LA BUGAL B’LAAN TRIBAL ASSOCIATION INC., et. al. v. V. O.

RAMOS, Secretary
Department of Environment and Natural Resources; H. RAMOS, Director, Mines and
Geosciences Bureau (MGB-DENR); R. TORRES, Executive Secretary; and WMC
(PHILIPPINES) INC.

The constitutional provision allowing the President to enter into FTAA is an exception to the rule
that participation in the nation’s natural resources is reserved exclusively to Filipinos. Provision
must be construed strictly against their enjoyment by non-Filipinos.
RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA
7942, or on March 30, 1995, the President signed a Financial and Technical Assistance Agreement
(FTAA) with WMCP, a corporation organized under Philippine laws, covering close to 100,000
hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August
15, 1995, the Environment Secretary Victor Ramos issued DENR Administrative Order 95-23,
which was later repealed by DENR Administrative Order 96-40, adopted on December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government
and WMCP be declared unconstitutional on ground that they allow fully foreign owned
corporations like WMCP to exploit, explore and develop Philippine mineral resources
in contravention of Article XII Section 2 paragraphs 2 and 4 of the Charter.
In January 2001, WMC – a publicly listed Australian mining and exploration company – sold its
whole stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of
which is owned by Indophil Resources, an Australian company. DENR approved the transfer and
registration of the FTAA in Sagittarius‘ name but Lepanto Consolidated assailed the same. The
latter case is still pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept,
consider and evaluate proposals from foreign owned corporations or foreign investors
for contracts or agreements involving wither technical or financial assistance for large scale
exploration, development and utilization of minerals which upon appropriate recommendation of
the (DENR) Secretary, the President may execute with the foreign proponent. WMCP likewise
contended that the annulmentof the FTAA would violate a treaty between the Philippines and
Australia which provides for the protection of Australian investments.

ISSUES:

1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned
corporations to exploit the Philippine mineral resources. 2. Whether or not the FTAA between the
government and WMCP is a ―service contract that permits fully foreign owned companies to
exploit the Philippine mineral resources.

HELD:

First Issue: RA 7942 is Unconstitutional

RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign
owned corporations to exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that
―All lands of the public domain, waters, minerals, coal, petroleum, and other minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State. The same section also
states that, ―the exploration and development and utilization of natural resources shall be under
the full control and supervision of the State.
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing
the State to grant licenses, concessions, or leases for the exploration, exploitation, development,
or utilization of natural resources. By such omission, the utilization of inalienable lands of the
public domain through license, concession or lease is no longer allowed under the 1987
Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the purpose
of exploiting a particular natural resource within a given area. The concession amounts
to complete control by the concessionaireover the country‘s natural resource, for it is given
exclusive and plenary rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase ―management or other forms of
assistance in the 1973 Charter. The present Constitution now allows only ―technical and financial
assistance. The management and the operation of the mining activities by foreign contractors, the
primary feature of the service contracts was precisely the evil the drafters of the 1987 Constitution
sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the rule
that participation in the nation‘s natural resources is reserved exclusively to Filipinos.
Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos.
Therefore, RA 7942 is invalid insofar as the said act authorizes service contracts. Although the
statute employs the phrase ―financial and technical agreements in accordance with the 1987
Constitution, its pertinent provisions actually treat these agreements as service contracts that grant
beneficial ownership to foreign contractors contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages the
mineral resources just like the foreign contractor in a service contract. By allowing foreign
contractors to manage or operate all the aspects of the mining operation, RA 7942 has, in effect,
conveyed beneficial ownership over the nation‘s mineral resources to these contractors, leaving
the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the
constitutionally ordained 60-40% capitalizationrequirement for corporations or associations
engaged in the exploitation, development and utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as conditions, considerations,
inducements or compensations for each other as to warrant a belief that the legislature intended
them as a whole, then if some parts are unconstitutional, all provisions that are thus dependent,
conditional or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to
merely technical or financial assistance to the State for large scale exploration, development and
utilization of minerals, petroleum and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional since
the agreement itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to
explore, exploit, utilize and dispose of all minerals and by-products that may be produced from the
contract area. Section 1.2 of the same agreement provides that EMCP shall provide all financing,
technology, management, and personnel necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken together, grant WMCP
beneficial ownership over natural resources that properly belong to the State and are intended for
the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are
precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress.
Consequently, the contract from which they spring must be struck down.

La Bugal-B’laan Tribal Association, Inc. Vs Ramos

Natural Resources and Environmental Laws

G.R. No. 127882; January 27, 2004

FACTS:
This petition for prohibition and mandamus challenges the constitutionality of Republic Act
No. 7942 (The Philippine Mining Act of 1995), its implementing rules and regulations and
the Financial and Technical Assistance Agreement (FTAA) dated March 30, 1995 by the
government with Western Mining Corporation(Philippines) Inc. (WMCP).
Accordingly, the FTAA violated the 1987 Constitution in that it is a service contract and is
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.

ISSUE:
What is the proper interpretation of the phrase “Agreements involving Either Technical or
Financial Assistance” contained in paragraph 4, Section 2, Article XII of the Constitution.

HELD:
The Supreme Court upheld 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.
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.