113206-2005-La Bugal B Laan Tribal Association v. Ramos20180410-1159-7zyul8 PDF

EN BANC
[G.R. No. 127882. February 1, 2005.]
LA BUGAL B'LAAN TRIBAL ASSOCIATION et al. , petitioners, vs .

RAMOS, et al. , respondents.
RESOLUTION
Gentlemen:
Quoted hereunder, for your information, is a resolution of the Court En Banc dated
February 1, 2005
Before the Court is petitioners' 38-page Motion for Reconsideration praying for the
reversal of this Court's Resolution promulgated on December 1, 2004, on the following
grounds:
"I
The assumption that Filipino-owned corporations cannot put up the capital

and that foreign-owned corporations are not willing to provide large amounts of
financial assistance are belied by the very facts of this case.
"II
The interpretation of paragraph four, section 2, article XII of the

Constitution practically negates the operation of the rst paragraph, section 2,
article XII of the Constitution.
"III
The interpretation in the Decision violates the constitutional requirement of

equitable sharing.
"IV
The 'control test' in the Decision is not in consonance with the requirement
of 'full control and supervision' required of the state considering that the kind of
service contracts during Martial Law has been reestablished and reinstated.
"V
The alleged transfer of the FTAA to TMRC is null and void because it
violates the fourth paragraph, section 2, article XII of the Constitution.
"VI
The provisions of the FTAA which were invalidated by the Decision dated
December 1, 2004 are not separable and are intrinsic to the agreements.
"VII
The 'closing out theory' of interpretation is not valid."
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A close perusal of the above issues and the discussions thereof shows that they are
a mere rehash of arguments and positions already raised and discussed extensively in the
246-page Resolution of December 1, 2004, penned by Justice Artemio V. Panganiban; as
well as in the 125-page Dissenting Opinion of Justice Antonio T. Carpio, the 100-page
Dissenting Opinion of Justice Conchita Carpio Morales, the 29-page Separate Opinion of
Justice Dante O. Tinga, and the 10-page Concurring Opinion of Justice Minita V. Chico-
Nazario.
Further discussion of these issues would not serve any useful purpose, as it would
merely repeat the same justi cations and reasons already taken up in the foregoing
Opinions, which tackled precisely those matters and even more; any further elucidations,
disquisitions and disputations would merely reiterate the same points already passed
upon. CSaITD
In regard to the present Dissenting Opinion of Justice Carpio, which in the main
attacks RA 7942 (the Mining Law), DAO 56-99 and the subject FTAA for allegedly limiting
"the equitable share of the State from the mining pro ts of the foreign contractor" (p. 46),
su ce it to reiterate that "the development of the mining industry [is] the responsibility of
the political branches of government. And let not this Court interfere inordinately and
unnecessarily." The issue of how much "pro t" the nation should or could derive from the
exploration, development and utilization of the country's mineral resources is a policy
matter, over which we "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," (pp. 240-241, Resolution dated December 1, 2004). That the
aforementioned law, executive issuance and contract had been declared constitutional will
not prevent Congress or the President or the parties to the FTAA from amending or
modifying them, if indeed, in their opinion they are unwise or wanting in any respect.
In any event, after a thorough deliberation on the Motion, none of the members of
this Court have changed their opinions or votes. Indeed, all the conceivable aspects of this
litigation —” factual, constitutional, legal, philosophical, technical, nancial, ecological,
environmental and technological —” have all been extensively taken up and addressed
during the Court's lengthy and purposeful debates and deliberations.
WHEREFORE, the Motion is DENIED with nality. The prayer for oral argument is
likewise DENIED. (Ynares-Santiago, Carpio, Morales, and Callejo Sr., JJ, maintain their
dissents; Azcuna, J, no part)
Separate Opinions
CARPIO , J., dissenting :
I dissent from the majority opinion and vote to grant petitioners' motion for
reconsideration of the Resolution of 1 December 2004.
First, DAO 56-99 operates to deprive the State of any share from the mining
revenues of foreign contractors under nancial and technical assistance agreements
(FTAAs). Second, DAO 56-99 is a usurpation by the Secretary of the Department of
Environment and Natural Resources (DENR) of the constitutional power of Congress to
prescribe the "general terms and conditions" 1 of FTAAs.
1. DAO 56-99 Does Not Give The Government Any Share
a. Like the WMCP FTAA, DAO 56-99 Gives a Sham Share to the State
In the Resolution of 1 December 2004, the majority assures the Filipino people that
DAO 56-99 gives them an equitable share in the mining revenues of FTAA contractors
under Section 81 of the Mining Act. 2 The majority further assures the Filipino people that
this equitable share under DAO 56-99 is "more than the usual taxes, duties and fees." Thus,
the majority guarantees the Filipino people, as the bene cial owner of the nation's mineral
resources, that under the Resolution of 1 December 2004 they will receive a fair share of
the revenues of foreigners who exploit the nation's mineral resources.
I disagree. The Resolution of 1 December 2004 legitimizes DAO 56-99. However,
DAO 56-99 makes it impossible for the State to receive any share from the mining
revenues of foreign contractors. DAO 56-99 is like the WMCP FTAA, which "guarantees" the
State a 60% share in the net mining proceeds of WMCP. However, on further scrutiny, the
WMCP FTAA cleverly takes away the 60% guaranteed share without any compensation to
the State. DAO 56-99 operates the same way. The conditions imposed by DAO 56-99
before the State can receive any share are simply impossible to fulfill.
b. The Impossible Conditions in DAO 56-99
DAO 56-99 provides three formulae, namely Options A, B and C, for determining the
State's share in the mining revenues of foreign contractors. The foreign contractor has the
sole option 3 to choose which formula to use. I will examine Option B, the option that
foreign contractors will most certainly choose.
In providing for Option B, Section 3(g)(2)(b) of DAO 56-99 states:
Additional Government Share. The Government shall collect an Additional
Government Share from the Contractor based on twenty- ve percent (25%) of the
additional pro ts once the arithmetic average of the ratio of Net Income After Tax
To Gross Output as de ned 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 pro t shall commence immediately after the Recovery Period. If the
computation covers a period of less than a year, the additional pro t
corresponding to this period shall be computed pro-rata wherein the total
additional pro t during the year shall be multiplied by the fraction of the year
after recovery. aDECHI
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 pro t 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.
Option B stipulates that the State's share shall consist of "twenty- ve percent (25%)
of the additional pro ts once the arithmetic average of the ratio" of the after-tax net
income to gross output for "the current and previous taxable years is 0.40 or higher." This
means four conditions must concur before the State can receive any share from the mining
revenues of the foreign contractor.
First, the foreign contractor's net income after tax must exceed 40% of its gross
output or sales. 4 Second, this extraordinary high-income ratio must average more than
40% of gross output over two consecutive years. Third, the State's share shall come only
from the excess of such 40% of gross output. Fourth, the State's share is only 25% of the
excess of such 40% of gross output.
The rst two conditions are impossible to achieve while the last two conditions are
grossly unfair to the State. An after-tax net income of 40% of gross sales means P40 of
after tax net income for every P100 of gross sales. Only P60 is left to answer for all
operating expenses, depreciation, interest expense, the 32% corporate income tax, the 2%
excise tax, and all other expenses. A 40% after tax net income on gross sales, two years
running, is highly extraordinary in the business world, and unheard of in the mining industry.
The net income after tax (NIAT), gross output (GO), and NIAT to GO ratio of the six
largest Philippine mining companies 5 for the last nine years are as follows:
APPLICATION OF OPTION B TO SIX LARGEST
PHILIPPINE MINING COMPANIES 6
(NIAT to GO RATIOS)
2003 2002 2001 2000 1999 1998 1997 1996 1995
Atlas -511 -345 -9.50 -10.14 -7.23 -9.08 na -2.52 -0.65

