as well as the so-called
"Commander-in-Chief" clause.6

Yet it has likewise been recognized in this jurisdiction that "executive power" is not limited to
such powers as are expressly granted by the Constitution. Marcos v. Manglapus7 concedes that
the President has powers other than those expressly stated under the Constitution,8 and thus
implies that these powers may be exercised without being derivative from constitutional
authority.9 The precedental value of Marcos v. Manglapus may be controvertible,10 but the
cogency of its analysis of the scope of executive power is indisputable. Neither is the concept of
plenary executive power novel, as discussed by Justice Irene Cortes in her ponencia:

It has been advanced that whatever power inherent in the government that is neither
legislative nor judicial has to be executive. Thus, in the landmark decision of Springer v.
Government of the Philippine Islands, 277 U.S. 189 (1928), on the issue of who between
the Governor-General of the Philippines and the Legislature may vote the shares of
stock held by the Government to elect directors in the National Coal Company and the
Philippine National Bank, the U.S. Supreme Court, in upholding the power of the
Governor-General to do so, said:

. . . Here the members of the legislature who constitute a majority of the "board"
and "committee" respectively, are not charged with the performance of any
 legislative functions or with the doing of anything which is in aid of performance
of any such functions by the legislature. Putting aside for the moment the
question whether the duties devolved upon these members are vested by the
Organic Act in the Governor-General, it is clear that they are not legislative in
character, and still more clear that they are not judicial. The fact that they do not
fall within the authority of either of these two constitutes logical ground for
concluding that they do fall within that of the remaining one among which the
powers of government are divided . . . [At 202-203; emphasis supplied.]

We are not unmindful of Justice Holmes' strong dissent. But in his enduring words of
dissent we find reinforcement for the view that it would indeed be a folly to construe the
powers of a branch of government to embrace only what are specifically mentioned in
the Constitution:

The great ordinances of the Constitution do not establish and divide fields of
black and white. Even the more specific of them are found to terminate in a
penumbra shading gradually from one extreme to the other. . . .

xxx xxx xxx

It does not seem to need argument to show that however we may disguise it by
veiling words we do not and cannot carry out the distinction between legislative
and executive action with mathematical precision and divide the branches into
watertight compartments, were it ever so desirable to do so, which I am far from
believing that it is, or that the Constitution requires.[At 210-211.]11

Such general power has not been diminished notwithstanding the avowed intent of some of the
framers of the 1987 Constitution to limit the powers of the President as a reaction to abuses
under President Marcos, for as the Court noted, "the result was a limitation of the specific
powers of the President, particularly those relating to the commander-in-chief clause, but not a
diminution of the general grant of executive power."12 The critical perspective of this case should
spring from a recognition of this elemental fact.

Undeniably, the particular power now in question is expressly provided for by Section 2, Article
XII of the Constitution. Still, it originates from the concept of executive power that is not explicitly
provided for by the Constitution. As a necessary incident of the functions of the executive office,
it can be concluded that the President has the authority to enter into contracts in behalf of the
State in matters which are not denied him or her or not otherwise assigned to the other great
branches of government, even if such general power is not categorically recognized in the
Constitution. Among these traditional functions of the executive branch is the power to
determine economic policy.

As once noted by Justice Feliciano, the Republic of the Philippines is itself a body corporate and
juridical person vested with the full panoply of powers and attributes which are compendiously
described as "legal personality."13 As "Chief of State" the President is also regarded as the head
of this body corporate,14 and thus is capacitated to represent the State when engaging with
other entities. Such executive function, in theory, does not require a constitutional provision, or
even a Constitution, in order to be operative. It is a power possessed by every duly constituted
presidency starting with Aguinaldo's. This faculty is complementary to the traditional regard of a
Head of State as emblematic of the State he/she represents.

The power to contract in behalf of the State is clearly an executive function, as opposed to
legislative or judicial. This is easily discernible through the process of exclusion. The other
branches of government — the legislative and the judiciary — are not similarly capacitated since
their core functions pertain to legislating and adjudicating respectively.

However, I am not making any pretense that such executive power to contract is unimpeachable
or limitless. The Constitution frowns on unchecked executive power, mandating in broad
strokes, the power of judicial review15 and legislative oversight.16 The Constitution itself may
expressly restrict the exercise of any sort of executive function. Section 2 undeniably constrains
the exercise of the executive power to contract in several regards.
 Constitutional Limitations under Section 2, Article XII

What are the express limitations under Section 2 on the power of the executive to contract with
foreign corporations regarding the exploration, development and utilization of our natural
resources?

There are two fundamental restrictions, both of which are asserted in the second paragraph of
Section 2. These are that the State retains legal ownership of all natural resources,17 and that
the State shall have full control and supervision over the exploration, development and
utilization of natural resources.18 These key postulates are facially broad and warrant
clarification. They also predicate several specific restrictions laid down in the fourth paragraph of
Section 2 on the power of the President to enter into agreements with foreign corporations.
These specific limitations are as follows:

First, the natural resources that may be subject of the agreement are a limited class, particularly
minerals, petroleum, and other mineral oils. Among the natural resources which are excluded
from these agreements are lands of the public domain, waters, coal, fisheries, forests or
timbers, wildlife, flora and fauna. Most notable of the exclusions are forests and timbers which
are in all respects expressly limited to Filipinos.

It is noteworthy that a previous version of the fourth paragraph of Section 2 deliberated upon
during the 1987 Constitutional Commission allowed agreements with foreign-owned
corporations with respect to all classes of natural resources.19 However, on the initiative of
Commissioner (now Chief Justice) Davide, the provision was amended to limit the scope of
such agreements to minerals, petroleum and other mineral oils, which Commissioner Davide
recognized as "those particular areas where Filipino capital may not be sufficient."20

The exclusion of timber resources from the scope of financial/technical assistance

agreements marks a significant distinction from the service contracts of old. This does
not come as a surprise, considering well-reported abuses under the old regime of
issuing timber licensing agreements, which numbered in the thousands prior to the 1987
Constitution. On the other hand, no similar extensive collateral damage has been
reported for the petroleum and mining industry, capital-intensive industries whose
potential for government revenues in billions of pesos has long been sought after by the
State.21 Hence, the variance in treatment from the timber industry and the rest of the
natural resources.

Second, these agreements with foreign-owned corporations can only be entered into for only
large-scale exploration, development and utilization of minerals, petroleum, and other mineral
oils.

Third, it is only the President who may enter into these agreements. This is another pronounced
change from the 1973 Constitution, which allowed private persons to enter into service contracts
with foreign corporations.

Fourth, these agreements must be in accord with the general terms and conditions provided by
law. This proviso by itself, and more so when taken together, as it should, with another
provision,22 entails legislative intervention and affirmance in the exercise of this executive
power. While it is the President who enters into these contracts, he/she must act within such
terms and conditions as may be prescribed by Congress through legislation. The value of
legislative input as a means of influencing policy should not be discounted. Policy initiatives
grounded on particular economic ideologies may find enactment through legislation when
approved by the necessary majorities in Congress. Legislative work includes consultative
processes with persons of diverse interests, assuring that economic decisions need not be
made solely from an ivory tower. There is also the possible sanction of repudiation by the voters
of legislators who prove insensate to the economic concerns of their constituents.

Fifth, the President is mandated to base the decision of entering into these agreements on "real
contributions to the economic growth and general welfare of the country." In terms of real
limitations, this condition has admittedly little effect. The discretion as to whether or not to enter
into these agreements is vested solely by the Constitution in the President, and such exercise of
discretion, pertaining as it does to the political wisdom of a co-equal branch, generally deserves
respect from the courts.

The above conditionalities, particularly the first three, effect the desire of the framers of the 1987
Constitution to limit foreign participation in natural resource-oriented enterprises. They provide a
vivid contrast to the 1973 Constitution, which permitted private persons to enter into service
contracts for financial, technical, management, or other forms of assistance with any person or
entity, including foreigners, and for the exploration or utilization of any of the natural
resources.23 These requisites imposed by the 1987 Constitution, which are significantly more
onerous than those laid down in the 1973 Constitution, warrant obeisance by the executive
branch and recognition by this Court.

Not Strictly Technical or Financial Assistance

The Court's previous Decision, now for reconsideration, insisted on another restriction
purportedly imposed by the fourth paragraph of Section 2. It is argued that foreign–owned
corporations are allowed to render only technical or financial assistance in the large-scale
exploration, development and utilization of minerals, petroleum and mineral oils. This
conservative view is premised on the sentiment that the Constitution limits foreign involvement
only to areas where they are needed, the overpowering intent being to allow Filipinos to benefit
from Filipino resources.24Towards that end, the perception arises that the power of the
executive to enter into agreements with foreign-owned corporations is an executive privilege,
hampered by the limitations that generally attach to the grant of privileges.

On the fundamental nature of this power, I harbor an entirely different view. The actual art of
governing under our Constitution does not and cannot conform to judicial definitions of the
power of any of its branches based on isolated clauses or even single articles torn from
context.25 The previously adopted approach is rigidly formalist, and impervious to the traditional
prerogatives of executive power.

As I stated earlier, the executive authority to contract is a right emanating from traditional
executive functions, and is connected with the power of the executive branch to determine
economic policy. Hence, the proper approach in interpreting Section 2, Article XII is to tilt
in favor of asserting the right rather than view the provision as a limitation on a privilege.
To subscribe to the Court's previous view will necessitate adopting as a fundamental
premise that absent an express grant of power, the executive branch has no capacity to
contract since such capacity arises from a privilege.

Had the provision been worded to state that the President may enter into agreements for
technical or financial assistance only, then this unambiguous limitation should be affirmed. Yet
the Constitution does not express such an intent. The controversial provision is crafted in such a
way that allows any type of agreement, so long as they involve either technical or financial
assistance. In fact, the provision does not restrict the scope of the agreement so as to pertain
exclusively either to technical or financial assistance.

The Constitution, in allowing foreign participation specifically in the large scale exploration,
development and utilization of natural resources, is cognizant of the sad truth that such activities
entail significant outlay of capital and advanced technological know-how that domestic
corporations may not yet have.26 The provision expressly adverts to "technical" and
"financial" assistance in recognition of the reality that these two facets are the
indispensable requisites to qualify foreign participants in the exploration, development,
and utilization of mineral and petroleum resources.

Had the framers chosen to restrict all aspects of all mining activities to domestic persons, the
real fear would have materialized that our mineral reserves could remain untapped for a
significant period of time, owing to the paucity of venture capital. There was a real option to
heed dogmatic guns who insisted that the mineral resources remain unutilized until the day
when the domestic mining industry becomes capacitated to undertake the extraction without
need of foreign aid. Obviously, the more pragmatic view won the day.
If indeed the foreign entity is limited only to technical or financial participation, the
implication is that it is up to the State to do all the rest. Considering the lack of know-how
and financial capital, matters which were appreciated by the framers of the Constitution,
this intended effect is preposterous. Even the State itself would hesitate to undertake
such extractive activities owing to the intensive capital and extensive training such
enterprise would entail. By allowing this expansive set-up under Section 2, the
Constitution enables the minimization of risk on the part of the State should it desire to
undertake large-scale mineral extractive activities. The pay-off though, understandably,
is an atypical cession of several State prerogatives in the development of its mineral and
petroleum resources.

Perhaps there is need to be explicit and incisive about the implications of Section 2. The word
"assistance," shorn of context, implies a charitable grant offered without any quid pro
quo attached. Unconditional foreign aid may be more prevalent this day and age with the
acceptance of the notion that there are base minimum standards of decent living which all
persons are entitled to. However, such concept is alien to the mining industry. There is no such
entity as an International Benevolent Association for Extraction of Minerals. If "assistance" is to
be restrictively interpreted according to ordinary parlance, no entity would be interested in
undertaking this regulated industry.

Any decision by any enterprise to assist in the exploration, development or utilization of mineral
resources does not arise from a philanthropic impulse. It is a pure and simple investment, and
one that is not engaged in unless there is the expectation or hope of a reasonable return. I
hasten to add that the deliberate incorporation of the fourth paragraph of Section 2 has created
a window of opportunity for foreign investments in the extractive enterprises involving petroleum
and other mineral oils, subject of course to limitations under the law. The term may prove
discomfiting to the ideologically committed, the sentimental nationalist or the visceral
oppositionist. Still, the notion is not inconsistent with the general power of the executive to enter
into agreements for the purpose of enticing foreign investments.

Why then the term "assistance?" Apart from its apparent political palatability in comparison with
"investment," as intimated before, the term is useful in underscoring the essential facets
of the foreign investment which is assistance in the financial or technical areas, as well
as the fundamental limitations and conditionalities of the investment. What is allowed is
participation, though limited, by foreign corporations which in turn are entitled to expect a return
on their investments.

The Court had earlier premised the invalidity of several provisions of the Mining Act on the
argument that those provisions authorized service contracts. But while the 1987 Constitution
does not utilize the term "service contracts," it actually contemplates a broader expanse
of agreements beyond mere contracts for services rendered. Still, although the provision
sanctions a more numerous class of agreements, these are subjected to more stringent
restrictions than what had been allowed under the 1973 Constitution. Thus, the test should be
whether the law and the contract take away the State's full control and supervision over
the exploration, development and utilization of the country's mineral resources and
negate or defeat the State's ownership thereof.

In line with the test, Section 2 should be accorded a liberal interpretation so as to recognize this
fundamental prerogative of the presidency. Such "liberal interpretation" does not equate to a
wholesale concession of mining resources to foreigners, much less to an atmosphere of
complaisance, whether from their perception or the Filipinos.' The fourth paragraph sets specific
limitations on the exercise by the President of this contract-making power. On the other hand,
the second paragraph of Section 2 lays down the fundamental limitations which likewise may
not be countermanded.

On the basis of the foregoing discussion, and as a necessary consequence of my view that the
agreements under Section 2 are not strictly limited to financial or technical assistance, I would
consider the following questioned provisions of Republic Act No. 7942 as valid —Sections 3 (g),
34 to 38, 40 to 41, 56 and 90. These provisions were struck down on the premise that they
allowed the constitution of "service contracts," an agreement which to my mind is still within the
contemplation of Section 2, Article XII.
 State Ownership over Mineral and Petroleum Resources

There is need to clarify the specific meaning of these general limitations arising from the State's
assertion of ownership, full control and supervision.

In respect to the petition, the question of ownership has become material to the proper share
the State should receive from the exploration, development and utilization of mineral resources.
I perceive that all the members of the Court agree that such profit may not be limited to only
such revenue derived from the taxation of the mining activities. Since the right of the State to
obtain a share in the net proceeds and not merely through taxes arises as an attribute of
ownership unequivocally reserved by the Constitution for the State, such right may not be
proscribed either by legislative provision or contractual stipulation.

Yet it should be conceded that the State has the right to enter into an agreement concerning
such profits. There are, as probably should be, political consequences if the President opts to
surrender all of the State's profits to a foreign corporation, yet in bare theory, the right to bargain
profits pertains to the wisdom of a political act not ordinarily justiciable before this Court. Still,
the overriding adherence of the Constitution to the regalian doctrine should be given due
respect, and an interpretation allowing "beneficial ownership" by the foreign corporation should
not be favored.

For purposes of the present judicial review, I would consider it prudent to limit myself to
conceding that the Court had previously erred in invalidating certain provisions of Rep. Act No.
7942 and the WMC FTAA on the mistaken notion that the law and the agreement cede
beneficial ownership of mineral resources to a foreign corporation.

Section 4 of Rep. Act No. 7942 expressly recognizes State ownership over mineral resources,
though it is silent on the operational terms of such ownership. Of course, such general
submission would not be in itself curative of whatever contraventions to State ownership are
contained in the same law; hence, the need for deeper inquiry.

The dissenters wish to strike down the second paragraph of Section 81 of Rep. Act No. 7942
because it purportedly precludes the Government from obtaining profits under the agreement
from sources other than its share in taxation. However, as the ponencia points out, the phrase
"among other things" sufficiently allows the government from demanding a share in the cash
flow or earnings of the mining enterprise. A contrary view is anchored on a rule of statutory
construction that concludes that "among other things" refers only to taxes. Yet, there is also a
rule of construction that laws should be interpreted with a view of upholding rather than
destroying it. Thus, the ponencia's formulation, which achieves the result of the minority without
need of statutory invalidation, is highly preferable.

