Related Provisions:
CONSTANTINO v CUISIA
Powers and Functions of the President - Contracting and Guaranteeing Foreign Loans
Date: 13 October 2005
Ponente: Tinga, J.
SUMMARY:
This case is about the foreign debt problem of the
Philippines (post-Marcos administration) and the
executive power of contracting and guaranteeing foreign
loans. The Court ruled that the relief contracts pursuant
to the Financing Program are under loans as provided in
the Constitution and that the power of contracting and
guaranteeing foreign loans is an executive power that
may be delegated.
ISSUES:
1. WoN debt-relief contracts entered into
pursuant to the Financing Program are beyond
the power of the President under Sec. 20, Art.
VII of 1987 Constitution (power of contracting
and guaranteeing foreign loans)
2. WoN it is only the President who may exercise
the power to enter into these contracts and
such power may not be delegated to
respondents
3. WoN the contracts executed or to be executed
by respondents were or will be done with grave
abuse of discretion amounting to lack or excess
of jurisdiction
FACTS:
1. Petitioners together with the Freedom from
Debt Coalition assailed the Financing Program
that began during the term of Cory Aquino.
2. The Financing Program was a negotiation-
oriented debt strategy involving cooperation
and negotiation with foreign creditors aimed at
managing the country’s external debt problem.
3. Pursuant to the program, Cory Aquino’s
administration entered into three restructuring
agreements with representatives of foreign
creditor governments. In line with this, three
similarly-oriented restructuring agreements
were executed with commercial bank creditors.
4. The Philippine Debt Negotiating Team and
representatives of all foreign commercial bank
creditors agreed upon a multi-option financing
package (Financing Program).
5. Petitioners assailed this alleging that even
before the execution of the program, it’s
buyback component was already implemented
(Philippines bought back 1.26 billion of external
debts).
6. Respondents argue that the program would
cover about 3.5 billion dollars of foreign
commercial debt aimed at dealing
comprehensively with the commercial bank debt
problem of the Philippines and at paving the
way for the country’s access to capital markets.
7. For issue no. 1 – petitioners claim that the
buyback and securitization/bonds conversion
schemes are neither loans nor guarantees, and
hence beyond the power of the President to
execute.
For issue no. 2 – petitioners claim that only the
President may exercise this power and that the
doctrine of qualified political agency is not
applicable
For issue no. 3 – petitioners contend that the
debts being addressed by the Financing Program
were fraudulently contracted or void (Marcos
regime loans). Since the debts were void the
Financing Program (options)
(1) cash buyback of portions of
Philippine foreign debt at a discount
(2) conversion of existing Philippine
debt instruments into the following
bonds/securities:
(a) new money bonds with a 5-year
grace period and 17 years final maturity
(b) interest-reduction bonds with a
maturity of 25 years
(c) principal-collateralized interest-
reduction bonds with a maturity of 25
years
Sec. 20, Art. VII, 1987 Constitution
The President may contract or
guarantee foreign loans in behalf of
the Republic of the Philippines with
prior concurrence of the Monetary
Board and subject to such limitations
as may be provided by law.
Role of the Monetary Board
Within 30 days from the end of every
quarter of the calendar year, the Board
shall submit to the Congress a complete
report of its decisions on applications
for loans to be contracted or
guaranteed by the government or
GOCCs which would have the effect of
increasing the foreign debt, and
containing other matters as may be
provided by law.
*powers of the President that may not
be delegated – declaration of martial
law, suspension of writ of habeas
corpus, exercise of pardoning power
 resultant relief agreements would also be void
for being waivers of the Republic’s right to
repudiate void or fraudulently contracted loans.

HOLDING:
1. YES. As regards the bond-conversion scheme, a
bond is an interest-bearing or discounted
security obligating issuer to pay bondholder
money. It’s a contract, agreement or guarantee,
same as a loan. As regards the debt buyback
scheme, the President is allowed to pre-
terminate debts without further action from
Congress. Law ordains the automatic
appropriate provisions for debt-servicing
empowering the President to execute debt
payment. Buyback, a purchase by sovereign
issuer of its own debts at a discount, is a
necessary power from grant of foreign
borrowing power vested in the President.
2. NO. The Secretary of Finance can implement the
President’s decision to address the country’s
debts because the process of establishing the
strategy for managing debts is within the
expertise of the Department of Finance. The
President can’t be expected to personally attend
to all matters or else he would have to pause
from running the country long enough to focus
on a welter of time-consuming detailed activities.
Doctrine of qualified political agency – heads of
executive departments are subject to
President’s direction as alter ego. The lack of
showing that the President countermanded
their acts is tantamount to President’s approval.

RULING:
The petition is hereby dismissed.