Benguet -1.61 -1.49 -2.15 -1.42 -1.37 -1.52 -1.43 -0.06 0.01
Lepanto -0.07 0.09 0.07 0.20 0.22 0.19 0.20 0.04 0.10
Marcopper -41839 -25302 -14156 -31178 -22099 na na na na
Philex -0.14 0.01 -0.45 0.06 -0.04 -0.39 na na na
Rio Tuba 0.23 0.06 0.10 0.17 0.00 0.17 0.27 0.22 0.23
Over the last nine years, the highest ratio resulting from the application of Option B
is 0.27 in 1997. The second highest ratio is 0.23 in 1995. Rio Tuba Nickel Mining
Corporation, the most pro table mining company in the Philippines, accounted for both
ratios which are, however, way below the trigger level of 0.40 in Option B. The highest two-
year average ratio of Rio Tuba Nickel Mining Corporation is only 0.25 for 1996 and 1997 ,
and its average ratio is only 0.16 over the nine-year period.
Lepanto Consolidated Mining Company, the second most pro table mining
company in the Philippines, attained its highest ratio at 0.22 in 1999 . Lepanto
Consolidated Mining Company had a highest two-year average ratio of only 0.21 in 1999
and 2000, and an average ratio of only 0.11 over the nine-year period. In short, in the last
nine years no mining company in the Philippines could satisfy the rst two conditions in
Option B —” a trigger level of 0.40 for two consecutive years.
The nine-year ratios of the six largest Philippine mining companies clearly show
beyond any doubt that the 0.40 trigger level in Option B is impossible to attain. If the
pro t-sharing formula in Option B is applied to mining companies operating in the
Philippines in the last nine years, the State will receive no share whatsoever in the mining
profits of the foreign contractor.
Even if applied to mining companies operating in other countries, the trigger level in
Option B is still impossible to achieve. For example, the 1995 to 2003 NIAT to GO ratios of
WMC Resources Ltd, the Australian mining company that owns or used to own respondent
WMCP, are as follows:
APPLICATION OF OPTION B
TO WMC RESOURCES LTD OF AUSTRALIA 7
(NIAT to GO RATIOS)
2003 2002 2001 2000 1999 1998 1997 1996 1995
WMC 0.08 -0.03 0.14 0.24 0.13 0.10 0.13 0.16 0.14
The average ratio of WMC Resources Ltd over the nine-year period is only 0.10 , and its
highest two-year average ratio is only 0.19 in 1999 and 2000 . Thus, even the parent or
former parent company of respondent WMCP could not meet the trigger level of 0.40 in
Option B in any year during the last nine years. The highest two-year average ratio of
0.19 of WMC Resources Ltd. is less than the highest two-year average ratio of 0.25 of
Rio Tuba Nickel Mining Corporation. The nine-year 0.10 average ratio of WMC
Resources Ltd is even lower than the 0.16 average ratio of Rio Tuba Nickel Mining
Corporation during the same period. WMC Resources Ltd. is the number one nickel
producer in Australia while Rio Tuba Nickel Mining Corporation is the number one nickel
producer in the Philippines. TcIHDa
The 1995 to 2003 NIAT to GO ratios of four of the world's largest mining companies
are as follows:
APPLICATION OF OPTION B
TO WORLD'S LARGEST MINING COMPANIES
(NIAT to GO RATIOS)
2003 2002 2001 2000 1999 1998 1997 1996 1995
Rio Tinto 8 0.16 0.07 0.13 0.19 0.17 0.09 0.16 0.15 0.15
Newmont 9 0.15 0.05 -0.03 0.00 0.01 -0.24 0.04 na na
Placer Dome 1 0 0.13 0.10 -0.10 -0.06 0.03 na na na na
Phelps Dodge 1 1 0.02 -0.09 -0.08 0.00 0.08 0.06 0.10 na na
These four mining companies have worldwide mining operations spanning several
continents.
The average ratio of Rio Tinto plc, the world's largest mining company, is only 0.14
over a nine-year period. The highest ratio of Rio Tinto is 0.19 in 2000 , and its highest two-
year average ratio only 0.18 in 1999 and 2000 . Newmont Mining Company, the largest gold
producer in the world, has an average ratio of only 0.02 over a seven-year period. The
highest ratio of Newmont Mining Company is only 0.15 in 2003 , and its highest two-year
average ratio is only 0.10 in 2002 and 2003 .
The average ratio of Placer Dome, Inc., one of the largest gold producers in the
world, is only 0.02 over a ve-year period. Placer Dome, Inc.'s highest ratio is only 0.13 in
2003, and its highest two-year average ratio is only 0.12 in 2002 and 2003. Phelps Dodge
Mining Company, the largest publicly listed copper producer in the world, has an average
ratio of only 0.01 over a seven-year period. The highest ratio of Phelps Dodge Mining
Company is only 0.10 in 1997 , and its highest two-year average ratio is only 0.08 in 1997
and 1998.
This merely con rms that the trigger level of 0.40 in Option B is beyond the reach of
any mining company of whatever size, whether local, foreign or with worldwide operations.
Obviously, the trigger level of 0.40 in DAO 56-99 is a target intended never to be achieved
so that the State will never receive any share in the foreign contractor's mining profits.
Mr. Benjamin M. De Vera, one of the proponents 1 2 of the formulae in DAO 56-99,
has written in a paper 1 3 that the 0.40 ratio in Option B is equivalent to a 20% return on
investment (ROI). 1 4 Mr. De Vera explains:
The trigger level of 0.40 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 Philippines is 15%. It was agreed upon that a return on
investment below 20% but not lower than 15% is normal pro t. If the project
reaches 20% or better, then it shall be considered as additional or excess pro ts .
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 proponents of DAO 56-99 consider pro ts not exceeding the trigger level of 0.40
as "normal pro ts." The proponents of DAO 56-99 have decreed that the State has no
right to share in the foreign contractor's "normal pro ts ." The proponents of DAO 56-99
allow the State a share only if the mining pro ts of the foreign contractor exceed the
trigger level of 0.40. The proponents of DAO 56-99 claim that the trigger level of 0.40 is
equivalent to a 20% ROI. In such event, the proponents of DAO 56-99 declare that the
State's share is only one-fourth of the pro ts in excess of the 0.40 trigger level or 20%
ROI.
The claim of Mr. Benjamin M. De Vera that a trigger level of 0.40 is equivalent to an
ROI of 20% is not supported by data from the Audited Financial Statements of the six
largest Philippine mining companies for the years 1995 to 2003. For example, the average
ratio of Rio Tuba Nickel Mining Corporation over the nine-year period is 0.16, and its
average ROI for the same period is 16%. Based on this, a NIAT to GO ratio of 0.40 for Rio
Tuba Nickel Mining Corporation should translate to an ROI of at least 40.7%.
Likewise, the average ratio of Lepanto Consolidated Mining Company over a seven-
year period 1 5 is 0.11 while its average ROI for the same period is 6%. Based on this, a ratio
of 0.40 for Lepanto Consolidated Mining Company should translate to an ROI of at least
21.8%. The industry data does not support Mr. De Vera's claim that a trigger level of 0.40 is
equivalent to a 20% ROI, which is signi cantly understated. What is apparent is that a ratio
of 0.40 implies an ROI significantly higher than 20%.
T h e admitted intent of the framers of DAO 56-99 is to prevent the State from
receiving any share if the foreign contractor's ROI is " normal." Even if the foreign
contractor's ROI is high or above normal, the intent of the framers of DAO 56-99 is still to
deprive the State of any share of the mining revenues. The framers of DAO 56-99 intended
to give the State a share only if the foreign contractor's ROI is extraordinarily high.
In its o cial publication A Response to the Issues Raised against Mining , 1 6 the
Mines and Geosciences Bureau (MGB) of the DENR has publicly admitted that the State is
entitled to a share only if the foreign contractor's pro ts are extraordinarily high. Thus, the
MGB states:
On the other hand, during periods of extraordinary pro tability, e.g., high metal
prices, the Government is entitled to a portion of such pro ts determined in
consultation with the Contractor. This share from the pro ts is the Additional
Government Share. The sharing is determined taking into consideration the
capital investment in the project, contribution to the economy, the community, the
local government, and the technical complexity of the project. (Emphasis and
underscoring supplied) EHSITc
Clearly, the MGB, the creator of DAO 56-99, never intended to give the State any
share if the foreign contractor's pro ts are normal or even high. Only if the foreign
contractor's pro ts are extraordinarily high may the State share in the mining revenues of
the foreign contractor. However, the extraordinarily high trigger level of 0.40, running for
two consecutive years, is impossible to achieve based on the historical performance of
mining companies in the Philippines and abroad.
The MGB's categorical admission that the State would share in the mining revenues
of the foreign contractor only in case of "extraordinary pro tability " is the "smoking gun"
that DAO 56-99 is grossly and manifestly disadvantageous to the government and the
Filipino people. The raison d'Ãªtre of DAO 56-99 betrays a callous intent to deprive the
State and Filipino people of their fair and rightful share in the mineral wealth of the nation.
On this score alone, even without applying Option B to the nancial results of mining
companies in the Philippines and abroad, this Court should declare DAO 56-99 void for
being manifestly and grossly disadvantageous to the government and the Filipino people.
Was it the intent of the framers of the 1987 Constitution that the Filipino people
should receive a share in the mining pro ts of the foreign contractor only in case of
"extraordinary pro tability "? Was it the intent of the framers of the 1987 Constitution that
the Filipino people should forego any share in case the foreign contractor's mining pro ts
are merely normal or even high? Obviously, this was never the intent of the framers of the
1987 Constitution for this would constitute betrayal of the national interest.
What is the legal basis of the MGB in deciding that the Filipino people deserve a
share in the mining pro ts of the foreign contractor only in case of " extraordinary
profitability"? The MGB "conceived and developed" DAO 56-99 without considering the
rights of the State as owner of the mineral resources. The MGB has placed the interest of
foreign contractors above the interest of the Filipino people. In a betrayal of public trust,
the MGB has deprived the Filipino people of any share from the normal and higher than
normal pro ts of foreign contractors. The MGB would concede to the Filipino people a
share only if the pro ts of the foreign contractor are miraculously extraordinary, and even
then at only one-fourth of every 1% percent of any extraordinary pro t. Without doubt, DAO
56-99 is grossly and manifestly disadvantageous to the government and the Filipino
people.
DAO 56-99 assumes that the Filipino people are entitled to share in the mining
pro ts of the foreign contractor only in case of " extraordinary pro tability ." The majority's
Resolution of 1 December 2004 puts the stamp of approval and legitimacy on DAO 56-99.
Is it also the intent of the majority of this Court that the Filipino people will share in the
mining profits of the foreign contractor only in case of "extraordinary profitability"?
The requirement of two consecutive years of extraordinary pro tability makes it
even harder for the State to receive any share given the historical volatility of metal prices.
The following graph showing the annual average gold and copper prices from 1991 to
2000 illustrates this volatility:
Free Market Metal Prices — 1991 to 2000 1 7
Gold Copper
YEAR London Final Grade A LME
US$/oz US$/lb
1991 362.18 1.06
1992 343.73 1.03
1993 359.77 0.87
1994 384.00 1.05
1995 383.98 1.33
1996 387.70 1.04
1997 331.10 1.03
1998 294.16 0.75
1999 278.77 0.75
2000 279.77 0.82
US$ = United States dollars