The provisions of Rep. Act No. 7942 which authorize the conversion of a financial or technical
assistance into a mineral production sharing agreement (MPSA) turned out to be just as
controversial. In this regard, the minority wishes to strike down Section 39, which in conjunction
with Sections 80 and 84 of the law would purportedly allow such conversion, in that it would
effectively limit the government share in the profits to only the excise tax on mineral products
under internal revenue law.

These concerns are valid and raise troubling questions. Yet equally troubling is that the Court is
being called upon to rule on a premature question. There is no such creature yet as an FTAA
converted into an MPSA, and so there is no occasion that calls for the application of Sections
39, 80 and 84. I do not subscribe to judicial pre-emptive strikes, as they preclude the application
of still undisclosed considerations which may prove illuminating and even crucial to the proper
disposition of the case. By seeking invalidation of these "MPSA provisions," the Court is also
asked to strike down an enactment of a co-equal branch which has not given rise to an actual
case or controversy. After all, such enactment deserves due respect from this branch of
government. Assuming that the provisions are indeed invalid, the Court will not hesitate, at the
proper time, to strike them down or at least impose a proper interpretation that does not run
afoul of the Constitution.27 However, in the absence of any actual attempt to convert an FTAA to
an MPSA, the time is not now.
I likewise agree with the ponencia that Section 7.9 deprives the State of its rightful share as an
incident of ownership without offsetting compensation. The provisions of the FTAA are fair game
for judicial review considering their present applicability. In fact, the invalidation of Section 7.9
becomes even more proper now under the circumstances since the provision has become
effectual considering the sale of the foreign equity in WMCP to a domestic corporation. It is
within the competence of this Court to invalidate Section 7.9 here and now. For that matter,
Section 7.8(e) of the FTAA may be similarly invalidated as it can already serve to unduly deprive
the Government of its proper share by allowing double recovery by WMC.

"Full Control and Supervision" of the State

The matter of "full control and supervision" emerges just as controversial. Does this grant of
power mandate that the State exercise management over the activity, or exclude the exercise of
managerial control by the foreign corporation?

I don't think it proper to construe the word "full" as implying that such control or supervision may
not be at all yielded or delegated, for reasons I shall elaborate upon. Instead, "full" should be
read as pertaining to the encompassing scope of the concerns of the State relating to the
extractive enterprises on which it may interfere or impose its will.

It must be conceded that whichever party obtains managerial control must be allowed
considerable elbow room in the exercise of management prerogatives. Management is in the
most informed position to make resources productive in the pursuit of the enterprise's
objectives.28 In this age of specialization, corporations have benefited with the devolution of
operational control to specialists, rather than generalists. The era of the buccaneer entrepreneur
chartering his industry solely on gut feel is over. The vagaries of international finance have
dictated that prudent capitalists cede to the opinion of their experts who are hired because they
trained within their particular fields to know better than the persons who employ them. The
Constitution does not prescribe a particular manner of management; thus, we can conclude that
the State is not compelled to adopt outmoded methods that could tend to minimize profits.

Still, the question as to who should exercise management is best left to the parties of the
agreement, namely the President and the foreign corporations. They would be in the best
position to determine who is best qualified to exert managerial control. This prerogative of
management can be exercised by the State if it so insists and the co-parties agree, and the
wisdom of such arrogation is ultimately a policy question this Court has little control over. And
even if the State cedes management to a different entity such as the foreign corporation,
it has the duty to safeguard that the actual exercise of managerial power does not
contravene our laws and public policy.

There is barely any support of the view that only the State may exert managerial control. Even
the minority concede that these foreign corporations are not precluded from participating in the
management of the project. I think it unwise to construe "full supervision and control" to the
effect that the State's assent or opinion is necessary before any day-to-day operational
questions may be resolved. There is neither an express rule to that effect, nor any law of
construction that necessitates such interpretation. Ideally of course, the most qualified party
should be allowed to manage the enterprise, and we should not allow an interpretation that
compels a possibly unsuited entity, such as the State, to operationalize the business.29 Such a
limited construction would be inconvenient and absurd,30 not to mention potentially wasteful.

The Constitution itself concedes that the State may not have the best sense as to how to
undertake large-scale exploration, development and utilization of mineral and petroleum
resources. This is evinced by the allowance of foreign technical assistance and foreign
participation in the extractive enterprise. Had the Constitution recognized that the State was
supremely qualified to undertake the operational aspects of the activity, then it could have
phrased the provision in such a way that would strictly limit the foreign participation to monetary
investment or a financial grant of assistance.

The absence of an express provision on management permits consideration of the following

sensible critique on yielding too many management prerogatives to a remote overseer such as
the State. An early United Nations report once noted that while it is theoretically possible to
endow a government department with a high degree of operating flexibility, it is in practice
difficult to do so.31 It has been proposed that the further away a decision-maker is to the market,
the higher the information cost, or the opportunity cost to the gaining of
information.32 Remoteness can be achieved through the layering of bureaucratic structure, and
because of the information loss that accompanies the transmission of information and
judgments from lower levels of the hierarchy to higher levels, the ultimate basis of a decision
may be misleading at best and erroneous at worst.33

The same conclusion arises from the view that what the provision authorizes is foreign
investment. The foreign player necessarily at least has a reasonable say in how the mining
venture is run. The interest of the investor in seeing that the investment is not wasted should be
recognized not only as a right available to the investor, but from the broader view that such say
would lead to a more prudent management of the project. It must be noted that mineral and
petroleum resources are non-renewable, thus a paramount interest arises to ensure against
wasteful exploitation.

Next for consideration is the situation, as in this case, if management is ceded to the foreign
corporation, or even to a private domestic corporation for that matter. What should be the proper
dichotomy, if any, between the private entity's exercise of managerial control, and the State's full
control and supervision?

The President may insist on conditions into the agreement pertaining to the State's degree of
control and supervision in the mining activity. This was certainly done with the WMC FTAA,
which is replete with stipulations delineating the State's control which are judicially enforceable,
imposed presumably at the President's call. But the FTAA itself is not the only vehicle by which
State control and supervision is exercised. These can similarly be enforced through statutes, as
well as executive or administrative issuances. The Mining Act itself is an expression of State
control and supervision, implemented in coordination with the executive and legislative
branches.

As a general point, I believe that State control and supervision is unconstitutionally yielded if
either of the Mining Act or the FTAA precludes the application of the laws and regulations of the
Philippines, enunciatory as they are of State policy. Neither the Mining Act nor the WMC FTAA
are flawed in that regard. The agreements under contemplation are not beyond the ambit of our
regular laws, or regulatory enactments pertaining to such areas as environmental concerns.
Violations of these laws uttered in the name of the FTAA are punishable in this jurisdiction.

Still, the fact that the Constitution requires "full control and supervision" indicates an
expectation of a more activist role on the part of the State in the operations of the mining
enterprise, perhaps to the prejudice of the laissez-fairecapitalist. Most importantly, the State
cannot abdicate its traditional functions by contractual limitations. It could compel the mining
operations to comply with existing environmental regulations, as well as with future issuances. It
may compel the foreign corporation payment of all assessable levies. It may evict officers of the
foreign corporation for violation of immigration laws. It may preclude mining operations that
affect prerogatives granted by law to indigenous peoples. It could restrict particular mining
operations which are established to be disasters or nuisances to the affected communities. The
power of the State to enforce its police powers needs no statutory grant and are certainly not
limited either by the Mining Act or the WMC FTAA.

As to "business decisions," I think that the State may exercise control for the purpose of
ensuring profit of the enterprise as a whole. This may involve visitorial activity, the conduct of
periodic audits, and such powers normally attributed to an overseer of a business. Just as the
foreign corporation is expected to guard against waste of financial capital, the State is expected
likewise to guard against the waste of resource capital.

I might as well add that, in my view, the constitutional objective of maintaining full control and
supervision over the exploration, development and utilization of the country's mineral resources
in the State would be best served by the creation of a public corporation for the development
and utilization of these resources, accountable to the State for all actions in its behalf. The
device of a corporation properly utilized provides sufficient protection to the State's interests
while affording flexibility and efficiency in the conduct of mining operations.34
The creation of a public corporation could remedy a number of potential problems regarding full
State control and supervision of extractive activities concerning our mineral resources by
entities which have the funds and/or technical know-how but which cannot have a great degree
of control and supervision over such activities. Persons knowledgeable and competent in mining
operations may sit in the corporation's board of directors and craft policies which implement and
further concretize the broad aims of R.A. No. 7942, taking into consideration the nature of the
mining industry. The Board would also be in charge of studying existing contracts for mining
activities, and approving proposed contracts. The Board may also employ corporate officers and
employees to take charge of the day-to-day operations of the mining activities pursuant to the
corporation's contracts with other entities.

Under such a scheme, the perceived abdication by the State of control and supervision over
mining activities in favor of the foreign entities rendering financial and/or technical assistance
would be greatly diminished. It would be the public corporation which would principally
undertake mining activities and contract with foreign entities for financial and/or technical
assistance if necessary. The foreign contractor in such cases would not have the power to
determine the course of the project or the major policies involved therein because these
functions would belong to the public corporation as the agent of the State.

A public corporation would also have the additional benefit of compelling the input of not only
the executive branch, but also that of the legislative. Such executive-legislative coordination is
necessary since public corporations may only be created through statute.

Section 3.3 of WMC FTAA Constitutional

Finally, it is argued that Section 3.3 of the WMC FTAA violates paragraph 1, Section 2, Article
XII of the Constitution, which imposes a limitation on the term of mineral agreements. I agree
with the ponencia that the constitutional provision does not pertain to FTAAs. It is clear from
reading Section 1 that the agreements limited in term therein are co-production agreements,
joint venture agreements, and mineral production-sharing agreements, which are all referred to
in Section 1, and not the FTAAs mentioned only in Section 4. Accordingly, Section 3.3 of the
WMC FTAA is not infirm.

Epilogue

Behind the legal issues presented by the petition are fundamental policy questions from which
highly opinionated views can develop, even from the members of this Court. The promise
brought about by the large-scale exploitation of our mineral and petroleum resources may bring
in much needed revenue, but Filipinos should properly inquire at what cost. As a Filipino, I am
distressed whenever the government crosses the line from cooperation to subservience to
foreign partners in development. Popular Western wisdom aside, what is good for General
Motors is not necessarily good for the country. The propagation of a foreign-influenced mining
industry may lead to a whole slew of social problems35 which shall be exacerbated if the
government is complicit, either through active participation or benign neglect, to abuses
committed by the mining industry against the Filipino people. Unlike the foreign corporation, the
bottom line which the State should consider is not found below a ledger, but in the socio-
economic dynamic that will confront the government as a result of the large-scale mining
venture. Political capital is more fickle than financial capital.

Still, the right to vote I exercise today is that as of a member of the Court, and not that of the
general electorate. The limits of judicial power would exasperate any well-meaning judge who
feels duty-bound to affirm a constitutionally valid law or principle he or she may otherwise
disagree with. My views on how the government should act are segregate from my view on
whether the government has the power to act at all.

My conclusions are borne out of a close textual analysis of Section 2 in light of my fundamental
understanding of the constitutional powers of the executive branch. This is in line with my
perception of the judicial duty as being limited to charting the scope and boundaries of the law.
The philosophy of inclusiveness that drives my interpretation of Section 2 is bolstered not
because it might lead to benefits to the economy, but because it gives due regard to the
discretion of the Executive to determine what is good for the economy. This judicial attitude may
not always ensure the economic good. But before we carve that judicial path out of what we
believe are good intentions, restraint is imperative out of due deference to our co-equal
branches, since the duty of formulating and implementing economic policies falls exclusively
within their purview.

In view of the foregoing, I concur with the opinion of Justice Panganiban.

Footnotes

1
Spelled as "Nequito" in the caption of the Petition, but "Nequinto" in the body. Rollo, p.
12.

2
As spelled in the body of the Petition. Id., p. 13. The caption of the Petition does not
include Louel A. Peria as one of the petitioners; only the name of his father, Elpidio V.
Peria, appears therein.

3
Stated as "Kaisahan Tungo sa Kaunlaran at Repormang Pansakahan (KAISAHAN)" in
the caption of the Petition, but "Philippine Kaisahan Tungo sa Kaunlaran at Repormang
Pansakahan (KAISAHAN)" in the body. Id., p. 14.

4
Erroneously designated in the Petition as "Western Mining Philippines Corporation." Id.,
p. 212.

5
This is dependent upon the discussion, infra, of the invalidity of Sections 7.8(e) and 7.9
of the subject FTAA, for violation of the Civil Code and the Anti-Graft Law -- these
provisions being contrary to public policy and grossly disadvantageous to the
government.

6
The FTAA is for the exploration, development and commercial exploitation of mineral
deposits in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato,
covering an area of 99,387 hectares.

7
At the time of execution of the subject FTAA in 1995, WMCP was owned by WMC
Resources International Pty., Ltd. (WMC) -- "a wholly owned subsidiary of Western
Mining Corporation Holdings Limited, a publicly listed major Australian mining and
exploration company." See WMCP FTAA, p. 2.

On Jan. 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc.
(Sagittarius), a corporation organized under Philippine laws, 60% the equity of which is
owned by Filipino citizens or Filipino-owned corporations and 40% by Indophil
Resources, NL, an Australian company. WMCP was then renamed "Tampakan Mineral
Resources Corporation," and now it claims that by virtue of the sale and transfer of
shares, it has ceased to be connected in any way with WMC. On account of such sale
and transfer of shares, the then DENR Secretary approved by Order dated Dec. 18,
2001 the transfer and registration of the subject FTAA from WMCP to Sagittarius
(Tampakan). Lepanto Consolidated Mining Co., which was interested in acquiring the
shares in WMCP, appealed this Order of the DENR Secretary, but the Office of the
President, and subsequently, the Court of Appeals (CA), upheld said Order.

8
Penned by the esteemed Justice Conchita Carpio Morales, the Decision was
promulgated on a vote of 8-5-1. Chief Justice Davide and Justices Puno, Quisumbing,
Carpio, Corona, Callejo, and Tinga concurred. Justices Santiago, Gutierrez, and
Martinez joined the Dissent of Justice Panganiban, while Justice Vitug wrote a separate
Dissent. Justice Azcuna took no part.

9
Promulgated on Dec. 31, 1972, Presidential Decree No. 87 (PD 87, otherwise known
as "The Oil Exploration and Development Act of 1972" in §1 thereof) permitted the
government to explore for and produce indigenous petroleum through service contracts.
A service contract has been defined as a contractual arrangement for engaging in the
exploitation and development of petroleum, mineral, energy, land and other natural
resources, whereby a government or an agency thereof, or a private person granted a
right or privilege by said government, authorizes the other party -- the service contractor
-- to engage or participate in the exercise of such right or the enjoyment of the privilege,
by providing financial or technical resources, undertaking the exploitation or production
of a given resource, or directly managing the productive enterprise, operations of the
exploration and exploitation of the resources, or the disposition or marketing of said
resources. See Prof. M. Magallona, Service Contracts in Philippine Natural Resources, 9
World Bulletin 1, 4 (1993).

Under PD 87, the service contractor undertook and managed the petroleum operations
subject to government oversight. The service contractor was required to be technically
competent and financially capable to undertake the necessary operations, as it provided
all needed services, technology and financing; performed the exploration work
obligations; and assumed all related risks. It could not recover any of its expenditures, if
no petroleum was produced. In the event petroleum is discovered in commercial
quantity, the contractor operated the field for the government. Proceeds of sale of the
petroleum produced under the contract were then applied to pay the service fee due the
contractor and reimburse it for its operating expenses incurred.

10
Sec. 9 of Art. XIV (National Economy and Patrimony) of the 1973 Constitution allowed
Filipino citizens, with the approval of the Batasang Pambansa, to enter into service
contracts with any person or entity for the exploration and utilization of natural resources.

"Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of

the natural resources of the Philippines shall be limited to citizens, or to corporations or
associations at least sixty per centum of which is owned by such citizens. The Batasang
Pambansa, in the national interest, may allow such citizens, corporations or associations
to enter into service contracts for financial, technical, management or other forms of
assistance with any person or entity for the exploration or utilization of any of the natural
resources. Existing valid and binding service contracts for financial, technical,
management or other forms of assistance are hereby recognized as such."

The intention behind the provision, according to a delegate, was to promote proper
development of the natural resources, given the lack of Filipino capital and technical
skills needed therefor. The original proposal was to authorize government to enter into
such service contracts with foreign entities, but as finally approved, the provision
permitted the Batasang Pambansa to authorize a citizen or private entity to be party to
such contract. Following the ratification of the 1973 Charter, PD Nos. 151, 463, 704,
705, 1442 were promulgated, authorizing service contracts for exploration, development,
exploitation or utilization of lands of the public domain; exploration, development, etc. of
a lessee's mining claims and the processing and marketing of the products thereof;
production, storage, marketing and processing of fish and fishery/aquatic products;
exploration, development, and utilization of forest resources; and exploration,
development, and exploitation of geothermal resources, respectively.

