La Bugal-B'laan Tribal Association vs Ramos

421SCRA 148 (2004)

FACTS:

● March 30, 1995, the President entered into a Financial or Technical

Assistance Agreement (FTAA) with Western Mining Corporation
Philippines WMCP, a ​major Australian mining and exploration
company, ​covering 99,387 hectares of land in South Cotabato,
Sultan Kudarat, Davao del Sur and North Cotabato.

● On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR
Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the
Implementing Rules and Regulations of R.A. No. 7942. This was later
repealed by DAO No. 96-40, s. 1996 which was adopted on December 20,
1996.

● On January 10, 1997, counsels for petitioners sent a letter to the

DENR Secretary demanding that the DENR stop the implementation
of R.A. No. 7942 and DAO No. 96-40, giving the DENR fifteen days
from receipt to act thereon. The DENR, however, has yet to respond
or act on petitioners’ letter.

● Petitioners thus filed the present petition for prohibition and

mandamus, with a prayer for a temporary restraining order. They
allege that at the time of the filing of the petition, 100 FTAA
applications had already been filed, covering an area of 8.4 million
hectares, 64 of which applications are by fully foreign-owned
corporations covering a total of 5.8 million hectares, and at least
one by a fully foreign-owned mining company over offshore areas.

● Petitioners claim that the DENR Secretary acted without or in excess

of jurisdictio​n

ISSUE

1. ​Whether or not the FTAA between the government and WMCP is a

―service contract that permits fully foreign owned ​companies to exploit
the Philippine mineral resources.

2. ​Whether or not the Philippine Mining Act is unconstitutional for allowing

fully foreign-owned corporations to exploit the Philippine mineral
resources
RULING

1. Yes. Section 1.3 of the FTAA grants WMCP a fully foreign owned
corporation the exclusive right to explore, exploit, utilize and
dispose of all minerals and by-products that may be produced from
the contract area. Section 1.2 of the same agreement provides that
EMCP shall provide all financing, technology, management, and
personnel necessary for the Mining Operations

● These contractual stipulations and related provisions in the FTAA

taken together, grant WMCP beneficial ownership over natural
resources that properly belong to the State and are intended for the
benefit of its citizens. Hence, constituting the provisions under this
act as a service contract that permits fully foreign owned companies
to exploit the Philippine mineral resources​.

2. YES, RA 7942 or the Philippine Mining Act of 1995 is

unconstitutional for permitting fully foreign owned
corporations to exploit the Philippine natural resources. Court
found it as invalid insofar as said Act authorizes service contracts.
Although the statute employs the phrase "financial and technical
agreements" in accordance with the 1987 Constitution, it actually
treats these agreements as service contracts that grant beneficial
ownership to foreign contractors’ contrary to the fundamental law.

● The underlying assumption in all these provisions is that the foreign

contractor manages the mineral resources, just like the foreign
contractor in a service contract. under the Act, an FTAA contractor
warrants that it "has or has access to all the financing, managerial,
and technical expertise.”

● This suggests that an FTAA contractor is bound to provide some

management assistance – a form of assistance that has been
eliminated and, therefore, proscribed by the present Charter. By
allowing foreign contractors to manage or operate all the aspects of
the mining operation, the above-cited provisions of R.A. No. 7942
have in effect conveyed beneficial ownership over the nation's
mineral resources to these contractors, leaving the State with
nothing but bare title thereto.
● The same provisions, whether by design or inadvertence, permit a
circumvention of the constitutionally ordained 60-40% capitalization
requirement for corporations or associations engaged in the
exploitation, development and utilization of Philippine natural
resources.

● When the parts of the statute are so mutually dependent and

connected as conditions, considerations, inducements, or
compensations for each other, as to warrant a belief that the
legislature intended them as a whole, and that if all could not be
carried into effect, the legislature would not pass the residue
independently, then, if some parts are unconstitutional, all the
provisions which are thus dependent, conditional, or connected,
must fall with them.

● As it the law implies, Under Article XII Section 2 of the 1987

Charter, foreign owned corporations are limited only to merely
technical or financial assistance to the State for large scale
exploration, development and utilization of minerals, petroleum and
other mineral oils. As RA 7942 is viewed as a service contract, these
stipulations are abhorrent to the 1987 Constitution. They are
precisely the vices that the fundamental law seeks to avoid, the
evils that it aims to suppress. Consequently, the contract from
which they spring must be struck down. Hence, such an act is
unconstitutional.