Source: British Columbia Ministry of Energy and Mines (MEM) Statistics
Gold and copper prices swing up and down, often preventing metal prices from
remaining extraordinarily high for two consecutive years. Gold and copper are two of
the three principal mineral exports of the country, in addition to nickel.
Assuming arguendo that the rst two conditions happen —” a NIAT to GO ratio of
0.40 running for two consecutive years —” the third and fourth conditions still limit the
State's share to 25% of the pro ts in excess of the 0.40 trigger level . In other words, for
every 4% additional pro ts in excess of the 0.40 trigger level, the State receives only 1%
share of the contractor's excess mining pro ts. Since it requires 4% additional pro ts for
the State to receive a 1% share, it will take an additional 40% of pro ts, in excess of the
profits corresponding to the trigger level of 0.40, for the State to receive a 10% share in the
excess mining pro ts. The excess pro ts over the trigger level of 0.40 refer to the pro ts
in excess of the rst 20% ROI if we follow the claim of Mr. Benjamin M. De Vera that a
trigger level of 0.40 is equivalent to a 20% ROI.
The ponente of the majority opinion has assured the En Banc that he has thoroughly
studied DAO 56-99, and that under DAO 56-99 the State will receive at least a 10% share in
the mining pro ts. For the State to receive a 10% share, the foreign contractor's ROI must
reach at least 50% per annum 1 8 for two consecutive years, if the trigger level of 0.40
equals 20% ROI as Mr. Benjamin M. De Vera claims. For the State to receive a 10% share
during the entire 50-year term of the FTAA —” a term the majority has ruled is valid —” the
foreign contractor must attain at least 50% ROI every year during the entire 50-year term of
the FTAA . Even an ordinary businessman with limited experience can tell that this is
impossible to achieve. aIHSEc
There is no mining company any where in the world that makes a 50% ROI every
year. The highest ROI that investment managers of mining funds promise investors on a
best efforts basis is an average of 20% ROI over a 10-year investment period. 1 9 This 20%
ROI, however, includes income from trading of mining shares in the stock market.
If the return is based solely on dividend income from equity investment, the rate of
return is much lower. The historical global return on equity (ROE) in the mining industry in
real terms is "just 5%" as stated in the World Mining Overview, thus:
However de ned, the industry as a whole needs to achieve returns that
exceed the cost of capital. In a paper entitled, "The Economic Performance of an
"Old" Industry: Mineral Extraction and Processing", Rob McDonald, Managing
Director of NM Rothschild & Sons (Australia) Limited, states that the mining
industry has generated an average compound real rate of return to shareholders
of just 5% over the past 25 years (McDonald, 2000). The paper further discusses
the real US dollar cost of capital for the mining industry over the past 25 years
has been between 7% and 8% per annum. Our industry clearly needs to improve if
it is to attract equity capital. 2 0 (Emphasis supplied)
No mining company in the Philippines in the last nine years has achieved a 50% ROI
even for one year. A 50% annual ROI during the 50-year term of an FTAA, as the majority
assures the Filipino people, is a pipe dream. The majority's reliance on DAO 56-99 to insure
an equitable share of the mining revenues for the Filipino people is a blunder of biblical
scale.
The majority praises the MGB and the DENR Secretary for their "admirable job of
conceiving and developing" 2 1 DAO 56-99. The world must be turning upside down. The
majority lavishes praise on those who formulate pro t-sharing schemes designed to
deprive the Filipino people of their fair and rightful share in the nation's mineral wealth. The
majority even legally sancti es such schemes and elevates them to statutory status just to
correct a constitutional in rmity in the Mining Act. The Filipino people will never
understand this.
b. DAO 56-99 is Grossly Disadvantageous to the Government
DAO 56-99 operates to deprive the State of its equitable share from mining
revenues. As owner of the mineral resources, the State must receive an equitable share
from mining revenues. The majority does not dispute this. However, by imposing
impossible conditions, DAO 56-99 gives all the mining revenues to the foreign contractor.
DAO 56-99 is grossly and manifestly disadvantageous to the State and the Filipino
people. DAO 56-99 is contrary to public policy 2 2 and contravenes the Anti-Graft and
Corrupt Practices Act. 2 3 DAO 56-99 is an insult to the Filipino people because it pretends
to give the Filipino people a fair share in mining revenues but in reality deprives them of any
share from such revenues. This Court must reject DAO 56-99 and declare it void.
c. DAO 56-99 Reinstates the "License, Concession or Lease" System
DAO 56-99 implements the intent of the Mining Act to limit the State's share in
mining operations only to taxes, duties and fees, the same taxes, duties and fees that
taxpayers who do not exploit mineral resources pay the government. DAO 56-99
implements the intent, plan and structure of the Mining Act, under its Sections 39, 80, 81,
84 and 112, to revert to the old system of "license, concession or lease" under the 1935
and 1973 Constitutions. The 1987 Constitution has abolished this discredited system. 2 4
This Court must reject any attempt to resurrect the old "license, concession or lease"
system.
d. Section 81 of Mining Act and DAO 56-99 Will Impoverish the Nation
The combined effect of Section 81 of the Mining Act and DAO 56-99 will impoverish
the Filipino people. The second and third paragraphs of Section 81 provide:
The Government share in nancial 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 nancial or technical assistance
agreement shall commence after the nancial or technical assistance agreement
contractor has fully recovered its pre-operating expenses, exploration, and
development expenditures, inclusive. (Emphasis and underscoring supplied)
Section 81 grants the foreign contractor the right to recover fully all its pre-
operating, exploration and development expenses. During this recovery period, which has
no time limit, the "collection of Government share" does not commence. During the
recovery period, the foreign contractor does not pay any tax, duty or fee to the
Government. The foreign contractor is exempt from corporate income tax, excise tax, "all . .
. other taxes, duties and fees," and even withholding tax on dividend or interest payments
to its stockholders! In short, during the recovery period, the Philippine government will not
collect a single centavo of tax, duty or fee from the foreign contractor and its
stockholders.
DAO 56-99 attempts to limit the foreign contractor's recovery period to ve years.
2 5 This violates the foreign contractor's statutory right to recover fully all its pre-operating,
exploration and development expenses if after the fth year the contractor still has not
fully recovered such expenses. DAO 56-99 cannot amend Section 81. DAO 56-99 cannot
truncate the foreign contractor's statutory right to recover fully all its pre-operating
expenses. SEIDAC
The average return on capital employed of mining companies worldwide in the last
four years is only 10.5%. 2 6 It will take the foreign contractor some 6 years 2 7 to recover
fully all its pre-operating, exploration and development expenses. During this 6-year
recovery period, the government cannot collect a single centavo of tax, duty or fee from
the foreign contractor and its stockholders. If the usual three-year pre-operating period 2 8
is counted, the total period that the government cannot collect any tax, duty or fee from the
foreign contractor and its stockholders extends to 9 years from the signing of the FTAA.
At least one President will have come and gone and still the State will not have
collected a single centavo of tax, duty or fee from the foreign contractor and its
stockholders. De nitely, no FTAA will contribute tax money to help solve the budget de cit
of the government, not for the next 9 years at least. Those who trumpet the Mining Act as
the solution to the current budget de cit have not studied thoroughly the Mining Act and
DAO 56-99.
During the recovery period, the government cannot collect even the State's share
under DAO 56-99. The State's share under DAO 56-99 does not run during the recovery
period, which can stretch to 9 years. When it does run, the collection of the State's share is
subject to the four conditions in Option B, which conditions are impossible to meet. In
sum, the State is deprived of any tax and revenue share during the 9-year recovery period.
After the recovery period, the State starts to collect the usual taxes but still cannot collect
any share from the mining revenues.
This is the sad fate of the Filipino people under the Court's Resolution of 1
December 2004. The combined effect of Section 81 of the Mining Act and DAO 56-99 is to
deprive the Filipino people of a fair share of their inheritance from the Creator —” the P47
trillion mineral wealth of the nation. This will impoverish further the Filipino people, many of
whom live below the poverty line. This Court should never allow such a tragedy to befall on
the Filipino people.
e . Government Cannot Dispute Operating Expenses of Foreign Contractor under DAO
56-99
Under DAO 56-99, the recovery of the foreign contractor's "pre-operating expenses"
is expressly subject to the approval of the DENR Secretary. 2 9 This insures that the foreign
contractor can deduct from the gross output or sales only actual, reasonable and
necessary pre-operating expenses.
However, DAO 56-99 does not require the DENR Secretary's approval of the foreign
contractor's operating expenses once commercial production begins. The only exception
is the amount of consulting fees incurred outside the Philippines, which requires the
approval of the MGB Director. 3 0 Capital expenses incurred after the start of commercial
production are not subject to approval if already included in the approved Mining Project
Feasibility Study. 3 1
There is no provision in DAO 56-99 allowing the DENR Secretary, after the start of
commercial production, to dispute the allowance of operating expenses or to submit such
dispute to arbitration. 3 2 The foreign contractor is free to deduct from the gross output all
operating expenses it wants to deduct. This will reduce the after tax net income of the
foreign contractor, bringing down further the NIAT to GO ratio . DAO 56-99 does not
protect the State from this eventuality. The State is left to the mercy of the foreign
contractor.
2. Congress Exercises the Power to Prescribe the General Terms of the Fiscal Regime
of FTAAs
The 1987 Constitution vests in Congress the power to prescribe the "general terms
and conditions" of FTAAs. The fourth paragraph of Section 2, Article XII of the 1987
Constitution provides:
The President may enter into agreements with foreign-owned corporations
involving either technical or nancial 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 scienti c
and technical resources. (Emphasis supplied)
The 1987 Constitution requires Congress to enact a law that prescribes the "general
terms and conditions" of FTAAs. The most important term or condition is the scal
regime of FTAAs, which must lay down clearly the share of the State in the mining
revenues of the foreign contractor.
As owner of the mineral resources, the State is entitled to a fair share in the mining
revenues of the foreign contractor. Such share is separate and distinct from the usual
taxes, duties and fees paid by taxpayers who do not exploit the State's mineral resources.
The usual taxes duties and fees are exactions by the State arising from its taxing power.
The share of the State in the mining revenues is the income of the State as owner of the
mineral resources. The right to receive a fair share in the mining revenues is an attribute of
ownership, not of the sovereign power to tax.
In enacting the Mining Act, Congress prescribed a scal regime that is
constitutionally de cient, both for FTAAs as well as for mineral production sharing
agreements (MPSAs). Sections 80 and 81 of the Mining Act limit the share of the State in
MPSAs and FTAAs to the usual taxes, duties and fees. The Mining Act does not require
FTAA or MPSA holders to pay the State any share from their mining revenues. Thus,
Sections 80 and 81 provide:
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. IASTDE
Section 81. Government Share in Other Mineral Agreements. —”

xxx xxx xxx
The Government share in nancial 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 nancial or technical assistance
agreement shall commence after the nancial or technical assistance agreement
contractor has fully recovered its pre-operating expenses, exploration, and
development expenditures, inclusive. (Emphasis supplied)
Section 80 expressly states that the "total government share in a mineral production
sharing agreement shall be the excise tax on mineral products." There are no ifs or buts.
The State is limited solely to the usual taxes, duties and fees. The State has no share
whatsoever in the mining revenues of MPSA holders. The Resolution of the majority,
however, skirts this issue by saying that Section 80 on MPSAs is not in issue in the present
case even though the WMCP FTAA is convertible to an MPSA any time at the sole option of
WMCP.
Section 81 of the Mining Act, which governs FTAAs, also limits the State's share to
the usual taxes, duties and fees. However, the Resolution of the majority points to the
phrase "among other things" in Section 81 as authority for the DENR Secretary to issue
DAO 56-99 prescribing the State's share in FTAAs. Apparently realizing the imsiness of
this theory, the majority subsequently advanced the argument that the President has the
power to prescribe the scal regime of FTAAs, and that the DENR Secretary issued DAO
56-99 in his capacity as the alter ego of the President.
The majority argues that since the 1987 Constitution authorizes the President to
enter into FTAAs, the President has the prerogative to specify certain terms and conditions
of the FTAAs. The Resolution of 1 December 2004 states:
. . . 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
t o specify certain terms and conditions of the FTAAs , for example, the scal
regime of FTAAs —” i.e., the sharing of the net revenues between the contractor
and the State. (Emphasis in the original; italics supplied)
This argument is patently baseless because the very provision of the 1987
Constitution authorizing the President to enter into FTAAs also states that the President
must enter into FTAAs " according to the general terms and conditions provided by law."
This particular phrase is rich in constitutional history.
The 1986 Constitutional Commission debated at length the power of the President
to enter into FTAAs in light of service contracts with foreign contractors entered into by
former President Ferdinand E. Marcos. One group of Commissioners favored the
concurrence of Congress to all FTAAs entered into by the President. Another group was
against Congressional concurrence but wanted Congress to prescribe the terms and
conditions governing FTAAs, with the understanding that President must strictly comply
with such terms and conditions. The following exchanges in the deliberations of the
Constitutional Commission are instructive:
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 contracts 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.
xxx xxx xxx
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 con ned to service contracts
but also to nancial 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 Commissioners 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 speci c area will have to be uniform. The
President has no choice but to follow all the guidelines that will be
provided by law. aCHDAE
xxx xxx xxx

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 that 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 nancial assistance for large-scale
exploration, development and utilization of natural resources or service
contracts, the people's elected representatives should be on top
xxx xxx xxx
MR. COLAYCO:
Thank you, Madam President.
I support in substance the position taken by Commissioners Gascon and Nolledo.