11
Renamed Tampakan Mineral Resources Corporation.

12
That is, the Court of Appeals' resolution of the petition for review -- docketed as CA-
GR No. 74161 and lodged by Lepanto Consolidated Mining -- of the decision of the
Office of the President which upheld the order of the DENR Secretary approving the
transfer and registration of the FTAA to Sagittarius Mines, Inc.

13
At p. 68.

14
433 Phil. 506, July 9, 2002; 403 SCRA 1, May 6, 2003; and 415 SCRA 403, November
11, 2003.

15
300 Phil. 906, March 12, 1998.
16
Chavez v. Public Estates Authority, 403 SCRA, 1, 28-29, supra, per Carpio, J.

17
The pendency of a motion for reconsideration shall stay the final resolution sought to
be reconsidered. §4 of Rule 52, and §4 of Rule 56B of the Rules of Court.

18
See Enrile v. Senate Electoral Tribunal, GR No. 132986, May 19, 2004.

19
Per the "List of Financial/Technical Assistance Agreement (FTAA applications)" as of
June 30, 2002 prepared by the Mines and Geosciences Bureau's (MGB) Mining
Tenements Management Division, cited in petitioners' Final Memorandum.

20
Instead of allowing Sec. Gen. Neri to speak during the Oral Argument, the Court in its
Resolution of June 29, 2004 required him to submit his Position Paper through the Office
of the Solicitor General. Said paper was made part of the Memorandum of the public
respondents.

21
27 SCRA 853, April 18, 1969.

22
Gonzales v. COMELEC, 137 Phil. 471, 489, April 18, 1969, per
Fernando, J. (later CJ.), citing People v. Vera, 65 Phil. 56, 94, November 16, 1937, per
Laurel, J.

23
433 Phil. 62, 68, July 2, 2002, citing Alunan III v. Mirasol, 342 Phil. 467, 477, July 31,
1997 and Viola v. Alunan III, 343 Phil. 184, 191, August 15, 1997.

24
Southern Pacific Terminal Co. v. ICC, 219 US 498, 31 S.Ct. 279, 283, February 20,
1911, per McKenna, J.

25
134 SCRA 438, 463-464, February 18, 1985, per Gutierrez Jr., J.

26
§1 of Rule 63 of the Rules of Court:

"Section 1. Who may file petition. – Any person interested under a deed, will, contract or
other written instrument, whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine any
question of construction or validity arising, and for a declaration of his rights or duties,
thereunder."

27
§2 of Rule 65 of the Rules of Court:

"Section 2. Petition for prohibition. – When the proceedings of any tribunal,

corporation, board, officer or person, whether exercising judicial, quasi-judicial or
ministerial functions, are without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment be
rendered commanding the respondent to desist from further proceedings in the
action or matter specified therein, or otherwise granting such incidental reliefs as
law and justice may require."

28
Pimentel Jr. v. Aguirre, 391 Phil. 84, 107, July 19, 2000, per Panganiban, J.

29
338 Phil. 546, May 2, 1997.

30
Tañada v. Angara, pp. 47-49, per Panganiban, J. Italics supplied.

31
Emphasis supplied.
32
Ang Bagong Bayani v. COMELEC, 412 Phil. 308, 338-339, June 26, 2001, per
Panganiban, J., citing JM Tuason & Co., Inc. v. LTA, 31 SCRA 413, 422-423, February
18, 1970, as cited in Agpalo, Statutory Construction (1990), pp. 311 and 313.

33
GR Nos. 160261, 160262, 160263, 160277, 160292, 160295, 160310, 160318,
160342, 160343, 160360, 160365, 160370, 160376, 160392, 160397, 160403, and
160405, November 10, 2003, per Carpio Morales, J.

34
Francisco v. The House of Representatives, 415 SCRA 44, 126-127, November 10,
2003, per Carpio Morales, J. Citations omitted.

35
During the Oral Argument, petitioner's counsel, Atty. Marvic Leonen conceded that the
foreign contractor may exercise limited management prerogatives to the extent of the
financial or technical assistance given. TSN, pp. 181-186. How such "limited
management" can be operationalized was not explained.

36
In the January 27, 2004 Decision, this Court held that the fourth paragraph of Section
2 of Art. XII limits foreign involvement in the local mining industry to agreements strictly
for financial and/or technical assistance only, and precludes agreements which grant to
foreign corporations the management of local mining operations, since the latter
agreements are purportedly in the nature of service contracts, as this concept was
understood under the 1973 Constitution. Such contracts were supposedly
deconstitutionalized and proscribed by the omission of the phrase "service contracts"
from the 1987 Constitution. Since the WMCP FTAA contains provisions that permit the
contractor's management of the concern, the Decision struck down the FTAA for being a
prohibited service contract. Provisions of RA 7942 which granted managerial authority to
the foreign contractor were also declared unconstitutional.

37
Intervenor's Memorandum, pp. 7, 11 and 12.

38
www.dictionary.com provides the following meanings for "involving":

1. To contain as a part; include.

2. To have as a necessary feature or consequence; entail: was told that the job would
involve travel.

3. To engage as a participant; embroil: involved the bystanders in his dispute with the
police.

4. a. To connect closely and often incriminatingly; implicate: evidence that involved the
governor in the scandal.

b. To influence or affect: The matter is serious because it involves your reputation.

5. To occupy or engage the interest of: a story that completely involved me for the rest of
the evening.

6. To make complex or intricate; complicate.

7. To wrap; envelop: a castle that was involved in mist.

8. Archaic. To wind or coil about.

39
It reads as follows: "Section 20. The President may contract or guarantee foreign loans
on behalf of the Republic of the Philippines with the prior concurrence of the Monetary
Board, and subject to such limitations as may be provided by law. The Monetary Board
shall, within thirty days from the end of every quarter of the calendar year, submit to the
Congress a complete report of its decision on applications for loans to be contracted or
guaranteed by the Government or government-owned and controlled corporations which
would have the effect of increasing the foreign debt, and containing other matters as
may be provided by law."

40
According to estimates by the MGB, the success-to-failure ratio of large-scale mining
or hydrocarbon projects is about 1:1,000. It goes without saying that such a miniscule
success ratio hardly encourages the investment of tremendous amounts of risk capital
and modern technology required for the discovery, extraction and treatment of mineral
ores, and oil and gas deposits.

41
The Constitutional Commission (ConCom) began its work in 1986, three short years
after the assassination in August 21, 1983 of former Senator Benigno "Ninoy" Aquino, Jr.
During the early part of this three-year period, the country underwent a wracking
economic crisis characterized by scarcity of funds, capital flight, stringent import
controls, grave lack of foreign exchange needed to fund critical importations of raw
materials, panic-buying, hoarding of commodities, and grave lack of foreign exchange
needed to fund critical importations of raw materials. Many businesses were on the
verge of failure and collapse, and many in fact did. The members of the ConCom were
unlikely to forget the critical condition of the Philippine economy and the penury of its
government.

42
The management of every business has two primary objectives. The first is to earn
profit. The second is to stay solvent, that is, to have on hand sufficient cash to pay debts
as they fall due. Other objectives may be targeted, but a business cannot hope to
accomplish them, unless it meets these two basic tests of survival -- operating profitably
and staying solvent. Meigs and Meigs, Accounting: The Basis for Business
Decisions (5thed., 1982), p. 11.

43
Art. XVIII, "Transitory Provisions," of the 1987 Constitution.

44
III Record of the Constitutional Commission, p. 348. Emphasis supplied.

45
Id., pp. 349-352. Emphasis supplied.

46
Id., p. 354. Emphasis supplied.

47
Id., pp. 355-356. Emphasis supplied.

48
Id., p. 361. Emphasis supplied.

49
V Records of the Constitutional Commission, p. 845.

50
Id., p. 841.

51
Id., p. 844.

52
Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 337-338, February 22,
1991, per Fernan, CJ.

53
The transitive verb 'control' has the following meanings -- to exercise restraining or
directing influence over; to regulate; to have power over; to rule; to govern. The noun
'control' refers to an act or instance of controlling; the power or authority to guide or
manage; and the regulation of economic activity especially by government directive (as
in price controls). From Merriam-Webster Online, Online Dictionary, www.m-w.com.

54
On p. 2 of the Final Memorandum for Petitioners.

55
Sec. 3(aq) of RA 7942 reads as follows: "aq. Qualified person means any citizen of the
Philippines with capacity to contract, or a corporation, partnership, association, or
cooperative organized or authorized for the purpose of engaging in miring, with technical
and financial capability to undertake mineral resources development and duly registered
in accordance with law at least sixty per centum (60 percent) of the capital of which is
owned by citizens of the Philippines: Provided, That a legally organized foreign-owned
corporation shall be deemed a qualified person for purposes of granting an exploration
permit, financial or technical assistance agreement or mineral processing
permit." Underscoring supplied.

56
Per Clause 4.6 of the WMCP FTAA, the contractor is required to relinquish each year
during the exploration period at least ten percent (10%) of the original contract area, by
identifying and dropping from the FTAA coverage those areas which do not have mineral
potentials, in order that by the time actual mining operations commence, the FTAA
contract area shall have been reduced to only 5,000 hectares.

57
Memorandum (in support of WMCP's Motion and Supplemental Motion for
Reconsideration), p. 61.

58
Id., pp. 63-64.

59
Accounts receivable may be converted to cash in one of three ways: (1) assignment of
receivables, which is a borrowing arrangement with receivables pledged as security on
the loan; (2) factoring receivables, which is a sale of receivables without recourse for
cash to a third party, usually a bank or other financial institution; and (3) the transfer of
receivables with recourse, which is a hybrid of the other two forms of receivable
financing. Smith and Skousen, Intermediate Accounting, (1992, 11th ed.), pp. 317-321.

Banks usually prefer lending against the security of accounts receivable backed up by
postdated checks. They refer to these facilities as "bills discounting lines."

60
Decision, p. 83; bold types supplied.

61
"Beneficial interest has been defined as the profit, benefit, or advantage resulting from
a contract, or the ownership of an estate as distinct from the legal ownership or
control." Christiansen v. Department of Social Security, 131 P. 2d 189, 191, 15 Wash. 2d
465, 467, November 25, 1942, per Driver, J.

Beneficial use, ownership or interest in property means "such a right to its enjoyment as
exists where the legal title is in one person and the right to such beneficial use or interest
is in another x x x." Montana Catholic Missions v. Missoula County, 26 S Ct. 197, 200,
200 U.S. 118, 127-128, January 2, 1906, per Peckham, J.

62
See p. 1138 thereof.

63
Ramos and De Vera, "The Fiscal Regime of Financial or Technical Assistance
Agreements", p. 2. A photocopy of their paper is attached as Annex 2 to the Motion for
Reconsideration of public respondents.

64
These incentives consist principally of the waiver of national taxes during the cost
recovery period of the FTAA. During such period, the contractor pays only part of the
basic government's share in taxes consisting of local government taxes and fees. These
are the local business tax, real property tax, community tax, occupation fees, regulatory
fees, all other local taxes and fees in force, and royalty payments to indigenous cultural
communities, if any.

These national taxes, however, are not to be paid by the contractor: (i) excise tax on
minerals; (ii) contractor's income tax; (iii) customs duties and fees on imported capital
equipment; (iv) value added tax on purchases of imported equipment, goods and
services; (v) withholding tax on interest payments on foreign loans; (vi) withholding tax
on dividends to foreign stockholders; and (vii) royalties due the government on mineral
reservations.

Other incentives to the contractor include those under the Omnibus Investment Code of
1997; those for the use of pollution control devices and facilities; income tax carry-
forward of losses (five-year net loss carry forward); and income tax accelerated
depreciation.

65
See §3(g), DAO 99-56. According to the paper by Messrs. Ramos and De
Vera, supra, who are, respectively, the director of the MGB and chief of the Mineral
Economics, Information and Publication Division of the MGB, majority of the payments
listed under Sec. 3(g) are relatively small in value. The most significant payments in
terms of amount are the excise tax, royalties to mineral reservations and indigenous
cultural communities, income tax and real property tax.

66
Per Messrs. Ramos and De Vera, supra, "(t)he term of a successful FTAA may be
divided into a pre-operating period, a cost recovery period and a post recovery period.
The pre-operating period consists of the exploration, pre-feasibility, feasibility,
development and construction phases. The aggregate of this period is a maximum of
eleven (11) years. The cost recovery period, on the other hand, consists of the initial
years of commercial operation where the contractor is allowed to recover its pre-
operating expenses. The end of this period is when the aggregate of the net cash flow
from the mining operation becomes equal to the total pre-operating expenses or a
maximum of five (5) years from commencement of commercial production, whichever
comes first. The post recovery period is the remaining term of the FTAA immediately
following the cost recovery period. The additional government share from an FTAA is
collected after the cost recovery period."

67
Ramos and De Vera, supra, pp. 3-4.

68
The discussion on pp. 4-7 of the Ramos-DeVera report, focusing on the modes of
computation of the additional government share as spelled out in DAO 99-56, is
significant:

The phrase "among other things" demands that Government is entitled to

additional share aside from the normal taxes and fees paid during operation.
Simple as it was formulated, the phrase is another challenging task to
operationalize. In 1997, the Philippine government conducted several
consultative meetings with various investor groups, national government
agencies concerned with taxation and incentives and other stakeholders of the
mining industry to formulate the possible modes of determining the additional
government share for FTAA. The negotiation took into consideration the
following:

· Capital investment in the project;

· Risks involved;

· Contribution of the project to the economy;

· Contribution of the project to community and local government;

· Technical complexity of the project; and

· Other factors that will provide for a fair and equitable sharing between
the government and the contractor.

During these consultations, some investor groups have repeatedly expressed

their objections to the imposition of an additional government share. However,
since Government is firmly committed to adhere to its interpretation of Section 81
of the mining law on government share in an FTAA, it decided to push through
with the collection of this additional government share by formally making part of
the mining regulation through the issuance by the Department of Environment
and Natural Resources of Administrative Order No. 99-56 providing for the
guidelines in establishing the fiscal regime of Financial or Technical Assistance
Agreements.
There were three schemes for computing the additional government share
presented in the administrative order.

5.1 Net Mining Revenue-Based Option

Net mining revenue means the gross output from mining operations during a
calendar year less deductible expenses. These deductible expenses consist of
expenses incurred by the Contractor directly, reasonably and necessarily related
to mining operations in the contract area during a calendar year, namely:

· Mining, milling, transport and handling expenses together with smelting

and refining costs other than smelting and refining costs paid to third
parties;

· General and administrative expenses actually incurred by the Contractor

in the Philippines;

· Consulting fees incurred for work related to the project; provided that
those expenses incurred outside of the Philippines are justifiable and
allowable subject to the approval of the Director of Mines and
Geosciences Bureau;

· Environmental expenses of the Contractor including such expenses

necessary to fully comply with its environmental obligations;

· Expenses for the development of host and neighboring communities and

for the development of geoscience and mining technology together with
training costs and expenses;

· Royalty payments to claim owners or surface land owners relating to the

Contract Area during the Operating Phase;

· Continuing exploration and mine development expenses within the

Contract Area after the pre-operating period; and

· Interest expenses charged on loans or such other financing-related

expenses incurred by the Contractor subject to limitations in debt/equity
ratio as given in the contract and which shall not be more than the
prevailing international rates charged for similar types of transactions at
the time the financing was arranged, and where such loans are necessary
for the operations; and

· Government taxes, duties and fees.

The additional government share from this option for any year i is the difference
between 50% of the cumulative annual net mining revenues CNi and the
cumulative total government share CGi (basic and additional). The intention is to
distribute the cumulative net mining revenue equally between the Government
and the contractor. It can be expressed through the following formula:

If 50% of CNi < CGi

Additional Government Share = 0

Else, if 50% of CNi > CGi

Additional Gov't Share = (50% x CNi) - CGi

5.2 Cash Flow-Based Option

Project cash flow before financing and tax (CFi) is calculated as follows:

CFi = GO - DE + I - PE - OC

In this formula, GO is the gross output; DE are the deductible expenses; I is the
interest expense; PE is unrecovered pre-operating expense; and OC is on-going
capital expenditures. This option provides that Government gets an additional
share from the project cash flow if the cumulative present value of the previous
total government share collected (basic and additional) is less than 50% of the
cumulative present value of the project cash flows. The additional government
share AGS is therefore the difference between 50% and the percentage of the
cumulative present value of total government shares CGA over the cumulative
present value of the project cash flows CP. The cumulative present value of
project cash flow for any year i is given by the following formula:

CPi = CPi-1 x (1.10) + CFi

The factor 1.10 is a future value factor based on the cost of borrowed money with
allowance for inflation of the US dollar. The cumulative present value of the total
government share before additional government share CGB for year i is:

CGBi = CGAi-1 x (1 + Cost of Capital) + BGSi

where CGAi is the cumulative present value of total government share inclusive
of the additional government share during the year is CGAi = CGBi + AGSi.