Let me point out the original thinking of the Committee itself. The second
paragraph of Section 3 reads: "The President with the concurrence of
Congress, by special law . . ." In other words, the original thinking of the
Committee here was really to put some safeguards, but it turned around
and agreed to delete the safeguards. These special contracts will probably
involve oil and mineral land explorations. These will, therefore, involve
millions.
One of the reasons given for the deletion of "the concurrence of Congress" is that
it may open the system to payola. This fear can also be entertained the
other way. The President acts only upon the advice of his advisers, and if
Congress can be bribed, a group of people can be bribed much more easily.
But I am not thinking of that; I am simply thinking of human error. Probably
Congress can anticipate the period, say, that the exploration should not
exceed a certain period, and set standards. But as to the share of our
government, for instance, there can easily be a mistake of judgment. There
is no way that Congress can anticipate the discretion that should be used
or the guidelines that should govern the thinking or the decision of the
President. And for this reason, I believe that some kind of a safeguard or
mechanism should be inserted in the system to obviate or at least reduce
the possibility that our government may be too negligent in accepting the
terms of the explorer. That is why I agree with the thinking of the two
Commissioners who spoke ahead of me that we should retain the original
plan of the Committee. However, personally, I would put it at a MAJORITY
of either the Lower House or the Upper House.
Those who were against Congressional concurrence to FTAAs won the argument.
Thus, under the 1987 Constitution, Congress prescribes the general terms and conditions
of FTAAs, and the President must strictly comply with such terms and conditions. Without
a law prescribing the terms and conditions of FTAAs, the President cannot enter into any
FTAA. The President on his own cannot prescribe the scal regime of FTAAs . The
following exchanges in the deliberations of the Constitutional Commission clearly bring
this out:
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 noti cation 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.

xxx xxx xxx
MR. DAVIDE:
To allow the execution of service contracts, there must be a law for said service
contracts.
MR. SUAREZ:
There must be a general law providing for the terms and conditions under which
particular service contracts can be entered into by the executive
department, Madam President.
MR. DAVIDE:

Yes, Madam President.
xxx xxx xxx
MR. SUAREZ:
As it is formulated, the President may enter into service contracts but subject to
the guidelines that may be promulgated by Congress? SEIcAD
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.

(Emphasis and italics supplied)
Contrary to the claim of the majority, the prerogative to prescribe the scal regime
of FTAAs does not belong to the President but to Congress. The clear intent of the framers
of the 1987 Constitution was to remove from the President the power to prescribe the
terms and conditions of FTAAs, a power that former President Ferdinand E. Marcos
exercised solely. The framers of the 1987 Constitution intentionally gave to Congress the
power to prescribe the terms and conditions of FTAAs, and to deny the President the
exercise of such powers.
The President can enter into FTAAs only within the terms and conditions prescribed
by Congress, in accordance with any delegated authority that Congress may include in the
enabling law. This is clear from the following exchange in the deliberations of the
Constitutional Commission:
THE PRESIDENT:
Commissioner Foz is recognized.
MR. FOZ:
May we just add the word GENERAL to describe "terms and conditions" because
Congress cannot be expected to lay down detailed terms and conditions
for the contracts to be entered into between the executive department and
the foreign-owned corporation. Congress can only lay down general
guidelines.
MR. ROMULO:
The Gentleman wants to add the word "GENERAL"?

MR. FOZ:
Yes, Madam President.
MR. ROMULO:
Does Commissioner Sarmiento accept that? We have no objection.
MR. SARMIENTO:
May I hear the amendment.
MR. FOZ:
It merely consists of the insertion of the word GENERAL before "terms."

MR. VILLEGAS:
I think the Committee will accept the amendment to the amendment.
MR. ROMULO:
We accept the amendment.
Plainly, based on the intent of the framers of the 1987 Constitution, and on the
language the framers used in the fourth paragraph of Section 2, Article XII, the power to
prescribe the terms and conditions of FTAAs, including their scal regime, rests with
Congress and not with the President.
Indeed, in enacting the Mining Act, Congress has stipulated the terms and
conditions for FTAAs. Section 35 of the Mining Act provides that the "following terms,
conditions, and warranties shall be incorporated in the nancial or technical assistance
agreement to wit: . . ." Section 38 of the Mining Act expressly limits an FTAA to a " term not
exceeding twenty-five (25) years."
The majority opinion claims that the President has the power to prescribe "the scal
regime of FTAAs —” i.e., the sharing of the net mining revenues between the contractor and
the State." This claim of the majority renders the entire Chapter XIV of the Mining Act, an
act of usurpation by Congress of Presidential power. Chapter XIV —” entitled "Government
Share" —” prescribes the scal regimes of MPSAs and FTAAs . The constitutionality of
Sections 80 and 81 of Chapter XIV —” whether the scal regimes prescribed in these
sections of the Mining Act comply with the 1987 Constitution —” is the threshold issue in
this case.
The majority seeks to uphold the constitutionality of Section 81 of the Mining Act, an
enactment of Congress prescribing the scal regime of FTAAs. If it is the President who
has the constitutional authority to prescribe the scal regime of FTAAs, then Section 81 is
unconstitutional for being a usurpation by Congress of a Presidential power. The majority's
argument is self-contradictory.
By claiming that the President has the prerogative to prescribe the scal regime of
FTAAs, the majority contradicts its basic argument that DAO 56-99 draws life from the
phrase "among other things" in Section 81 of the Mining Act. Apparently, the majority is not
con dent of its position that DAO 56-99 draws life from the phrase " among other things."
The majority 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. IHTASa
In issuing DAO 56-99, the DENR Secretary usurped the power of Congress to
prescribe the terms and conditions of FTAAs. The following provisions in DAO 56-99
reveal this blatant usurpation of legislative prerogative:
SECTION 1. Scope. —” This Administrative Order is promulgated to:
a . Establish the scal 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; . . .
xxx xxx xxx
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.
xxx xxx xxx
(Emphasis supplied)
DAO 56-99 purports to "establish the scal regime of FTAAs " without guidelines or
standards from Congress, for there are none. DAO 56-99 xes the non-tax "Government
Share" from mining revenues, a share that Congress does not prescribe in Section 81 of
the Mining Act. DAO 56-99 is void because the DENR Secretary has clearly no power to
prescribe the scal regime of FTAAs, particularly the government's non-tax share from
mining revenues.
3. Conclusion
In Sections 80 and 81 of the Mining Act, Congress required holders of MPSAs and
FTAAs to pay only the usual taxes, duties and fees. Nothing in Sections 80 and 81 requires
holders of MPSAs and FTAAs to pay the State any share from their mining revenues.
Section 84 reiterates that the State's share is limited to the 2% excise tax. 3 3 Section 112
places under the scal regime established in Section 80 all MPSAs and FTAAs executed
prior to the Mining Act. Thus, holders of prior MPSAs and FTAAs shall pay only the 2%
excise tax as the "total" share of the State. Section 39 grants holders of FTAAs, like
respondent WMCP, the option to convert their FTAAs to MPSAs.
The President cannot save the Mining Act from constitutional in rmity by requiring
FTAA contractors to pay the State a share from their mining revenues. The power to
prescribe the scal regime of FTAAs belongs to Congress, not to the President. Neither
can this Court elevate DAO 56-99 to the status of a law to plug a fatal constitutional hole in
the Mining Act. Like the President, this Court cannot legislate the fiscal regime of FTAAs.
This Court must simply do its solemn duty —” declare Sections 39, 80, 81, 84 and
112 of the Mining Act unconstitutional for violation of Section 2, Article XII of the 1987
Constitution. This Court must allow Congress to enact the remedial measures to correct
the constitutional in rmities in the Mining Act . This Court cannot act as savior of the
Mining Act by interpreting the phrase "among other things" as the source of authority for
the DENR Secretary to correct a constitutional defect in the Mining Act. This Court cannot
invest in the President the power to prescribe the scal regime of FTAAs just to save the
Mining Act from constitutional in rmity. Such power clearly belongs to Congress, not the
President.
This Court must also declare void the 50-year term in Section 3.3 of the WMCP
FTAA. FTAAs are mineral agreements that are subject to the 25-year term limit in the rst
paragraph of Section 2, Article XII of the 1987 Constitution. The WMCP FTAA's 50-year
term also violates Section 38 of the Mining Act, which expressly limits FTAAs to 25-year
terms, thus:
Term of Financial or Technical Assistance Agreement . —” A nancial or
technical assistance agreement shall have a term not exceeding twenty- ve (25)
years to start from the execution thereof, renewable for not more than twenty- ve
(25) years under such terms and conditions as may be provided by law.
There is no escaping from the invalidity of the 50-year term of the WMCP FTAA. This
violation is so glaring and blatant that the Court has no choice but to declare the 50-year
term void. The majority cannot simply declare the 50-year term valid without any
explanation why a 50-year term is valid considering the mandatory 25-year term limit in
Section 38 of the Mining Act. To merit observance and respect a ruling of this Court must
state clearly and distinctly the law which serves as basis of the ruling. 3 4
Likewise, the Resolution of 1 December 2004 ruled that Section 112 of the Mining
Act "cannot be made to apply to FTAAs ." Since Section 112 does not apply to FTAAs, the
majority conclude that the provision in Section 112 placing all mineral agreements under
the scal regime applicable to MPSAs "cannot be made to apply to FTAAs." The majority
justified its ruling that Section 112 does not apply to FTAAs by stating that —”
. . . Section 112 does not speci cally 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. . .
." (Emphasis supplied)
The majority's justi cation that Section 112 does not speci cally mention or refer to
FTAAs collides with the express language of Section 112, which 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, nally , That such leases, production-sharing
agreements, nancial or technical assistance agreements shall comply with the
applicable provisions of this Act and its implementing rules and regulations.
The last proviso of Section 112 categorically states that " nancial or technical
assistance agreements shall comply with the applicable provisions of this Act and its
implementing rules and regulations." It is as clear as daylight that Section 112
specifically mentions and refers to FTAAs. aCcHEI
There is no doubt whatsoever that Section 112 applies to FTAAs. There are no ifs or
buts that Section 112, by its clear and unequivocal language, applies to FTAAs. The last
proviso of Section 112 expressly mandates that FTAAs must comply with the applicable
provisions of the Mining Act. One of the applicable provisions is Section 112 itself, which
places "all" mineral agreements executed prior to the Mining Act under the scal regime
governing MPSAs in Section 80 which limits the "total government share" to the 2% excise
tax. This makes the last proviso of Section 112 unconstitutional because it limits the
government share in FTAAs to the usual taxes, duties and fees.
How the majority can proclaim that Section 112 does not speci cally mention or
refer to FTAAs de es the clear, physical and tangible written wording of Section 112. The
majority has ruled that the words " nancial or technical assistance agreements" do not
appear in Section 112 when in reality and in fact these words appear in Section 112. The
majority should explain why the last proviso in Section 112 does not apply to FTAAs
despite its express reference to FTAAs, instead of saying that Section 112 does not
contain any language mentioning or referring to FTAAs.
This Court cannot rule that a word does not appear in the law when in fact the word
is so obviously written in the law. What this Court can validly rule is that despite the
express mention of a particular word, the intent of the law is otherwise. The majority must
read the written words in the law the way the public reads the written words in the law. No
one can dispute what the written words are in the law. The written words are found in the
enrolled bill enacted by Congress and approved by the President or allowed by the
President to lapse into law. The majority can interpret the written words differently from
the minority, but the majority cannot simply wish away the existence of certain words
expressly written in the law.
This Court, moreover, must declare unconstitutional Section 3(aq) of the Mining Act
authorizing the issuance to foreign contractors of exploration permits. Section 2, Article
XII of the 1987 Constitution reserves to Philippine citizens and 60% Filipino owned
corporations the "exploration, development and utilization" of natural resources. In FTAAs,
the State may authorize the foreign contractor to conduct the physical act of exploration
as agent of the State but not as holder of the exploration permit.
In FTAAs, the State itself directly undertakes the exploration and exploitation of
minerals, petroleum, and other mineral oils with the foreign contractor providing the State
assistance —” nancial or technical or even both. The foreign contractor, as contracting
agent of the State, may manage the contracted mining operations covered by the FTAA to
the extent of the foreign contractor's nancial and technical contribution. Such
management, however, remains subject to the full control and supervision of the State.
There is no dispute that the foreign contractor can engage in mining operations as
the contracting agent of the State under an FTAA . The fourth paragraph of Section 2,
Article XII of the 1987 Constitution expressly allows the State to enter into an FTAA with a
"foreign-owned corporation." Thus, the issue is not whether a foreign contractor can
engage in mining operations in the Philippines. Rather, the issue is the equitable share of
the State from the mining profits of the foreign contractor.
The P47 trillion mineral wealth of the nation is the Filipino people's inheritance from
the Creator. This mineral wealth is exhaustible and non-renewable. Once removed from the
earth, this mineral wealth is gone forever. This mineral wealth is a major part of the
patrimony of the nation. The 1987 Constitution mandates the State to "conserve and
develop" the national patrimony for the bene t of the Filipino people. Sections 3(aq), 39,
80, 81, 84 and 112, as well as DAO 56-99, constitute a sell-out of the national patrimony to
foreigners.
Let it not be said that no one warned this Court of the tragedy about to strike the
Filipino people as a result of the Resolution of 1 December 2004. One can just imagine the
anger of the Filipino people once they realize they will not receive any share in the mining
pro ts of foreign contractors. The Filipino people will inherit a land environmentally
degraded before by forest denudation, and now by large-scale mining. The Filipino people
did not receive any share in the profits of logging concessionaires. Now, the Filipino people
will also not receive any share in the pro ts of mining contractors. To save themselves
from the Filipino people's ire, the mining industry, the legislature and the executive will all
point to this Court's Resolution of 1 December 2004. Sadly, the blame will fall squarely on
this Court.
By validating DAO 56-99, the Court's Resolution of 1 December 2004 legitimizes the
plunder of the P47 trillion mineral wealth of the nation. This reminds us of the plunder by
the Spanish conquistadores in the 16th century of the riches of the Aztecs, Mayans and
Incas. The only difference is that the Aztecs, Mayans and Incas lost their wealth
involuntarily by force of arms. Under the Resolution of 1 December 2004, the Filipino
people will lose their mineral wealth voluntarily to foreigners by judicial fiat of this Court.
The decision of this Court in the present case will determine largely whether this
country will remain poor, or whether this country can parlay its P47 trillion mineral
resources into developing the national economy. History will judge whether this Court has
met in the present case the challenge of conserving and developing the national patrimony
for the benefit of the Filipino people.
I vote to grant petitioners' motion for reconsideration and to declare
unconstitutional Section 3(aq), Section 39, Section 80, the second paragraph of Section
81, the proviso in Section 84, and the rst proviso in Section 112 of the Mining Act. 3 5 The
power to prescribe the scal regime of FTAAs is lodged in Congress, which must consider
the following in prescribing the fiscal regime:
a. The Constitutional mandate that the State shall "conserve and develop" the
national patrimony for the benefit of the Filipino people;
b. The Constitutional declaration that mineral resources are "owned" by the State;
IaAHCE
c. The Constitutional mandate that the State shall exercise "full control and
supervision" in the exploration and exploitation of mineral resources;
d. The Constitutional requirement that FTAAs shall "make real contributions to the
economic growth and general welfare" of the Filipino people;
e. The admissions by intervenor Chamber of Mines of the Philippines and
respondent WMCP that in FTAAs the State stands in the place of the 60%
Filipino owned company and that the State is entitled to 60% of the net
mining revenues;
f. The industry practice between mine claim owners and operators under the 1935
and 1973 Constitutions as exemplified in the Consolidated Mines case; 3 6
g. The precedent set in the Occidental-Shell FTAA involving the Malampaya

offshore gas fields; 3 7
h. The cost of rehabilitating the environment degraded by the mining operations,
and the share of the State in such cost.
I also vote to declare void DAO 56-99 for being manifestly and grossly
disadvantageous to the government and the Filipino people, aside from being a usurpation
of the legislative power to prescribe the scal regime of FTAAs. In issuing DAO 56-99, the
DENR Secretary gravely abused his discretion amounting to lack of jurisdiction.
Lastly, I also vote to declare the WMCP FTAA void since its Sections 2.1, 3.3, 7.8, 7.9,
8.3 and 10.4(i) violate Section 2, Article XII of the 1987 Constitution. 3 8 Section 3.3 of the
WMCP FTAA is also void for violation of Section 38 of the Mining Act.
CARPIO MORALES , J., dissenting :
"Great cases, like hard cases, make bad law. For great cases are called
great, not by reason of their real importance in shaping the law of the future, but
because of some accident of immediate overwhelming interest which appeals to
the feelings and distorts the judgment. These immediate interests exercise a kind
of hydraulic pressure which makes what previously was clear seem doubtful, and
before which even well settled principles of law will bend." (Dissenting Opinion of
Justice Oliver Wendell Homes in Northern Securities Company v. U.S ., 193 U.S.
197, 400-401 [1904])
The issue of the constitutionality of Republic Act No. 7942 (the Mining Act of 1995)
and its implementing rules —” an issue which has proven to be of "immediate
overwhelming interest" —” is once again before this Court.
This time, petitioners seek a reconsideration of this Court's December 1, 2004
Resolution which granted the respondents' and intervenors' Motions for Reconsideration
of its Decision of January 27, 2004. The dispositive portion of the December 1, 2004
Resolution reads: 1
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 nancial 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(e) 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. (Italics in the original)
Arguing that the Mining Act and its implementing rules violate the provisions of
Section 2, Article XII of the Constitution regarding "agreements with foreign-owned
corporations involving either technical or nancial assistance for large-scale exploration,
development, and utilization of minerals, petroleum and other mineral oils," petitioners pray
that:
(a) Oral argumentation be set for the purpose of clarifying the new issues
raised in the [Resolution] of December 1, 2004;
(b) After notice and hearing:
1. the [Resolution] rendered on December 1, 2004 be set aside and vacated;
2. the WMCP FTAA deriving force and effect from it be declared

unconstitutional, illegal and null and void;
3. Republic Act No. 7942 and its Implementing Rules and Regulations be
declared unconstitutional and null and void.
Such other relief as are just and equitable under the premises.
Unfortunately, as noted in the majority Resolution on petitioners' Motion for

Reconsideration at bar, "after a thorough deliberation on the Motion, none of the members
of this Court have changed their opinions or votes." Petitioners are thus not afforded the
opportunity to fully discuss, through oral argument, the new issues which have arisen in
this case.
However, at some future time, this Court may have the opportunity to re-examine
and re-evaluate the pronouncements and conclusions made by the majority. I am thus
compelled to underscore the following points in addition to those set forth in my
Dissenting Opinion of December 1, 2004. cHDEaC
As petitioners point out, the Court's December 1, 2004 Resolution makes much of
the government's self-declared " scal crisis" and ultimately concludes that the State will
never be in a position to directly explore, develop or utilize its own resources:
However, it is of common knowledge, and of judicial notice as well, that the
government is and has for many years been nancially 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 " scal crisis" or "budget
de cit" merely con rms 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 require me, but also the attendant risk of never nding and
developing economically viable quantities of minerals, petroleum and other
mineral oils. 2 (Emphasis supplied)

At the same time, the ponencia seems to have accepted the necessity of engaging
in large scale mining activities in order to realize the projected riches, which are expected
to materialize as a result:
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 oundering 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. 3 (Emphasis supplied)
Indeed, the majority appears to have taken a liking to the mining industry as a whole,
affording economic woes a greater measure of sympathy than that accorded to the "big
three" oil players in Tatad v. Secretary of the Department of Energy 4 or local cement
producers in Southern Cross Cement Corp. v. Phil. Cement Manufacturers Corp . 5 Thus, in
abandoning his original finding of mootness, the ponente states:
But of equal if not greater signi cance 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.
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, it is evident that strong reasons of public policy
demand that the constitutionality issue be resolved now. 6 (Emphasis supplied;
italics in the original)
Not surprisingly, petitioners object to the foregoing economic considerations which

are perceived to underpin this Court's December 1, 2004 Resolution. Thus, they argue:
The main ponencia arrives at its conclusions with respect to determining
what constitutes equitable sharing as well as reasonable control through the
following assumptions which may have taken the form of judicial notice:
First, in agreements with fully foreign owned corporations in the
exploration, development and utilization of mineral resources, the government
does not take any risk;
Second, increasing investments in the commercial extraction of mineral
resources would contribute positively to economic growth;
Third, a more liberal investment friendly interpretation of the provisions of
the constitution will result in increase in beneficial investments.
These are assumptions expected of investors who are wishing to convince
the state to make regulations friendlier to their operations. However, they do not
necessarily redound to the bene t of the many more members of communities
directly or indirectly affected 7
Instead, petitioners, advocate what they believe to be the better development

paradigm:
The main opinion opens with a desire to arrive at an interpretation of the
constitution that does not "strangulate economic growth . . . to serve narrow
parochial interests." It also assumes that encouraging the exploitation of mineral
resources would "attract foreign investments and expertise" and that it would
necessarily "secure for our people and our posterity the blessings of prosperity
and peace."
Besides simply asserting it to be a truism that restricting investments in
extractive natural resources slows growth, the respondents have not presented
any viable empirically proven causation between restricted investments in
extractive natural resource industries and slower growth. In fact, study after study
has shown that the opposite is empirically proven. cAaETS
The natural resource curse is a phenomenon that is a demonstrable