If CGBi > 50% of CPi :

Additional Government Share = 0

Else, if CGBi < 50% of CPi :

Additional Government Share = (50% x CPi) – CGBi

5.3 Profit-Based Option

This third option provides that Government shall receive an additional share of
twenty-five percent (25%) of the additional or excess profits during a taxable year
when the two-year average ratio of the net income after tax (NIAT) to gross
output (GO) is 0.40 or better. The trigger level of 0.40 ratio is approximately
equivalent to a 20% return on investment when computed based on the life of the
project. Investors have indicated that their minimum return on investment before
they would invest on a mining project in the Philippine is 15%. It was agreed
upon that a return on investment below 20% but not lower than 15% is normal
profit. If the project reaches 20% or better, there is then an additional or excess
profits. The computation of the 0.40 trigger shall be based on a 2-year moving
average which is the average of the previous year's ratio and the current year's
ratio. The additional or excess profit is computed using the following formula:

Additional Profits = [NIAT - (0.40 x GO)] / (1 - ITR)

In the above formula, ITR refers to the prevailing income tax rate applied by the
Bureau of Internal Revenue in computing the income tax of the contractor during
a taxable year.

If the two-year average ratio is less than 0.40:

Additional Government Share = 0

Else, if the two-year average ratio is 0.40 or better:

 Additional Government Share = 25% x Excess Profits

The government shares 25% of any marginal profit derived by the contractor at
20% or higher return on investment.

In all of these three options, the basis of computation are all in US dollars based
on prevailing foreign exchange rate at the time the expenses were incurred.
Alternatives or options aside from these three schemes are studied by
Government for possible improvement of the current fiscal system. The basic
guideline, however, is that the total government share should not be less than
fifty percent of the sharing.

6. Collection of the Additional Government Share

The term of a successful FTAA may be divided into a pre-operating period, a cost
recovery period and a post recovery period. The pre-operating period consists of
the exploration, pre-feasibility, feasibility, development and construction phases.
The aggregate of this period is a maximum of eleven (11) years. The cost
recovery period, on the other hand, consists of the initial years of commercial
operation where the contractor is allowed to recover its pre-operating expenses.
The end of this period is when the aggregate of the net cash flow from the mining
operation becomes equal to the total pre-operating expenses or a maximum of
five (5) years from commencement of commercial production, whichever comes
first. The post recovery period is the remaining term of the FTAA immediately
following the cost recovery period. The additional government share from an
FTAA is collected after the cost recovery period. (underscoring supplied)

69
The cash flows of a business concern tend to be more accurate and realistic indicia of
the financial capacity of the enterprise, rather than net income or taxable income, which
are arrived at after netting out non-cash items like depreciation, doubtful accounts
expense for probable losses, and write-offs of bad debts.

Cash flows provide relevant information about the cash effects of an entity's operations,
and its investing and financing transactions. Smith and Skousen, supra, p. 184.

70
Some of these indirect taxes are: fuel taxes; withholding tax on payrolls, on royalty
payments to claim owners and surface owners and on royalty payments for technology
transfer; value added tad on local equipment, supplies and services.

71
Other contributions of mining projects include: infrastructure (hospitals, roads, schools,
public markets, churches, and the like) and social development projects; payroll and
fringe benefits (direct and indirect employment); expenditures by the contractor for
development of host and neighboring communities; expenditures for the development of
geosciences/mining technology; expenditures for social infrastructures; and the resulting
multiplier effects of mining operations.

72
The third paragraph of §81, RA 7942 states: "The collection of Government share in
financial or technical assistance agreement shall commence after the financial or
technical assistance agreement contractor has fully recovered its pre-operating
expenses, exploration, and development expenditures, inclusive."

73
§§80 and 84 of RA 7942 are reproduced below:

Sec. 80. Government Share in Mineral Production Sharing Agreement. – The total
government share in a mineral production sharing agreement shall be the excise tax on
mineral products as provided in Republic Act No. 7729, amending Section 151(a) of the
National Internal Revenue Code, as amended.

Sec. 84. Excise Tax on Mineral Products. – The contractor shall be liable to pay the
excise tax on mineral products as provided for under Section 151 of the National Internal
Revenue Code: Provided, however, That with respect to a mineral production sharing
agreement, the excise tax on mineral products shall be the government share under said
agreement. (Underscoring supplied)

74
§112 of RA 7942 is reproduced below:

Sec. 112. Non-impairment of Existing Mining/Quarrying Rights. – All valid and

existing mining lease contracts, permits/licenses, leases pending renewal,
mineral production-sharing agreements granted under Exec. Order No. 279, at
the date of effectivity of this Act, shall remain valid, shall not be impaired, and
shall be recognized by the Government: Provided, That the provisions of Chapter
XIV on government share in mineral production sharing agreement and of
Chapter XVI on incentives of this Act shall immediately govern and apply to a
mining lessee or contractor unless the mining lessee or contractor indicates his
intention to the Secretary, in writing, not to avail of such provisions: Provided,
further, That no renewal of mining lease contracts shall be made after the
expiration of its term: Provided, finally, That such leases, production-sharing
agreements, financial or technical assistance agreements shall comply with the
applicable provisions of this Act and its implementing rules and regulations.
(Underscoring supplied)

75
Even during the cost recovery period, the contractor will still have to pay a portion of
the basic government share consisting of local government taxes and fees, such as local
business taxes, real property taxes, community taxes, occupation fees, regulatory fees,
and all other local taxes and fees, plus royalty payments to indigenous cultural
communities, if any.

76
Ramos and DeVera, supra, p. 7.

77
Ibid., p. 11. See also §3e of DAO 99-56.

78
Justice Carpio argues thus: The WMCP FTAA grants the State 60 percent of net profit;
CMP likewise agrees to 60 percent; the Malampaya-Shell FTAA provides for 60 percent
also; so the Court should decree a minimum of 60 percent. Our answer: no law
authorizes this Court to issue such a decree. It is up to the State to negotiate the most
advantageous percentage. This Court cannot be stampeded into the realm of legislation.

79
Clause 1.2 thereof states: "All financing, technology, management and personnel
necessary for the Mining Operations shall be provided by the Contractor in accordance
with the provisions of this Agreement. If no Minerals in commercial quantity are
developed and produced, the Contractor acknowledges that it will not be entitled to
reimbursement of its expenses incurred in conducting the Mining Operations."

80
WMCP FTAA Clause 2.1 (iv), p. 6.

81
Id., Clause 2.1 (v), p. 6.

82
Id., Clause 2.1 (vii), p. 6.

83
"Qualified Entity" is defined as "an entity that at the relevant time is qualified to enter
into a mineral production sharing agreement with the Government under the laws
restricting foreign ownership and equity in natural resource projects." §2 -- Definitions,
WMCP FTAA, p. 10. (Underscoring supplied.)

Pursuant to §26a in relation to §§3g and 3aq of RA 7942, a contractor in an MPSA

should be a citizen of the Philippines or a corporation at least 60 percent of the capital of
which is owned by citizens of the Philippines.

84
Since we assume that the buyer-corporation, which buys up 60% equity in WMCP, is
60% Filipino-owned and 40% foreign-owned, therefore, the foreign stockholders in such
buyer-corporation hold 24% beneficial interest in WMCP.
 85
Fourth paragraph of Sec. 2, Art. XII of the 1987 Constitution.

86
See, for instance, Maestrado v. CA, 327 SCRA 678, 692, March 9, 2000
and Philippine Telegraph and Telephone Co. v. NLRC, 338 Phil. 1093, 1111, May 23,
1997.

87
Art. 1306 of the Civil Code provides: "The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy.".

88
Republic v. CA, 354 SCRA 148, March 9, 2001, per Ynares-Santiago, J.

89
Philippine Basketball Association v. CA, 337 SCRA 358, 369, August 8, 2000.
Likewise, §11 of Book I of Chapter 3 of Exec. Order No. 292, otherwise known as "The
Administrative Code of 1987," states: "Sec. 11. The State's Responsibility for Acts of
Agents. – (1) The State shall be legally bound and responsible only through the acts
performed in accordance with the Constitution and the laws by its duly authorized
representatives. (2) The State shall not be bound by the mistakes or errors of its officers
or agents in the exercise of their functions."

90
Art. 1420 of the Civil Code provides: "In case of a divisible contract, if the illegal terms
can be separated from the legal ones, the latter may be enforced."

91
Sarmiento v. CA, 353 Phil. 834, 853, July 2, 1998.

92
Ramos-DeVera, supra, p. 2.

93
Bold types supplied.

94
§3[h] in relation to §26[b] of RA 7942.

95
§26[c] of RA 7942.

96
OXFAM America Research Report, September 2002.

97
Dated December 2003.

98
§1 of EO 270.

99
Decena v. Malayaon, AM No. RTJ-02-1669, April 14, 2004, per Tinga, J.

100
Manila Electric Company v. Pasay Transportation, 57 Phil. 600, 605, November 25,
1932, per Malcolm, J.

CHICO-NAZARIO, J.:

1
Mondano v. Silvosa, GR No. L-7708, 30 May 1955, 97 Phil. 143

2
J. Bernas, S.J. The Intent of the 1987 Constitution Writers, 1995 Ed., p. 812.

3
Id. at 818

4
Ibid.

5
Id. at 817-818.

6
In Reagan v. Commission on Internal Revenue (L-26379, 27 December 1969, 30
SCRA 968,973) the Court discussed the concept of auto-limitation in this wise: "It is to
be admitted that any State may by its consent, express or implied, submit to a restriction
of its sovereignty rights. That is the concept of sovereignty as auto-limitation which, in
 the succinct language of Jellinek, 'is the property of a state-force due to which it has the
exclusive capacity of legal-self determination and self-restriction.' A State then, if it
chooses to, may refrain from the exercise of what otherwise is illimitable competence."
See also Tañada v. Angara, GR No. 118295, 2 May 1997, 272 SCRA 18

7
Cf. Akbayan-Youth v. Commission on Elections, 355 SCRA 318 (2001).

8
Section 2, Rep. Act. No. 7942

9
Pilipinas Kao, Inc. vs. Court of Appeals, G.R. No. 105014, 18 December 2001, 372
SCRA 548

10
Aris (Phis.) Inc. v. National Labor Relations Commission, G.R. No. 90501, 05 August
1991, 200 SCRA 246

11
Ibid.

12
See Tanada v. Angara, 272 SCRA 18.

CARPIO, J.:

1
Philippine Mining Act of 1995.

2
Rollo, pp. 23–24.

3
Ibid., pp. 65-120. Then Executive Secretary Teofisto Guingona, Jr. signed the WMCP
FTAA on behalf of then President Fidel V. Ramos upon recommendation of then DENR
Secretary Angel C. Alcala.

4
Section 2, Article XII of the 1987 Constitution provides in full: "All lands of the public
domain, waters, 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. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The State may
directly undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by such citizens. Such agreements may
be for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and under such terms and conditions as may be provided by law. In cases of
water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fishworkers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with
this provision, within thirty days from its execution."
5
Chavez v. Public Estates Authority, 433 Phil. 506 (2002).

6
The only limitation is that the State cannot alienate its natural resources except for
agricultural lands. However, the State can exploit commercially its natural resources and
sell the marketable products from such exploitation. See note 12.

7
Article 441, Civil Code.

8
Section 1, Article XIII of the 1935 Constitution; Section 8, Article XIV of the 1973
Constitution.

9
Miners Association of the Philippines v. Hon. Factoran, Jr., et al., 310 Phil. 113 (1995).

10
Records of the Constitutional Commission, Vol. III, p. 260.

11
See note 7.

12
Hector de Leon, PHILIPPINE CONSTITUTIONAL LAW, Vol. 2, p. 804 (1999 Ed.).

13
See note 9.

14
Section 2, Article XII of the 1987 Constitution provides in part: "x x x With the
exception of agricultural lands, all other natural resources shall not be alienated."

15
Chapter XIV covers Sections 80 to 82 of RA 7942.

16
The five Mineral Production Sharing Agreements (Annexes A to F) attached to the 20
October 2004 Compliance of the Solicitor General uniformly contain the following
provision:

Share of the Government - The Government Share shall be the excise tax
on mineral products at the time of removal and at the rate provided for in
Republic Act No. 7729 amending Section 151(a) of the National Internal
Revenue Code, as amended, as well as other taxes, duties, and fees levied
by existing laws. (Emphasis supplied)

Clearly, the State's share is limited to taxes, duties and fees just like under the
old system of "license, concession or lease." See the (1) Mineral Production
Sharing Agreement between the Republic of the Philippines and Ungay-
Malobago Mines, Inc. and Rapu-Rapu Minerals, Inc. dated 12 September 2000;
(2) Mineral Production Sharing Agreement between the Republic of the
Philippines and Ungay-Malobago Mines, Inc. and TVI Resource Development
(Phils.), Inc. dated 17 June 1998; (3) Mineral Production Sharing Agreement
between the Republic of the Philippines and Base Metals Mineral Resources
Corporation (BMMRC) dated 20 November 1997; (4) Mineral Production Sharing
Agreement between the Republic of the Philippines and Philex Gold Philippines,
Inc. dated 29 December 1999 (MPSA No. 148-99XIII); and (5) Mineral
Production Sharing Agreement between the Republic of the Philippines and
Philex Gold Philippines, Inc. dated 29 December 1999 (MPSA No. 149-99-XIII).

17
Sections 144, 145 and 149, National Internal Revenue Code.

18
Commissioner of Internal Revenue v. Court of Appeals, 312 Phil. 337 (1995).

19
Memorandum dated 13 July 2004, p. 56.

20
Section 26, RA 7942.

21
Chapter XIV covers Sections 80 to 82 of RA 7942.
22
China Banking Corporation v. Court of Appeals, G.R. Nos. 146749 & 147938, 10 June
2003, 403 SCRA 634; City of Baguio v. De Leon, 134 Phil. 912 (1968).

23
The 1995 Implementing Rules and Regulations of RA 7942 attempt to limit the period
to five years. Thus, Section 236 of the Implementing Rules states that the "period of
recovery which is reckoned from the date of commercial operation shall be for a period
not exceeding five years or until the date of actual recovery, whichever comes first."
However, the succeeding sentence of Section 236 also states, "For clarification, the
Government's entitlement to its share shall commence after the FTAA contractor has
fully recovered its pre-operating, exploration and development stage expenses, inclusive
and the contractor's obligations under Chapter XXVII (on Taxes and Fees) of the rules
and regulations do not arise until this time." What the first sentence limits the succeeding
sentence cancels. The 1996 Revised Implementing Rules and Regulations of RA 7942
omit the clarificatory sentence.

24
Section 94(a) of RA 7942 guarantees the foreign contractor the "right to repatriate the
entire proceeds of the liquidation of the foreign investment in the currency in which the
investment was originally made and at the exchange rate prevailing at the time of
repatriation." Section 94(b) guarantees the "right to remit earnings from the investment in
the currency in which the foreign investment was originally made and at the exchange
rate prevailing at the time of remittance."

25
Memorandum dated 13 July 2004, p. 65.

26
Annex 8, Compliance of the Solicitor General dated 20 October 2004.

27
Fifth Whereas Clause, Occidental-Shell FTAA.

28
Section 1.1, Occidental-Shell FTAA.

29
Sections 7.3 and 7.4, Occidental-Shell FTAA.

30
Section 2.19, Occidental-Shell FTAA.

31
Sections 12.1 and 15.2, Occidental-Shell FTAA; Paragraph 4, Annex B on Accounting
Procedures.

32
Section 7.2, Occidental-Shell FTAA.

33
Section 6.1.i, Occidental-Shell FTAA.

34
Sections 2.16 and 2.17, Occidental-Shell FTAA.

35
Sections 2.24, 6.1.j, 6.3 and 8.1, Occidental-Shell FTAA.

36
Under Section 12.1 of the Occidental-Shell FTAA, the three-man arbitral panel
consists of the Philippine Government's nominee, Occidental-Shell's nominee, and a
third member mutually chosen by the nominees of the Government and Occidental-
Shell.