empirical fact. With few exceptions, countries which rely heaviest on their natural
resources sector are the ones that exhibited the slowest growth. Empirical and
analytic studies cited by economists Sachs and Warner . . . show that the natural
resource curse is a demonstrable empirical fact, even after controlling for trends
in commodity prices. There is little direct evidence that omitted geographical or
climate variables explain the curse, or that there is bias resulting from some other
unobserved growth deterrent. Resource-abundant countries tended to be high-
priced economies and, consequently, tended to miss out on export-led growth.
Natural resource abundance can crowd-out drivers of growth such as traded-
manufacturing activities, education and even growth-promoting entrepreneurial
activity.
If, as the ponencia admonishes, we are to read the Constitution in broad,
life-giving strokes —” in a manner that does not strangulate economic growth and
gives justice to all, present and future generations —” we cannot close our eyes to
this empirical reality: that dependence on our natural resources can ultimately
lead to slower growth, if not a growth collapse. It should be cautious rather than
embracing of very large investments into the exploration, development and
utilization of natural resources. The fear expressed by the ponencia that our
growth will stagnate has no empirical leg to stand on and therefore should not be
the basis of any form of judicial assumption or judicial notice. 8 (Italics in the
original; citations omitted)
To my mind, both approaches, which articulate a desired economic result, are

inappropriate and inapplicable to the determination of the constitutionality of the Mining
Act. In my view, judicial decision making should not be in uenced by a desired economic
outcome, but should be the product of the application of established neutral legal
principles to the facts and the law of the case. If, in deciding a question of constitutionality,
a judicial decision should re ect a particular economic perspective, it should only be that
adopted by the Constitution itself.
As Aristotle put it, "Law is reason free from passion." And, since the authority of this
Court —” possessed of neither the purse nor the sword —” ultimately rests on sustained
public confidence in its moral sanction, 9 it must ultimately depend on the power of reason,
its sole currency to paraphrase Justice Thurgood Marshall, 1 0 for sustained public
confidence in the justness of its decisions. 1 1
It should be plain that judges do not engage in reason giving or opinion
writing merely as an intellectual performance. . . . A judicial justi cation . . . is
offered in order to justify to someone the decision or conclusion; a justi cation is
directed to an audience. Perhaps the rst person to whom the justi cation is
directed is the losing litigant; and to this may be added all other people whose
interests might be adversely affected by the result. These persons need to be
assured that the administration of the law is not just a bald exercise of coercion,
that it is not the might of the judge (the power of enforcement) that makes the
decision right. Reasoned decisions, therefore, can be viewed as attempts at
rational persuasion; and by means of such decisions, losing parties may be
brought to accept the result as a legitimate exercise of authority. If this
acceptance is achieved, the cause of social peace is also promoted, since every
case has a loser. The system of administering justice through the courts is not
likely to survive for very long if half the people whose disputes are resolved are
convinced that judges arbitrarily decide questions of law. 1 2 (Italics in the original;
emphasis and italics supplied)
Judicial decisions, however, do not merely serve the purpose of convincing people
that judges do not act arbitrarily. Justice Oliver Wendell Holmes, Jr. correctly viewed case
law as a prediction of what courts will do. 1 3 Judicial decisions supply guidance to other
individuals on what the law is and on how their cases are likely to be decided should they
end up in court, so that those individuals can adjust their conduct accordingly. 1 4
. . . But a decision can serve this function only if reasons are given,
otherwise, all one has is an unconnected series of raw facts. One has to know
which facts are legally signi cant —” which is what the reasons indicate. (The
fact that the man who went through the red light was named Smith is not legally
signi cant, but the fact that he was on his way to a hospital may be crucial.)
Second, appellate courts are supposed to supply legal guidance to lower courts,
and because of considerations similar to those just mentioned, their decisions will
not be very helpful unless they lay out the reasons for their rulings. And third, in
the American system many decisions are justi ed by reference to precedent —”
the decisions made in prior cases. Again, it is only because explicit reasons were
given for these earlier decisions that they are of any use for later cases. Plainly,
many of the functions that courts serve require reasoned decisions. 1 5 (Emphasis
supplied)
It goes without saying that certainty, predictability and stability in the law are the
major objectives of the legal system, and judicial decisions serve the important purpose of
providing stability to the law and to the society governed by that law. Hence, the doctrine
of stare decisis 1 6 which Justice Sandra Day O' Connor described in State Oil Co. v. Khan 1 7
as "the preferred course because it promotes the evenhanded, predictable, and consistent
development of legal principles, fosters reliance on judicial decisions, and contributes to
the actual and perceived integrity of the judicial process." 1 8 This sentiment is echoed by
Justice Benjamin Cardozo:
. . . I must be logical, just as I must be impartial, and upon like grounds. It
will not do to decide the same question one way between one set of litigants and
the opposite way between another. "If a group of cases involves the same point,
the parties expect the same decision. It would be a gross injustice to decide
alternate cases on opposite principles. If a case was decided against me
yesterday when I was defendant, I shall look for the same judgment today if I am
plaintiff. To decide differently would raise a feeling of resentment and wrong in
my breast; it would be an infringement, material and moral, of my rights."
Everyone feels the force of this sentiment when two cases are the same.
Adherence to precedent must then be the rule rather than the exception if litigants
are to have faith in the even-handed administration of justice in the courts. 1 9
(Citations omitted; emphasis supplied) IESTcD
And these desired objectives of certainty, predictability and stability can only be
achieved if courts render decisions based on legal principles. The determination of the
correctness of a judicial decision turns on far more than its outcome. 2 0 Rather, it turns
primarily on whether its outcome evolved from principles of judicial methodology 2 1 since
the Judiciary's function is not to bring about some desirable state of affairs but to nd
objectively the right decision by adhering to the established general system of rules. 2 2
The philosophy of "the end justi es the means" espoused by Niccolo Machiavelli simply
has no place in decision making. As one judge puts it:
These methodological constraints do mean that we judges sometimes
sustain actions we think make little sense, invalidate programs we like, or apply
precedents we believe were wrongly decided. . . . In all these cases, though, we
may have been troubled by the outcomes, we knew that vindicating the rule of law
was far more important to our constitutional system than the issues at stake in
any particular case. Oliver Wendell Holmes, Jr. put it this way: "It has given me
great pleasure to sustain the Constitutionality of laws that I believe to be as bad
as possible, because I thereby helped to mark the difference between what I
would forbid and what the Constitution permits." 2 3 (Citation omitted; emphasis
and italics supplied).
In his seminal article entitled Toward Neutral Principles of Constitutional Law , 2 4

Columbia law professor Herbert Wechsler popularized the phrase "principled decision"
which he de ned as "one that rests on reasons with respect to all the issues in the case,
reasons that in their generality and their neutrality transcend any immediate result that is
involved." 2 5 Consequently, to adopt a strained interpretation of a rule to achieve desired
results is not a "neutral principle," and decisions that apply it are not genuinely principled
decisions because they do not rest on analysis and reasons quite transcending the
immediate result. 2 6 Wechsler further elaborates:
When no su cient reasons of this kind can be assigned for overturning
value choices of the other branches of the Government . . . those choices must, of
course, survive.
xxx xxx xxx
The virtue or demerit of a judgment turns, therefore, entirely on the reasons
that support it and their adequacy to maintain any choice of values it decrees, or,
it is vital that we add, to maintain the rejection of a claim that any given choice
should be decreed. 2 7
That said, it is readily apparent that this Court should not heed the apprehension of
some foreign businessmen that this Court's January 27, 2004 Decision in La Bugal-B'Laan
Tribal Association, Inc. v. Ramos 2 8 might hamper the government's efforts of
resuscitating the mining industry and ultimately result in "the possible loss of billions of
dollars of investments and exports and tens of thousands of jobs. . . ." 2 9
Nor should this Court be swayed by moves to fault Justices whose decisions are
not to a party's liking. 3 0 As observed by Professor Aharon Barak, the President of the
Supreme Court of Israel, criticism of the judiciary is unavoidable:
. . . In performing [its] duty, the court must, inevitably, be in con ict with the
other branches, especially so in modern times where more and more political
questions present themselves as legal questions, and are brought to be
adjudicated before the courts, and especially so where the scope of judicial review
over the other branches is wider than in the past. A wider judicial review carries
with it wider interest in the courts, and widening tension between the court and the
other branches of government. If there will be no con ict and no tension, the court
will not be fulfilling its constitutional role. Thus, criticism there will always be. 3 1
I n Tatad v. Secretary of Department of Energy , 3 2 this Court, speaking through

Justice (now Senior Associate Justice) Reynato S. Puno, put aside all consideration of the
possible impact the invalidation of the Oil Deregularization Law might have on the
pro tability of the petroleum industry in favor of a principled interpretation of the
Constitution:
With this Decision, some circles will chide the Court for interfering with an
economic decision of Congress. Such criticism is charmless for the Court is
annulling R.A. No. 8180 not because it disagrees with deregulation as an
economic policy but because as cobbled by Congress in its present form, the law
violates the Constitution. The right call therefor should be for Congress to write a
new oil deregulation law that conforms with the Constitution and not for this
Court to shirk its duty of striking down a law that offends the Constitution.
Striking down R.A. No. 8180 may cost losses in quanti able terms to the oil
oligopolists. But the loss in tolerating the tampering of our Constitution is not
quanti able in pesos and centavos. More worthy of protection than the supra-
normal pro ts of private corporations is the sanctity of the fundamental
principles of the Constitution. Indeed when confronted by a law violating the
Constitution, the Court has no option but to strike it down dead. Lest it is missed,
the Constitution is a covenant that grants and guarantees both the political and
economic rights of the people. The Constitution mandates this Court to be the
guardian not only of the people's political rights but their economic rights as well.
The protection of the economic rights of the poor and the powerless is of greater
importance to them for they are concerned more with the esoterics of living and
less with the esoterics of liberty. Hence, for as long as the Constitution reigns
supreme so long will this Court be vigilant in upholding the economic rights of our
people especially from the onslaught of the powerful. Our defense of the people's
economic rights may appear heartless because it cannot be half-hearted. 3 3
(Italics in the original; emphasis supplied)
In reversing this Court's January 27, 2004 Decision, I fear that the majority has
retreated from its resolve in Tatad and, unwittingly, has been swayed by peripheral and
ultimately irrelevant economic arguments in its well-intentioned desire to arrive at a result
which it believes would encourage economic recovery and prop up the oundering mining
industry.
By doing so, however, the majority has given its imprimatur to an interpretation and
application of the concepts of "verba legis," "full control and supervision," and "permissible
legislative delegation," which are inconsistent with established "neutral principles" and
incompatible with the letter and intent of the Constitution, 3 4 thus undermining the stability
of our jurisprudence and making the administration of justice a constant subject of
speculation.
In both the questioned Resolution of December 1, 2004 and in the present
Resolution denying petitioners' Motion for Reconsideration, the majority has continuously
expressed its trust in the faithful exercise of discretion by both the President and her alter-
ego, the Secretary of Environment and Natural Resources, in order to secure for all
Filipinos, present and future, their just share in the nation's mineral resources:
. . . The issue of how much "pro t" the nation should or could derive from
the exploration, development and utilization of the country's mineral resources is
a policy matter, over which we "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," (pp. 240-241, Resolution
dated December 1, 2004). That the aforementioned law, executive issuance and
contract had been declared constitutional will not prevent Congress or the
President or the parties to the FTAA from amending or modifying them, if indeed,
in their opinion they are unwise or wanting in any respect.
While there can be no doubt that the political branches of government enjoy a wide
discretion in enacting and implementing programs and policies for the common good, still
the exercise of this discretion is subject to the limitations imposed by the Constitution.
Thus, in my view, respect for the other co-equal branches of government can, and should,
go hand-in-hand with a critical investigation of those limits.
Indeed, behind every constitution is the premise of mistrust. Consider the insight of
James Madison, widely regarded as the Father of the American Constitution:
But what is government itself, but the greatest of all re ections on human
nature? If men were angels, no government would be necessary. If angels were to
govern men, neither external nor internal controls on government would be
necessary. In framing a government which is to be administered by men over
men, the great di culty lies in this: you must rst enable the government to
control the governed; and in the next place oblige it to control itself. A dependence
on the people is, no doubt, the primary control on the government; but experience
has taught mankind the necessity of auxiliary precautions. 3 5 (Emphasis
supplied) TcEaAS
Our present Constitution is no exception. The 1987 is the product of our experience
during martial law as elucidated by Justice Puno:
. . . The serendipity of the 1935 Constitution was tested by the tumult of
the 60's and the 70's. The writ of habeas corpus was suspended and when that
remedy proved inadequate, President Marcos wielded the state's ultimate weapon
by declaring martial law. The President's exercise of his commander-in-chief
powers distorted the distribution and balance of state powers. The legislature was
shut down; the executive became the dominant branch of government; and the
exercise of certain political and civil rights was diminished. The rearrangement of
powers and its effects on individual rights brought to the limelight the judiciary
and its power of judicial review. Demand was made for the Highest Court of the
land to exercise its power of review, to set aside the presidential proclamation of
martial law, and to void the 1973 Constitution's rati cation. . . . [T]he High Court
decided these cases by following the traditional and prudential path in
constitutional litigations. It declined to strike down the acts of the Chief Executive
and the rati cation by the people of the 1973 Constitution on the ground that they
constitute political questions.
Thus, the President continued to be the dominant force in the legal
landscape. Under Amendment No. 1 of the 1973 Constitution, the president was
further given the unusual power to make laws. Congress abdicated its lawmaking
powers, the rst time legislative power was surrendered to the executive. With the
legislative and executive powers concentrated in the presidency, the judiciary
became more passive in the exercise of its power of review. There was more
resort to the doctrine of political question to justify non-interference in acts of
government.
Soon, the volume and velocity of the problems that confronted the Marcos
government reached a disturbing level. . . . [J]udicial control of government
wrongdoings weakened, proving to be critical to the administration's fate. The
passivity with which the power of judicial review was wielded by the courts drove
those who sought grievance for their complaints to take to the streets. Street
sovereignty reigned over the sovereignty of the parliament; the people's tribunal
determined what the rule of law ought to be and not the courts of justice. In the
end, people power settled the issues which the courts declined to resolve. . . . 3 6
And "born out of the trauma of martial law, the 1987 Constitution relies on a
strengthened judiciary not only to safeguard the liberties of the people but also to
prevent the unwarranted assumption of power by the other two departments of
government." 3 7
With the words "and 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," 3 8 the scope of judicial inquiry broadened into areas
which the Court under previous constitutions would have normally left to the political
departments to decide. 3 9
Included in this new found strength is the Court's power-duty to review economic
measures implementing policy as Dean Paci co A. Agabin, counsel for intervenor,
Chamber of Mines, more than adequately explains:
The 1987 Constitution follows the modern trend. It is not made out of the
same mold as the American federal constitution. While the latter is almost silent
on government intervention in the economy, our constitution is replete with
provisions for regulation of the economy and of the state's positive obligation to
promote social justice. As its framers like to put it, our present constitution is "pro-
people, pro-poor, and pro-Filipino." This means that the Philippine Supreme Court,
unlike the U.S. Supreme Court, cannot promote the development of capitalist
institutions at the expense of the people. It cannot assume the function of
protecting the market from various regulatory incursions if these con icts with
the economic policies incorporated in the constitution. While the constitutional
tools which may be used to protect free enterprise have been copied in the present
constitution, like the due process clause, the equal protection clause, the contracts
clause, and the takings clause, these have been neutralized not only by the
reversals by the Supreme Court but also by countervailing policies in the
constitution itself. Unless we reduce the constitution to a mere imitation of its
American counterpart, the Supreme Court cannot behave like the U.S. Supreme
Court during the Gilded Age when it tilted the balance in favor of free markets over
the sovereignty of the people.
Of course, the basic understanding behind our politico-legal culture is that
the function of our electorally accountable legislative branch is to make policy
choices; the function of our electorally accountable executive branch is to
administer policy choices; and the function of our electorally unaccountable
judicial branch is merely to enforce policy choices. Proceeding from this premise,
it becomes clear that it is the duty of our Supreme Court to enforce policy choices
especially if these are provided for in the fundamental law. While "originalists"
think that it is illegitimate for the judiciary to go beyond the enforcement of policy
to the making of policy, and while it is illegitimate for the judiciary to oppose itself
to the democratic departments of government, it must now follow that it is the
legitimate duty of the judiciary to enforce policy which has been
constitutionalized by the people. It must be granted that policies
constitutionalized by the people constitute valid delegations of power to the
Supreme Court, which it cannot shirk to enforce if its members are to be true to
their oath to support the constitution. To draw an analogy from the U.S.
Constitution, it is like the ideals of liberty and equality which are enshrined in that
constitution To paraphrase Justice Benjamin Cardozo, these "are preserved
against the assaults of opportunism, the scorn and derision of those who have no
patience with general principles, by enshrining them in constitutions, and
consecrating to the task of their protection a body of defenders." Since the "body
of defenders" referred to is the Supreme Court, it cannot shirk the defense of
provisions embodied in the constitution without abdicating its duty, not to
mention that of the individual justices to uphold the constitution. To quote
Justice Felix Frankfurter in another context, "the course of constitutional history
has cast responsibilities upon the Supreme Court which it would be 'stulti cation'
for it to evade." 4 0
xxx xxx xxx

Critics of the Supreme Court are not really against judicial review of
economic policy in principle. They are against judicial review only if the Court
declares a law unconstitutional, or if it reverses administrative agency action
implementing economic policy as grave abuse of discretion. In short, they are
against the use of judicial review as a veto power, with the Supreme Court sitting
as a super legislature or as super executive. But this depends, as one wag puts it,
on "whose ox is being gored."
xxx xxx xxx
This attack against judicial "intrusion" in economic policy is off-tangent in
the Philippine context. This view of the limited role of the Court uses the American
constitution as its frame of reference, and sees the Court as the counterpart of the
American Supreme Court. Indeed, it is reminiscent of the American cultural bias
for non-intervention in economic affairs. Perhaps in our day and age, with
globalization and liberalization of trade and commerce as the pervasive
buzzwords, this is the proper perspective. 4 1 But the historical fact is that the
Philippine constitution is not completely carved out of the pattern of the American
constitution. The Philippine constitution is cast in the modern mold which lists a
number of economic, social, and educational policies which the Court is bound to
enforce. This enforcement of economic policy, which necessarily carries with it
the interpretation of words and phrases used in the constitution, gives the Court
not only the opportunity but also the duty to review economic measures
implementing policy. 4 2 (Citations omitted; emphasis and italics supplied). DAETcC
Thus, I do not believe that the issue of whether the State receives a just share of the
proceeds from the country's mineral wealth under the Mining Act and its implementing
rules can be lightly rebuffed as a "policy question." Section 2, Article XII of the Constitution
provides that agreements with foreign-owned corporations "for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils" be, among
other considerations, "based on real contributions to the economic growth and general
welfare of the country." Thus, the discretion of the legislative and executive branches is
clearly circumscribed by this constitutional limitation. 4 3
As discussed in my Dissenting Opinion of December 1, 2004, I do not believe that
the Mining Act and its implementing rules comply with this constitutional requirement.
Instead, I nd that the Mining Act and its implementing rules provide for the
unconstitutional transfer of the bene cial ownership of Philippine mineral resources to
foreign hands. DTISaH
In light of the foregoing, and for the speci c reasons discussed fully in my
Dissenting Opinion of December 1, 2004, I vote to grant petitioners' Motion for
Reconsideration, qualified by this Court's Decision of January 27, 2004.
Footnotes
CARPIO, J., dissenting :
1. Paragraph 4, Section 2, Article XII of the 1987 Constitution 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, 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.(Emphasis supplied)
2. Republic Act No. 7942.

3. Section 3(g)(2) of DAO 56-99 provides: "Additional Government Share. Prior 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."
4. Section 151(B)(1) of the National Internal Revenue Code provides: "'Gross output' shall be
interpreted as the actual market value of minerals or mineral products, or of bullion from
each mine or mineral land operated as a separate entity, without any deduction from
mining, milling, refining (including all expenses incurred to prepare the said minerals or
mineral products in a marketable state), as well as transporting, handling, marketing or
any other expenses: Provided, That if the minerals or mineral products are sold or
consigned abroad by the lessee or owner of the mine under C.I.F. terms, the actual cost
of ocean freight and insurance shall be deducted: Provided, however, That in the case of
mineral concentrate not traded in commodity exchanges in the Philippines or abroad,
such as copper concentrate, the actual market value shall be the world price quotations
of the refined mineral products content thereof prevailing in the said commodity
exchanges, after deducting the smelting, refining and other charges incurred in the
process of converting the mineral concentrates into refined metal traded in those
commodity exchanges.
5. Taken from the Audited Financial Statements filed with the Securities & Exchange
Commission by the following companies: Atlas Consolidated Mining & Development
Corporation (Atlas), Benguet Corporation (Benguet), Lepanto Consolidated Mining
Company (Lepanto), Marcopper Corporation (Marcopper), Philex Mining Corporation
(Philex), and Rio Tuba Nickel Mining Corporation (Rio Tuba).
6. Figures are taken from the Audited Financial Statements filed with the Securities & Exchange
Commission for the years 1995 to 2003. Records prior to 1995 are no longer available.
7. Taken from the 1995 to 2003 Annual Reports of WMC Resources Ltd., www.wmc.com.
8. Taken from the Databook of Rio Tinto plc, www.riotinto.com.
9. Taken from the 1997 to 2003 Annual Reports of Newmont Mining Company,
www.newmont.com; data for the years 1996 and 1995 are not available.
10. Taken from the 1999 to 2003 Annual Reports of Placer Dome, Inc., www.placerdome.com;
data for the years 1995 to 1998 are not available.
11. Taken from the 1997 to 2003 Annual Reports of Phelps Dodge Mining Company,
www.phelpsdodge.com; data for the years 1996 and 1995 are not available.
12. Resolution of 1 December 2004, p. 118.
13. Sharing the Proceeds of Mineral Development: the Fiscal Regime of Philippine Mining,
paper presented during the 8th Annual Mine Safety and Environment Symposium held
on 24 November 2000 at Concorde Hotel, Baguio City; www.mgb.gov.ph.
14. Return on investment (ROI) is a measure of a corporation's profitability, equal to a fiscal