37
Intervenor CMP's Motion for Reconsideration dated 10 July 2004, p. 22.

38
Ibid.

39
Respondent WMCP's Memorandum dated 15 July 2004, p. 42.

40
Ibid.

41
See note 3.
42
The same provision appears in the FTAA between the Republic of the Philippines and
ARIMCO Mining Corporation dated 20 June 1994. ARIMCO, a domestic corporation
owned and controlled by an Australian mining company, does not need to pay the 60%
share of the Philippine Government in the mining revenues if ARIMCO's foreign parent
company sells 60% of ARIMCO's equity to a Philippine citizen or to a 60% Filipino
owned corporation. In such event, the share of the Philippine Government in the mining
revenues is ZERO percent. ARIMCO will only pay the Philippine Government the 2%
excise tax due on mineral products under a mineral production sharing
agreement. See Annex 5, Compliance of Solicitor General dated 20 October 2004.

43
Section 2.1 of the WMCP FTAA defines a "Qualified Entity" as an "entity that at the
relevant time is qualified to enter into a mineral production sharing agreement with the
Government under the laws restricting foreign ownership and equity in natural resource
projects."

44
Motion for Reconsideration dated 14 July 2004, p. 22.

45
Ibid., p. 20.

46
Ibid., p. 12.

47
Decision dated 27 January 2004.

48
Memorandum dated 14 April 2004, p.12.

49
Memorandum dated 15 July 2004, p. 42.

50
Section 10.2 (l), WMCP FTAA.

51
Article 441, Civil Code.

52
Section 2.1 of the WMCP FTAA allows WMCP to recover pre-operating expenses over
10 years from the start of commercial production.

53
Memorandum dated 13 July 2004, p. 65.

54
Section 9, Article XII of the 1987 Constitution.

55
Memorandum dated 13 July 2004, p. 60.

56
Ibid., p. 59.

57
Ibid., p. 65.

58
Section 151, National Internal Revenue Code.

59
DENR ADMINISTRATIVE ORDER NO. 56-99

SUBJECT: Guidelines Establishing the Fiscal Regime of Financial or Technical

Assistance Agreements Pursuant to Section 81 and other pertinent provisions of
Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995
(the "Mining Act"), the following guidelines establishing the fiscal regime of
Financial or Technical Assistance Agreements (FTAA) are hereby
promulgated.

SECTION 1. Scope

This Administrative Order is promulgated to:

a. Establish the fiscal regime for FTAAs which the Government and the FTAA
Contractors shall adopt for the large-scale exploration, development and
commercial utilization of mineral resources in the country; and

b. Provide for the formulation of a Pro Forma FTAA embodying the fiscal regime
established herein and such other terms and conditions as provided in the Mining
Act and the Implementing Rules and Regulations (IRR) of the Mining Act.

SECTION 2. Objectives

The objectives of this Administrative Order are:

a. To achieve an equitable sharing among the Government, both National and

Local, the FTAA Contractor and the concerned communities of the benefits
derived from mineral resources to ensure sustainable mineral resources
development; and

b. To ensure a fair, equitable, competitive and stable investment regime for the
large scale exploration, development and commercial utilization of minerals.

SECTION 3. Fiscal Regime of a Financial or Technical Assistance Agreement

The Financial or Technical Assistance Agreement which the Government and the
FTAA Contractor shall enter into shall have a Fiscal Regime embodying the
following provisions:

a. General Principles. The Government Share derived from Mining Operations

after the Date of Commencement of Commercial Production shall be determined
in accordance with this Section.

b. Occupation Fees. Prior to or upon registration of the FTAA and on the same
date every year thereafter, the Contractor shall pay to the concerned Treasurer
of the municipality(ies) or city(ies) the required Occupation Fee over the Contract
Area at the rate provided for by existing laws, rules and regulations.

c. Deductible Expenses. Allowable deductible expenses shall include all the

expenses incurred by the Contractor directly, reasonably and necessarily related
to the Mining Operations in the Contract Area in a Calendar Year during the
Operating Phase. Allowable deductible expenses shall include the following:

1. Mining, milling, transport and handling expenses together with smelting and
refining costs other than smelting and refining costs paid to third parties;

2. General and administrative expenses actually incurred by the Contractor in the

Philippines;

3. Consulting fees:

a) incurred within the Philippines for work related to the project

b) incurred outside the Philippines for work related to the project: Provided, That
such fees are justifiable and subject to the approval of the Director.

4. Environmental expenses of the Contractor including such expenses necessary

to fully comply with its environmental obligations as stipulated in the
environmental protection provision of the FTAA and in the IRR;

5. Expenses for the development of host and neighboring communities and for
the development of geoscience and mining technology as stipulated in the FTAA
and in the IRR together with the training costs and expenses referred to in the
FTAA;

6. Royalty payments to Claimowners or surface land owners relating to the

Contract Area during the Operating Phase;

7. Continuing exploration and mine development expenses within the Contract

Area after the pre-operating period;

8. Interest expenses charged on loans or such other financing-related expenses

incurred by the Contractor subject to the financing requirement in the FTAA,
which shall not be more than the prevailing international rates charged for similar
types of transactions at the time the financing was arranged, and where such
loans are necessary for the operations; and

9. Government taxes, duties and fees.

Ongoing Capital Expenditures shall be considered as capital expenses subject to

Depreciation Charges.

"Ongoing Capital Expenditures" shall mean expenses for approved acquisitions

of equipment and approved construction of buildings necessary for the Mining
Operations as provided in its approved Mining Project Feasibility Study.

"Depreciation Charges" means the annual non-cash deduction from the

Operating Income for the use of fixed assets that are subject to exhaustion, wear
and tear and obsolescence during their employment in a Mining Operation. Its
applicability and computation are regulated by existing taxation laws, the Mining
Act and the IRR. Incentives relating to depreciation allowance shall be in
accordance to the provisions of the Mining Act and the IRR.

"Operating Income" means the Gross Output less Deductible Expenses, while
"Gross Output" has the meaning ascribed to it in the National Internal Revenue
Code.

d. Payment of Government Taxes and Fees. The Contractor shall promptly pay
all the taxes and fees required by the Government in carrying out the activities
covered in the FTAA and in such amount, venue, procedure and time as
stipulated by the particular law and implementing rules and regulations governing
such taxes and fees subject to all rights of objection or review as provided for in
relevant laws, rules and regulations. In case of non-collection as covered by
Clause 3-g-1 of this Section, the Contractor shall follow the prevailing procedures
for availment of such non-collection in accordance with pertinent laws, rules and
regulations. Where prevailing orders, rules and regulations do not fully recognize
and implement the provisions covered by Clause 3-g-1 of this Section, the
Government shall exert its best efforts to ensure that all such orders, rules and
regulations are revised or modified accordingly.

e. Recovery of Pre-Operating Expenses. Considering the high risk, high cost and
long term nature of Mining Operations, the Contractor is given the opportunity to
recover its Pre-Operating Expenses incurred during the pre-operating period,
after which the Government shall receive its rightful share of the national
patrimony. The Recovery Period, which refers to the period allowed to the
Contractor to recover its Pre-Operating Expenses as provided in the Mining Act
and the IRR, shall be for a maximum of five (5) years or at a date when the
aggregate of the Net Cash Flows from the Mining Operations is equal to the
aggregate of its Pre-operating Expenses, reckoned from the Date of
Commencement of Commercial Production, whichever comes first. The basis for
determining the Recovery Period shall be the actual Net Cash Flows from Mining
Operations and actual Pre-Operating Expenses converted into its US dollar
equivalent at the time the expenditure was incurred.
"Net Cash Flow" means the Gross Output less Deductible Expenses, Pre-
Operating Expenses, Ongoing Capital Expenditures and Working Capital
charges.

f. Recoverable Pre-Operating Expenses. Pre-Operating Expenses for recovery

which shall be approved by the Secretary upon recommendation of the Director
shall consist of actual expenses and capital expenditures relating to the following:

1. Acquisition, maintenance and administration of any mining or exploration

tenements or agreements covered by the FTAA;

2. Exploration, evaluation, feasibility and environmental studies, production,

mining, milling, processing and rehabilitation,

3. Stockpiling, handling, transport services, utilities and marketing of minerals

and mineral products;

4. Development within the Contract Area relating to the Mining Operations;

5. All Government taxes and fees;

6. Payments made to local Governments and infrastructure contributions;

7. Payments to landowners, surface rights holders, Claimowners, including the

Indigenous Cultural Communities, if any;

8. Expenses incurred in fulfilling the Contractor's obligations to contribute to

national development and training of Philippine personnel;

9. Consulting fees incurred inside and outside the Philippines for work related
directly to the Mining Operations;

10. The establishment and administration of field and regional offices including
administrative overheads incurred within the Philippines which are properly
allocatable to the Mining Operations and directly related to the performance of
the Contractor's obligations and exercise of its rights under the FTAA;

11. Costs incurred in financial development, including interest loans payable

within or outside the Philippines, subject to the financing requirements required in
the FTAA and to a limit on debt-equity ratio of 5:1 for investments equivalent to
200 Million US Dollars or less, or for the first 200 Million US Dollars of
investments in excess of 200 Million US Dollars, or 8:1 for that part of the
investment which exceeds 200 Million US Dollars: Provided, That the interests
shall not be more than the prevailing international rates charged for similar types
of transaction at the time the financing was arranged;

12. All costs of constructing and developing the mine incurred before the Date of
Commencement of Commercial Production, including capital and property as
hereinafter defined irrespective as to their means of financing, subject to the
limitations defined by Clause 3-f-11 hereof, and inclusive of the principal
obligation and the interests arising from any Contractor's leasing, hiring,
purchasing or similar financing arrangements including all payments made to
Government both National and Local; and

13. General and administrative expenses actually incurred by the Contractor for
the benefit of the Contract Area.

The foregoing recoverable Pre-Operating Expenses shall be subject to

verification of its actual expenditure by an independent audit recognized by the
Government and chargeable against the Contractor.
g. Government Share.

1. Basic Government Share. The following taxes, fees and other such charges
shall constitute the Basic Government Share:

a) Excise tax on minerals;

b) Contractor's income tax;

c) Customs duties and fees on imported capital equipment;

d) Value added tax on the purchase of imported equipment, goods and services;

e) Withholding tax on interest payments on foreign loans;

f) Withholding tax on dividends to foreign stockholders;

g) Royalties due the Government on Mineral Reservations;

h) Documentary stamps taxes,

i) Capital gains tax;

j) Local business tax;

k) Real property tax,

l) Community tax;

m) Occupation fees;

n) All other local Government taxes, fees and imposts as of the effective date of
the FTAA;

o) Special Allowance, as defined in the Mining Act; and

p) Royalty payments to any Indigenous People(s)/Indigenous Cultural

Community(ies).

From the Effective Date, the foregoing taxes, fees and other such charges
constituting the Basic Government Share, if applicable, shall be paid by the
Contractor: Provided, That above items (a) to (g) shall not be collected from the
Contractor upon the date of approval of the Mining Project Feasibility Study up to
the end of the Recovery Period. Any taxes, fees, royalties, allowances or other
imposts, which should not be collected by the Government, but nevertheless paid
by the Contractor and are not refunded by the Government before the end of the
next taxable year, shall be included in the Government Share in the next taxable
year. Any Value-Added Tax refunded or credited shall not form part of
Government Share.

2. Additional Government Share. Prior to the commencement of Development

and Construction Phase, the Contractor may select one of the formula for
calculating the Additional Government Share set out below which the Contractor
wishes to apply to all of its Mining Operations and notify the Government in
writing of that selection. Upon the issuance of such notice, the formula so
selected shall thereafter apply to all of the Contractor's Mining Operations.

a) Fifty-Fifty Sharing of the Cumulative Present Value of Cash Flows. The

Government shall collect an Additional Government Share from the Contractor
equivalent to an amount which when aggregated with the cumulative present
value of Government Share during the previous Contract Years and the Basic
Government Share for the current Contract Year is equivalent to a minimum of
fifty percent (50%) of the Cumulative Present Value of Project Cash Flow before
financing for the current Contract Year. as defined below.

Computation. The computation of the Additional Government Share shall

commence immediately after the Recovery Period. If the computation covers a
period of less than one year, the Additional Government Share corresponding to
this period shall be computed pro-rata wherein the Additional Government Share
during the year shall be multiplied by the fraction of the year after recovery. The
Additional Government Share shall be computed as follows:

Project Cash Flow Before Financing and Tax ("CF") for a taxable year shall be
calculated as follows:

CF = GO - DE +I - PE - OC

Cumulative Present Value of Project Cash Flow ("CP") shall be the sum of the
present value of the cumulative present value of project cash flow during the
previous year (CP i-1 x 1.10) and the Project Cash Flow Before Financing and
Tax for the current year ("CF"), and shall be calculated as follows:

CP = (CP i-1 x 1.10)

Cumulative Present Value of Total Government Share Before Additional

Government Share ("CGB") shall be the sum of: the present value of the
cumulative present value of the Total Government Share during the previous
year (CGA i-J x 1.10), and the Basic Government Share for the current year
(BGS), and shall be calculated as follows:

CGB = (CGA i-1 x 1.10) + BGS

The Additional Government Share ("AGS") shall be:

If: CGB > CP x 0.5 then AGS = 0

If CGB < CP x 0.5 then AGS = [CP x 0.5] - CGB

Cumulative Present Value of Total Government Share (CGA):

CGA = CGB + AGS

where:

BGS = Basic Government Share shall have the meaning as described in Clause
3-g-1 hereof;

GO = Gross Output shall have the same meaning as defined in the National
Internal Revenue Code;

DE = Deductible Expenses shall have the meaning as described in Clause 3-c

hereof;

I = Interest payments on loans included in the Deductible Expenses shall be

equivalent to those referred to in Clause 3-c-8 hereof;

PE = unrecovered Pre-Operating Expenses;

OC = On-going Capital Expenditures as defined in Clause 3-c hereof;

CPi-1 = cumulative present value of project cash flow during the previous year;
and

CGA = cumulative present value of total Government Share during the previous
year.

b) Profit Related Additional Government Share. The Government shall collect an

Additional Government Share from the Contractor based on twenty-five percent
(25%) of the additional profits once the arithmetic average of the ratio of Net
Income After Tax To Gross Output as defined in the National Internal Revenue
Code, for the current and previous taxable years is 0.40 or higher rounded off to
the nearest two decimal places.

Computation. The computation of the Additional Government Share from

additional profit shall commence immediately after the Recovery Period. If the
computation covers a period of less than a year, the additional profit
corresponding to this period shall be computed pro-rata wherein the total
additional profit during the year shall be multiplied by the fraction of the year after
recovery.

The additional profit shall be derived from the following formula.:

If the computed average ratio as derived from above is less than 0.40:

Additional Profit = 0

If the computed average ratio is 0.40 or higher:

[NIAT-(0.40xGO)]

Additional Profit = ------------------------------

(1-ITR)

The Additional Government Share from the additional profit is computed using
the following formula:

Additional Government Share

From Additional Profit = 25% x Additional Profit

where:

NIAT = Net Income After Tax for the particular taxable year under consideration.

GO = Gross Output from operations during the same taxable year.

ITR = Income Tax Rate applied by the Bureau of Internal Revenue in computing
the income tax of the Contractor during the taxable year.

c) Additional Share Based from the Cumulative Net Mining Revenue. The
Additional Government Share for a given taxable year shall be calculated as
follows:

(i) Fifty percent (50%) of cumulative Net Mining Revenue from the end of the
Recovery Period to the end of that taxable year;

LESS
(ii) Cumulative Basic Government Share for that period as calculated under
Clause 3-g-1 hereof;

AND LESS (if applicable)

(iii) Cumulative Additional Government Share in respect of the period

commencing at the end of the Recovery Period and expiring at the end of the
taxable year immediately preceding the taxable year in question.

"Net Mining Revenue" means the Gross Output from Mining Operations during a
Calendar year less Deductible Expenses, plus Government taxes, duties and
fees included as part of Deductible Expenses.

3. Failure to Notify. If the Contractor does not notify the Government within the
time contemplated by Clause 3-g-2 of the formula for calculating the Additional
Government Share which the Contractor wishes to apply to all of its Mining
Operations, the Government shall select and inform the Contractor which option
will apply to the latter.