year's income divided by common stock and preferred stock equity plus long-term debt.
ROI measures how effectively the firm uses its capital to generate profit; the higher the
ROI, the better; http://www.investorwords.com/.
15. Lepanto's audited financial statements for 1995 and 1998 are incomplete thus preventing
the calculation of its ROI for these two years.
16. www.mgb.gov.ph/response/miningissues.htm.
17 www.metals.about.com; The Mines and Geosciences Bureau provides the following similar
data www.mgb.gov.ph/aveprice-metals.htm:
Average Prices of Metals 17
1996 1997 1998 1999 2000 2001 2002 2003 2004 (1st
Qtr)
Average World
Price of Copper $1.04/lb $1.03/lb $0.75/lb $0.71/lb $0.82/lb $0.72/lb $0.71/lb $0.81/lb $1.24/lb
(WMS)
Average World
Price of Gold $387/oz $331/oz $293/oz $279.04/oz $279.28/oz $270.71/oz $309.71/oz $363.38/oz $408.27/oz
(WMS)
Average World
Price of Silver $5.20/oz $4.90/oz $5.51/oz $5.22/oz $4.95/oz $4.36/oz $4.60/oz $4.87/oz $6.64/oz
(WMS)
Average World
Price of Nickel $3.40/lb $3.14/lb $2.10/lb $2.73/lb $3.92/lb $2.69/lb $3.06/lb $4.37/lb $6.67/lb
(WMS)
Peso to US Dollar
Exchange Rate P21.25/$ P29.47/$ P40.90/$ P39.08/$ P43.81/$ P50.8/$ P51.28/$ P54.02/$ P55.74/$
(BSP)
18. If the NIAT initially increases by 40% above the amount corresponding to the 0.40 trigger
level, resulting in an additional government share of 10% of this increase, and if this
additional share is tax deductible, then the additional taxable income is the 40% minus
the 10% or 30%. At a tax rate of 32%, the after tax profit to the foreign contractor is
20.4% out of the original 40% increase in profit.
19. New Africa Mining Fund, Report R40/2002, p. 6, Department of Minerals and Energy,
Republic of South Africa, www.dme.gov.za.
20. See note 19.
21. Resolution of 1 December 2004, p. 133.
22. Article 1409(1), Civil Code.

23. Section 3 of RA No. 3019 provides:
xxx xxx xxx
e) Causing any undue injury to any party, including the Government, or giving any private party
any unwarranted benefits, advantage or preference in the discharge of his official
administrative or judicial functions through manifest partiality, evident bad faith or gross
inexcusable negligence. This provision shall apply to officers and employees of offices
or government corporations charged with the grant of licenses or permits or other
concessions.
xxx xxx xxx

(g) Entering, on behalf of the Government, into any contract or transaction manifestly and
grossly disadvantageous to the same, whether or not the public officer profited or will
profit thereby.
24. Miners Association of the Philippines v. Hon. Factoran, Jr., et al., 310 Phil. 113 (1995).
25. Section 3(e) of DAO 56-99 provides:". . . 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. . . ."
26. World Mining Overview, see note 17.
27. Assuming a depreciation period of 15 years, the annual depreciation will be roughly 1/15 or
6.7% of the initial investment, assuming all investments are in depreciable assets with
only negligible working capital. Thus, the recovery period would be about 100/(10.5+6.7)
or 5.8 or some 6 years.
28. The pre-operating period may even stretch to 7 years. The Philippine Daily Inquirer reported
on 30 December 2004, p. B2, in an article entitled "Don't bet on mine revenue, gov't
urged":
According to Walter Brown, Philex Mining Corp. President, mining projects have long "gestating
period" (sic).
He said the entire project —” from the exploration phase to the conduct of feasibility study,
construction and actual mining production —” may (sic) take six to seven years.
(Emphasis supplied)
29. Section 3(f) of DA) 56-99 provides: "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: . . ."(Emphasis supplied)
30. Section 3(c)(3)(b), DAO 56-99.
31. Section 3(c), DAO 56-99.

32. In contrast, the Occidental-Shell FTAA gives the State the right to dispute operating
expenses, and in case the dispute is not amicably settled, to submit the dispute to
arbitration. See Dissenting Opinion of 1 December 2004.
33. Under Section 151(A) of the National Internal Revenue Code, the excise tax on metallic
products is only 2% of the gross value at the time of removal from the mine site.
34. Section 14, Article VIII of the 1987 Constitution states: "No decision shall be rendered by any
court without expressing therein clearly and distinctly the facts and the law on which it is
based."
35. Republic Act No. 7942.

36. Consolidated Mines, Inc. v. Court of Tax Appeals, 157 Phil. 608 (1974).
37. See Dissenting Opinion of 1 December 2004.
38. Ibid.
CARPIO MORALES, J., dissenting :
1. As clarified and amended by this Court's Resolution dated January 25, 2005.
2. La Bugal-B'Laan Tribal Association, Inc. v. Ramos, G.R. No. 127882, December 1, 2004.
3. Ibid.
4. 281 SCRA 330 (1997).
5. G.R. No. 158540, July 8, 2004.
6. La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra.

7. Motion for Reconsideration at 19.
8. Id. at 23-24.
9. Baker v. Carr, 369 U.S. 186, 267 (1962) (Frankfurter, J., dissenting).
10. Payne v. Tennessee, 501 U.S. 808, 844 (1991) (Marshall, J., dissenting).
11. People v. Bugarin, 273 SCRA 384, 393 (1997).

12. M. Gerhardt, T. Rowe, Jr., R. Brown & G. Spann, Constitutional Theory: Arguments and
Perspectives 26 (2nd ed., 2000).
13. Vide: O. W. Holmes, Jr., The Path of the Law, 10 HARV. L. REV. 457 (1897).
14. M. Gerhardt, T. Rowe, Jr., R. Brown, supra at 27 (2nd ed., 2000).
15. Ibid.
16. Stare decisis et non quieta movere. To adhere to precedents, and not to unsettle things
which are established. [Black's Law Dictionary 1406 (1990 6th ed.)]
17. 522 U.S. 3 (1997).
18. Id. at 20.

19. B. Cardozo, The Nature of the Judicial Process 33-34 (1921).
20. D. Tatel, Judicial Methodology, Southern School Desegregation, and the Rule of Law, 79
N.Y.U.L. REV. 1071, 1074 (2004).
21. Ibid.
22. N. Barry, The Classical Theory of Law, 73 CORNELL L. REV. 283, 285-286 (1988).
23. Vide note 20, supra at 1075-1076.
24. H. Wechsler, Toward Neutral Principles of Constitutional Law, 73 HARV. L. REV. 1 (1959).
25. Id. at 19.

26. Id. at 15.
27. Id. at 19-20.
28. 421 SCRA 148 (2004).

29. Vide: www.manilatimes.net/national/2004/feb/05/yehey/business/20040205bus10.html
30. www.mindanews.com/2004/12/03nws-impeach.html
31. R. Puno, Judicial Review: Quo Vaids?, 79 Phil. L. J. 249, 263 (2004).
32. Supra.
33. Id. at 370.
34. As discussed fully in my Dissenting Opinion of December 1, 2004.
35. http://federalistpatriot.us/fedpapers/fed_51.html.
36. R. Puno, supra at 258-259.
37. P. Agabin, Judicial Review of Economic Policy under the 1987 Constitution, 72 Phil. L. J.
176, 189 (1997).
38. In its entirety, Section 1, Article VIII of the 1987 Constitution reads:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and 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.
39. Marcos v. Manglapus, 177 SCRA 668, 695 (1989).
40. P. Agabin, supra at 183-184.

41. En passant, Dean Agabin has written an article regarding the judicial function in the
Philippines in the midst of globalization. Vide: P. Agabin, Globalization and the Judicial
Function in the Philippines, SOKA L. REV. Nov. 1999, p. 1.
42. P. Agabin, supra at 193-194.
43. Vide: La-Bugal B'laan Tribal Assoc., Inc. v. Ramos, 421 SCRA 148, 207-208 (2004).

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EN BANC

[G.R. No. 127882. February 1, 2005.]

LA BUGAL B'LAAN TRIBAL ASSOCIATION et al. , petitioners, vs .

The assumption that Filipino-owned corporations cannot put up the capital

The interpretation of paragraph four, section 2, article XII of the

The interpretation in the Decision violates the constitutional requirement of

CD Technologies Asia, Inc. © 2018 cdasiaonline.com

Computation. The computation of the Additional Government Share from

The additional profit shall be derived from the following formula:

If the computed average ratio is 0.40 or higher:

GO = Gross Output from operations during the same taxable year.

Atlas -511 -345 -9.50 -10.14 -7.23 -9.08 na -2.52 -0.65

US$ = United States dollars

Section 81. Government Share in Other Mineral Agreements. —”

The Government share in nancial or technical assistance agreement shall

The Commissioner is right, Madam President.

xxx xxx xxx

xxx xxx xxx

I support in substance the position taken by Commissioners Gascon and Nolledo.

Commissioner Tan is recognized.

Thank you, Madam President.

CD Technologies Asia, Inc. © 2018 cdasiaonline.com

That is also correct, Madam President

That is 100 percent correct.

Commissioner Foz is recognized.

The Gentleman wants to add the word "GENERAL"?

Yes, Madam President.

It merely consists of the insertion of the word GENERAL before "terms."

I think the Committee will accept the amendment to the amendment.

xxx xxx xxx

SECTION 3. Fiscal Regime of a Financial or Technical Assistance

g. The precedent set in the Occidental-Shell FTAA involving the Malampaya

CARPIO MORALES , J., dissenting :

2. the WMCP FTAA deriving force and effect from it be declared

Unfortunately, as noted in the majority Resolution on petitioners' Motion for

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Not surprisingly, petitioners object to the foregoing economic considerations which

Instead, petitioners, advocate what they believe to be the better development

The natural resource curse is a phenomenon that is a demonstrable

To my mind, both approaches, which articulate a desired economic result, are

In his seminal article entitled Toward Neutral Principles of Constitutional Law , 2 4

I n Tatad v. Secretary of Department of Energy , 3 2 this Court, speaking through

xxx xxx xxx

2. Republic Act No. 7942.

14. Return on investment (ROI) is a measure of a corporation's profitability, equal to a fiscal

22. Article 1409(1), Civil Code.

xxx xxx xxx

31. Section 3(c), DAO 56-99.

35. Republic Act No. 7942.

6. La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra.

CD Technologies Asia, Inc. © 2018 cdasiaonline.com

18. Id. at 20.

25. Id. at 19.

28. 421 SCRA 148 (2004).

40. P. Agabin, supra at 183-184.

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