4. Filing and Payment of Additional Government Share. Payment of the

Additional Government Share shall commence after the Recovery Period. The
Additional Government Share shall be computed, filed and paid to the MGB
within fifteen (15) clays after the filing and payment of the final income tax return
during the taxable year to the Bureau of Internal Revenue. Late filing and
payment of the Additional Government Share shall be subject to the same
penalties applicable to late filing of income tax returns. The Contractor shall
furnish the Director a copy of its income tax return not later than fifteen (15) days
after the date of filing.

A record of all transactions relating to the computation of the Additional

Government Share shall be maintained by the Contractor and shall be made
available to the Secretary or his/her authorized representative for audit.

h. Sales and Exportation — The Contractor shall endeavor to dispose of the

minerals and by-products produced in the Contract Area at the highest
commercially achievable market price and lowest commercially achievable
commissions and related fees in the circumstances then prevailing and to
negotiate for sales terms and conditions compatible with world market conditions.
The Contractor may enter into long term sales and marketing contracts or foreign
exchange and commodity hedging contracts which the Government
acknowledges to be acceptable notwithstanding that the sale price of minerals
may from time to time be lower, or that the terms and conditions of sales are less
favorable, than those available elsewhere.

The Government shall be informed by the Contractor when it enters into a

marketing agreement with both foreign and local buyers. The Contractor shall
provide the Government a copy of the final marketing agreement entered into
with buyers subject to the confidentiality clause of the FTAA.

The Government shall be entitled to check and inspect all sales and exportation
of minerals and/or mineral products including the terms and conditions of all
sales commitments.

Sales commitments with affiliates, if any, shall be made only at prices based on
or equivalent to arm's length sales and in accordance with such terms and
conditions at which such agreement would be made if the parties had not been
affiliated, with due allowance for normal selling discounts or commissions. Such
discounts or commissions allowed the affiliates must be no greater than the
prevailing rate so that such discounts or commissions will not reduce the net
proceeds of sales to the Contractor below those which it would have received if
the parties had not been affiliated. The Contractor shall, subject to confidentiality
clause of the FTAA, submit to the Government evidence of the correctness of the
figures used in computing the prices discounts and commissions, and a copy of
the sales contract.

The Contractor undertakes that any mining, processing or treatment of Ore by

the Contractor shall be conducted in accordance with such generally accepted
international standards as are economically and technically feasible, and in
accordance with such standards the Contractor undertakes to use all reasonable
efforts to optimize the mining recovery of Ore from proven reserves and
metallurgical recovery of minerals from the Ore: Provided, That it is economically
and technically feasible to do so.

For purposes of this Clause 3-h, an affiliate of an affiliated company means:

a) any company in which the Contractor holds fifty percent (50%) or more
of the shares;

b) any company which holds fifty percent (50%) or more of the

Contractor's shares;

c) any company affiliated by the same definition in (a) or (b) to an

affiliated company of the Contractor is itself considered an affiliated
company for purposes of the FTAA;

d) any company which, directly or indirectly, is controlled by or controls, or

is under common control by the Contractor;

e) any shareholder or group of shareholders of the Contractor or of an

affiliated company; or

f) any individual or group of individuals in the employment of the

Contractor or of any affiliated company.

Control means the power exercisable, directly or indirectly, to direct or cause the
direction of the management and policies of a company exercised by any other
company and shall include the right to exercise control or power to acquire
control directly or indirectly, over the company's affairs and the power to acquire
not less than fifty percent (50%) of the share capital or voting power of the
Contractor. For this purpose, a creditor who lends, directly or indirectly, to the
contractor, unless he has lent money to the Contractor in the ordinary course of
money-lending business, may be deemed to be a Person with power to acquire
not less than fifty percent (50%) of the share capital or voting power of the
Contractor if the amount of the total of its loan is not less than fifty percent (50%)
of the total loan capital of the company. cdll

If a person ("x") would not be an affiliate of an affiliated company ("y") on the

basis of the above definition but would be an affiliate if each reference in that
definition to "fifty percent (50%)" was read as a reference to "forty percent (40%)"
and the Government has reasonable grounds for believing that "x" otherwise
controls "y" or "x" is otherwise controlled by "y," then, upon the Contractor being
notified in writing by the Government of that belief and the grounds therefore, "x"
and "y" shall be deemed to be affiliates unless the Contractor is able to produce
reasonable evidence to the contrary.

i. Price or Cost Transfers. The Contractor commits itself not to engage in

transactions involving price or cost transfers in the sale of minerals or mineral
products and in the purchase of input goods and services resulting either in the
illegitimate loss or reduction of Government Share or illegitimate increase in
Contractor's share. If the Contractor engages affiliates or an affiliated company in
the sale of its mineral products or in providing goods, services, loans or other
 forms of financing hereunder, it shall do so on terms no less than would be the
case with unrelated persons in arms-length transactions.

SECTION 4. Pro Forma FTAA Contract

The fiscal regime provided herein, and the terms and conditions provided in the
Mining Act and IRR shall be embodied in a Pro Forma FTAA Contract to be
prepared by the Department of Environment and Natural Resources. The Pro
Forma FTAA Contract shall also incorporate such other provisions as the DENR
may formulate as a result of consultations or negotiations conducted for that
purpose with concerned entities.

The Pro Forma FTAA Contract shall be used by the DENR, the Negotiating
Panel and the mining applicant for negotiation of the terms and conditions of the
FTAA: Provided, That the terms and conditions provided in the Pro Forma FTAA
Contract shall be incorporated in each and every FTAA.

SECTION 5. Status of Existing FTAAs

All FTAAs approved prior to the effectivity of this Administrative Order

shall remain valid and be recognized by the Government: Provided, That
should a Contractor desire to amend its FTAA, it shall do so by filing a
Letter of Intent (LOI) to the Secretary thru the Director. Provided, further,
That if the Contractor desires to amend the fiscal regime of its FTAA, it may
do so by seeking for the amendment of its FTAA's whole fiscal regime by
adopting the fiscal regime provided hereof: Provided, finally, That any
amendment of an FTAA other than the provision on fiscal regime shall
require the negotiation with the Negotiating Panel and the recommendation
of the Secretary for approval of the President of the Republic of the
Philippines.

SECTION 6. Repealing Clause

All orders and circulars or parts thereof inconsistent with or contrary to the
provisions of this Order are hereby repealed, amended or modified accordingly.

SECTION 7. Effectivity

This Order shall take effect fifteen (15) days upon its complete publication in
newspaper of general circulation and fifteen (15) days after registration with the
Office of the National Administrative Register.

(SGD.) ANTONIO H. CERILLES

Secretary

60
G.R. Nos. L-18843 & 18844, 29 August 1974; Supra, note 77.

61
323 Phil. 297 (1996).

62
112 Phil. 24 (1961).

63
156 Phil. 498 (1974).

64
Ruben E. Agpalo, STATUTORY CONSTRUCTION, p. 217 (1998 Ed.), citing
Commissioner of Customs v. Court of Appeals, G.R. No. 33471, 31 January 1972, 43
SCRA 192; Asturias Sugar Central, Inc. v. Commissioner of Customs, G.R. No. 19337,
30 September 1969, 29 SCRA 617; People v. Kottinger, 45 Phil. 352 (1923).

65
Section IX of the WMCP FTAA, entitled "Option to Convert into MPSA," provides:
 9.1 The Contractor may, at any time, give notice to the Secretary of its intention to
convert this Agreement either in whole or in part into one or more Mineral
Production Sharing Agreements in the form of the Agreement annexed hereto in
Annexure B ("the MPSA") over such part or parts of the Contract Area as are
specified in the notice.

66
The five Mineral Production Sharing Agreements (Annexes A to F) attached to the 20
October 2004 Compliance of the Solicitor General are: (1) Mineral Production Sharing
Agreement between the Republic of the Philippines and Ungay-Malobago Mines, Inc.
and Rapu-Rapu Minerals, Inc. dated 12 September 2000; (2) Mineral Production Sharing
Agreement between the Republic of the Philippines and Ungay-Malobago Mines, Inc.
and TVI Resource Development (Phils.), Inc. dated 17 June 1998; (3) Mineral
Production Sharing Agreement between the Republic of the Philippines and Base Metals
Mineral Resources Corporation (BMMRC) dated 20 November 1997; (4) Mineral
Production Sharing Agreement between the Republic of the Philippines and Philex Gold
Philippines, Inc. dated 29 December 1999 (MPSA No. 148-99XIII); and (5) Mineral
Production Sharing Agreement between the Republic of the Philippines and Philex Gold
Philippines, Inc. dated 29 December 1999 (MPSA No. 149-99-XIII).

67
p. 1140, 2003 Edition.

68
Cebu Portland Cement Company v. Municipality of Naga, Cebu, et al., 133 Phil. 695
(1968).

69
Resins, Inc. v. Auditor General, 134 Phil. 697 (1968).

70
Luzon Surety Co., Inc. v. De Garcia, et al., 140 Phil. 509 (1969); Quijano, et al. v.
Development Bank of the Phils., et al., 146 Phil. 283 (1970); Chartered Bank Employees
Association v. Ople, No. L-44717, 28 August 1985, 138 SCRA 273.

71
Motion for Reconsideration dated 14 July 2004, p. 22.

72
Ibid., p. 20.

73
Ibid., p. 12.

74
Memorandum dated 15 July 2004, p. 42.

75
www.malampaya.com

76
Ibid.

77
157 Phil. 608 (1974).

CARPIO MORALES, J.:

1
421 SCRA 148 (2004).

2
Section 3 (aq); Section 23; Sections 33-41; Section 56; Section 81, pars. 2-3; and
Section 90.

3
Rep. Act No. 7942 (1995).

4
In its Motion for Intervention, intervenor PCM alleged that the Court's January 27, 2004
Decision in this case would adversely affect the ability of domestic mining companies to
contract with their foreign counterparts with regard to mining operations beyond the
resources of the local companies. (Rollo, at 2096.)

5
Transcript of Stenographic Notes, June 29, 2004 (TSN) at 129.
6
Rules of Court, Rule 18, sec. 7.

7
La Buga-B'Laan Tribal Association, Inc. v. Ramos, 421 SCRA 148 (2004).

8
Id. at 173-174.

9
Id. at 234.

10
Memorandum (In support of WMCP's Motion and Supplemental Motion for
Reconsideration) at 42-43.

11
Final Memorandum for the Petitioners at 9.

12
Angara v. Electoral Commission, 63 Phil. 139, 156-158 (1936).

13
Bengson v. Senate Blue Ribbon Committee, 203 SCRA 767, 775-776 (1991).

14
Const., art. VIII, sec. 1.

15
Tañada v. Cuenco, 103 Phil. 1051, 1067 (1957).

16
Valmonte v. Belmonte, Jr., 170 SCRA 256, 268 (1989).

17
Ibid.

18
Francisco, Jr. v. House of Representatives, 415 SCRA 44, 143-151 (2003).

19
Ibid.

20
Vide: La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 207-208.

21
Memorandum for WMCP at 37.

22
Id. at 38.

23
Id. at 39.

24
Ibid.

25
Memorandum for Public Respondents at 34.

26
Id. at 37.

27
Id. at 21.

28
Id. at 22.

29
Rollo at 1373-1374.

30
Memorandum for Public Respondents at 24.

31
Ibid.

32
Id. at 25.

33
Id. at 23.

34
Memorandum for Intervenor at 7.
35
Statement for Intervenor at 1.

36
Memorandum for Intervenor at 9.

37
Vide: Black's Law Dictionary 156 (6th ed., 1991).

38
Article 1440 of the Civil Code provides:

Art. 1440. A person who establishes a trust is called a trustor; one in whom
confidence is reposed as regards property for the benefit of another person is
known as the trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary.

Justice Jose C. Vitug (ret.) describes a trust relationship as follows:

A trust is a juridical relationship that exists between one person having the
equitable title or beneficial enjoyment of property, real or personal, and another
having the legal title thereto. The person who establishes the trust is the trustor
(or grantor); one in whom confidence is reposed as regards property for the
benefit of another person is known as the trustee (fiduciary), and the person for
whose benefit the trust has been created is referred to as the beneficiary (cestui
que trust). The Code has adopted the principles of the general law of trusts,
insofar as they are not in conflict with its provisions, the Code of Commerce, the
Rules of Court and special laws. [III J.C. Vitug Civil Law 175 (2003); citations
omitted]

39
Vide: Black's Law Dictionary 156 (6th ed., 1991).

40
Const. art. II, sec. 1.

41
Memorandum for Petitioners at 11.

42
Memorandum for WMCP at 59.

43
Oposa v. Factoran, Jr., 224 SCRA 792, 803 (1993).

44
Vide: Miners Association of the Philippines, Inc. v. Factoran, Jr., 240 SCRA 100, 106
(1995).

45
Vide: Rep. Act No. 7942 (1995), sec. 26 (c).

46
Memorandum for Public Respondents at 49.

47
For instance an article written by Patricia Thompson describes the 1996 Marcopper
environmental disaster:

Between 2.4 and 4 million tons of tailings solids escaped from an open pit
impoundment at Marcopper's copper mine on the island of Marinduque in the
Philippines on March 24, 1996, when a concrete drainage plug gave way. The
sediment-laden water flowed into the Boac River system at rates of 5 to 10 cubic
meters per second. Although "independent studies by the United Nations and the
Philippine Department of Science and Technology have concluded that the
escaped material is not toxic," the increased sediment load in the Boac River led
to substantial salt and freshwater kills. An impact assessment estimated that ten
years would elapse before freshwater fish would be viable in the river again and
predicted a seventy percent reduction in the "salt water fish catch from the mouth
of the Boac River," however, there are some indications that this initial estimate
may be too high. Although the Boac River itself is not a drinking water source,
the release threatened potable water supplies along the banks of the river and
necessitated airdrops of food and medical supplies. [P. Thompson, II. Mining
 Criminal Sanctions Sought in Philippine Mine Tailings Spill, 1996 Colo. J. Int'l
Envt'l. l. & Pol'y 54 (1996).]

48
Vide: Oposa v. Factoran, Jr., supra.

49
II J. Aruego, The Framing of the Philippine Constitution 605-606 (1949); vide: La
Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 192, note 111.

50
Vide: Pres. Decree No. 87 (Amending Presidential Decree No. 8 issued on October 2,
1972, and Promulgating an Amended Act to Promote the Discovery and Production of
Indigenous Petroleum and Appropriate Funds therefor), Pres. Decree No. 151 (Allowing
Citizens of the Philippines or Corporations or Associations at least Sixty Per Centum of
the Capital of which is Owned by such Citizens to Enter into Service Contracts with
Foreign Persons, Corporations for the Exploration, Development, Exploitation or
Utilization of Lands of the Public Domain, amending for the purpose certain provisions of
Commonwealth Act No. 141), Pres. Decree No. 463 (Providing for A Modernized System
of Administration and Disposition of Mineral Lands and to Promote and Encourage the
Development and Exploitation thereof), and Pres. Decree No. 1442 (An Act to Promote
the Exploration and Development of Geothermal Resources).

51
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 199-205 & 233, note 252.

52
Id. at 234.

53
Caltex (Philippines), Inc. v. Court of Appeals, 212 SCRA 448, 463 (1992).

54
Capati v. Ocampo, 113 SCRA 794, 796 (1982).

55
Const., art. XII, sec. 2, first par.

56
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 208 & 218-222.

57
TSN at 37-40.

58
http://dictionary.reference.com/search?q=either

59
Ibid.

60
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 252-253.

61
Laurel v. Civil Service Commission, 203 SCRA 195, 209 (1991).

62
III Record of the Constitutional Commission 316-317.

63
Id. at 358-359.

64
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 224.

65
I Draft Proposal of the 1986 U.P. Law Constitution Project, Article XV at 12 -13.

66
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 217-218.

67
Id. at 208 & 218-222.

68
Vide: Section 1 ("No person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied of the equal protection of the laws.");
Section 4 ("No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the government
for redress of grievances."); Section 5 ("No law shall be made respecting an
establishment of religion, or prohibiting the exercise thereof. The free exercise and
enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed. No religious test shall be required for the exercise of civil or political
rights.")

69
I Draft Proposal of the 1986 U.P. Law Constitution Project, Article XV at 11-12.

70
P. A. Agabin, Service Contracts: Old Wines in New Bottles?, II Draft Proposal of the
1986 U.P. Law Constitution Project 16, cited in La Bugal-B'Laan Tribal Association, Inc.
v. Ramos, supra at 229.

71
A case omitted is to be held as intentionally omitted. [Black's Law Dictionary 219
(6th ed., 1991)]

72
371 SCRA 196 (2001).

73
Id. at 205.

74
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 220.

75
The expression of one thing is the exclusion of another. [Black's Law Dictionary 581
(6th ed., 1991)]

76
Vide: Canet v. Decena, G.R. No. 155344, January 20, 2004; Commissioner of Internal
Revenue v. Michel J. Lhuiller Pawnshop, Inc., 406 SCRA 178, 186 (2003); National
Power Corporation v. City of Cabanatuan,401 SCRA 259, 280 (2003); Malinias v.
Commission on Elections, 390 SCRA 480, 491 (2002); Integrated Bar of the Philippines
v. Zamora, 338 SCRA 81, 109 (2000); People v. Mamac, 332 SCRA 547, 556
(2000); Mathay, Jr. v. Court of Appeals, 320 SCRA 703, 711 (1999); Miranda v.
Abaya, 311 SCRA 617, 624 (1999); City Government of San Pablo, Laguna v. Reyes,
305 SCRA 353, 361 (1999); Centeno v. Villalon-Pornillos, 236 SCRA 197, 203
(1994); Phil. American Life Insurance Company v. Ansaldo, 234 SCRA 509, 515
(1994); Commissioner of Customs v. Court of Tax Appeals, 224 SCRA 665, 669-670
(1993); Ledesma v. Court of Appeals, 211 SCRA 753, 760 (1992); Montoya v. Escayo,
171 SCRA 442, 448 (1989); Singapore Airlines Local Employees Association v.
NLRC, 130 SCRA 472, 479 (1984); Vera v. Fernandez, 89 SCRA 199, 203
(1979); Central Barrio v. City Treasurer of Davao, 23 SCRA 6, 9 (1968); Catuiza v.
People, 13 SCRA 538, 542 (1965); Ursal v. Court of Tax Appeals, 101 Phil. 209, 212
(1957); Vega v. Mun. Board of the City of Iloilo, 94 Phil. 949, 953 (1954); Sotto v.
Commission on Elections, 76 Phil. 516, 530 (1946).

77
That which is expressed makes that which is implied to cease. [Black's Law Dictionary
581 (6th ed., 1991)]

78
Vide: Canet v. Decena, G.R. No. 155344, January 20, 2004; Malinias v. Commission
on Election 390 SCRA 480, 491 (2002); National Electrification Administration v.
Commission on Audit, 377 SCRA 223, 232 (2002); Espiritu v. Cipriano, 55 SCRA 533,
538 (1974).

79
Comm. Villegas' response that there was no requirement in the 1973 Constitution for a
law to govern service contracts and that, in fact, there were then no such laws is
inaccurate. The 1973 Charter required similar legislative approval, although it did not
specify the form it should take: "The Batasang Pambansa, in the national interest, may
allow such citizens … to enter into service contracts …" As previously noted in this
Court's Decision of January 27, 2004, however, laws authorizing service contracts were
actually enacted by presidential decree [i.e. Presidential Decree No. 87 (Amending
Presidential Decree No. 8 issued on October 2, 1972, and Promulgating an Amended
Act to Promote the Discovery and Production of Indigenous Petroleum and Appropriate
Funds therefore), Pres. Decree No. 151 (Allowing Citizens of the Philippines or
Corporations or Associations at least Sixty Per Centum of the Capital of which is Owned
by such Citizens to Enter into Service Contracts with Foreign Persons, Corporations for
the Exploration, Development, Exploitation or Utilization of Lands of the Public Domain,
amending for the purpose certain provisions of Commonwealth Act No. 141), Pres.
Decree No. 463 (Providing for a Modernized System of Administration and Disposition of
Mineral Lands and to Promote and Encourage the Development and Exploitation
thereof), and Pres. Decree No. 1442 (An Act to Promote the Exploration and
Development of Geothermal Resources)]

80
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 233-234.

81
Id. at 224.

82
III Record of the Constitutional Commission 260.

83
224 SCRA 792 (1993).

84
Id. at 811-813.

85
III Record of the Constitutional Commission 319.

86
Rollo at 2779.

87
TSN at 181-186.

88
Memorandum for Public Respondents, Annex 1.

89
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 227-234.

90
Statement for Intervenor, p. 2.

91
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 206; vide: Miners
Association of the Philippines v. Factoran, 240 SCRA 100, 104 (1995).

92
P. A. Agabin, Service Contracts: Old Wines in New Bottles?, II Draft Proposal of the
1986 U.P. Law Constitution Project 3-4.

93
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 227-228 citing
Agabin, supra, at 15-16.

94
Ibid.

95
Rep. Act No. 7942 (1995), secs. 35 (g), sec. 3 (af).

96
Id., sec. 3 (q).

97
Id., sec. 3 (j).

98
Id., sec. 3 (az).

99
Id., sec. 33.

100
Id., sec. 72.

101
Id., sec. 73.

102
Id., sec. 74.

103
Id., sec. 75.

104
Id., sec. 76.
105
Id., sec. 35 (h).

106
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 195.

107
Vide: Pres. Decree No. 87, sec. 8 (c), (e) and (f).

108
The DENR Secretary is also empowered to charge fines for late or non-submission of
reports under Section 111 of the Mining Act, but the majority opinion either overlooked
this provision or considered it too insubstantial to be able to compel enforcement of the
law and its implementing rules.

109
Section 108 provides a criminal penalty for violation of the terms and conditions of an
environmental compliance certificate, but this remedy is judicial and not administrative.
In any event, what is the likelihood of a Philippine court acquiring criminal jurisdiction
over the person of the foreign corporate officers of the foreign FTAA contractor who may
be responsible for such violations?

110
Const., art. XII, sec. 20.

111
Rep. Act. No. 7653 (1993), sec. 29.

112
Id. sec. 30

113
Id. sec. 37.

114
Const. art. XIII, sec. 3.

115
Pres. Decree No. 442 as amended.

116
Id. art. 128 (b).

117
Id. art. 263 (g).

118
Rep. Act No. 8424 (1997), sec. 115.

119
Id. sec. 206.

120
Id. sec. 207.

121
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 196.

122
Vide: Pres. Decree No. 87, sec. 8 (k) and sec. 9 (e).

123
National Power Corporation v. Province of Albay, 186 SCRA 198, 207 (1990).

124
Progressive Development Corporation v. Quezon City, 172 SCRA 629, 635 (1989).

125
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 236.

126
Guidelines Establishing the Fiscal Regime of financial or Technical Assistance
Agreements.

127
Section 3 (g) (1) of DAO 99-56 provides:

Section 3. Fiscal Regime of a Financial or Technical Assistance Agreement

xxx

g. Government Share.
 1. Basic Government Share. The following taxes, fees and other such charges
shall constitute the Basic Government Share:

a) Excise tax on minerals;

b) Contractor's income tax;

c) Customs duties and fees on imported capital equipment;

d) Value added tax on the purchase of imported equipment, goods and

services;

e) Withholding tax on interest payments on foreign loans;

f) Withholding tax on dividends to foreign stockholders;

g) Royalties due the Government on Mineral Reservations;

h) Documentary stamps taxes;

i) Capital gains tax;

j) Local business tax;

k) Real property tax;

l) Community tax;

m) Occupation fees;

n) All other local Government taxes, fees and imposts as of the effective
date of the FTAA;

o) Special Allowance, as defined in the Mining Act; and

p) Royalty payments to any Indigenous People(s)/Indigenous Cultural

Community (ies).

From the Effective Date, the foregoing taxes, fees and other such charges
constituting the Basic Government Share, if applicable, shall be paid by the
Contractor: Provided, That above items (a) to (g) shall not be collected from the
Contractor upon the date of approval of the Mining Project Feasibility Study up to
the end of the Recovery Period. Any taxes, fees, royalties, allowances or other
imposts, which should not be collected by the Government, but nevertheless paid
by the Contractor and are not refunded by the Government before the end of the
next taxable year, shall be included in the Government Share in the next taxable
year. Any Value-Added Tax refunded or credited shall not form part of
Government Share.

128
Section 3 (g) (2) of DAO 99-56 provides:

2. Additional Government Share. Prior to the commencement of Development

and Construction Phase, the Contractor may select one of the formula for
calculating the Additional Government Share set out below which the Contractor
wishes to apply to all of its Mining Operations and notify the Government in
writing of that selection. Upon the issuance of such notice, the formula so
selected shall thereafter apply to all of the Contractor's Mining Operations.

xxx
129
Section 3 (g) (2) (1) of DAO 99-56 provides:

a) Fifty-Fifty Sharing of the Cumulative Present Value of Cash Flows. The

Government shall collect an Additional Government Share from the Contractor
equivalent to an amount which when aggregated with the cumulative present
value of Government Share during the previous Contract Years and the Basic
Government Share for the current Contract Year is equivalent to a minimum of
fifty percent (50%) of the Cumulative Present Value of Project Cash Flow before
financing for the current Contract Year, as defined below.

Computation. The computation of the Additional Government Share shall

commence immediately after the Recovery Period. If the computation covers a
period of less than one year, the Additional Government Share corresponding to
this period shall be computed pro-rata wherein the Additional Government Share
during the year shall be multiplied by the fraction of the year after recovery. The
Additional Government Share shall be computed as follows:

Project Cash Flow Before Financing and Tax ("CF") for a taxable year shall be
calculated as follows:

CF = GO - DE + I - PE - OC

Cumulative Present Value of Project Cash Flow ("CP") shall be the sum of the
present value of the cumulative present value of project cash flow during the
previous year (CP i-1 x 1.10) and the Project Cash Flow Before Financing and
Tax for the current year ("CF"), and shall be calculated as follows:

CP = (CP i-1 x 1.10) + CF

Cumulative Present Value of Total Government Share Before Additional

Government Share ("CGB") shall be the sum of: the present value of the
cumulative present value of the Total Government Share during the previous
year (CGAi-1 x 1.10), and the Basic Government Share for the current year
(BGS), and shall be calculated as follows:

CGB = (CGA i-1 x 1.10) + BGS

The Additional Government Share ("AGS") shall be:

If: CGB > CP □ 0.5 then AGS = 0

If: CGB < CP □ 0.5 then AGS = [ CP x 0.5 ] - CGB

Cumulative Present Value of Total Government Share (CGA):

CGA = CGB + AGS

where:

BGS = Basic Government Share shall have the meaning as

described in Clause 3-g-1 hereof;

GO = Gross Output shall have the same meaning as defined in

the National Internal Revenue Code;

DE = Deductible Expenses shall have the meaning as

described in Clause 3-c hereof;

 I = Interest payments on loans included in the Deductible

Expenses shall be equivalent to those referred to in Clause 3-c-8 hereof;

PE = unrecovered Pre-Operating Expenses;

OC = On-going Capital Expenditures as defined in Clause 3-c

hereof;

CP i-1 = cumulative present value of project cash flow during the

previous year; and

CGAi-1 = cumulative present value of total Government Share

during the previous year.

130
Section 3 (g) (2) (2) of DAO 99-56 provides:

b) Profit Related Additional Government Share. The Government shall collect an

Additional Government Share from the Contractor based on twenty-five percent
(25%) of the additional profits once the arithmetic average of the ratio of Net
Income After Tax To Gross Output as defined in the National Internal Revenue
Code, for the current and previous taxable years is 0.40 or higher rounded off to
the nearest two decimal places.

Computation. The computation of the Additional Government Share from

additional profit shall commence immediately after the Recovery Period. If the
computation covers a period of less than a year, the additional profit
corresponding to this period shall be computed pro-rata wherein the total
additional profit during the year shall be multiplied by the fraction of the year after
recovery.

The additional profit shall be derived from the following formula:

If the computed average ratio as derived from above is less than 0.40:

Additional Profit = 0

If the computed average ratio is 0.40 or higher:

[NIAT-(0.40 x GO)]

Additional Profit = ------------------------

( 1 - ITR )

The Additional Government Share from the additional profit is computed using
the following formula:

Additional Government Share

From Additional Profit = 25% x Additional Profit

where:

NIAT = Net Income After Tax for the particular taxable year under consideration.

GO = Gross Output from operations during the same taxable year.

 ITR = Income Tax Rate applied by the Bureau of Internal Revenue in computing
the income tax of the Contractor during the taxable year.

131
Section 3 (g) (2) (3) of DAO 99-56 provides:

c) Additional Share Based from the Cumulative Net Mining Revenue. The
Additional Government Share for a given taxable year shall be calculated as
follows:

(i) Fifty percent (50%) of cumulative Net Mining Revenue from the end of the
Recovery Period to the end of that taxable year;

LESS

(ii) Cumulative Basic Government Share for that period as calculated under
Clause 3-g-1 hereof;

AND LESS (if applicable)

(iii) Cumulative Additional Government Share in respect of the period

commencing at the end of the Recovery Period and expiring at the end of the
taxable year immediately preceding the taxable year in question.

"Net Mining Revenue" means the Gross Output from Mining Operations during a
Calendar year less Deductible Expenses, plus Government taxes, duties and
fees included as part of Deductible Expenses.

132
Republic Act No. 8424 as amended.

133
The 40% equity of the foreign stockholders in a 60-40 Filipino corporation would
translate to a 24% (40% x 60%) beneficial interest in the corporation undertaking the
MPSA.

134
Of course, the 60% Filipino equity in a 60-40 Filipino corporation could also be held
by another 60-40 Filipino corporation or corporations, further diluting actual Filipino
beneficial interest and increasing foreign beneficial interest.

135
As noted in the Decision (La Bugal-B'Laan Tribal Association, Inc., supra at 212-213),
unlike E.O. 279, the Mining Act does not define "large-scale" in terms of capital
expenditure although this was evidently the way it was understood by the 1986
Constitutional Commission. (vide: III Records of the Constitutional Commission 255).

In fact, the Mining Act does not categorically define "large-scale" at all. However,
a comparison of the maximum areas for exploration in Section 22 for Exploration
Permits (400 meridional blocks onshore for corporations), Section 28 for Mineral
Agreements (200 meridional blocks for corporations) and Section 34 for FTAAs
(1,000 meridional blocks for corporations) indicates that "large-scale" under the
Mining Act refers to the size of the contract area.

It is only Section 56 of DAO 40-96 that any reference to the US$50,000,000.00

minimum capital investment prescribed by E.O. 279 is made.

136
Applying the formula in Section 56 (a) of DAO 40-96 and assuming: (1) the foreign
FTAA contractor began with the maximum contract area of 1,000 meridional blocks
onshore, (2) an exploration period of 6 years and (3) compliance with Section 60 of DAO
40-96 on relinquishment of areas covered by FTAA.

The figure for an exploration period of 10 years is US$ 4.8 million. The figure for
a 20-year exploration period is US$ 7.7 million.
 One meridional block is equivalent to 81 hectares. (Website of the Philippine
Mines and Geosciences Bureau www.mgb.gov.ph/epprimer.htm)

137
SECTION 23. Rights and Obligations of the Permittee. — An exploration
permit shall grant to the permittee, his heirs or successors-in-interest, the right
to enter, occupy and explore the area: Provided, That if private or other parties
are affected, the permittee shall first discuss with the said parties the extent,
necessity, and manner of his entry, occupation and exploration and in case of
disagreement, a panel of arbitrators shall resolve the conflict or disagreement.

The permittee shall undertake an exploration work on the area as specified by its
permit based on an approved work program.

Any expenditure in excess of the yearly budget of the approved work program
may be carried forward and credited to the succeeding years covering the
duration of the permit. The Secretary, through the Director, shall promulgate
rules and regulations governing the terms and conditions of the permit.

The permittee may apply for a mineral production sharing agreement, joint
venture agreement, co-production agreement or financial or technical assistance
agreement over the permit area, which application shall be granted if the
permittee meets the necessary qualifications and the terms and conditions
of any such agreement: Provided, That the exploration period covered by the
exploration permit shall be included as part of the exploration period of the
mineral agreement or financial or technical assistance agreement. (Emphasis
supplied)

138
SECTION 24. Declaration of Mining Project Feasibility. — A holder of an exploration
permit who determines the commercial viability of a project covering a mining area may,
within the term of the permit, file with the Bureau a declaration of mining project
feasibility accompanied by a work program for development. The approval of the
mining project feasibility and compliance with other requirements provided in this
Act shall entitle the holder to an exclusive right to a mineral production sharing
agreement or other mineral agreements or financial or technical assistance agreement.
(Emphasis supplied)

139
Sections 17-30 of DAO 40-96 on exploration permits contains absolutely no minimum
requirement for ground expenditures, much less the minimum required investment of
US$ 50,000,000.00 for development, infrastructure and utilization.

140
Vide: note 20.

141
Memorandum for WMCP, p. 2.

142
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 176.

143
287 SCRA 465, 474 (1998). The Constitution prohibits non-Filipinos from acquiring or
holding title to private lands or to lands of the public domain, except only by way of legal
succession.

144
Id. at 475.

145
In 1997 Bre-X, a large Canadian mining firm, was found to have inflated the
prospective amount of gold deposits in its Busang, Indonesia mining operation by
"salting" and tampering with gold samples taken from the site. After news of the gold
salting scam had broken out, Bre-X's share price fell by almost 90%. [W. Symonds & M.
Shari, 'After Bre-X, Gold's Glow is Gone' Available at
http:// www.businessweek.com/1997/15/b352267.htm]

146
In January, 2004, 20% of Royal Dutch/Shell's reserves of oil and gas were
reclassified from "proven" to merely "probable" or other even less certain categories. As
a result, Shell's share prices fell by 7% ['Shell shock' Available at
http:// www.economist.co.uk/business/PrinterFriendly.cfm?Story_ID=2354469]

147
Memorandum for Petitioners at 14.

148
Memorandum for WMCP at 67.

149
US$ 4,000,000.00 or approximately P224,000,000.00.

150
Memorandum for WMCP at 16.

151
Id. at 67.

152
At the prevailing rate of exchange, the US$10,000,000.00 selling price of WMC's
shares in WMCP is worth approximately P560,000,000.00.

153
TSN at 155-156; Memorandum for WMCP at 60-61.

154
La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 176.

155
Id. at 243-245.

156
Memorandum for WMCP at 5.

157
Civil Code, art. 1350.

158
Section 8.3 provides:

If the Secretary gives a Rejection Notice the Parties shall promptly meet and
endeavour to agree on amendments to the Work Programme or budget. If the
Secretary and the Contractor fail to agree on the proposed revision within
30 days from delivery of the Rejection Notice then the Work Programme or
Budget or variation thereof proposed by the Contractor shall be deemed
approved, so as not to unnecessarily delay the performance of this Agreement.
(Emphasis supplied; Rollo, p. 92-93.)

159
Civil Code, art. 1409 (1).

160
Id. art. 1352.

161
Id. art. 1409.

162
R.A. No. 7942, sec. 33.

163
Id, sec. 35 (e).

164
3.3. This Agreement shall be renewed by the Government for a further period of
twenty-five (25) years under the same terms and conditions provided that the Contractor
lodges a request for renewal with the Government not less than sixty (60) days prior to
the expiry of the initial terms of this Agreement and provided that the Contractor is not in
breach of any of the requirements of this Agreement.

165
http://en.wikipedia.org/wiki/Open-pit_mining htm.

166
Webster's Third New International Dictionary 1579 (1976).

167
http://riot.ieor.berkeley.edu/riot/Applications/OPM/OPMDetails.html.

168
http://www.mine-
engineer.com/mining/open_pit.htm; http://en.wikipedia.org/wiki/Open-pit_mining htm.
 169
http://www.mcq.org/roc/en/exploitation/exploitation_2_1_2.html.

TINGA, J.:

1
SECTION 2. All lands of the public domain, waters, 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. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as
may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, beneficial use may be the
measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters,
territorial sea, and exclusive economic zone, and reserve its use and enjoyment
exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by

Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fishworkers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations

involving either technical or financial assistance for large-scale
exploration, development, and utilization of minerals, petroleum, and other
mineral oils according to the general terms and conditions provided by law,
based on real contributions to the economic growth and general welfare of
the country. In such agreements, the State shall promote the development
and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution. (Emphasis
supplied)

2
Each time Sec. 2 is hereafter mentioned, it is understood to be Sec. 2, Art. XII of the
Constitution.

3
"The Philippines is a democratic and republican State. xxx" See Section 1, Article II,
Constitution. "Republicanism, in so far as it implies the adoption of a representative type
of government, necessarily points to the enfranchised citizen as a particle of popular
sovereignty and as the ultimate source of the established authority." Moya v. Del Fierro,
69 Phil. 199, 204 (1939), See also Badelles v. Cabili, 136 Phil. 383, 395-396 (1969).

4
Section 1, Article VII of the Constitution states: "The executive power shall be vested in
the President of the Philippines."

5
See Section 17, Article VII, Constitution, which reads: "The President shall have control
of all the executive departments, bureaus and offices. He shall ensure that the laws be
faithfully executed."

6
See Section 18, Article VII, Constitution, which begins: "The President shall be the
Commander-in-Chief of all armed forces of the Philippines and whenever it becomes
necessary, he may call out such armed forces to prevent or suppress lawless violence,
invasion or rebellion. xxx"

7
G.R. No. 88211, 27 October 1989, 178 SCRA 760.
8
Id. at 764. Citing the eminent American legal scholar Laurence Tribe, who notes that
US jurisprudence makes clear "that the constitutional concept of inherent power is not a
synonym for power without limit; rather, the concept suggests only that not all powers
granted in the Constitution are themselves exhausted by internal enumeration, so that,
within a sphere properly regarded as one of "executive" power, authority is implied
unless there or elsewhere expressly limited." Ibid.

9
Justice Irene Cortes, who penned the Court's decision in Marcos v. Manglapus, has
opined elsewhere on the grant of plenary executive powers on the President, "[who]
personifies the executive branch. There is a unity in the executive branch absent from
the two other branches of government. The president is not the chief of many
executives. He is the executive. His direction of the executive branch can be more
immediate and direct than the United States president because he is given by express
provision of the constitution control over all executive departments, bureaus and offices."
I. Cortes, The Philippine Presidency: A Study of Executive Power, pp. 68-69; cited in
Sanlakas v. Executive Secretary et al., G.R. Nos. 159086, 159103, 159185, 159196, 3
February 2004.

10
"This case is unique. It should not create a precedent, for the case of a dictator forced
out of office and into exile after causing twenty years of political, economic and social
havoc in the country and who within the short space of three years seeks to return, is in
a class by itself." Marcos v. Manglapus, supra note 7, at 682.

11
Id. at 692. See also supra note 8. In light of the U.S. Supreme Court decision in the
famed Steel Seizure case, Youngstown Sheet v. Sawyer, supra note 2, and the
competing analyses of Justice Black (whose "formalist" approach led to rigid
categorization of separate legislative, executive and judicial functions), and Justices
Frankfurter and Jackson (who opted for a more flexible, functional approach), Gunther
and Sullivan note that "[m]uch scholarly commentary on separation of powers has
endorsed the functional approach, and cite this following argument for the "functional"
view: "When the Constitution confers power, it confers power on the three generalist
political heads of authority, not on branches as such. [Its] silence about the shape of the
inevitable, actual government was a product both of drafting compromises and of the
explicit purpose to leave Congress free to make whatever arrangements it deemed
'necessary and proper' for the detailed pursuit of government purposes." G. Gunther and
K. Sullivan, Constitutional Law (14th ed., 2001), at 342; citing Strauss, "Formal and
Functional Approaches to Separation of Powers Questions – A Foolish Inconsistency,"
72 Corn.L.Rev. 488 (1987).

Another analysis is proferred by Chemerinsky, who acknowledges that the debate on

inherent presidential power has existed "from the earliest days of the country." E.
Chemerinsky, Constitutional Law: Principles and Policies (2nd ed., 2002), at 329. In
analyzing the U.S. Supreme Court's divided opinions in the seminal case of Youngstown
Sheet, supra note 2, he notes that while the majority opinion of Justice Black seems to
deny the existence of any inherent presidential power, the concurring opinions of
Justices Douglas, Frankfurter and Jackson do seem to acknowledge the existence of
such power, albeit subject to proscription by the legislative branch. Chemerinsky also
notes that the view of inherent presidential authority had been affirmed in the earlier
case of U.S. v. Curtiss-Wright Export Corporation, 299 U.S. 304 (1936), which pertained
to the presidential power to conduct foreign policy. Id. at 334.

12
Ibid. See also Sanlakas v. Executive Secretary; supra note 9.

13
Iron and Steel Authority v. Court of Appeals, 319 Phil. 648, 658 (1995).

14
Apropos to the nature of the Filipino presidency is the following comment on the U.S.
presidency by an American historian, "As our Chief of State, and as such the
embodiment of the people's elective will, the President is clad with the prerogative of the
office, and possesses more actual sovereign power than any British king since George
III. In his role as Chief of Foreign Relations, from the beginning he has been the sole
organ of the nation in its external relations, and its sole representative with foreign
nations. While the Senate must advise and consent to any treaty, the President has
exclusive initiative in their negotiation." G.F. Milton, The Use of Presidential Power:
1789-1943 (1980 ed.), at 3.

15
Section 1, Article VIII, Constitution enables the courts to determine whether or not
there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the executive, a duty which is made easier if there is a specifically prescribed
constitutional standard which warrants obeisance by the executive branch.

16
See Secs. 21 and 22, Art. VI, Const., which read:

Sec. 21. The Senate or the House of Representatives or any of its respective
committees may conduct inquiries in aid of legislation in accordance with its duly
published rules of procedure. The rights of persons appearing in or affected by
such inquiries shall be respected.

Sec. 22. The heads of departments may upon their own initiative, with the
consent of the President, or upon the request of either House, as the rules of
each House shall provide, appear before and be heard by such House or any
matter pertaining to their departments. Written questions shall be submitted to
the President of the Senate or the Speaker of the House of Representatives at
least three days before their scheduled appearance. Interpellations shall not be
limited to written questions, but may cover matters related thereto. When the
security of the State or the public interest so requires and the President so states
in writing, the appearance shall be conducted in executive session.

17
See Section 2, Article XII, Constitution, which states in part, "All lands of the public
domain, waters, 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." An offshoot of the long-standing Regalian doctrine recognized
in this jurisdiction.

18
"The exploration, development, and utilization of natural resources shall be under the
full control and supervision of the State." Id.

19
The so-called "Jamir amendment," proposed by Commissioner Alberto M.K. Jamir,
which read "The President may enter into agreements with foreign-owned corporations
involving either technical or financial assistance for large-scale exploration, development
and utilization of natural resources according to the general terms and conditions
provided by law based on real contributions to the long-term growth of the economy." 3
Record of the Constitutional Commission: Proceedings and Debates (1987), at 351.

20
Id. at 356.

21
Indeed, since 1973 when the service contract system for petroleum was implemented,
the government has earned over 1.882 Billion Pesos and 10.160 Billion Pesos in
revenues from oil and natural gas production, respectively. Based on data provided by
the Department of Energy.

22
Paragraph 5, Sec. 2, Art. XII. It provides: The President shall notify the Congress of
every contract entered into in accordance with this provision, within thirty days from its
execution.

23
See Section 9, Article XIV, 1973 Constitution.

24
Resolution, p. 26.

25
Per Jackson, J., concurring, Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579
(1952).
26
The following exchanges during the debates of the 1987 Constitutional Commission
indicate that the absence of domestic capital for mineral and petroleum development
was duly considered by the framers.

MR. GASCON. As far as investment is concerned in developing certain priority

areas for our economic development, are there areas where there is much need
for foreign investments?

MR. VILLEGAS. During the public hearings, we heard people from the mining
and oil exploration industries, who presented a very strong case, that foreign
investment is actually indispensable because there is no risk capital available in
the Philippines. If the Gentleman will remember, the figure cited over the last ten
years is that P800 million literally went down the drain in oil exploration and up to
now, no oil has been found, and all that money was foreign money. These people
asked a rhetorical question: Can you imagine if that money belonged to
Filipinos? 3 Record of the Constitutional Commission: Proceedings and Debates
(1987), at 310.

xxx

MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals,

petroleum and mineral oils. The Commission has just approved the possible
foreign entry into the development, exploration and utilization of these minerals,
petroleum and other mineral oils by virtue of the Jamir amendment. I voted in
favor of the Jamir amendment because it will eventually give way to vesting in
exclusively Filipino citizens and corporations wholly owned by Filipino citizens the
right to utilize the other natural resources. This means that as a matter of policy,
natural resources should be utilized and exploited only by Filipino citizens or
corporations wholly owned by such citizens. But by virtue of the Jamir
amendment, since we feel that Filipino capital may not be enough for the
development and utilization of minerals, petroleum and other mineral oils, the
President can enter into service contracts with foreign corporations precisely for
the development and utilization of such resources. 3 Record of the Constitutional
Commission: Proceedings and Debates (1987), at 361.

27
Invalidity of provisions which do not adequately assert constitutional rights or
prerogatives need not always be the proper remedy, considering, as Justice Vitug noted
in his separate opinion in this case, that "[t]he fundamental law is deemed written in
every contract." Vitug, J., Separate Opinion, La Bugal-B'laan Tribal Association, Inc. v.
Ramos, G.R. No. 127882, 27 January 2004.

28
N. Hamilton, The Iron Range Resources and Rehabilitation Board: An Unconstitutional
and Confused Delegation of Executive Power to Legislators, 25 William Mitchell Law
Rev. 1204, 1235 (1999).

29
The following traditional observation of John Thurston, as cited in a periodical article,
bears noting:

[Thurston] explained that the day-to-day administration of the corporation should

be independent of the executive and the legislature, but "[I]n matters of general
and public policy, the corporation must necessarily be subject to executive and
legislative control." In addition to having control over "general and public policy,"
the executive and legislature also should monitor the efficiency of the public
corporation. However, Thurston perceived a dilemma in balancing the need "to
ensure that the corporation functions efficiently and without waste," and the
problem of "preventing unnecessary interference with details of administration."
xxx Id., at 1231.

30
Interpretatio talis in ambiguis simper fienda est, ut evitur inconveniens et
absurdum. Where there is ambiguity, such interpretation as will avoid inconvenience and
absurdity is to be adopted. Cosico v. NLRC, 338 Phil. 1080, 1089
(1997); citing Commissioner of Internal Revenue v. TMX Sales, Inc., 205 SCRA 184,
188 (1992).

31
United Nations Technical Assistance Administration, Some Problems in the
Organization and Administration of Public Enterprise in the Industrial Field 8 (1954),
cited in Hamilton, supra note 35, at 1230. "As long as an enterprise is not clearly
differentiated from other types of governmental activity, strong pressures will be brought
to make it conform to standard government regulations and procedures." Ibid.

32
Id. at 1228.

33
Ibid.

34
The employment of the corporate entity was suggested by Neil W. Hamilton, a
Professor of Regulatory Policy in the William Mitchell College of Law, in his article
analyzing the effectiveness and economic efficiency of a government board for the
rehabilitation iron mines in Minnesota, U.S.A. which were being depleted. Professor
Hamilton proffered the view that the executive and the legislative branches of
government would have control over the general and public policy concerning the
operation of iron mines and should monitor the efficiency of the public corporation
created to take care of the operation of iron mines, but the corporation, through its board
of directors and officers, would have control over day-to-day operations. ("The Iron
Range Resources and Rehabilitation Board: An Unconstitutional and Confused
Delegation of Executive Power to Legislators," 25 William Mitchell Law Review 1203
[1999] ).

35
The following perspective from sectors not affiliated with the business community
deserve contemplation:

"Creating a favorable investment climate for foreign mining companies has led to
new social problems, namely human rights problems and dislocation of
indigenous peoples. The country has experienced incidents of armed violence
from mining guards and military personnel assigned to assist the mining
companies. Indigenous tribes have been displaced as military operations
facilitate the entry of corporations into mining areas. Mining operations are
severely infringing on communities and their livelihoods. In 1996, a mining
tailings spill from the Marcopper tailing dam in Marinduque seriously polluted the
Boac River and Calancan Bay on which the local communities depend."
See http://www.foe.org/camps/intl/imf/selling/asia4.html.

"At risk to the peoples of the Philippines is their remaining patrimony and
economic sovereignty. Mining legislation opens up the country to further foreign
domination and control. It perpetuates the semi-feudal, semi-capitalist
neocolonial character of the economy. It is creating mass displacement,
especially of indigenous communities and upland farmers. Foreign companies
have an abominable history of creating environmental disasters as well, and
turning virgin forests and clean water sources and farming lands into wastelands
and deserts. They also have a terrible reputation for excessive exploitation of
workers and mass unemployment. Finally, foreign owned mines will bring
militarization as the owners will guard mining areas." B.J. Warden, at
http://www.canadianliberty.bcca/relatedinfo/miningco.html.